**Exhibit      13**

**TABLE      OF CONTENTS**

**From      The Chairman**

**3**

**AFFILIATED      BANKS **

**8**

**9**

**10**

**11**

**12**

**13**

**14**

**15**

**16**

**17**

**18      **

**19**

**20**

**21**

**22**

**23**

**24**

**25**

**26**

**27**

**28**

**29**

**30**

**31**

**32**

**33**

**34**

**35**

**36**

**37**

**38**

**39**

**40**

**41**

**42**

**43**

**44**

**45**

**46**

**47**

**48**

**49**

**50**

**51**

**52**

**53**

**54**

**55**

**56**

**57**

**NON-BANK      AFFILIATES**

**58**

**59**

**FINANCIAL      INFORMATION**

----

**AFFILIATED      BANKS**

**EASTERN      REGIONS**

*President*

**GREAT      LAKES REGION**

*President*

**Illinois**

**Indiana**

**Michigan**

**Ohio**

**MIDWEST      REGIO**

*President      *

**Missouri**

**NORTHEAST      REGION**

*In      Development *

**SOUTHEAST      REGION**

*President  *

**Georgia**

**North      Carolina**

**WESTERN      REGIONS**

*President *

**Arizona**

**CALIFORNIA      REGION**

*President      *

**NORTHWEST      REGION**

*President*

**Washington**

**SOUTHWEST      REGION**

**Colorado**

**Nevada**

**New      Mexico**

**TEXAS      REGION**

*President*

----

**T      O  O U R  S H A R E H O L D E R S**

**DEAR      SHAREHOLDER:**

----

*FROM      THE CHAIRMAN -continued-*

**CREATING      VALUE FOR INVESTORS **

*de      novo*
*de      novo*

----

*FROM      THE CHAIRMAN -continued-*

**LEADERSHIP      AT EVERY LEVEL **

**CULTIVATING      OUR MOST IMPORTANT ASSETS **

----

*FROM      THE CHAIRMAN -continued-*

**FOCUS      FOR THE FUTURE **

----

**CAPITOL        BANCORP LIMITED**

**BOARD        OF DIRECTORS**

----

**FINANCIAL        HIGHLIGHTS**

----

**1ST        COMMERCE BANK**

**Southwest      Region**

----

----

----

**BOARD      OF DIRECTORS**

**OFFICERS      **

----

**ANN      ARBOR COMMERCE BANK**

**Great      Lakes Region**

----

*      President & CEO*

----

*Founded:      October 1, 1990*

----

**BOARD      OF DIRECTORS**

**OFFICERS      **

----

**ARROWHEAD      COMMUNITY BANK**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      September 21, 2000*

----

**BOARD      OF DIRECTORS**

**OFFICERS      **

----

**ASIAN      BANK OF ARIZONA**

**Southwest      Region**

----

* President*

----

*Founded:      April 27, 2006*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF AUBURN HILLS**

**Great      Lakes Region**

----

*President*

----

*Founded:      July 13, 2005*

----

**BOARD      OF DIRECTORS**

**ADVISORY      DIRECTORS**

**OFFICERS**

----

**BANK      OF BELLEVILLE**

**Great      Lakes Region**

----

*President*

----

*Founded:      November 4, 2005*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF BELLEVUE**

**Northwest      Region**

----

*President      & CEO*

----

*Founded:      June 15, 2005*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF ESCONDIDO**

**California      Region**

----

*President      & CEO*

----

*Founded:      October 14, 2003*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF EVERETT**

**Northwest      Region**

----

*First      50.*

*President      & CEO*

----

*Founded:      June 30, 2006*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF LAS VEGAS**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      February 11, 2002*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF MAUMEE**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      October 2, 2006*

----

**BOARD      OF DIRECTORS**

**ADVISORY      DIRECTORS**

**OFFICERS**

----

**BANK      OF MICHIGAN**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      January 10, 2005*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF SAN FRANCISCO**

**California      Region**

----

*President*

----

*Founded:      August 1, 2005*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF SANTA BARBARA**

**California      Region**

----

*Good      to Great,*

*President*

----

*Founded:      December 19, 2005*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      *of***
** TUCSON**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:        June 27, 1996*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BANK      OF VALDOSTA**

**Southeast      Region**

----

*President*

----

*Founded:      June 21, 2006*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BLACK      MOUNTAIN COMMUNITY BANK **

**Southwest      Region**

----

*President      & CEO  *

----

*Founded:      March 27, 2000*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**BRIGHTON      COMMERCE BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      January 8, 1997*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**CAMELBACK      COMMUNITY BANK**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      May 20, 1998*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**CAPITOL      NATIONAL BANK**

**Great      Lakes Region**

----

*President*

----

*Founded:      November 22, 1982*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**COMMUNITY      BANK OF ROWAN**

**Southeast      Region**

----

*President      & CEO*

----

*Founded:      February 21, 2006*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**DESERT      COMMUNITY BANK**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      August 6, 1999*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**DETROIT      COMMERCE BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      December 14, 1998*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**EAST      VALLEY BANK**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      June 30, 1999*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**ELKHART      COMMUNITY BANK**

**Great      Lakes Region**

----

*President*

----

*Founded:      September 9, 1999*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**EVANSVILLE      COMMERCE BANK**

**Great      Lakes Region**

----

*President*

----

*Founded:      May 30, 2006*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**FIRST      CAROLINA STATE BANK**

**Southeast      Region**

----

*President      & CEO*

----

*Founded:      November 27, 2000*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**FORT      COLLINS COMMERCE BANK **

**Southwest      Region**

----

|  MARK                A. KROSSPresident  |  C.                GERARD NALEZNYCEO  |
|---------------------------------------------------|-------------------------------------------------|

*CEO*

*President*

----

*Founded:      June 27, 2005*

----

**BOARD      OF DIRECTORS**

**ADVISORY      DIRECTOR**

**OFFICERS**

----

**GOSHEN      COMMUNITY BANK**

**Great      Lakes Region**

----

*President*

----

*Founded:      September 29, 2000*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**GRAND      HAVEN BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      May 1, 1995*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**KENT      COMMERCE BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      January 12, 1998*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**MACOMB      COMMUNITY BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      September 18, 1996*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**MESA      BANK**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      October 20, 1998*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**MUSKEGON      COMMERCE BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      December 3, 1997*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**NAPA      COMMUNITY BANK**

**California      Region**

----

*President      & CEO*

----

*Founded:      March 1, 2002*

----

**BOARD      OF DIRECTORS**

**ADVISORY      DIRECTORS**

**OFFICERS**

----

**OAKLAND      COMMERCE BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      July 7, 1992*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**OHIO      COMMERCE BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      November 2, 2006*

----

**BOARD      OF DIRECTORS**

**ADVISORY      DIRECTORS**

**OFFICERS**

----

**PARAGON      BANK AND TRUST**

**Great      Lakes Region**

----

*      President & CEO*

----

*Founded:      September 24, 1990*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**PEOPLES      STATE BANK**

**Southeast      Region**

----

*Acting      President *

----

*Founded:      April 5, 2005*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**POINT      LOMA COMMUNITY BANK**

**California      Region**

----

*President*

----

*Founded:      August 2, 2004*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**PORTAGE      COMMERCE BANK**

**Great      Lakes Region**

----

*President      & CEO*

----

*Founded:      May 2, 1988*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**RED      ROCK COMMUNITY BANK**

**Southwest      Region**

----

*President*

----

*Founded:      November 29, 1999*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**SOUTHERN      ARIZONA COMMUNITY BANK **

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      August 17, 1998*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**SUMMIT      BANK OF KANSAS CITY**

**Midwest      Region**

----

*Kansas      City Business Journal*

*President*

----

*Founded:      November 18, 2005*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**SUNRISE      BANK OF ALBUQUERQUE **

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      April 6, 2000*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**SUNRISE      BANK OF ARIZONA**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      December 16, 1998*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**SUNRISE      BANK OF ATLANTA**

**Southeast      Region**

----

*President*

----

*Founded:      June 21, 2006*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**SUNRISE      BANK OF SAN DIEGO**

**California      Region**

----

*      President & CEO *

----

*Founded:      January 11, 2001*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**VALLEY      FIRST COMMUNITY BANK **

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      June 30, 1997*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**YUMA      COMMUNITY BANK**

**Southwest      Region**

----

*President      & CEO*

----

*Founded:      December 15, 2000*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**AMERA      MORTGAGE CORPORATION**

----

*CEO*

----

*Founded:      June 9, 1983*

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**CAPITOL      WEALTH**

----

*President      & CEO*

----

----

**BOARD      OF DIRECTORS**

**OFFICERS**

----

**C      A P I T O L  B A N C O R P  L I M I T E D**

**OFFICERS**

*Chairman      & CEO*

*Vice      President*

*President*

*Chief      Information Officer*

*Vice      President*

*Assistant      Vice President*

*Corporate      Counsel*

*Vice      Chairman*

*Director      of Tax*

*Director      of Strategic Products*

*President*

*Chief      Information Officer*

*Corporate      Counsel*

*General      Counsel*

*Senior      Vice President*

*Chief      Credit Officer*

*President*

*Corporate      Finance Manager*

*Corporate      Counsel*

*Assistant      Vice President*

*Vice      President*

*Chief      Financial Officer*

*Assistant      Director of Accounting*

*Director      of Government Relations*

*Assistant      Vice President*

*Vice      President*

*Corporate      Counsel*

*President*

*Vice      President*

*Corporate      Counsel*

*Corporate      Counsel*

*Loan      Quality Control Specialist*

*President*

*Director      of Bank Accounting*

*Director      of Training*

*Cashier*

*Corporate      Counsel*

*Vice      President*

*Cashier*

*Vice      President*

*Chief      of Capital Markets*

*Vice      President*

*Director      of Risk Management*

*Vice      President*

*Vice      President*

*Director      of Corporate Relations*

*Director      of Credit Administration*

*Director      of Human Resources Services*

*Director      of Government Guaranteed Lending*

*Director      of Communications*

*Corporate      President*

*Director      of Bank Development*

*Senior      Counsel*

*President*

*Senior      Vice President*

*Corporate      Tax Officer *

*Vice      President*

*President*

*Senior      Vice President*

*Director      of Shareholder Services*

*Vice      President*

*President*

*President*

*Director      of Accounting*

*Senior      Vice President*

*Corporate      Counsel*

*Cashier*

----

**F      I N A N C I A L   I N F O R M A T I O N**

----

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***Table      of Contents***

| Selected                Consolidated Financial Data                                                                                                                                |                  F-2 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|
| Information                Regarding Capitol's Common Stock                                                                                                                        |                  F-3 |
| Chief                Executive Officer and Chief Financial Officer                Certifications                                                                                   |                  F-4 |
| Availability                of Form 10-K and Certain Other Reports                                                                                                                 |                  F-4 |
| Other                Corporate and Shareholder Information                                                                                                                         |                  F-5 |
| Cautions                Regarding Forward-Looking Statements                                                                                                                       |                  F-6 |
| Management's                Discussion and Analysis of Capitol's Business, Financial Condition                andResults                of Operations:                             |                      |
| Summary                and Overview                                                                                                                                                |                  F-7 |
| Capitol's                Bank Development Strategy                                                                                                                                 |                  F-8 |
| Bank                Development as a Defined Focus                                                                                                                                 |                  F-8 |
| "Incubation"                of Young Community Banks                                                                                                                               |                  F-8 |
| Monitoring                and Managing Capitol's Investments in Community Banks                                                                                                    |                  F-9 |
| Capitol's                Results of Operations                                                                                                                                     | F-12                      |
| Capitol's                Financial Position                                                                                                                                        | F-15                      |
| Liquidity,                Capital Resources and Capital Adequacy                                                                                                                   | F-21                      |
| Trends                Affecting Operations                                                                                                                                         | F-25                      |
| Critical                Accounting Policies Affecting Capitol's Financial                Statements                                                                                | F-29                      |
| Use                of Estimates in Determining the Allowance for Loan Losses                                                                                                       | F-29                      |
| Accounting                for Goodwill and Other Intangibles                                                                                                                       | F-30                      |
| Accounting                for Stock Options                                                                                                                                        | F-30                      |
| Consolidation                Policy                                                                                                                                                | F-31                      |
| New                Accounting Standards                                                                                                                                            | F-31                      |
| Risk                Factors Affecting Capitol and its Banks                                                                                                                        | F-31                      |
| Report                on Management's Assessment of Internal Control Over Financial                Reporting                                                                  | F-33                      |
| Report                of Independent Registered Public Accounting Firm on Management's                Assessment                of Internal Control Over Financial Reporting  | F-34                      |
| Consolidated                Financial Statements:                                                                                                                                  |                      |
| Report                of Independent Registered Public Accounting Firm                                                                                                             | F-36                      |
| Consolidated                Balance Sheets                                                                                                                                         | F-37                      |
| Consolidated                Statements of Income                                                                                                                                   | F-38                      |
| Consolidated                Statements of Changes in Stockholders' Equity                                                                                                          | F-39                      |
| Consolidated                Statements of Cash Flows                                                                                                                               | F-40                      |
| Notes                to Consolidated Financial Statements                                                                                                                          | F-41                      |

----

**Selected      Consolidated Financial Data**

|                                                          |   | As                of and for the Year Ended December 31 |
|---------------------------------------------------------------|--------|---------------------------------------------------------|
|                                                          |   | 2006(1)                                                 |   | 2005(2) |   | 2004(3) |   | 2003(4) |   | 2002(5) |
| For                the year:                                  |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                                |   | $                                                       | 279,353 |   | $ | 224,439 |   | $ | 179,089 |   | $ | 164,416 |   | $ | 156,454 |
| Interest                expense                               |   |                                                    | 105,586 |   |   | 67,579 |   |   | 47,496 |   |   | 49,490 |   |   | 55,860 |
| Net                interest income                            |   |                                                    | 173,767 |   |   | 156,860 |   |   | 131,593 |   |   | 114,926 |   |   | 100,594 |
| Provision                for loan losses                      |   |                                                    | 12,156 |   |   | 10,960 |   |   | 12,708 |   |   | 9,861 |   |   | 12,676 |
| Noninterest                income                             |   |                                                    | 21,532 |   |   | 21,048 |   |   | 19,252 |   |   | 20,087 |   |   | 14,982 |
| Noninterest                expense                            |   |                                                    | 137,804 |   |   | 117,289 |   |   | 97,787 |   |   | 86,952 |   |   | 76,538 |
| Net                income                                     |   |                                                    | 42,391 |   |   | 35,925 |   |   | 26,716 |   |   | 23,380 |   |   | 16,653 |
| Net                income per share:                          |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                         |   |                                                    | 2.69 |   |   | 2.42 |   |   | 1.88 |   |   | 1.86 |   |   | 1.64 |
| Diluted                                                       |   |                                                    | 2.57 |   |   | 2.34 |   |   | 1.79 |   |   | 1.77 |   |   | 1.57 |
| Cash                dividends paid per share                  |   |                                                    | .95 |   |   | .72 |   |   | .65 |   |   | .51 |   |   | .44 |
|                                                          |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| At                end of year:                                |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                   |   | $                                                       | 4,065,816 |   | $ | 3,475,721 |   | $ | 3,091,418 |   | $ | 2,737,062 |   | $ | 2,409,288 |
| Total                earning assets                           |   |                                                    | 3,743,041 |   |   | 3,204,646 |   |   | 2,885,545 |   |   | 2,521,375 |   |   | 2,226,969 |
| Portfolio                loans                                |   |                                                    | 3,488,678 |   |   | 2,991,189 |   |   | 2,692,904 |   |   | 2,247,440 |   |   | 1,991,372 |
| Deposits                                                      |   |                                                    | 3,258,485 |   |   | 2,785,259 |   |   | 2,510,072 |   |   | 2,288,664 |   |   | 2,062,072 |
| Notes                payable and short-termborrowings         |   |                                                    | 191,154 |   |   | 175,729 |   |   | 172,534 |   |   | 92,774 |   |   | 93,398 |
| Subordinated                debentures                        |   |                                                    | 101,035 |   |   | 100,940 |   |   | 100,845 |   |   | 90,816 |   |   | 51,583 |
| Minority                interests in consolidatedsubsidiaries |   |                                                    | 126,512 |   |   | 83,838 |   |   | 39,520 |   |   | 30,946 |   |   | 28,016 |
| Stockholders'                equity                           |   |                                                    | 361,879 |   |   | 301,866 |   |   | 252,159 |   |   | 218,897 |   |   | 160,037 |

|                                            |   |                                            |    | Quarterly                Results of Operations (unaudited) |
|-------------------------------------------------|--------|-------------------------------------------------|---------|------------------------------------------------------------|
|                                            |   | Total                forthe                Year |    | FourthQuarter                                              |   | ThirdQuarter |   | SecondQuarter |   | FirstQuarter |
| Year                ended December 31, 2006:(1) |   |                                            |    |                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                  |   | $                                               | 279,353 |                                                       | $ | 74,978 |   | $ | 73,082 |   | $ | 68,196 |   | $ | 63,097 |
| Interest                expense                 |   |                                            | 105,586 |                                                       |   | 30,896 |   |   | 28,387 |   |   | 24,559 |   |   | 21,744 |
| Net                interest income              |   |                                            | 173,767 |                                                       |   | 44,082 |   |   | 44,695 |   |   | 43,637 |   |   | 41,353 |
| Provision                for loan losses        |   |                                            | 12,156  |                                                       |   | 3,444 |   |   | 3,441 |   |   | 2,815 |   |   | 2,456 |
| Net                income                       |   |                                            | 42,391  |                                                       |   | 11,382 | (6) |   | 10,789 |   |   | 10,267 |   |   | 9,953 |
| Net                income per share:            |   |                                            |    |                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   |                                            | 2.69    |                                                       |   | .71 |   |   | .68 |   |   | .65 |   |   | .64 |
| Diluted                                         |   |                                            | 2.57    |                                                       |   | .68 | (6) |   | .66 |   |   | .63 |   |   | .61 |
| Cash                dividends paid per share    |   |                                            | .95     |                                                       |   | .25 |   |   | .25 |   |   | .25 |   |   | .20 |
|                                            |   |                                            |    |                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Year                ended December 31, 2005:(2) |   |                                            |    |                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                  |   | $                                               | 224,439 |                                                       | $ | 61,372 |   | $ | 58,655 |   | $ | 54,491 |   | $ | 49,921 |
| Interest                expense                 |   |                                            | 67,579  |                                                       |   | 19,748 |   |   | 17,814 |   |   | 15,899 |   |   | 14,118 |
| Net                interest income              |   |                                            | 156,860 |                                                       |   | 41,624 |   |   | 40,841 |   |   | 38,592 |   |   | 35,803 |
| Provision                for loan losses        |   |                                            | 10,960  |                                                       |   | 3,791 |   |   | 2,107 |   |   | 3,039 |   |   | 2,023 |
| Net                income                       |   |                                            | 35,925  |                                                       |   | 10,019 |   |   | 9,594 |   |   | 8,297 |   |   | 8,015 |
| Net                income per share:            |   |                                            |    |                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   |                                            | 2.42    |                                                       |   | .66 |   |   | .64 |   |   | .56 |   |   | .55 |
| Diluted                                         |   |                                            | 2.34    |                                                       |   | .64 |   |   | .61 |   |   | .54 |   |   | .52 |
| Cash                dividends paid per share    |   |                                            | .72     |                                                       |   | .19 |   |   | .18 |   |   | .18 |   |   | .17 |

| (1) | Includes                Community Bank of Rowan, effective February 2006 (located in Salisbury,                North Carolina), Asian Bank of Arizona, effective April 2006 (located                in                Phoenix, Arizona), Evansville Commerce Bank, effective May 2006 (located                in Evansville, Indiana), Bank of Valdosta (located in Valdosta, Georgia),                Sunrise Bank of Atlanta (located in Atlanta, Georgia) and Bank of                Everett                (located in Everett, Washington), all effective June 2006, Bank of                Maumee                (located in Maumee, Ohio) and 1st Commerce Bank (located in                North Las Vegas, Nevada), both effective October 2006, and Ohio Commerce                Bank (located in Beachwood, Ohio), effective November 2006.                                                                                                                               |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Includes                Bank of Michigan, effective January 2005 (located in Farmington Hills,                Michigan), Peoples State Bank, acquired April 7, 2005 (located in                Jeffersonville, Georgia), Bank of Bellevue (located in Bellevue,                Washington) and Fort Collins Commerce Bank (located in Fort Collins,                Colorado), both effective June 2005, Bank of Auburn Hills, effective                July                2005 (located in Auburn Hills, Michigan), Bank of San Francisco,                effective                August 2005 (located in San Francisco, California), Bank of Belleville                (located in Belleville, Illinois) and Summit Bank of Kansas City                (located                in Lee's Summit, Missouri), both effective November 2005, and Bank                of                Santa Barbara, effective December 2005 (located in Santa Barbara,                California). |
| (3) | Includes                First Carolina State Bank (located in Rocky Mount, North Carolina),                acquired April 1, 2004 and Point Loma Community Bank (located in                San                Diego, California), effective August 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (4) | Includes                Bank of Escondido (located in Escondido, California), effective October                2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (5) | Includes                Bank of Las Vegas (located in Las Vegas, Nevada), effective February                2002                and Napa Community Bank (located in Napa, California), effective                March                2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (6) | Fourth                quarter 2006 net income was favorably impacted by year-end adjustments,                primarily driven by loan fees, approximating $1.3 million ($0.07                per                diluted share) net of income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

----

***INFORMATION      REGARDING CAPITOL'S COMMON STOCK***

|                          |   | 2006   |   | 2005   |
|-------------------------------|--------|--------|--------|--------|
|                          |   | Low    |   | High   |   | Low |   | High |
| Quarter                Ended: |   |   |   |   |   |   |   |   |   |   |   |   |
| March                31       |   | $      | 36.74  |   | $ | 47.22 |   | $ | 29.30 |   | $ | 35.82 |
| June                30        |   |   | 37.84  |   |   | 47.16 |   |   | 28.75 |   |   | 34.00 |
| September                30   |   |   | 36.89  |   |   | 46.00 |   |   | 31.25 |   |   | 36.96 |
| December                31    |   |   | 44.12  |   |   | 47.49 |   |   | 29.10 |   |   | 38.93 |

|   |   | Period                Ended |
|--------|--------|-----------------------------|
| Index  |   | 12/31/01                    |   | 12/31/02 |   | 12/31/03 |   | 12/31/04 |   | 12/31/05 |   | 12/31/06 |
|   |   |                        |   |   |   |   |   |   |   |   |   |   |
| CBC    |   | 100.00                      |   | 178.66 |   | 223.47 |   | 283.73 |   | 308.27 |   | 388.96 |
| R-2000 |   | 100.00                      |   | 79.52 |   | 117.09 |   | 138.55 |   | 144.86 |   | 171.47 |
| SNL    |   | 100.00                      |   | 115.44 |   | 156.98 |   | 193.74 |   | 190.43 |   | 220.36 |

----

***INFORMATION      REGARDING CAPITOL'S COMMON STOCK--Continued***

*http://www.umb.com*

***CHIEF      EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER      CERTIFICATIONS***

***AVAILABILITY      OF FORM 10-K AND CERTAIN OTHER REPORTS***

----

***AVAILABILITY      OF FORM 10-K AND CERTAIN OTHER REPORTS--Continued***

*http://www.sec.gov*
*http://www.capitolbancorp.com*

***OTHER      CORPORATE INFORMATION***

**EXECUTIVE      OFFICES**

| Capitol                Bancorp Center      | 2777                East Camelback Road |
|--------------------------------------------|-----------------------------------------|
| 200                Washington Square North | Suite                375                |
| Lansing,                Michigan 48933     | Phoenix,                Arizona 85016   |
| 517/487-6555                               | 602/955-6100                            |
| www.capitolbancorp.com                     |

**INDEPENDENT      AUDITORS**

***SHAREHOLDER      INFORMATION***

**ANNUAL      MEETING**

**COMMON      STOCK TRADING INFORMATION**

**COMMON      STOCK TRANSFER AGENT**

**DIRECT      PURCHASE AND DIVIDEND REINVESTMENT PLAN**

----

**TRUST-PREFERRED      SECURITIES TRADING INFORMATION**

**TRUST-PREFERRED      SECURITIES TRUSTEE**

***CAUTIONS      REGARDING FORWARD-LOOKING STATEMENTS***

----

***Management's          Discussion and Analysis of Capitol's Business,***

***Financial          Condition and Results of Operations***

**Summary          and Overview**

* *
*bank-development          company*

*de          novo*

| ·   | Record                    earnings of $42 million for the year ($2.57 per diluted share),                    an                    increase of 18% over 2005 earnings of $36 million ($2.34 per                    diluted                    share).  |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Total                    assets surpassing $4 billion at year end.                                                                                                                                                                                     |
| ·   | Substantial                    growth in the number of banks within Capitol's affiliation network,                    from                    41 at the beginning of the year to 50 at                    year-end.                                         |

----

**Capitol's          Bank Development Strategy**

*Bank          Development as a Defined Focus*

*on-site          authority*
*profession*
*banking          professionals*

| ·   | A                    bank president candidate with a significant background in the                    future                    bank's business community, capable of attracting customer relationships                    and other banking professionals    |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | An                    office address from which to operate a bank, optimally located                    in that                    business community                                                                                                         |
| ·   | A                    strong group of potential board members, drawn from the local                    business                    community, to oversee the future bank's activities and assist                    in business                    development |
| ·   | Availability                    of capital from community investors seeking to invest up to 49%                    in the                    required start-up equity of the future                    bank                                                   |

*"Incubation"          of Young Community Banks*

*de          novo*

----

*de          novo*

*Monitoring          and Managing Capitol's Investments in Community Banks*

| ·   | Accounting                                        |
|--------------------|---------------------------------------------------|
| ·   | Capital                    management             |
| ·   | Credit                    administration          |
| ·   | Data                    processing                |
| ·   | Human                    resources administration |
| ·   | Internal                    audit                 |
| ·   | Legal                    support                  |
| ·   | Risk                    management                |

----

|                                                            |   | Total                    Assets |      | Total                    Revenues(3) |
|-----------------------------------------------------------------|--------|---------------------------------|-----------|--------------------------------------|
|                                                            |   | 2006                            |      | 2005                                 |   | 2006 |   | 2005 |
| *Eastern                    Regions:*                           |   |                            |      |                                 |   |   |   |   |
| Great                    Lakes Region:                          |   |                            |      |                                 |   |   |   |   |   |   |   |   |
| Ann                    Arbor Commerce Bank                      |   | $                               | 310,407   |                                 | $ | 320,075 |   | $ | 23,598 |   | $ | 24,035 |
| Bank                    of Auburn Hills(2)                      |   |                            | 31,559    |                                 |   | 10,848 |   |   | 1,849 |   |   | 348 |
| Bank                    of Belleville(2)                        |   |                            | 24,948    |                                 |   | 14,641 |   |   | 1,188 |   |   | 70 |
| Bank                    of Maumee(1)                            |   |                            | 9,915     |                                 |   |   |   |   | 133 |   |   |   |
| Bank                    of Michigan(2)                          |   |                            | 51,287    |                                 |   | 31,119 |   |   | 3,073 |   |   | 773 |
| Brighton                    Commerce Bank                       |   |                            | 103,909   |                                 |   | 105,694 |   |   | 7,889 |   |   | 7,268 |
| Capitol                    National Bank                        |   |                            | 256,741   |                                 |   | 246,132 |   |   | 17,531 |   |   | 16,118 |
| Detroit                    Commerce Bank                        |   |                            | 106,233   |                                 |   | 84,979 |   |   | 8,634 |   |   | 6,466 |
| Elkhart                    Community Bank                       |   |                            | 86,883    |                                 |   | 75,648 |   |   | 6,476 |   |   | 5,329 |
| Evansville                    Commerce Bank(1)                  |   |                            | 20,772    |                                 |   |   |   |   | 591 |   |   |   |
| Goshen                    Community Bank                        |   |                            | 80,137    |                                 |   | 74,545 |   |   | 5,216 |   |   | 4,076 |
| Grand                    Haven Bank                             |   |                            | 129,033   |                                 |   | 122,757 |   |   | 9,702 |   |   | 8,629 |
| Kent                    Commerce Bank                           |   |                            | 86,916    |                                 |   | 78,939 |   |   | 6,800 |   |   | 6,304 |
| Macomb                    Community Bank                        |   |                            | 101,353   |                                 |   | 93,497 |   |   | 7,713 |   |   | 6,498 |
| Muskegon                    Commerce Bank                       |   |                            | 95,551    |                                 |   | 96,649 |   |   | 7,494 |   |   | 7,236 |
| Oakland                    Commerce Bank                        |   |                            | 134,437   |                                 |   | 115,720 |   |   | 9,660 |   |   | 8,711 |
| Ohio                    Commerce Bank(1)                        |   |                            | 14,466    |                                 |   |   |   |   | 199 |   |   |   |
| Paragon                    Bank & Trust                     |   |                            | 98,804    |                                 |   | 106,535 |   |   | 7,816 |   |   | 8,499 |
| Portage                    Commerce Bank                        |   |                            | 179,413   |                                 |   | 183,018 |   |   | 14,813 |   |   | 14,122 |
| Great                    Lakes Region Total                     |   |                            | 1,922,764 |                                 |   | 1,760,796 |   |   | 140,375 |   |   | 124,482 |
|                                                            |   |                            |      |                                 |   |   |   |   |   |   |   |   |
| Southeast                    Region:                            |   |                            |      |                                 |   |   |   |   |   |   |   |   |
| Bank                    of Valdosta(1)                          |   |                            | 21,626    |                                 |   |   |   |   | 561 |   |   |   |
| Community                    Bank of Rowan(1)                   |   |                            | 45,503    |                                 |   |   |   |   | 1,870 |   |   |   |
| First                    Carolina State Bank                    |   |                            | 93,819    |                                 |   | 83,345 |   |   | 6,341 |   |   | 4,669 |
| Peoples                    State Bank(2)                        |   |                            | 32,714    |                                 |   | 31,620 |   |   | 2,629 |   |   | 1,415 |
| Sunrise                    Bank of Atlanta(1)                   |   |                            | 16,990    |                                 |   |   |   |   | 912 |   |   |   |
| Southeast                    Region Total                       |   |                            | 210,652   |                                 |   | 114,965 |   |   | 12,313 |   |   | 6,084 |
|                                                            |   |                            |      |                                 |   |   |   |   |   |   |   |   |
| Midwest                    Region-Summit Bank of Kansas City(2) |   |                            | 19,529    |                                 |   | 9,152 |   |   | 841 |   |   | 40 |
|                                                            |   |                            |      |                                 |   |   |   |   |   |   |   |   |
| Eastern                    Regions Total                        |   | $                               | 2,152,945 |                                 | $ | 1,884,913 |   | $ | 153,529 |   | $ | 130,606 |

----

|                                                           |   | Total                    Assets |      | Total                    Revenues(3) |   |
|----------------------------------------------------------------|--------|---------------------------------|-----------|--------------------------------------|--------|
|                                                           |   | 2006                            |      | 2005                                 |   | 2006 |   | 2005 |   |
|                                                           |   |                            |      |                                 |   |   |   |   |   |
| Eastern                    Regions Total (from preceding page) |   | $                               | 2,152,945 |                                 | $      | 1,884,913 |   | $ | 153,529 |   | $ | 130,606 |   |
|                                                           |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| *Western                    Regions:*                          |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| Southwest                    Region:                           |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| 1st                    Commerce Bank(1)                        |   |                            | 14,829    |                                 |   |   |   |   | 202 |   |   |   |   |
| Arrowhead                    Community Bank                    |   |                            | 79,152    |                                 |   | 83,639 |   |   | 8,076 |   |   | 7,043 |   |
| Asian                    Bank of Arizona(1)                    |   |                            | 20,248    |                                 |   |   |   |   | 781 |   |   |   |   |
| Bank                    of Las Vegas                           |   |                            | 67,478    |                                 |   | 58,315 |   |   | 5,331 |   |   | 4,130 |   |
| Bank                    of Tucson                              |   |                            | 187,683   |                                 |   | 167,638 |   |   | 15,358 |   |   | 12,758 |   |
| Black                    Mountain Community Bank               |   |                            | 138,961   |                                 |   | 128,958 |   |   | 10,984 |   |   | 8,746 |   |
| Camelback                    Community Bank                    |   |                            | 83,003    |                                 |   | 82,309 |   |   | 6,355 |   |   | 5,937 |   |
| Desert                    Community Bank                       |   |                            | 93,914    |                                 |   | 78,907 |   |   | 7,464 |   |   | 5,749 |   |
| East                    Valley Community Bank                  |   |                            | 35,954    |                                 |   | 43,352 |   |   | 3,202 |   |   | 3,606 |   |
| Fort                    Collins Commerce Bank(2)               |   |                            | 54,410    |                                 |   | 27,427 |   |   | 3,641 |   |   | 943 |   |
| Mesa                    Bank                                   |   |                            | 165,822   |                                 |   | 132,775 |   |   | 15,798 |   |   | 10,890 |   |
| Red                    Rock Community Bank                     |   |                            | 108,362   |                                 |   | 102,618 |   |   | 8,515 |   |   | 7,410 |   |
| Southern                    Arizona Community Bank             |   |                            | 85,912    |                                 |   | 98,849 |   |   | 6,629 |   |   | 6,032 |   |
| Sunrise                    Bank of Albuquerque                 |   |                            | 59,798    |                                 |   | 61,812 |   |   | 4,796 |   |   | 5,169 |   |
| Sunrise                    Bank of Arizona                     |   |                            | 119,785   |                                 |   | 111,204 |   |   | 10,347 |   |   | 10,630 |   |
| Valley                    First Community Bank                 |   |                            | 72,333    |                                 |   | 72,759 |   |   | 5,629 |   |   | 4,694 |   |
| Yuma                    Community Bank                         |   |                            | 74,477    |                                 |   | 61,523 |   |   | 6,049 |   |   | 4,629 |   |
| Southwest                    Region Total                      |   |                            | 1,462,121 |                                 |   | 1,312,085 |   |   | 119,157 |   |   | 98,366 |   |
|                                                           |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| California                    Region:                          |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| Bank                    of Escondido                           |   |                            | 82,412    |                                 |   | 70,807 |   |   | 5,115 |   |   | 3,790 |   |
| Bank                    of San Francisco(2)                    |   |                            | 28,122    |                                 |   | 13,685 |   |   | 1,649 |   |   | 286 |   |
| Bank                    of Santa Barbara(2)                    |   |                            | 42,559    |                                 |   | 14,386 |   |   | 2,138 |   |   | 16 |   |
| Napa                    Community Bank                         |   |                            | 99,009    |                                 |   | 84,512 |   |   | 7,212 |   |   | 5,788 |   |
| Point                    Loma Community Bank                   |   |                            | 43,715    |                                 |   | 34,213 |   |   | 3,185 |   |   | 2,061 |   |
| Sunrise                    Bank of San Diego                   |   |                            | 71,170    |                                 |   | 66,809 |   |   | 5,800 |   |   | 5,616 |   |
| California                    Region Total                     |   |                            | 366,987   |                                 |   | 284,412 |   |   | 25,099 |   |   | 17,557 |   |
|                                                           |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| Northwest                    Region:                           |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| Bank                    of Bellevue(2)                         |   |                            | 33,155    |                                 |   | 19,726 |   |   | 2,061 |   |   | 408 |   |
| Bank                    of Everett(1)                          |   |                            | 20,061    |                                 |   |   |   |   | 489 |   |   |   |   |
| Northwest                    Region Total                      |   |                            | 53,216    |                                 |   | 19,726 |   |   | 2,550 |   |   | 408 |   |
|                                                           |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| Western                    Regions Total                       |   |                            | 1,882,324 |                                 |   | 1,616,223 |   |   | 146,806 |   |   | 116,331 |   |
|                                                           |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| Other,                    net                                  |   |                            | 30,547    |                                 |   | (25,415 | ) |   | 550 |   |   | (1,450 | ) |
|                                                           |   |                            |      |                                 |   |   |   |   |   |   |   |   |   |
| Consolidated                    totals                         |   | $                               | 4,065,816 |                                 | $      | 3,475,721 |   | $ | 300,885 |   | $ | 245,487 |   |

| (1) | Became                    a Capitol affiliate in 2006 and is included for periods after                    addition to                    the Capitol banking network. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Became                    a Capitol affiliate in 2005 and is included for periods after                    addition to                    the Capitol banking network. |
| (3) | Total                    revenues is the sum of interest income and noninterest                    income.                                                             |

----

**Capitol's          Results of Operations**

|                                                                  |   | Net                    Income |   | Return                    on Average Equity |   | Return                    on Average Assets |   |
|-----------------------------------------------------------------------|--------|-------------------------------|--------|---------------------------------------------|--------|---------------------------------------------|--------|
|                                                                  |   | 2006                          |   | 2005                                        |   | 2004                                        |   | 2006 |   | 2005 |   | 2004 |   | 2006 |   | 2005 |   | 2004 |   |
| *Eastern                    Regions:*                                 |   |                          |   |                                        |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Great                    Lakes Region:                                |   |                          |   |                                        |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ann                    Arbor Commerce Bank                            |   | $                             | 3,739  |                                        | $      | 4,007                                       |   | $ | 4,234 |   |   | 14.19 | % |   | 14.80 | % |   | 16.24 | % |   | 1.21 | % |   | 1.22 | % |   | 1.30 | % |
| Bank                    of Auburn Hills(2)                            |   |                          | (332   | )                                           |   | (437                                        | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                    of Belleville(2)                              |   |                          | (548   | )                                           |   | (405                                        | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                    of Maumee(1)                                  |   |                          | (619   | )                                           |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                    of Michigan(2)                                |   |                          | (343   | )                                           |   | (1,017                                      | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Brighton                    Commerce Bank                             |   |                          | 845    |                                        |   | 1,097                                       |   |   | 1,091 |   |   | 8.93 | % |   | 11.86 | % |   | 13.09 | % |   | 0.80 | % |   | 1.02 | % |   | 1.11 | % |
| Capitol                    National Bank                              |   |                          | 2,879  |                                        |   | 3,510                                       |   |   | 3,602 |   |   | 14.97 | % |   | 18.62 | % |   | 20.77 | % |   | 1.20 | % |   | 1.46 | % |   | 1.59 | % |
| Detroit                    Commerce Bank                              |   |                          | 942    |                                        |   | 633                                         |   |   | 163 |   |   | 11.23 | % |   | 9.15 | % |   | 2.91 | % |   | 0.99 | % |   | 0.80 | % |   | 0.27 | % |
| Elkhart                    Community Bank                             |   |                          | 948    |                                        |   | 726                                         |   |   | 703 |   |   | 11.18 | % |   | 9.21 | % |   | 9.76 | % |   | 1.16 | % |   | 0.97 | % |   | 1.17 | % |
| Evansville                    Commerce Bank(1)                        |   |                          | (851   | )                                           |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Goshen                    Community Bank                              |   |                          | 383    |                                        |   | 47                                          |   |   | 405 |   |   | 5.58 | % |   | 0.71 | % |   | 6.34 | % |   | 0.55 | % |   | 0.08 | % |   | 0.83 | % |
| Grand                    Haven Bank                                   |   |                          | 1,284  |                                        |   | 999                                         |   |   | (412 | ) |   | 11.75 | % |   | 9.75 | % |   |   |   |   | 1.01 | % |   | 0.82 | % |   |   |   |
| Kent                    Commerce Bank                                 |   |                          | 365    |                                        |   | 678                                         |   |   | 578 |   |   | 4.72 | % |   | 8.14 | % |   | 7.01 | % |   | 0.44 | % |   | 0.79 | % |   | 0.70 | % |
| Macomb                    Community Bank                              |   |                          | 58     |                                        |   | 442                                         |   |   | 867 |   |   | 0.66 | % |   | 5.03 | % |   | 9.83 | % |   | 0.06 | % |   | 0.47 | % |   | 0.93 | % |
| Muskegon                    Commerce Bank                             |   |                          | 158    |                                        |   | 1,184                                       |   |   | 1,516 |   |   | 1.87 | % |   | 12.52 | % |   | 16.25 | % |   | 0.16 | % |   | 1.23 | % |   | 1.70 | % |
| Oakland                    Commerce Bank                              |   |                          | 1,143  |                                        |   | 1,835                                       |   |   | 1,014 |   |   | 11.50 | % |   | 17.75 | % |   | 10.14 | % |   | 0.94 | % |   | 1.46 | % |   | 0.77 | % |
| Ohio                    Commerce Bank(1)                              |   |                          | (383   | )                                           |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Paragon                    Bank & Trust                           |   |                          | 858    |                                        |   | 819                                         |   |   | 1,073 |   |   | 7.71 | % |   | 7.18 | % |   | 9.53 | % |   | 0.85 | % |   | 0.74 | % |   | 1.00 | % |
| Portage                    Commerce Bank                              |   |                          | 2,706  |                                        |   | 2,940                                       |   |   | 2,862 |   |   | 16.72 | % |   | 18.31 | % |   | 20.54 | % |   | 1.51 | % |   | 1.56 | % |   | 1.66 | % |
| Great                    Lakes Region Total                           |   |                          | 13,232 |                                        |   | 17,058                                      |   |   | 17,696 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   |                          |   |                                        |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southeast                    Region:                                  |   |                          |   |                                        |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                    of Valdosta(1)                                |   |                          | (822   | )                                           |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Community                    Bank of Rowan(1)                         |   |                          | (1,095 | )                                           |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| First                    Carolina State Bank(3)                       |   |                          | 637    |                                        |   | 478                                         |   |   | 445 |   |   | 5.59 | % |   | 4.42 | % |   | 4.31 | % |   | 0.75 | % |   | 0.64 | % |   | 0.66 | % |
| Peoples                    State Bank(2)                              |   |                          | 282    |                                        |   | 77                                          |   |   |   |   |   | 6.57 | % |   | 2.90 | % |   |   |   |   | 0.55 | % |   | 0.36 | % |   |   |   |
| Sunrise                    Bank of Atlanta(1)                         |   |                          | (820   | )                                           |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southeast                    Region Total                             |   |                          | (1,818 | )                                           |   | 555                                         |   |   | 445 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   |                          |   |                                        |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Midwest                    Region—Summit Bank of Kansas City(2) |   |                          | (593   | )                                           |   | (319                                        | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   |                          |   |                                        |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                    Regions Total                              |   | $                             | 10,821 |                                        | $      | 17,294                                      |   | $ | 18,141 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                             |   | Net                      Income |   | Return                      on Average Equity |   | Return                      on Average Assets |   |
|------------------------------------------------------------------|--------|---------------------------------|--------|-----------------------------------------------|--------|-----------------------------------------------|--------|
|                                                             |   | 2006                            |   | 2005                                          |   | 2004                                          |   | 2006 |   | 2005 |   | 2004 |   | 2006 |   | 2005 |   | 2004 |   |
|                                                             |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                      Regions Total (from preceding page) |   | $                               | 10,821 |                                          | $      | 17,294                                        |   | $ | 18,141 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Western                      Regions:*                          |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southwest                      Region:                           |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1st                      Commerce Bank(1)                        |   |                            | (432   | )                                             |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Arrowhead                      Community Bank                    |   |                            | 1,293  |                                          |   | 1,255                                         |   |   | 758 |   |   | 15.68 | % |   | 17.47 | % |   | 12.53 | % |   | 1.49 | % |   | 1.56 | % |   | 1.14 | % |
| Asian                      Bank of Arizona(1)                    |   |                            | (567   | )                                             |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                      of Las Vegas                           |   |                            | 707    |                                          |   | 670                                           |   |   | 224 |   |   | 7.24 | % |   | 9.70 | % |   | 3.65 | % |   | 1.09 | % |   | 1.16 | % |   | 0.41 | % |
| Bank                      of Tucson                              |   |                            | 4,656  |                                          |   | 3,732                                         |   |   | 2,962 |   |   | 29.93 | % |   | 27.61 | % |   | 24.69 | % |   | 2.62 | % |   | 2.12 | % |   | 1.86 | % |
| Black                      Mountain Community Bank               |   |                            | 2,556  |                                          |   | 2,204                                         |   |   | 1,428 |   |   | 20.40 | % |   | 20.95 | % |   | 16.20 | % |   | 1.96 | % |   | 1.84 | % |   | 1.50 | % |
| Camelback                      Community Bank                    |   |                            | 1,119  |                                          |   | 1,167                                         |   |   | 554 |   |   | 13.64 | % |   | 13.90 | % |   | 6.24 | % |   | 1.36 | % |   | 1.42 | % |   | 0.68 | % |
| Desert                      Community Bank                       |   |                            | 1,302  |                                          |   | 1,061                                         |   |   | 634 |   |   | 15.29 | % |   | 13.65 | % |   | 8.18 | % |   | 1.51 | % |   | 1.42 | % |   | 1.05 | % |
| East                      Valley Community Bank                  |   |                            | 514    |                                          |   | 313                                           |   |   | 219 |   |   | 9.51 | % |   | 6.38 | % |   | 5.12 | % |   | 1.27 | % |   | 0.67 | % |   | 0.49 | % |
| Fort                      Collins Commerce Bank(2)               |   |                            | 170    |                                          |   | (396                                          | )      |   |   |   |   | 2.10 | % |   |   |   |   |   |   |   | 0.42 | % |   |   |   |   |   |   |
| Mesa                      Bank                                   |   |                            | 3,995  |                                          |   | 2,808                                         |   |   | 1,659 |   |   | 32.56 | % |   | 31.37 | % |   | 22.83 | % |   | 2.59 | % |   | 2.45 | % |   | 1.91 | % |
| Red                      Rock Community Bank                     |   |                            | 2,162  |                                          |   | 1,856                                         |   |   | 806 |   |   | 17.38 | % |   | 15.32 | % |   | 6.47 | % |   | 2.09 | % |   | 1.73 | % |   | 0.75 | % |
| Southern                      Arizona Community Bank             |   |                            | 1,189  |                                          |   | 1,290                                         |   |   | 1,291 |   |   | 13.51 | % |   | 14.74 | % |   | 15.47 | % |   | 1.39 | % |   | 1.46 | % |   | 1.54 | % |
| Sunrise                      Bank of Albuquerque                 |   |                            | 494    |                                          |   | 929                                           |   |   | 770 |   |   | 7.50 | % |   | 13.58 | % |   | 12.53 | % |   | 0.86 | % |   | 1.36 | % |   | 1.09 | % |
| Sunrise                      Bank of Arizona                     |   |                            | 1,372  |                                          |   | 2,215                                         |   |   | 2,674 |   |   | 10.82 | % |   | 18.12 | % |   | 23.27 | % |   | 1.17 | % |   | 1.82 | % |   | 2.03 | % |
| Valley                      First Community Bank                 |   |                            | 716    |                                          |   | 604                                           |   |   | 310 |   |   | 9.67 | % |   | 9.06 | % |   | 5.11 | % |   | 0.97 | % |   | 0.86 | % |   | 0.60 | % |
| Yuma                      Community Bank                         |   |                            | 1,199  |                                          |   | 992                                           |   |   | 915 |   |   | 16.95 | % |   | 14.88 | % |   | 15.59 | % |   | 1.70 | % |   | 1.66 | % |   | 1.74 | % |
| Southwest                      Region Total                      |   |                            | 22,445 |                                          |   | 20,700                                        |   |   | 15,204 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| California                      Region:                          |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                      of Escondido                           |   |                            | 787    |                                          |   | 452                                           |   |   | (186 | ) |   | 7.70 | % |   | 4.78 | % |   |   |   |   | 1.04 | % |   | 0.72 | % |   |   |   |
| Bank                      of San Francisco(2)                    |   |                            | (484   | )                                             |   | (726                                          | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                      of Santa Barbara(2)                    |   |                            | (630   | )                                             |   | (514                                          | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Napa                      Community Bank                         |   |                            | 1,572  |                                          |   | 965                                           |   |   | 579 |   |   | 13.65 | % |   | 9.47 | % |   | 6.80 | % |   | 1.86 | % |   | 1.27 | % |   | 0.87 | % |
| Point                      Loma Community Bank(3)                |   |                            | 196    |                                          |   | (467                                          | )      |   | (703 | ) |   | 2.84 | % |   |   |   |   |   |   |   | 0.48 | % |   |   |   |   |   |   |
| Sunrise                      Bank of San Diego                   |   |                            | 885    |                                          |   | 1,095                                         |   |   | 1,104 |   |   | 8.18 | % |   | 10.18 | % |   | 11.26 | % |   | 1.27 | % |   | 1.69 | % |   | 1.58 | % |
| California                      Region Total                     |   |                            | 2,326  |                                          |   | 805                                           |   |   | 794 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northwest                      Region:                           |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                      of Bellevue(2)                         |   |                            | (384   | )                                             |   | (551                                          | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                      of Everett(1)                          |   |                            | (733   | )                                             |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northwest                      Region Total                      |   |                            | (1,117 | )                                             |   | (551                                          | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Western                      Regions Total                       |   |                            | 23,654 |                                          |   | 20,954                                        |   |   | 15,998 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other,                      net                                  |   |                            | 7,916  |                                          |   | (2,323                                        | )      |   | (7,423 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                            |   |                                          |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                      totals                         |   | $                               | 42,391 |                                          | $      | 35,925                                        |   | $ | 26,716 |   |   | 12.94 | % |   | 13.34 | % |   | 11.25 | % |   | 1.12 | % |   | 1.08 | % |   | 0.91 | % |

| (1) | Became                      a Capitol affiliate in 2006 and is included for periods after                      addition to                      the Capitol banking network. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Became                      a Capitol affiliate in 2005 and is included for periods after                      addition to                      the Capitol banking network. |
| (3) | Became                      a Capitol affiliate in 2004 and is included for periods after                      addition to                      the Capitol banking network. |

----

*Financial          Position*

----

|                                                                                                                                                          |   | 2006   |   | 2005   |   | 2004   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Preopening                    and start-up costs of*de                    novo*                    banks and bank-development                    subsidiaries |   | $      | 4,462  |   | $      | 2,971  |   | $  | 448 |
| Advertising                                                                                                                                                   |   |   | 2,921  |   |   | 2,266  |   |   | 1,981 |
| Professional                    fees                                                                                                                          |   |   | 2,547  |   |   | 2,124  |   |   | 2,046 |
| Paper,                    printing and supplies                                                                                                               |   |   | 2,409  |   |   | 2,135  |   |   | 1,697 |
| Directors'                    fees                                                                                                                            |   |   | 2,196  |   |   | 1,577  |   |   | 914 |
| Taxes                    other than income taxes                                                                                                              |   |   | 1,372  |   |   | 1,401  |   |   | 1,010 |
| Bank                    services (ATMs, telephonebanking                    and Internet banking)                                                             |   |   | 1,564  |   |   | 1,229  |   |   | 1,123 |
| Communications                                                                                                                                                |   |   | 1,380  |   |   | 1,229  |   |   | 996 |
| Other                                                                                                                                                         |   |   | 13,252 |   |   | 13,866 |   |   | 10,006 |
| Total                                                                                                                                                         |   | $      | 32,103 |   | $      | 28,798 |   | $ | 20,221 |

**Capitol's          Financial Position**

*Liquidity,          Capital Resources and Capital Adequacy*

----

| ·   | Loan                    underwriting and documentation                                                                                                                                 |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Credit                    granting authorities within the bank                                                                                                                         |
| ·   | Acceptable                    collateral and loan structuring                                                                                                                          |
| ·   | Loan                    participations amongst other affiliates or other funding sources,                    when                    proposals exceed an individual bank's limitations |
| ·   | Collections                    and workouts                                                                                                                                            |
| ·   | Documenting                    and evaluating the adequacy of the allowance for loan                    losses                                                                         |
| ·   | Establishing                    corporate credit administration resources to aid the banks when                    needed                                                              |

----

----

*Critical          Accounting Policies*

----

|                                                                 |   |   Total                    Portfolio Loans |      |  Allowance                    forLoan                    Losses |   |  NonperformingLoans |   | Allowance                    as a % of Total Portfolio Loans |   |
|----------------------------------------------------------------------|--------|------------------------------------------------------|-----------|----------------------------------------------------------------------|--------|--------------------------|--------|--------------------------------------------------------------|--------|
|                                                                 |   | 2006                                                 |      | 2005                                                                 |   | 2006                     |   | 2005                                                         |   | 2006 |   | 2005 |   |                      2006 |   | 2005 |   |
| *Eastern                    Regions:*                                |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |
| Great                    Lakes Region:                               |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ann                    Arbor Commerce Bank                           |   | $                                                    | 288,408   |                                                                 | $      | 286,146                  |   | $                                                            | 4,393  |   | $ | 4,712 |   | $ | 4,441 |   | $ | 3,103 |   |   | 1.52 | % |   | 1.65 | % |
| Bank                    of Auburn Hills(2)                           |   |                                                 | 26,432    |                                                                 |   | 6,058                    |   |                                                         | 410    |   |   | 90 |   |   | 629 |   |   |   |   |   | 1.55 | % |   | 1.49 | % |
| Bank                    of Belleville(2)                             |   |                                                 | 17,410    |                                                                 |   | 1,534                    |   |                                                         | 260    |   |   | 23 |   |   |   |   |   |   |   |   | 1.49 | % |   | 1.50 | % |
| Bank                    of Maumee(1)                                 |   |                                                 | 3,327     |                                                                 |   |                     |   |                                                         | 50     |   |   |   |   |   |   |   |   |   |   |   | 1.50 | % |   |   |   |
| Bank                    of Michigan(2)                               |   |                                                 | 44,630    |                                                                 |   | 28,062                   |   |                                                         | 669    |   |   | 421 |   |   |   |   |   |   |   |   | 1.50 | % |   | 1.50 | % |
| Brighton                    Commerce Bank                            |   |                                                 | 94,987    |                                                                 |   | 93,553                   |   |                                                         | 995    |   |   | 978 |   |   | 522 |   |   | 1,412 |   |   | 1.05 | % |   | 1.05 | % |
| Capitol                    National Bank                             |   |                                                 | 196,074   |                                                                 |   | 197,062                  |   |                                                         | 2,833  |   |   | 3,233 |   |   | 3,365 |   |   | 4,938 |   |   | 1.44 | % |   | 1.64 | % |
| Detroit                    Commerce Bank                             |   |                                                 | 103,153   |                                                                 |   | 81,533                   |   |                                                         | 1,335  |   |   | 1,104 |   |   | 1,328 |   |   | 110 |   |   | 1.29 | % |   | 1.35 | % |
| Elkhart                    Community Bank                            |   |                                                 | 77,515    |                                                                 |   | 70,671                   |   |                                                         | 1,010  |   |   | 919 |   |   | 676 |   |   | 908 |   |   | 1.30 | % |   | 1.30 | % |
| Evansville                    Commerce Bank(1)                       |   |                                                 | 14,711    |                                                                 |   |                     |   |                                                         | 232    |   |   |   |   |   |   |   |   |   |   |   | 1.58 | % |   |   |   |
| Goshen                    Community Bank                             |   |                                                 | 63,653    |                                                                 |   | 53,497                   |   |                                                         | 862    |   |   | 648 |   |   | 233 |   |   | 443 |   |   | 1.35 | % |   | 1.21 | % |
| Grand                    Haven Bank                                  |   |                                                 | 120,025   |                                                                 |   | 117,241                  |   |                                                         | 2,643  |   |   | 2,575 |   |   | 2,682 |   |   | 3,342 |   |   | 2.20 | % |   | 2.20 | % |
| Kent                    Commerce Bank                                |   |                                                 | 83,065    |                                                                 |   | 74,385                   |   |                                                         | 1,237  |   |   | 1,277 |   |   | 2,256 |   |   | 1,751 |   |   | 1.49 | % |   | 1.72 | % |
| Macomb                    Community Bank                             |   |                                                 | 87,737    |                                                                 |   | 90,448                   |   |                                                         | 1,670  |   |   | 1,422 |   |   | 3,738 |   |   | 2,142 |   |   | 1.90 | % |   | 1.57 | % |
| Muskegon                    Commerce Bank                            |   |                                                 | 81,799    |                                                                 |   | 88,007                   |   |                                                         | 1,231  |   |   | 1,021 |   |   | 3,906 |   |   | 1,430 |   |   | 1.50 | % |   | 1.16 | % |
| Oakland                    Commerce Bank                             |   |                                                 | 114,876   |                                                                 |   | 101,859                  |   |                                                         | 1,636  |   |   | 1,424 |   |   | 2,862 |   |   | 948 |   |   | 1.42 | % |   | 1.40 | % |
| Ohio                    Commerce Bank(1)                             |   |                                                 | 739       |                                                                 |   |                     |   |                                                         | 11     |   |   |   |   |   |   |   |   |   |   |   | 1.49 | % |   |   |   |
| Paragon                    Bank & Trust                          |   |                                                 | 82,259    |                                                                 |   | 92,427                   |   |                                                         | 1,298  |   |   | 1,375 |   |   | 2,132 |   |   | 2,216 |   |   | 1.58 | % |   | 1.49 | % |
| Portage                    Commerce Bank                             |   |                                                 | 167,005   |                                                                 |   | 171,679                  |   |                                                         | 1,729  |   |   | 2,057 |   |   | 1,380 |   |   | 2,119 |   |   | 1.04 | % |   | 1.20 | % |
| Great                    Lakes Region Total                          |   |                                                 | 1,667,805 |                                                                 |   | 1,554,162                |   |                                                         | 24,504 |   |   | 23,279 |   |   | 30,150 |   |   | 24,862 |   |   | 1.47 | % |   | 1.50 | % |
|                                                                 |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southeast                    Region:                                 |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                    of Valdosta(1)                               |   |                                                 | 18,870    |                                                                 |   |                     |   |                                                         | 283    |   |   |   |   |   |   |   |   |   |   |   | 1.50 | % |   |   |   |
| Community                    Bank of Rowan(1)                        |   |                                                 | 36,534    |                                                                 |   |                     |   |                                                         | 534    |   |   |   |   |   |   |   |   |   |   |   | 1.46 | % |   |   |   |
| First                    Carolina State Bank                         |   |                                                 | 73,884    |                                                                 |   | 68,235                   |   |                                                         | 800    |   |   | 690 |   |   | 150 |   |   | 173 |   |   | 1.08 | % |   | 1.01 | % |
| Peoples                    State Bank(2)                             |   |                                                 | 15,154    |                                                                 |   | 19,909                   |   |                                                         | 263    |   |   | 140 |   |   |   |   |   | 16 |   |   | 1.74 | % |   | 0.70 | % |
| Sunrise                    Bank of Atlanta(1)                        |   |                                                 | 14,553    |                                                                 |   |                     |   |                                                         | 215    |   |   |   |   |   |   |   |   |   |   |   | 1.48 | % |   |   |   |
| Southeast                    Region Total                            |   |                                                 | 158,995   |                                                                 |   | 88,144                   |   |                                                         | 2,095  |   |   | 830 |   |   | 150 |   |   | 189 |   |   | 1.32 | % |   | 0.94 | % |
|                                                                 |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Midwest                    Region—Summit Bank of KansasCity(2) |   |                                                 | 15,645    |                                                                 |   | 644                      |   |                                                         | 235    |   |   | 10 |   |   |   |   |   |   |   |   | 1.50 | % |   |  1.55 |  % |
|                                                                 |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                    Regions Total                             |   | $                                                    | 1,842,445 |                                                                 | $      | 1,642,950                |   | $                                                            | 26,834 |   | $ | 24,119 |   | $ | 30,300 |   | $ | 25,051 |   |   | 1.46 | % |   | 1.47 | % |

----

|                                                           |   |   Total                    Portfolio Loans |      |  Allowance                    forLoan                    Losses |   |  NonperformingLoans |   | Allowance                    as a % of Total Portfolio Loans |   |
|----------------------------------------------------------------|--------|------------------------------------------------------|-----------|----------------------------------------------------------------------|--------|--------------------------|--------|--------------------------------------------------------------|--------|
|                                                           |   | 2006                                                 |      | 2005                                                                 |   | 2006                     |   | 2005                                                         |   | 2006 |   | 2005 |   |                      2006 |   | 2005 |   |
|                                                           |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |
| Eastern                    Regions Total (from preceding page) |   | $                                                    | 1,842,445 |                                                                 | $      | 1,642,950                |   | $                                                            | 26,834 |   | $ | 24,119 |   | $ | 30,300 |   | $ | 25,051 |   |   | 1.46 | % |   | 1.47 | % |
| *Western                    Regions:*                          |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southwest                    Region:                           |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1st                    Commerce Bank(1)                        |   |                                                 | 9,588     |                                                                 |   |                     |   |                                                         | 125    |   |   |   |   |   |   |   |   |   |   |   | 1.30 | % |   |   |   |
| Arrowhead                    Community Bank                    |   |                                                 | 71,252    |                                                                 |   | 73,800                   |   |                                                         | 720    |   |   | 654 |   |   | 855 |   |   | 140 |   |   | 1.01 | % |   | 0.89 | % |
| Asian                    Bank of Arizona(1)                    |   |                                                 | 14,499    |                                                                 |   |                     |   |                                                         | 200    |   |   |   |   |   |   |   |   |   |   |   | 1.38 | % |   |   |   |
| Bank                    of Las Vegas                           |   |                                                 | 62,818    |                                                                 |   | 50,899                   |   |                                                         | 705    |   |   | 495 |   |   |   |   |   |   |   |   | 1.12 | % |   | 0.97 | % |
| Bank                    of Tucson                              |   |                                                 | 160,009   |                                                                 |   | 143,900                  |   |                                                         | 1,472  |   |   | 1,405 |   |   | 199 |   |   | 200 |   |   | 0.92 | % |   | 0.98 | % |
| Black                    Mountain Community Bank               |   |                                                 | 127,844   |                                                                 |   | 103,627                  |   |                                                         | 1,529  |   |   | 1,277 |   |   |   |   |   | 131 |   |   | 1.20 | % |   | 1.23 | % |
| Camelback                    Community Bank                    |   |                                                 | 78,922    |                                                                 |   | 73,813                   |   |                                                         | 733    |   |   | 852 |   |   | 46 |   |   | 41 |   |   | 0.93 | % |   | 1.15 | % |
| Desert                    Community Bank                       |   |                                                 | 83,284    |                                                                 |   | 71,050                   |   |                                                         | 830    |   |   | 830 |   |   | 137 |   |   | 273 |   |   | 1.00 | % |   | 1.17 | % |
| East                    Valley Community Bank                  |   |                                                 | 31,884    |                                                                 |   | 38,716                   |   |                                                         | 321    |   |   | 497 |   |   |   |   |   |   |   |   | 1.01 | % |   | 1.28 | % |
| Fort                    Collins Commerce Bank(2)               |   |                                                 | 52,147    |                                                                 |   | 22,619                   |   |                                                         | 695    |   |   | 306 |   |   |   |   |   |   |   |   | 1.33 | % |   | 1.35 | % |
| Mesa                    Bank                                   |   |                                                 | 157,979   |                                                                 |   | 125,513                  |   |                                                         | 1,473  |   |   | 1,215 |   |   |   |   |   |   |   |   | 0.93 | % |   | 0.97 | % |
| Red                    Rock Community Bank                     |   |                                                 | 100,010   |                                                                 |   | 83,259                   |   |                                                         | 1,084  |   |   | 1,300 |   |   | 151 |   |   | 198 |   |   | 1.08 | % |   | 1.56 | % |
| Southern                    Arizona Community Bank             |   |                                                 | 77,845    |                                                                 |   | 76,953                   |   |                                                         | 775    |   |   | 720 |   |   | 16 |   |   | 59 |   |   | 1.00 | % |   | 0.94 | % |
| Sunrise                    Bank of Albuquerque                 |   |                                                 | 53,027    |                                                                 |   | 53,669                   |   |                                                         | 778    |   |   | 693 |   |   |   |   |   | 300 |   |   | 1.47 | % |   | 1.29 | % |
| Sunrise                    Bank of Arizona                     |   |                                                 | 112,720   |                                                                 |   | 101,846                  |   |                                                         | 1,126  |   |   | 1,253 |   |   | 246 |   |   | 70 |   |   | 1.00 | % |   | 1.23 | % |
| Valley                    First Community Bank                 |   |                                                 | 66,256    |                                                                 |   | 57,794                   |   |                                                         | 611    |   |   | 526 |   |   |   |   |   |   |   |   | 0.92 | % |   | 0.91 | % |
| Yuma                    Community Bank                         |   |                                                 | 58,577    |                                                                 |   | 50,474                   |   |                                                         | 500    |   |   | 485 |   |   |   |   |   | 27 |   |   | 0.85 | % |   | 0.96 | % |
| Southwest                    Region Total                      |   |                                                 | 1,318,661 |                                                                 |   | 1,127,932                |   |                                                         | 13,677 |   |   | 12,508 |   |   | 1,650 |   |   | 1,439 |   |   | 1.04 | % |   | 1.11 | % |
|                                                           |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| California                    Region:                          |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                    of Escondido                           |   |                                                 | 37,398    |                                                                 |   | 38,228                   |   |                                                         | 370    |   |   | 460 |   |   | 19 |   |   | 23 |   |   | 0.99 | % |   | 1.20 | % |
| Bank                    of San Francisco(2)                    |   |                                                 | 26,415    |                                                                 |   | 7,291                    |   |                                                         | 375    |   |   | 102 |   |   |   |   |   |   |   |   | 1.42 | % |   | 1.40 | % |
| Bank                    of Santa Barbara(2)                    |   |                                                 | 40,198    |                                                                 |   | 3,546                    |   |                                                         | 533    |   |   | 54 |   |   |   |   |   |   |   |   | 1.33 | % |   | 1.52 | % |
| Napa                    Community Bank                         |   |                                                 | 78,467    |                                                                 |   | 70,359                   |   |                                                         | 1,020  |   |   | 1,237 |   |   |   |   |   | 19 |   |   | 1.30 | % |   | 1.76 | % |
| Point                    Loma Community Bank                   |   |                                                 | 38,018    |                                                                 |   | 29,759                   |   |                                                         | 510    |   |   | 423 |   |   |   |   |   |   |   |   | 1.34 | % |   | 1.42 | % |
| Sunrise                    Bank of San Diego                   |   |                                                 | 65,250    |                                                                 |   | 58,983                   |   |                                                         | 540    |   |   | 588 |   |   |   |   |   | 200 |   |   | 0.83 | % |   | 1.00 | % |
| California                    Region Total                     |   |                                                 | 285,746   |                                                                 |   | 208,166                  |   |                                                         | 3,348  |   |   | 2,864 |   |   | 19 |   |   | 242 |   |   | 1.17 | % |   | 1.38 | % |
|                                                           |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northwest                    Region:                           |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                    of Bellevue(2)                         |   |                                                 | 28,037    |                                                                 |   | 8,327                    |   |                                                         | 370    |   |   | 120 |   |   |   |   |   |   |   |   | 1.32 | % |   | 1.44 | % |
| Bank                    of Everett(1)                          |   |                                                 | 8,269     |                                                                 |   |                     |   |                                                         | 122    |   |   |   |   |   |   |   |   |   |   |   | 1.48 | % |   |   |   |
| Northwest                    Region Total                      |   |                                                 | 36,306    |                                                                 |   | 8,327                    |   |                                                         | 492    |   |   | 120 |   |   |   |   |   |   |   |   | 1.36 | % |   | 1.15 | % |
|                                                           |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Western                    Regions Total                       |   |                                                 | 1,640,713 |                                                                 |   | 1,344,425                |   |                                                         | 17,517 |   |   | 15,492 |   |   | 1,669 |   |   | 1,681 |   |   | 1.07 | % |   | 1.15 | % |
|                                                           |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other,                    net                                  |   |                                                 | 5,520     |                                                                 |   | 3,814                    |   |                                                         | 1,063  |   |   | 948 |   |   | 2,305 |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                                 |      |                                                                 |   |                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                    totals                         |   | $                                                    | 3,488,678 |                                                                 | $      | 2,991,189                |   | $                                                            | 45,414 |   | $ | 40,559 |   | $ | 34,274 |   | $ | 26,732 |   |   | 1.30 | % |   | 1.36 | % |

| (1) | Became                    a Capitol affiliate in 2006 and is included for periods after                    addition to                    the Capitol banking network. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Became                    a Capitol affiliate in 2005 and is included for periods after                    addition to                    the Capitol banking network. |

----

*Critical          Accounting Policies*

**Liquidity,          Capital Resources and Capital Adequacy**

----

|                                                                             |   |           |      | Payments                    Due by Period |
|----------------------------------------------------------------------------------|--------|----------------|-----------|-------------------------------------------|
|                                                                             |   |  Total(1) |      | Within1                    Year           |   | Within1-3                    Years |   | Within3-5                    Years |   | After5                    Years |
|                                                                             |   |           |      |                                      |   |   |   |   |   |   |
| Deposits                    without a statedmaturity                             |   | $              | 1,838,252 |                                      | $ | 1,838,252 |   |   |   |   |   |   |   |   |   |
| Time                    deposits                                                 |   |           | 1,420,233 |                                      |   | 1,153,331 |   | $ | 204,984 |   | $ | 59,282 |   | $ | 2,636 |
| Debt                    obligations                                              |   |           | 191,154   |                                      |   | 125,314 |   |   | 33,128 |   |   | 32,594 |   |   | 118 |
| Rent                    commitments undernoncancelable                    leases |   |           | 41,898    |                                      |   | 7,167 |   |   | 11,973 |   |   | 9,478 |   |   | 13,280 |
| Trust-preferred                    securities                                    |   |           | 103,300   |                                      |   |   |   |   |   |   |   |   |   |   | 103,300 |
|                                                                             |   |           |      |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                                            |   | $              | 3,594,837 |                                      | $ | 3,124,064 |   | $ | 250,085 |   | $ | 101,354 |   | $ | 119,334 |

----

*de          novo*

*de          novo*

----

| ·   | Stockholders'                    equity                                                              |
|--------------------|------------------------------------------------------------------------------------------------------|
| ·   | Minority                    interests in consolidated subsidiaries                                   |
| ·   | Trust-preferred                    securities and related subordinated                    debentures |

*well          capitalized*
*adequately          capitalized*
*inadequately          capitalized*
*inadequately          capitalized*

----

*adequately          capitalized*
*well          capitalized*
*well          capitalized*

*well          capitalized*

**Trends          Affecting Operations**

----

|                                                                                                        |   | Interest                    Rate Sensitivity |      |                             |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|----------------------------------|
|                                                                                                        |   | 0                    to 3Months              |      | 4                    to 12Months |   | 1                    to 5Years |   | Over                    5Years |   |  Total |
| ASSETS                                                                                                      |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Money                    market and interest-bearing deposits                                               |   | $                                            | 17,707    |                             | $ | 19,101 |   | $ | 396 |   |   |   |   | $ | 37,204 |
| Federal                    funds sold                                                                       |   |                                         | 141,913   |                             |   |   |   |   |   |   |   |   |   |   | 141,913 |
| Loans                    held for sale                                                                      |   |                                         | 34,593    |                             |   |   |   |   |   |   |   |   |   |   | 34,593 |
| Investment                    securities                                                                    |   |                                         | 17,937    |                             |   | 2,068 |   |   | 6,926 |   | $ | 13,722 |   |   | 40,653 |
| Portfolio                    loans:                                                                         |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                                                                  |   |                                         | 1,280,104 |                             |   | 251,326 |   |   | 1,449,943 |   |   | 121,752 |   |   | 3,103,125 |
| Real                    estate mortgage                                                                     |   |                                         | 201,354   |                             |   | 20,851 |   |   | 30,654 |   |   | 6,745 |   |   | 259,604 |
| Installment                                                                                                 |   |                                         | 32,161    |                             |   | 24,506 |   |   | 60,415 |   |   | 8,867 |   |   | 125,949 |
| Nonearning                    assets                                                                        |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   | 322,775 |
|                                                                                                        |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Total                    assets                                                                             |   | $                                            | 1,725,769 |                             | $ | 317,852 |   | $ | 1,548,334 |   | $ | 151,086 |   | $ | 4,065,816 |
|                                                                                                        |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                    AND STOCKHOLDERS' EQUITY                                                     |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                    deposits:                                                               |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Time                    deposits under $100,000                                                             |   | $                                            | 123,976   |                             | $ | 230,873 |   | $ | 103,750 |   | $ | 1,605 |   | $ | 460,204 |
| Time                    deposits $100,000 and over                                                          |   |                                         | 363,192   |                             |   | 435,290 |   |   | 160,516 |   |   | 1,031 |   |   | 960,029 |
| All                    other interest-bearing deposits                                                      |   |                                         | 813,859   |                             |   | 204,211 |   |   | 82,601 |   |   | 86,327 |   |   | 1,186,998 |
| Total                    interest-bearing deposits                                                          |   |                                         | 1,301,027 |                             |   | 870,374 |   |   | 346,867 |   |   | 88,963 |   |   | 2,607,231 |
| Notes                    payable and short-term borrowings                                                  |   |                                         | 57,380    |                             |   | 67,934 |   |   | 65,722 |   |   | 118 |   |   | 191,154 |
| Trust                    preferred securities                                                               |   |                                         | 48,000    |                             |   |   |   |   |   |   |   | 55,300 |   |   | 103,300 |
| Noninterest-bearing                    liabilities                                                          |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   | 675,740 |
| Minority                    interests in consolidated subsidiaries                                          |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   | 126,512 |
| Stockholders'                    equity                                                                     |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   | 361,879 |
|                                                                                                        |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Total                    liabilities and stockholders' equity                                               |   | $                                            | 1,406,407 |                             | $ | 938,308 |   | $ | 412,589 |   | $ | 144,381 |   | $ | 4,065,816 |
|                                                                                                        |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest                    rate sensitive period gap                                                       |   | $                                            | 319,362   |                             | $ | (620,456 | ) | $ | 1,135,745 |   | $ | 6,705 |   |   |   |
|                                                                                                        |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest                    rate sensitive cumulative gap                                                   |   | $                                            | 319,362   |                             | $ | (301,094 | ) | $ | 834,651 |   | $ | 841,356 |   |   |   |
|                                                                                                        |   |                                         |      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Period                    rate sensitive assets/period ratesensitive                    liabilities         |   |                                         | 1.23      |                             |   | 0.34 |   |   | 3.75 |   |   | 1.05 |   |   |   |
| Cumulative                    rate sensitive assets/cumulativerate                    sensitive liabilities |   |                                         | 1.23      |                             |   | 0.87 |   |   | 1.30 |   |   | 1.29 |   |   |   |
| Cumulative                    gap to total assets                                                           |   |                                         | 7.85      | %                                |   | (7.41 | )% |   | 20.53 | % |   | 20.69 | % |   |   |

----

|                                         |   | Pro                          Forma Assuming No Change in Interest Rates |    | Pro                          Forma Effect of Interest Rate Increases |   | Pro                          Forma Effect of Interest Rate Decreases |
|----------------------------------------------|--------|-------------------------------------------------------------------------|---------|----------------------------------------------------------------------|--------|----------------------------------------------------------------------|
|                                         |   |                                                                    |    | +100                          bp                                     |   | +200                          bp                                     |   | -100                          bp |   | -200                          bp |
|                                         |   |                                                                    |    |                                                                 |   |                                                                 |   |   |   |   |
| Interest                          income     |   | $                                                                       | 308,683 |                                                                 | $      | 328,927                                                              |   | $ | 349,237 |   | $ | 288,704 |   | $ | 268,648 |
| Interest                          expense    |   |                                                                    | 142,855 |                                                                 |   | 162,108                                                              |   |   | 181,260 |   |   | 122,872 |   |   | 102,888 |
|                                         |   |                                                                    |    |                                                                 |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Net                          interest income |   | $                                                                       | 165,828 |                                                                 | $      | 166,819                                                              |   | $ | 167,977 |   | $ | 165,832 |   | $ | 165,760 |

----

* *

----

**Critical          Accounting Policies Affecting Capitol's Financial          Statements**

*Significant          Accounting Policies*

*Use          of Estimates in Determining the Allowance for Loan Losses*

----

*Accounting          for Goodwill and Other Intangibles.*

*Accounting          for Stock Options.*

----

*Consolidation          Policy*

**New          Accounting Standards**

**Risk          Factors Affecting Capitol and its Banks**

| ·   | The                    favorable environment for formation of new banks could change                    adversely                                                                                                                                 |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | New                    banks, which include Capitol's younger affiliates, incur operating                    losses                    and may not contribute to consolidated earnings for a period                    of                    time |

----

| ·   | The                    favorable environment which has made both capital and management                    talent                    readily available for formation of new banks could change                    adversely                                                                     |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Changes                    in regulations, or regulatory action regarding Capitol or its                    banks could                    limit future expansion plans                                                                                                                         |
| ·   | The                    consolidated allowance for loan losses is based on                    estimates                                                                                                                                                                                          |
| ·   | Concentrations                    in loans secured by commercial real estate could limit or delay                    future                    expansion plans and loss estimates could change significantly                    if real                    estate market conditions deteriorate |
| ·   | The                    complexity of Capitol's structure (a mixture of partially-owned                    and                    wholly-owned banks and related entities) complicates financial                    analysis                                                                     |

----

***Report            on Management****'s Assessment of***

***Internal            Control Over Financial Reporting***

*Internal          Control - Integrated Framework*
*Internal          Control - Integrated Framework*

|  Joseph                    D. ReidChairman                    and CEO Lansing,                    MichiganMarch                    14, 2007 | Lee                    W. HendricksonChief                    Financial Officer |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|

----

|                        | **BDO                  Seidman, LLP**Accountants                  and Consultants | 99                  Monroe Avenue N.W., Suite 800Grand                  Rapids, Michigan 49503-2654Telephone:                  (616) 774-7000Fax:                  (616) 776-3680 |
|--------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Report          of Independent Registered Public Accounting Firm**

*Internal          Control-Integrated Framework*

----

|  Grand                    Rapids, MichiganMarch                    14, 2007 |
|----------------------------------------------------------------------------------|

----

|   | **BDO                Seidman, LLP**Accountants                  and Consultants | 99                  Monroe Avenue N.W., Suite 800Grand                  Rapids, Michigan 49503-2654Telephone:                  (616) 774-7000Fax:                  (616) 776-3680 |
|--------|---------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Report            of Independent Registered Public Accounting Firm**

*Internal            Control - Integrated Framework*

|  Grand                      Rapids, MichiganMarch                      14, 2007 |
|--------------------------------------------------------------------------------------|

----

***Consolidated            Balance Sheets***

|                                                                                                                                                                                                                 |   | -December                      31- |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-----------|
|                                                                                                                                                                                                                 |   | 2006                               |      | 2005 |   |
|                                                                                                                                                                                                                 |   | (in                      $1,000s)  |      |
| ASSETS                                                                                                                                                                                                               |   |                          |      |    |   |
| Cash                      and due from banks                                                                                                                                                                         |   | $169,753                           |      | $157,963 |   |
| Money                      market and interest-bearing deposits                                                                                                                                                      |   |  37,204                       |      |  19,846 |   |
| Federal                      funds sold                                                                                                                                                                              |   |  141,913                      |      |  128,299 |   |
| Cash                      and cash equivalents                                                                                                                                                                       |   |  348,870                      |      |  306,108 |   |
| Loans                      held for sale                                                                                                                                                                             |   |  34,593                       |      |  21,638 |   |
| Investment                      securities—Note C:                                                                                                                                                             |   |                          |      |    |   |
| Available                      for sale, carried at market value                                                                                                                                                     |   |  18,904                       |      |  25,929 |   |
| Held                      for long-term investment, carried at amortizedcost                      which approximates market value                                                                                    |   |                               | 21,749    |   |   | 17,745 |   |
| Total                      investment securities                                                                                                                                                                     |   |                               | 40,653    |   |   | 43,674 |   |
| Portfolio                      loans, less allowance for loan losses of $45,414in                      2006 and $40,559 in 2005—Note D                                                                         |   |                               | 3,443,264 |   |   | 2,950,630 |   |
| Premises                      and equipment—Note F                                                                                                                                                             |   |                               | 54,295    |   |   | 41,629 |   |
| Accrued                      interest income                                                                                                                                                                         |   |                               | 17,524    |   |   | 13,719 |   |
| Goodwill                      and other intangibles—Notes B and R                                                                                                                                              |   |                               | 62,215    |   |   | 50,378 |   |
| Other                      assets                                                                                                                                                                                    |   |                               | 64,402    |   |   | 47,945 |   |
|                                                                                                                                                                                                                 |   |                               |      |   |   |   |   |
| TOTAL                      ASSETS                                                                                                                                                                                    |   | $                                  | 4,065,816 |   | $ | 3,475,721 |   |
|                                                                                                                                                                                                                 |   |                               |      |   |   |   |   |
| LIABILITIES                      AND STOCKHOLDERS' EQUITY                                                                                                                                                            |   |                               |      |   |   |   |   |
| Deposits:                                                                                                                                                                                                            |   |                               |      |   |   |   |   |
| Noninterest                      bearing                                                                                                                                                                             |   | $                                  | 651,253   |   | $ | 591,229 |   |
| Interest-bearing—Note                      G                                                                                                                                                                   |   |                               | 2,607,232 |   |   | 2,194,030 |   |
| Total                      deposits                                                                                                                                                                                  |   |                               | 3,258,485 |   |   | 2,785,259 |   |
| Debt                      obligations:                                                                                                                                                                               |   |                               |      |   |   |   |   |
| Notes                      payable and short-term borrowings—Note H                                                                                                                                            |   |                               | 191,154   |   |   | 175,729 |   |
| Subordinated                      debentures—Note I                                                                                                                                                            |   |                               | 101,035   |   |   | 100,940 |   |
| Total                      debt obligations                                                                                                                                                                          |   |                               | 292,189   |   |   | 276,669 |   |
| Accrued                      interest on deposits and other liabilities                                                                                                                                              |   |                               | 26,751    |   |   | 28,089 |   |
| Total                      liabilities                                                                                                                                                                               |   |                               | 3,577,425 |   |   | 3,090,017 |   |
|                                                                                                                                                                                                                 |   |                               |      |   |   |   |   |
| MINORITY                      INTERESTS IN CONSOLIDATED SUBSIDIARIES—Note A                                                                                                                                    |   |                               | 126,512   |   |   | 83,838 |   |
|                                                                                                                                                                                                                 |   |                               |      |   |   |   |   |
| STOCKHOLDERS'                      EQUITY—Notes B, J and P                                                                                                                                                     |   |                               |      |   |   |   |   |
| Common                      stock, no par value, 50,000,000 shares authorized;issued                      and outstanding:2006                      - 16,656,481 shares2005                      - 15,776,192 shares |   |                               | 249,244   |   |   | 216,539 |   |
| Retained                      earnings                                                                                                                                                                               |   |                               | 112,779   |   |   | 85,553 |   |
| Market                      value adjustment (net of tax effect) for investment                      securitiesavailable                      for sale (accumulated other comprehensive income/loss)                 |   |                               | (144      | ) |   | (226 | ) |
| Total                      stockholders' equity                                                                                                                                                                      |   |                               | 361,879   |   |   | 301,866 |   |
|                                                                                                                                                                                                                 |   |                               |      |   |   |   |   |
| TOTAL                      LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                      |   | $                                  | 4,065,816 |   | $ | 3,475,721 |   |

----

***Consolidated            Statements of Income***

|                                                                                                                      |   |       | -Year                        Ended December 31-           |       |
|---------------------------------------------------------------------------------------------------------------------------|--------|------------|-----------------------------------------------------------|------------|
|                                                                                                                      |   |  2006 |                                                      |  2005 |   |  2004 |   |
|                                                                                                                      |   |       | (in                        $1,000s except per share data) |       |
| Interest                        income:                                                                                   |   |       |                                                      |       |   |   |   |   |   |   |
| Portfolio                        loans (including fees)                                                                   |   | $          | 264,701                                                   |       | $ | 214,882 |   | $ | 173,376 |   |
| Loans                        held for sale                                                                                |   |       | 2,740                                                     |       |   | 2,627 |   |   | 2,150 |   |
| Taxable                        investment securities                                                                      |   |       | 956                                                       |       |   | 1,008 |   |   | 1,331 |   |
| Federal                        funds sold                                                                                 |   |       | 8,703                                                     |       |   | 4,734 |   |   | 1,620 |   |
| Other                                                                                                                     |   |       | 2,253                                                     |       |   | 1,188 |   |   | 612 |   |
| Total                        interest income                                                                              |   |       | 279,353                                                   |       |   | 224,439 |   |   | 179,089 |   |
| Interest                        expense:                                                                                  |   |       |                                                      |       |   |   |   |   |   |   |
| Deposits                                                                                                                  |   |       | 88,629                                                    |       |   | 53,213 |   |   | 36,695 |   |
| Debt                        obligations and other                                                                         |   |       | 16,957                                                    |       |   | 14,366 |   |   | 10,801 |   |
| Total                        interest expense                                                                             |   |       | 105,586                                                   |       |   | 67,579 |   |   | 47,496 |   |
| Net                        interest income                                                                                |   |       | 173,767                                                   |       |   | 156,860 |   |   | 131,593 |   |
| Provision                        for loan losses—Note D                                                             |   |       | 12,156                                                    |       |   | 10,960 |   |   | 12,708 |   |
| Net                        interest income after provision forloan                        losses                          |   |       | 161,611                                                   |       |   | 145,900 |   |   | 118,885 |   |
| Noninterest                        income:                                                                                |   |       |                                                      |       |   |   |   |   |   |   |
| Service                        charges on deposit accounts                                                                |   |       | 4,318                                                     |       |   | 4,120 |   |   | 4,381 |   |
| Trust                        and wealth-management revenue                                                                |   |       | 3,336                                                     |       |   | 2,069 |   |   | 3,456 |   |
| Fees                        from origination of non-portfolio residentialmortgage                        loans            |   |       | 5,439                                                     |       |   | 6,146 |   |   | 5,581 |   |
| Gains                        on sale of government-guaranteed loans                                                       |   |       | 2,434                                                     |       |   | 2,980 |   |   | 3,778 |   |
| Realized                        gains (losses) on sales of investmentsecurities                        available for sale |   |       |                                                      |       |   | 8 |   |   | (603 | ) |
| Other                                                                                                                     |   |       | 6,005                                                     |       |   | 5,725 |   |   | 2,659 |   |
| Total                        noninterest income                                                                           |   |       | 21,532                                                    |       |   | 21,048 |   |   | 19,252 |   |
| Noninterest                        expense:                                                                               |   |       |                                                      |       |   |   |   |   |   |   |
| Salaries                        and employee benefits                                                                     |   |       | 85,196                                                    |       |   | 72,387 |   |   | 63,281 |   |
| Occupancy                                                                                                                 |   |       | 12,116                                                    |       |   | 9,735 |   |   | 8,791 |   |
| Equipment                        rent, depreciation and maintenance                                                       |   |       | 8,389                                                     |       |   | 6,369 |   |   | 5,494 |   |
| Other                                                                                                                     |   |       | 32,103                                                    |       |   | 28,798 |   |   | 20,221 |   |
| Total                        noninterest expense                                                                          |   |       | 137,804                                                   |       |   | 117,289 |   |   | 97,787 |   |
| Income                        before income taxes and minority interest                                                   |   |       | 45,339                                                    |       |   | 49,659 |   |   | 40,350 |   |
| Income                        taxes—Note L                                                                          |   |       | 15,463                                                    |       |   | 19,232 |   |   | 14,699 |   |
| Income                        before minority interest                                                                    |   |       | 29,876                                                    |       |   | 30,427 |   |   | 25,651 |   |
| Minority                        interest in net losses of consolidated subsidiaries                                       |   |       | 12,515                                                    |       |   | 5,498 |   |   | 1,065 |   |
|                                                                                                                      |   |       |                                                      |       |   |   |   |   |   |   |
| NET                        INCOME                                                                                         |   | $          | 42,391                                                    |       | $ | 35,925 |   | $ | 26,716 |   |
|                                                                                                                      |   |       |                                                      |       |   |   |   |   |   |   |
| NET                        INCOME PER SHARE—Note M:                                                                 |   |       |                                                      |       |   |   |   |   |   |   |
| Basic                                                                                                                     |   | $          | 2.69                                                      |       | $ | 2.42 |   | $ | 1.88 |   |
|                                                                                                                      |   |       |                                                      |       |   |   |   |   |   |   |
| Diluted                                                                                                                   |   | $          | 2.57                                                      |       | $ | 2.34 |   | $ | 1.79 |   |

----

***Consolidated            Statements of Changes in Stockholders' Equity (in $1,000s, except share            and            per-share data)***

|                                                                                                                                                                                           |   |   CommonStock |    |   RetainedEarnings |   | AccumulatedOtherComprehensive                      Income (Loss) |   |    Total |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|------------------------------|--------|------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                                                                                                                                           |   |                    |    |                         |   |                                                             |   |                    |   |
| Balances                      at January 1, 2004                                                                                                                                               |   | $                       | 175,962 |                         | $      | 43,135                                                           |   | $                       | (200   | ) | $ | 218,897 |   |
| Issuance                      of 183,349 shares of common stock in conjunctionwith                      acquisition of First Carolina State Bank                                               |   |                    | 4,970   |                         |   |                                                             |   |                    |   |   |   | 4,970 |   |
| Issuance                      of 346,947 shares of common stock to acquireminority                      interests in subsidiaries                                                              |   |                    | 8,665   |                         |   |                                                             |   |                    |   |   |   | 8,665 |   |
| Issuance                      of 257,409 shares of common stock upon exerciseof                      stock options, net of common stock surrendered tofacilitate                      exercise |   |                    | 1,302   |                         |   |                                                             |   |                    |   |   |   | 1,302 |   |
| Issuance                      of 13,063 unvested shares of restricted commonstock,                      net of related unearned employee compensation                                          |   |                    | --      |                         |   |                                                             |   |                    |   |   |   | -- |   |
| Recognition                      of compensation expense relating to restrictedcommon                      stock of $1,168 and other                                                           |   |                    | 820     |                         |   |                                                             |   |                    |   |   |   | 820 |   |
| Cash                      dividends paid ($0.65 per share)                                                                                                                                     |   |                    |    |                         |   | (9,375                                                           | )      |                    |   |   |   | (9,375 | ) |
| Components                      of comprehensive income:                                                                                                                                       |   |                    |    |                         |   |                                                             |   |                    |   |   |   |   |   |
| Net                      income for 2004                                                                                                                                                       |   |                    |    |                         |   | 26,716                                                           |   |                    |   |   |   | 26,716 |   |
| Market                      value adjustment for investment securitiesavailable                      for sale (net of income tax effect)                                                       |   |                    |    |                         |   |                                                             |   |                    | 164    |   |   | 164 |   |
| Comprehensive                      income for 2004                                                                                                                                             |   |                    |    |                         |   |                                                             |   |                    |   |   |   | 26,880 |   |
|                                                                                                                                                                                           |   |                    |    |                         |   |                                                             |   |                    |   |   |   |   |   |
| BALANCES                      AT DECEMBER 31, 2004                                                                                                                                             |   |                    | 191,719 |                         |   | 60,476                                                           |   |                    | (36    | ) |   | 252,159 |   |
|                                                                                                                                                                                           |   |                    |    |                         |   |                                                             |   |                    |   |   |   |   |   |
| Issuance                      of 610,383 shares of common stock to acquireminority                      interests in subsidiaries                                                              |   |                    | 20,136  |                         |   |                                                             |   |                    |   |   |   | 20,136 |   |
| Issuance                      of 337,059 shares of common stock upon exerciseof                      stock options, net of common stock surrendered tofacilitate                      exercise |   |                    | 2,510   |                         |   |                                                             |   |                    |   |   |   | 2,510 |   |
| Recognition                      of compensation expense relating to restrictedcommon                      stock of $1,242 and other                                                           |   |                    | 1,590   |                         |   |                                                             |   |                    |   |   |   | 1,590 |   |
| Issuance                      of shares to ESOP                                                                                                                                                |   |                    | 584     |                         |   |                                                             |   |                    |   |   |   | 584 |   |
| Cash                      dividends paid ($0.72 per share)                                                                                                                                     |   |                    |    |                         |   | (10,848                                                          | )      |                    |   |   |   | (10,848 | ) |
| Components                      of comprehensive income:                                                                                                                                       |   |                    |    |                         |   |                                                             |   |                    |   |   |   |   |   |
| Net                      income for 2005                                                                                                                                                       |   |                    |    |                         |   | 35,925                                                           |   |                    |   |   |   | 35,925 |   |
| Market                      value adjustment for investment securitiesavailable                      for sale (net of income tax effect)                                                       |   |                    |    |                         |   |                                                             |   |                    | (190   | ) |   | (190 | ) |
| Comprehensive                      income for 2005                                                                                                                                             |   |                    |    |                         |   |                                                             |   |                    |   |   |   | 35,735 |   |
|                                                                                                                                                                                           |   |                    |    |                         |   |                                                             |   |                    |   |   |   |   |   |
| BALANCES                      AT DECEMBER 31, 2005                                                                                                                                             |   |                    | 216,539 |                         |   | 85,553                                                           |   |                    | (226   | ) |   | 301,866 |   |
|                                                                                                                                                                                           |   |                    |    |                         |   |                                                             |   |                    |   |   |   |   |   |
| Issuance                      of 555,280 shares of common stock to acquireminority                      interest in subsidiaries                                                               |   |                    | 24,962  |                         |   |                                                             |   |                    |   |   |   | 24,962 |   |
| Issuance                      of 244,259 shares of common stock upon exerciseof                      stock options, net of common stock surrendered tofacilitate                      exercise |   |                    | 3,573   |                         |   |                                                             |   |                    |   |   |   | 3,573 |   |
| Issuance                      of 80,750 unvested shares of restricted commonstock,                      net of related unearned employee compensation                                          |   |                    | --      |                         |   |                                                             |   |                    |   |   |   | -- |   |
| Recognition                      of compensation expense relating to restrictedcommon                      stock                                                                               |   |                    | 1,689   |                         |   |                                                             |   |                    |   |   |   | 1,689 |   |
| Tax                      benefit from share-based payments                                                                                                                                     |   |                    | 2,481   |                         |   |                                                             |   |                    |   |   |   | 2,481 |   |
| Cash                      dividends paid ($0.95 per share)                                                                                                                                     |   |                    |    |                         |   | (15,165                                                          | )      |                    |   |   |   | (15,165 | ) |
| Components                      of comprehensive income:                                                                                                                                       |   |                    |    |                         |   |                                                             |   |                    |   |   |   |   |   |
| Net                      income for 2006                                                                                                                                                       |   |                    |    |                         |   | 42,391                                                           |   |                    |   |   |   | 42,391 |   |
| Market                      value adjustment for investment securitiesavailable                      for sale (net of income tax effect)                                                       |   |                    |    |                         |   |                                                             |   |                    | 82     |   |   | 82 |   |
| Comprehensive                      income for 2006                                                                                                                                             |   |                    |    |                         |   |                                                             |   |                    |   |   |   | 42,473 |   |
|                                                                                                                                                                                           |   |                    |    |                         |   |                                                             |   |                    |   |   |   |   |   |
| BALANCES                      AT DECEMBER 31, 2006                                                                                                                                             |   | $                       | 249,244 |                         | $      | 112,779                                                          |   | $                       | (144   | ) | $ | 361,879 |   |

----

***Consolidated            Statements of Cash Flows***

|                                                                                                                       |   | -Year                      Ended December 31- |     |
|----------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|----------|
|                                                                                                                       |   | 2006                                          |     | 2005 |   | 2004 |   |
|                                                                                                                       |   | (in                      $1,000s)             |     |
| OPERATING                      ACTIVITIES                                                                                  |   |                                          |     |   |   |   |   |   |   |   |
| Net                      income                                                                                            |   | $                                             | 42,391   |   | $ | 35,925 |   | $ | 26,716 |   |
| Adjustments                      to reconcile net income to net cash provided byoperating                      activities: |   |                                          |     |   |   |   |   |   |   |   |
| Provision                      for loan losses                                                                             |   |                                          | 12,156   |   |   | 10,960 |   |   | 12,708 |   |
| Depreciation                      of premises and equipment                                                                |   |                                          | 7,219    |   |   | 5,661 |   |   | 4,881 |   |
| Amortization                      of intangibles                                                                           |   |                                          | 585      |   |   | 577 |   |   | 549 |   |
| Net                      amortization (accretion) of investment securitypremiums                      (discounts)          |   |                                          | (8       | ) |   | 63 |   |   | 87 |   |
| Loss                      on sales of premises and equipment                                                               |   |                                          | 18       |   |   | 157 |   |   | 111 |   |
| Minority                      interest in net losses of consolidatedsubsidiaries                                           |   |                                          | (12,515  | ) |   | (5,498 | ) |   | (1,065 | ) |
| Compensation                      expense relating to restricted commonstock                                               |   |                                          | 1,689    |   |   | 1,242 |   |   | 1,168 |   |
| Deferred                      federal income tax credit                                                                    |   |                                          | (5,493   | ) |   | (5,263 | ) |   | (2,282 | ) |
| Originations                      and purchases of loans held for sale                                                     |   |                                          | (483,850 | ) |   | (634,362 | ) |   | (715,238 | ) |
| Proceeds                      from sales of loans held for sale                                                            |   |                                          | 470,895  |   |   | 655,867 |   |   | 715,096 |   |
| Increase                      in accrued interest income and other assets                                                  |   |                                          | (17,504  | ) |   | (15,815 | ) |   | (5,475 | ) |
| Increase                      (decrease) in accrued interest expense on depositsand                      other liabilities |   |                                          | (1,338   | ) |   | 11,801 |   |   | 347 |   |
| NET                      CASH PROVIDED BY OPERATING ACTIVITES                                                              |   |                                          | 14,245   |   |   | 61,315 |   |   | 37,603 |   |
|                                                                                                                       |   |                                          |     |   |   |   |   |   |   |   |
| INVESTING                      ACTIVITIES                                                                                  |   |                                          |     |   |   |   |   |   |   |   |
| Cash                      and cash equivalents of acquired subsidiary                                                      |   |                                          |     |   |   | 3,557 |   |   | 4,202 |   |
| Proceeds                      from sales of investment securities availablefor                      sale                   |   |                                          |     |   |   | 1,756 |   |   | 59,574 |   |
| Proceeds                      from calls, prepayments and maturities ofinvestment                      securities          |   |                                          | 14,266   |   |   | 11,249 |   |   | 18,254 |   |
| Purchases                      of investment securities                                                                    |   |                                          | (9,347   | ) |   | (14,667 | ) |   | (19,736 | ) |
| Net                      increase in portfolio loans                                                                       |   |                                          | (504,790 | ) |   | (306,258 | ) |   | (403,358 | ) |
| Proceeds                      from sales of premises and equipment                                                         |   |                                          | 708      |   |   | 93 |   |   | 23 |   |
| Purchases                      of premises and equipment                                                                   |   |                                          | (20,611  | ) |   | (14,879 | ) |   | (11,139 | ) |
| NET                      CASH USED BY INVESTING ACTIVITIES                                                                 |   |                                          | (519,774 | ) |   | (319,149 | ) |   | (352,180 | ) |
|                                                                                                                       |   |                                          |     |   |   |   |   |   |   |   |
| FINANCING                      ACTIVITIES                                                                                  |   |                                          |     |   |   |   |   |   |   |   |
| Net                      increase in demand deposits, NOW accounts andsavings                      accounts                |   |                                          | 134,250  |   |   | 85,385 |   |   | 151,512 |   |
| Net                      increase in certificates of deposit                                                               |   |                                          | 338,976  |   |   | 189,802 |   |   | 16,354 |   |
| Net                      borrowings from debt obligations                                                                  |   |                                          | 15,425   |   |   | 3,195 |   |   | 77,900 |   |
| Net                      proceeds from issuance of subordinated debentures                                                 |   |                                          |     |   |   |   |   |   | 9,935 |   |
| Resources                      provided by minority interests                                                              |   |                                          | 68,751   |   |   | 62,794 |   |   | 14,778 |   |
| Net                      proceeds from issuance of common stock                                                            |   |                                          | 3,573    |   |   | 2,510 |   |   | 954 |   |
| Tax                      benefit from share-based payments                                                                 |   |                                          | 2,481    |   |   |   |   |   |   |   |
| Cash                      dividends paid                                                                                   |   |                                          | (15,165  | ) |   | (10,848 | ) |   | (9,375 | ) |
| NET                      INCREASE PROVIDED BY FINANCINGACTIVITIES                                                          |   |                                          | 548,291  |   |   | 332,838 |   |   | 262,058 |   |
| INCREASE                      (DECREASE) IN CASH ANDCASH                      EQUIVALENTS                                  |   |                                          | 42,762   |   |   | 75,004 |   |   | (52,519 | ) |
| Cash                      and cash equivalents at beginning of year                                                        |   |                                          | 306,108  |   |   | 231,104 |   |   | 283,623 |   |
|                                                                                                                       |   |                                          |     |   |   |   |   |   |   |   |
| CASH                      AND CASH EQUIVALENTS AT END OF YEAR                                                              |   | $                                             | 348,870  |   | $ | 306,108 |   | $ | 231,104 |   |
|                                                                                                                       |   |                                          |     |   |   |   |   |   |   |   |
| See                      notes to consolidated financial statements.                                                       |   |                                          |     |   |   |   |   |   |   |   |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND***

***PRINCIPLES            OF CONSOLIDATION***

|   Affiliate                                            |   |   Location                             |   | Percentage                      Ownedat                      December 31,2006 |   |  Year                      Formed orAcquired |
|------------------------------------------------------------------|--------|--------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|---------------------------------------------------|
|                                                             |   |                                             |   |                                                                          |   |                                              |
| *Eastern                      Regions*                           |   |                                             |   |                                                                          |   |                                              |
| Great                      Lakes Region:                         |   |                                             |   |                                                                          |   |                                              |
| Ann                      Arbor Commerce Bank                     |   | Ann                      Arbor, Michigan         |   | 100%                                                                          |   | 1990                                              |
| Bank                      of Auburn Hills                        |   | Auburn                      Hills, Michigan      |   | (1)                                                                           |   | 2005                                              |
| Bank                      of Belleville                          |   | Belleville,                      Illinois        |   | (1)                                                                           |   | 2005                                              |
| Bank                      of Maumee                              |   | Maumee,                      Ohio                |   | (1)                                                                           |   | 2006                                              |
| Bank                      of Michigan                            |   | Farmington                      Hills, Michigan  |   | (1)                                                                           |   | 2005                                              |
| Brighton                      Commerce Bank                      |   | Brighton,                      Michigan          |   | 100%                                                                          |   | 1997                                              |
| Capitol                      National Bank                       |   | Lansing,                      Michigan           |   | 100%                                                                          |   | 1982                                              |
| Detroit                      Commerce Bank                       |   | Detroit,                      Michigan           |   | 100%                                                                          |   | 1998                                              |
| Elkhart                      Community Bank                      |   | Elkhart,                      Indiana            |   | 100%                                                                          |   | 1999                                              |
| Evansville                      Commerce Bank                    |   | Evansville,                      Indiana         |   | (1)                                                                           |   | 2006                                              |
| Goshen                      Community Bank                       |   | Goshen,                      Indiana             |   | 100%                                                                          |   | 2000                                              |
| Grand                      Haven Bank                            |   | Grand                      Haven, Michigan       |   | 100%                                                                          |   | 1995                                              |
| Kent                      Commerce Bank                          |   | Grand                      Rapids, Michigan      |   | 100%                                                                          |   | 1998                                              |
| Macomb                      Community Bank                       |   | Clinton                      Township, Michigan  |   | 100%                                                                          |   | 1996                                              |
| Muskegon                      Commerce Bank                      |   | Muskegon,                      Michigan          |   | 100%                                                                          |   | 1997                                              |
| Oakland                      Commerce Bank                       |   | Farmington                      Hills, Michigan  |   | 100%                                                                          |   | 1992                                              |
| Ohio                      Commerce Bank                          |   | Beachwood,                      Ohio             |   | (1)                                                                           |   | 2006                                              |
| Paragon                      Bank & Trust                    |   | Holland,                      Michigan           |   | 100%                                                                          |   | 1994                                              |
| Portage                      Commerce Bank                       |   | Portage,                      Michigan           |   | 100%                                                                          |   | 1988                                              |
|                                                             |   |                                             |   |                                                                          |   |                                              |
| Midwest                      Region - Summit Bank of Kansas City |   | Lee's                      Summit, Missouri      |   | (1)                                                                           |   | 2005                                              |
|                                                             |   |                                             |   |                                                                          |   |                                              |
| Southeast                      Region:                           |   |                                             |   |                                                                          |   |                                              |
| Bank                      of Valdosta                            |   | Valdosta,                      Georgia           |   | (1)                                                                           |   | 2006                                              |
| Community                      Bank of Rowan                     |   | Salisbury,                      North Carolina   |   | (1)                                                                           |   | 2006                                              |
| First                      Carolina State Bank                   |   | Rocky                      Mount, North Carolina |   | 100%                                                                          |   | 2004                                              |
| Peoples                      State Bank                          |   | Jeffersonville,                      Georgia     |   | 100%                                                                          |   | 2005                                              |
| Sunrise                      Bank of Atlanta                     |   | Atlanta,                      Georgia            |   | (1)                                                                           |   | 2006                                              |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND***

***PRINCIPLES            OF CONSOLIDATION—Continued***

|   Affiliate                                |   |   Location                           |   | Percentage                      Ownedat                      December 31,2006 |   |  Year                      Formed orAcquired |
|------------------------------------------------------|--------|------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|---------------------------------------------------|
|                                                 |   |                                           |   |                                                                          |   |                                              |
| *Western                      Regions*               |   |                                           |   |                                                                          |   |                                              |
| Southwest                      Region:               |   |                                           |   |                                                                          |   |                                              |
| 1st                      Commerce Bank               |   | North                      Las Vegas, Nevada   |   | (1)                                                                           |   | 2006                                              |
| Arrowhead                      Community Bank        |   | Glendale,                      Arizona         |   | 100%                                                                          |   | 2000                                              |
| Asian                      Bank of Arizona           |   | Phoenix,                      Arizona          |   | (1)                                                                           |   | 2006                                              |
| Bank                      of Las Vegas               |   | Las                      Vegas, Nevada         |   | 100%                                                                          |   | 2002                                              |
| Bank                      of Tucson                  |   | Tucson,                      Arizona           |   | 100%                                                                          |   | 1996                                              |
| Black                      Mountain Community Bank   |   | Henderson,                      Nevada         |   | 100%                                                                          |   | 2000                                              |
| Camelback                      Community Bank        |   | Phoenix,                      Arizona          |   | 100%                                                                          |   | 1998                                              |
| Desert                      Community Bank           |   | Las                      Vegas, Nevada         |   | 100%                                                                          |   | 1999                                              |
| East                      Valley Community Bank      |   | Chandler,                      Arizona         |   | 100%                                                                          |   | 1999                                              |
| Fort                      Collins Commerce Bank      |   | Fort                      Collins, Colorado    |   | 51%                                                                           |   | 2005                                              |
| Mesa                      Bank                       |   | Mesa,                      Arizona             |   | 100%                                                                          |   | 1998                                              |
| Red                      Rock Community Bank         |   | Las                      Vegas, Nevada         |   | 100%                                                                          |   | 1999                                              |
| Southern                      Arizona Community Bank |   | Tucson,                      Arizona           |   | 100%                                                                          |   | 1998                                              |
| Sunrise                      Bank of Albuquerque     |   | Albuquerque,                      New Mexico   |   | 100%                                                                          |   | 2000                                              |
| Sunrise                      Bank of Arizona         |   | Phoenix,                      Arizona          |   | 100%                                                                          |   | 1998                                              |
| Valley                      First Community Bank     |   | Scottsdale,                      Arizona       |   | 100%                                                                          |   | 1997                                              |
| Yuma                      Community Bank             |   | Yuma,                      Arizona             |   | 100%                                                                          |   | 2000                                              |
|                                                 |   |                                           |   |                                                                          |   |                                              |
| California                      Region:              |   |                                           |   |                                                                          |   |                                              |
| Bank                      of Escondido               |   | Escondido,                      California     |   | 100%                                                                          |   | 2003                                              |
| Bank                      of San Francisco           |   | San                      Francisco, California |   | 51%                                                                           |   | 2005                                              |
| Bank                      of Santa Barbara           |   | Santa                      Barbara, California |   | (1)                                                                           |   | 2005                                              |
| Napa                      Community Bank             |   | Napa,                      California          |   | 87%                                                                           |   | 2002                                              |
| Point                      Loma Community Bank       |   | Point                      Loma, California    |   | 51%                                                                           |   | 2004                                              |
| Sunrise                      Bank of San Diego       |   | San                      Diego, California     |   | 100%                                                                          |   | 2001                                              |
|                                                 |   |                                           |   |                                                                          |   |                                              |
| Northwest                      Region:               |   |                                           |   |                                                                          |   |                                              |
| Bank                      of Bellevue                |   | Bellevue,                      Washington      |   | (1)                                                                           |   | 2005                                              |
| Bank                      of Everett                 |   | Everett,                      Washington       |   | (1)                                                                           |   | 2006                                              |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND***

***PRINCIPLES            OF CONSOLIDATION—Continued***

*de            novo*

*de            novo*
*de            novo*

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND***

***PRINCIPLES            OF CONSOLIDATION—Continued***

***NOTE            B—SIGNIFICANT ACCOUNTING POLICIES***

*Estimates:*

*Cash            and Cash Equivalents:*

*Loans            Held For Sale:*

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            B—SIGNIFICANT ACCOUNTING POLICIES—Continued***

*Investment            Securities:*

*Loans,            Credit Risk and Allowance for Loan Losses:*

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            B—SIGNIFICANT ACCOUNTING POLICIES—Continued***

*Interest            and Fees on Loans:*

*Premises            and Equipment:*

*Goodwill            and Other Intangibles:*

*Other            Real Estate:*

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            B—SIGNIFICANT ACCOUNTING POLICIES—Continued***

*Stock-Based            Compensation:*

*Share-Based            Payment*

|                                                                                                      |   | 2005   |                           | 2004   |
|-----------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------|--------|
| Fair                      value assumptions:                                                              |   |   |                           |   |   |   |
| Risk-free                      interest rate                                                              |   |   | 4.2%                           |   |   | 3.9% |
| Dividend                      yield                                                                       |   |   | 2.0%                           |   |   | 2.3% |
| Stock                      price volatility                                                               |   |   | .30                            |   |   | .25 |
| Expected                      option life                                                                 |   |   | 6.8                      years |   |   | 6.7                      years |
| Aggregate                      estimated fair value ofoptions                      granted (in thousands) |   | $      | 9,373                          |   | $ | 6,581 |
| Net                      income (in thousands):                                                           |   |   |                           |   |   |   |
| As                      reported                                                                          |   |   | 35,925                         |   |   | 26,716 |
| Pro                      forma                                                                            |   |   | 29,833                         |   |   | 21,450 |
| Net                      income per share:                                                                |   |   |                           |   |   |   |
| Basic:                                                                                                    |   |   |                           |   |   |   |
| As                      reported                                                                          |   |   | 2.42                           |   |   | 1.88 |
| Pro                      forma                                                                            |   |   | 2.01                           |   |   | 1.51 |
| Diluted:                                                                                                  |   |   |                           |   |   |   |
| As                      reported                                                                          |   |   | 2.34                           |   |   | 1.79 |
| Pro                      forma                                                                            |   | $      | 1.94                           |   | $ | 1.44 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            B—SIGNIFICANT ACCOUNTING POLICIES—Continued***

*Trust            Assets and Related Income:*

*Federal            Income Taxes:*

*Comprehensive            Income:*

*New            Accounting Standards: *
*Share-Based            Payment*

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            B—SIGNIFICANT ACCOUNTING POLICIES—Continued***

*The            Meaning of Other-Than-Temporary Impairment and its Application to Certain            Investments*

*Accounting            for Servicing of Financial Assets*

*Accounting            for Uncertainty in Income Taxes,*
*Accounting            for Income Taxes*

*Fair            Value Measurements*

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            B—SIGNIFICANT ACCOUNTING POLICIES—Continued***

*The            Fair Value Option for Financial Assets and Financial            Liabilities*

| ·   | Proposed                      amendment to Statement No. 128, *Earnings                      per Share;*                                                                                                                             |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Proposed                      replacement of Statement No. 141 regarding *Business                      Combinations*;                      and                                                                                      |
| ·   | Proposed                      replacement of Accounting Research Bulletin No. 51 regarding*Consolidated                      Financial Statements, Including Accounting and Reporting for                      Noncontrolling Interests*. |

| ·   | FASB                      FSP to require recalculation of leveraged leases if the timing                      of tax                      benefits affects cash flows;                                                               |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | EITF                      Issue No. 06-4 which addresses accounting for deferred compensation                      and                      post retirement benefits of endorsement split-dollar life insurance;                      and |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            B—SIGNIFICANT ACCOUNTING POLICIES—Continued***

| ·   | EITF                      Issue No. 06-5 which encompasses accounting for purchases of                      life                      insurance and the ramifications of determining the amount that                      could be                      realized in accordance with FASB Technical Bulletin 84-4. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***NOTE            C—INVESTMENT SECURITIES***

|                                                           |   | 2006                |   | 2005                 |
|----------------------------------------------------------------|--------|---------------------|--------|----------------------|
|                                                           |   |  AmortizedCost |   | EstimatedMarketValue |   |  AmortizedCost |   | EstimatedMarketValue |
| Available                      for sale:                       |   |                |   |                 |   |   |   |   |   |   |   |   |
| United                      States government agencysecurities |   | $                   | 13,403 |                 | $ | 13,285 |   | $ | 23,276 |   | $ | 23,022 |
| Mortgage                      backed securities                |   |                | 4,089  |                 |   | 3,991 |   |   | 2,430 |   |   | 2,348 |
| Municipals                                                     |   |                | 1,630  |                 |   | 1,628 |   |   | 568 |   |   | 559 |
|                                                           |   |                | 19,122 |                 |   | 18,904 |   |   | 26,274 |   |   | 25,929 |
| Held                      for long-term investment:            |   |                |   |                 |   |   |   |   |   |   |   |   |
| Federal                      Reserve Bank stock                |   |                | 864    |                 |   | 864 |   |   | 536 |   |   | 536 |
| Federal                      Home Loan Bank stock              |   |                | 14,148 |                 |   | 14,148 |   |   | 12,960 |   |   | 12,960 |
| Mortgage                      backed securities                |   |                | --     |                 |   | -- |   |   | 7 |   |   | 7 |
| Municipals                                                     |   |                | --     |                 |   | -- |   |   | 1,072 |   |   | 1,072 |
| Corporate                      stock                           |   |                | 4,419  |                 |   | 4,419 |   |   | 1,835 |   |   | 1,835 |
| Other                                                          |   |                | 2,318  |                 |   | 2,318 |   |   | 1,335 |   |   | 1,335 |
|                                                           |   |                | 21,749 |                 |   | 21,749 |   |   | 17,745 |   |   | 17,745 |
|                                                           |   | $                   | 40,871 |                 | $ | 40,653 |   | $ | 44,019 |   | $ | 43,674 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            C—INVESTMENT SECURITIES—Continued***

|                                                           |   | 2006   |   | 2005   |
|----------------------------------------------------------------|--------|--------|--------|--------|
|                                                           |   | Gains  |   | Losses |   | Gains |   | Losses |
| United                      States government agencysecurities |   | $      | --     |   | $ | 118 |   | $ | 35 |   | $ | 289 |
| Mortgage                      backed securities                |   |   | 13     |   |   | 111 |   |   | -- |   |   | 82 |
| Municipals                                                     |   |   | 11     |   |   | 13 |   |   | 4 |   |   | 13 |
|                                                           |   | $      | 24     |   | $ | 242 |   | $ | 39 |   | $ | 384 |

|                                                           |   | 2006           |   | 2005          |
|----------------------------------------------------------------|--------|----------------|--------|---------------|
|                                                           |   | UnrealizedLoss |   | CarryingValue |   | UnrealizedLoss |   | CarryingValue |
| One                      year or less:                         |   |           |   |          |   |   |   |   |   |   |   |   |
| United                      States government agencysecurities |   | $              | 7      |          | $ | 3,488 |   | $ | 129 |   | $ | 8,744 |
| Mortgage                      backed securities                |   |           | --     |          |   | -- |   |   | 82 |   |   | 2,340 |
| Municipals                                                     |   |           | --     |          |   | -- |   |   | 13 |   |   | 242 |
|                                                           |   | $              | 7      |          | $ | 3,488 |   | $ | 224 |   | $ | 11,326 |
|                                                           |   |           |   |          |   |   |   |   |   |   |   |   |
| In                      excess of one year:                    |   |           |   |          |   |   |   |   |   |   |   |   |
| United                      States government agencysecurities |   | $              | 111    |          | $ | 9,297 |   | $ | 160 |   | $ | 12,595 |
| Mortgage                      backed securities                |   |           | 111    |          |   | 3,444 |   |   | -- |   |   | -- |
| Municipals                                                     |   |           | 13     |          |   | 231 |   |   | -- |   |   | -- |
|                                                           |   |           | 235    |          |   | 12,972 |   |   | 160 |   |   | 12,595 |
|                                                           |   | $              | 242    |          | $ | 16,460 |   | $ | 384 |   | $ | 23,921 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            C—INVESTMENT SECURITIES—Continued***

|                                                                                                           |   |  AmortizedCost |   | EstimatedMarketValue |
|----------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|----------------------|
|                                                                                                           |   |                |   |                 |
| Due                      in one year or less                                                                   |   | $                   | 5,243  |                 | $ | 5,222 |
| After                      one year, through five years                                                        |   |                | 6,677  |                 |   | 6,612 |
| After                      five years, through ten years                                                       |   |                | 3,961  |                 |   | 3,900 |
| After                      ten years                                                                           |   |                | 3,241  |                 |   | 3,170 |
| Securities                      held for long-terminvestment,                      without standard maturities |   |                | 21,749 |                 |   | 21,749 |
|                                                                                                           |   | $                   | 40,871 |                 | $ | 40,653 |

***NOTE            D—LOANS***

|                                                |   | 2006   |      | 2005   |   |
|-----------------------------------------------------|--------|--------|-----------|--------|--------|
|                                                |   |   |      |   |   |
| Commercial                                          |   | $      | 3,103,125 |   | $      | 2,688,361 |   |
| Real                      estate mortgage           |   |   | 259,604   |   |   | 212,142 |   |
| Installment                                         |   |   | 125,949   |   |   | 90,686 |   |
| Total                      portfolio loans          |   |   | 3,488,678 |   |   | 2,991,189 |   |
| Less                      allowance for loan losses |   |   | (45,414   | )      |   | (40,559 | ) |
| Net                      portfolio loans            |   | $      | 3,443,264 |   | $      | 2,950,630 |   |

|                                                                                               |   | 2006   |   | 2005   |   | 2004   |   |
|----------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                               |   |   |   |   |   |   |   |
| Balance                        at January 1                                                        |   | $      | 40,559 |   | $      | 37,572 |   | $ | 31,404 |   |
| Allowance                        for loan losses of acquiredbank                        subsidiary |   |   | --     |   |   | --     |   |   | 724 |   |
| Provision                        charged to operations                                             |   |   | 12,156 |   |   | 10,960 |   |   | 12,708 |   |
| Loans                        charged off (deduction)                                               |   |   | (8,699 | )      |   | (9,643 | )      |   | (8,388 | ) |
| Recoveries                                                                                         |   |   | 1,398  |   |   | 1,670  |   |   | 1,124 |   |
| Net                        charge-offs                                                             |   |   | (7,301 | )      |   | (7,973 | )      |   | (7,264 | ) |
| Balance                        at December 31                                                      |   | $      | 45,414 |   | $      | 40,559 |   | $ | 37,572 |   |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            D—LOANS—Continued***

|                                               |   | December                      31 |
|----------------------------------------------------|--------|----------------------------------|
|                                               |   | 2006                             |   | 2005 |
| Nonaccrual                      loans:             |   |                             |   |   |   |   |
| Commercial                                         |   | $                                | 25,219 |   | $ | 19,734 |
| Real                      estate mortgage          |   |                             | 3,609 |   |   | 1,734 |
| Installment                                        |   |                             | 898 |   |   | 1,154 |
| Total                      nonaccrual loans        |   |                             | 29,726 |   |   | 22,622 |
|                                               |   |                             |   |   |   |   |
| Past                      due (>90 days) loans: |   |                             |   |   |   |   |
| Commercial                                         |   |                             | 3,860 |   |   | 3,235 |
| Real                      estate mortgage          |   |                             | 523 |   |   | 592 |
| Installment                                        |   |                             | 165 |   |   | 283 |
| Total                      past due loans          |   |                             | 4,548 |   |   | 4,110 |
|                                               |   |                             |   |   |   |   |
| Total                      nonperforming loans     |   | $                                | 34,274 |   | $ | 26,732 |

|                                                       |   | December                            31, 2006 |   | December                            31, 2005                                                  |   |
|------------------------------------------------------------|--------|----------------------------------------------|--------|-----------------------------------------------------------------------------------------------|--------|
|                                                       |   | Amount                                       |   | Percentageof                            TotalPortfolio                            Loans  |   | Amount |   | Percentageof                            TotalPortfolio                            Loans  |   |
|                                                       |   |                                         |   |                                                                                          |   |   |   |   |   |
| Commercial                                                 |   | $                                            | 41,178 |                                                                                          |   | 1.18 | % | $ | 37,498 |   |   | 1.26 | % |
| Real                            estate mortgage            |   |                                         | 2,675  |                                                                                          |   | 0.08 |   |   | 1,866 |   |   | 0.06 |   |
| Installment                                                |   |                                         | 1,561  |                                                                                          |   | 0.04 |   |   | 1,195 |   |   | 0.04 |   |
|                                                       |   |                                         |   |                                                                                          |   |   |   |   |   |   |   |   |   |
| Total                            allowance for loan losses |   | $                                            | 45,414 |                                                                                          |   | 1.30 | % | $ | 40,559 |   |   | 1.36 | % |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            E—RELATED PARTIES TRANSACTIONS***

***NOTE            F—PREMISES AND EQUIPMENT***

|                                                   |   | 2006   |    | 2005   |   |
|--------------------------------------------------------|--------|--------|---------|--------|--------|
|                                                   |   |   |    |   |   |
| Land,                      buildings and improvements  |   | $      | 19,891  |   | $      | 16,551 |   |
| Leasehold                      improvements            |   |   | 19,483  |   |   | 14,631 |   |
| Equipment,                      furniture and software |   |   | 45,734  |   |   | 35,875 |   |
|                                                   |   |   | 85,108  |   |   | 67,057 |   |
| Less                      accumulated depreciation     |   |   | (30,813 | )      |   | (25,428 | ) |
|                                                   |   | $      | 54,295  |   | $      | 41,629 |   |

| 2007                                     |   | $      | 7,167  |
|------------------------------------------|--------|--------|--------|
| 2008                                     |   |   | 6,406  |
| 2009                                     |   |   | 5,567  |
| 2010                                     |   |   | 4,895  |
| 2011                                     |   |   | 4,583  |
| 2012                      and thereafter |   |   | 13,280 |
|                                     |   | $      | 41,898 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            G—DEPOSITS***

| 2007                                     |   | $      | 1,153,331 |
|------------------------------------------|--------|--------|-----------|
| 2008                                     |   |   | 154,753   |
| 2009                                     |   |   | 50,231    |
| 2010                                     |   |   | 28,417    |
| 2011                                     |   |   | 30,865    |
| 2012                      and thereafter |   |   | 2,636     |
|                                     |   | $      | 1,420,233 |

***NOTE            H—NOTES PAYABLE AND SHORT-TERM BORROWINGS***

|                                                                             |   | 2006   |    | 2005   |
|----------------------------------------------------------------------------------|--------|--------|---------|--------|
| Borrowings                      from Federal HomeLoan                      Banks |   | $      | 183,598 |   | $ | 172,736 |
| Repurchase                      agreements                                       |   |   | 559     |   |   | 1,133 |
| Federal                      funds purchased                                     |   |   | 6,997   |   |   | 1,860 |
|                                                                             |   | $      | 191,154 |   | $ | 175,729 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            H—NOTES PAYABLE AND SHORT-TERM BORROWINGS—Continued***

| 2007                                     |   | $      | 125,314 |
|------------------------------------------|--------|--------|---------|
| 2008                                     |   |   | 24,628  |
| 2009                                     |   |   | 8,500   |
| 2010                                     |   |   | 27,000  |
| 2011                                     |   |   | 5,594   |
| 2012                      and thereafter |   |   | 118     |
|                                     |   | $      | 191,154 |

***NOTE            I—SUBORDINATED DEBT***

|                                                  |   |  Interest                          Rate atDecember                          31 |                                           |   Scheduled |   | AggregateLiquidationAmount            |   | Net                          Carrying Amount                                      at December 31                                         (in                          $1,000s) |
|-------------------------------------------------------|--------|-------------------------------------------------------------------------------------|------------------------------------------------|-----------------------|--------|---------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                  |   | 2006                                                                                |                                           | Maturity              |   | (in                          $1,000s) |   | 2006                                                                                                                                                                                                                                                                                                                       |   | 2005 |
|                                                  |   |                                                                                |                                           |                  |   |                                  |   |                                                                                                                                                                                                                                                                                                                       |   |   |
| Capitol                          Trust I              |   |                                                                                |                            8.50% fixed    |                  |   | 2027                                  |   | $                                                                                                                                                                                                                                                                                                                          | 25,300 |   | $ | 24,543 |   | $ | 24,507 |
| Capitol                          Trust II             |   |                                                                                |                            10.25% fixed   |                  |   | 2031                                  |   |                                                                                                                                                                                                                                                                                                                       | 10,000 |   |   | 9,753 |   |   | 9,743 |
| Capitol                          Statutory Trust III  |   |                                                                                |                            8.96% variable |                  |   | 2031                                  |   |                                                                                                                                                                                                                                                                                                                       | 15,000 |   |   | 14,630 |   |   | 14,615 |
| Capitol                          Trust IV             |   |                                                                                |                            9.02% variable |                  |   | 2032                                  |   |                                                                                                                                                                                                                                                                                                                       | 3,000 |   |   | 2,914 |   |   | 2,911 |
| Capitol                          Trust VI             |   |                                                                                |                            8.67% variable |                  |   | 2033                                  |   |                                                                                                                                                                                                                                                                                                                       | 10,000 |   |   | 9,738 |   |   | 9,727 |
| Capitol                          Trust VII            |   |                                                                                |                            7.78% fixed    |                  |   | 2033                                  |   |                                                                                                                                                                                                                                                                                                                       | 10,000 |   |   | 9,866 |   |   | 9,861 |
| Capitol                          Statutory Trust VIII |   |                                                                                |                            8.31% variable |                  |   | 2033                                  |   |                                                                                                                                                                                                                                                                                                                       | 20,000 |   |   | 19,650 |   |   | 19,637 |
| Capitol                          Trust IX             |   |                                                                                |                            7.69% fixed    |                  |   | 2034                                  |   |                                                                                                                                                                                                                                                                                                                       | 10,000 |   |   | 9,941 |   |   | 9,939 |
|                                                  |   |                                                                                |                                           |                  |   |                                  |   | $                                                                                                                                                                                                                                                                                                                          | 103,300 |   | $ | 101,035 |   | $ | 100,940 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            I—SUBORDINATED DEBT—Continued***

***NOTE            J—RESTRICTED COMMON STOCK AND STOCK OPTIONS***

|                                         |   | 2006                     |    | 2005                                                                           |   | 2004                     |
|----------------------------------------------|--------|--------------------------|---------|--------------------------------------------------------------------------------|--------|--------------------------|
|                                         |   |    Shares |    | Weighted-AverageGrant                      DateFair                      Value |   |    Shares |   | Weighted-AverageGrant                      DateFair                      Value |   |    Shares |   | Weighted-AverageGrant                      DateFair                      Value |
|                                         |   |                     |    |                                                                           |   |                     |   |   |   |   |   |   |
| Unvested                      at January 1   |   |                     | 200,631 |                                                                           | $      | 21.76                    |   |   | 258,978 |   | $ | 21.91 |   |   | 259,017 |   | $ | 21.76 |
| Granted                                      |   |                     | 80,750  |                                                                           |   | 38.69                    |   |   | -- |   |   | -- |   |   | 13,063 |   |   | 28.86 |
| Vested                                       |   |                     | 56,965  |                                                                           |   | 22.27                    |   |   | 58,347 |   |   | 22.43 |   |   | 13,102 |   |   | 25.92 |
| Forfeited                                    |   |                     | --      |                                                                           |   | --                       |   |   | -- |   |   | -- |   |   | -- |   |   | -- |
| Unvested                      at December 31 |   |                     | 224,416 |                                                                           | $      | 27.72                    |   |   | 200,631 |   | $ | 21.76 |   |   | 258,978 |   | $ | 21.91 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            J—RESTRICTED COMMON STOCK AND STOCK OPTIONS—Continued***

|                                                  |   | Number                      ofStock                      OptionsOutstanding |      |  ExercisePrice                      Range |   | WeightedAverageExercise                      Price |
|-------------------------------------------------------|--------|-----------------------------------------------------------------------------|-----------|------------------------------------------------|--------|----------------------------------------------------|
|                                                  |   |                                                                        |      |                                           |   |                                               |   |   |   |   |
| Outstanding                      at January 1, 2004   |   |                                                                        | 2,298,067 |                                           | $      | 9.88                                               |   |   | to |   | $ | 27.23 |   | $ | 16.95 |
| Granted                      in 2004                  |   |                                                                        | 834,647   |                                           |   | 22.43                                              |   |   | to |   |   | 33.01 |   |   | 27.77 |
| Exercised                      in 2004                |   |                                                                        | (515,836  | )                                              |   | 9.88                                               |   |   | to |   |   | 25.92 |   |   | 15.93 |
| Cancelled                      or expired in 2004     |   |                                                                        | (32,739   | )                                              |   |                                               |   |   |   |   |   |   |   |   |   |
| Outstanding                      at December 31, 2004 |   |                                                                        | 2,584,139 |                                           |   | 10.81                                              |   |   | to |   |   | 33.01 |   |   | 21.06 |
|                                                  |   |                                                                        |      |                                           |   |                                               |   |   |   |   |   |   |   |   |   |
| Granted                      in 2005                  |   |                                                                        | 929,425   |                                           |   | 30.21                                              |   |   | to |   |   | 37.48 |   |   | 33.96 |
| Exercised                      in 2005                |   |                                                                        | (589,943  | )                                              |   | 11.00                                              |   |   | to |   |   | 30.21 |   |   | 15.94 |
| Cancelled                      or expired in 2005     |   |                                                                        | (41,338   | )                                              |   |                                               |   |   |   |   |   |   |   |   |   |
| Outstanding                      at December 31, 2005 |   |                                                                        | 2,882,283 |                                           |   | 10.81                                              |   |   | to |   |   | 37.48 |   |   | 26.07 |
|                                                  |   |                                                                        |      |                                           |   |                                               |   |   |   |   |   |   |   |   |   |
| Granted                      in 2006                  |   |                                                                        | --        |                                           |   |                                               |   |   |   |   |   |   |   |   |   |
| Exercised                      in 2006                |   |                                                                        | (312,192  | )                                              |   | 10.81                                              |   |   | to |   |   | 37.48 |   |   | 19.59 |
| Cancelled                      or expired in 2006     |   |                                                                        | --        |                                           |   |                                               |   |   |   |   |   |   |   |   |   |
| Outstanding                      at December 31, 2006 |   |                                                                        | 2,570,091 |                                           | $      | 10.81                                              |   |   | to |   | $ | 37.48 |   | $ | 26.86 |

|                                                                                                   |   |                    |      | Weighted                      Average |   |                     |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|---------------------------------------|--------|--------------------------|
|  Exercise                      PriceRange                                                         |   |  NumberOutstanding |      |  ExercisePrice                   |   | RemainingContractualLife |   | AggregateIntrinsicValue |
|                                                                                                   |   |                    |      |                                  |   |                     |   |   |
|            $10.00                      to 14.99 |   |                    | 142,033   |                                  | $      | 11.28                    |   |   | 0.61                      years |   | $ | 4,959,792 |
|            $15.00                      to 19.99 |   |                    | 279,493   |                                  |   | 16.62                    |   |   | 2.83                      years |   |   | 8,267,403 |
|            $20.00                      to 24.99 |   |                    | 458,868   |                                  |   | 21.68                    |   |   | 3.81                      years |   |   | 11,251,443 |
|            $25.00                      to 29.99 |   |                    | 643,267   |                                  |   | 27.00                    |   |   | 3.39                      years |   |   | 12,350,726 |
|            $30.00                      to 34.99 |   |                    | 697,643   |                                  |   | 32.11                    |   |   | 4.69                      years |   |   | 9,829,790 |
|            $35.00                      or more  |   |                    | 348,787   |                                  |   | 37.48                    |   |   | 5.86                      years |   |   | 3,041,423 |
|                                                                                                   |   |                    | 2,570,091 |                                  |   |                     |   |   |   |   | $ | 49,700,577 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            K—EMPLOYEE RETIREMENT PLANS***

***NOTE            L—INCOME TAXES***

|                                             |   | 2006   |   | 2005   |   | 2004   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Federal:                                         |   |   |   |   |   |   |   |   |   |   |
| Currently                      payable           |   | $      | 21,367 |   | $      | 22,326 |   | $ | 15,401 |   |
| Deferred                      (credit)           |   |   | (5,493 | )      |   | (5,263 | )      |   | (2,282 | ) |
|                                             |   |   | 15,874 |   |   | 17,063 |   |   | 13,119 |   |
| State                      income taxes (credit) |   |   | (411   | )      |   | 2,169  |   |   | 1,580 |   |
|                                             |   | $      | 15,463 |   | $      | 19,232 |   | $ | 14,699 |   |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            L—INCOME TAXES—Continued***

|                                                                                          |   | 2006   |   | 2005   |   | 2004   |   |
|-----------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Federal                      income tax computed at statutoryrate                      of 35% |   | $      | 15,869 |   | $      | 17,381 |   | $ | 14,122 |   |
| State                      income taxes (credit)                                              |   |   | (411   | )      |   | 2,169  |   |   | 1,580 |   |
| Federal                      tax effect of:                                                   |   |   |   |   |   |   |   |   |   |   |
| Amortization                      of intangibles                                              |   |   | 205    |   |   | 202    |   |   | 192 |   |
| State                      income taxes                                                       |   |   | 144    |   |   | (759   | )      |   | (553 | ) |
| Other                                                                                         |   |   | (344   | )      |   | 239    |   |   | (642 | ) |
|                                                                                          |   | $      | 15,463 |   | $      | 19,232 |   | $ | 14,699 |   |

|                                                                                                          |   | 2006   |   | 2005   |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|                                                                                                          |   |   |   |   |   |
| Allowance                      for loan losses                                                                |   | $      | 15,099 |   | $      | 13,186 |   |
| Net                      operating losses of subsidiaries                                                     |   |   | 8,202  |   |   | 3,774 |   |
| Deferred                      compensation                                                                    |   |   | 2,635  |   |   | 2,395 |   |
| Depreciation                                                                                                  |   |   | (2,136 | )      |   | (1,944 | ) |
| Start-up                      costs for *de                      novo*                      banks             |   |   | 2,730  |   |   | 1,301 |   |
| Market                      value adjustment for investmentsecurities                      available for sale |   |   | 74     |   |   | 117 |   |
| Other,                      net                                                                               |   |   | (1,629 | )      |   | 696 |   |
|                                                                                                          |   | $      | 24,975 |   | $      | 19,525 |   |

| 2024   |   | $      | 2,545  |
|--------|--------|--------|--------|
| 2025   |   |   | 7,344  |
| 2026   |   |   | 13,545 |
|   |   | $      | 23,434 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            M—NET INCOME PER SHARE***

|                                                                                                                                                                                        |   | 2006   |   | 2005   |   | 2004   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                                                                        |   |   |   |   |   |   |
| Numerator—net                      income                                                                                                                                             |   | $      | 42,391 |   | $      | 35,925 |   | $ | 26,716 |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |
| Weighted                      average number of shares outstanding,excluding                      unvested restricted shares(denominator                      for basic earnings per share) |   |   | 15,772 |   |   | 14,867 |   |   | 14,183 |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Effect                      of dilutive securities:                                                                                                                                         |   |   |   |   |   |   |   |   |   |
| Unvested                      restricted shares                                                                                                                                             |   |   | 86     |   |   | 86     |   |   | 263 |
| Stock                      options                                                                                                                                                          |   |   | 623    |   |   | 412    |   |   | 445 |
| Potential                      dilution                                                                                                                                                     |   |   | 709    |   |   | 498    |   |   | 708 |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Denominator                      for diluted earnings per share—weightedaverage                      number of shares and potential dilution                                          |   |   | 16,481 |   |   | 15,365 |   |   | 14,891 |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Number                      of antidilutive stock options excluded fromdiluted                      earnings per share computation                                                          |   |   | --     |   |   | 1,085  |   |   | 160 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            N—ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS***

|                                                                           |   | 2006          |      | 2005                                     |   |
|--------------------------------------------------------------------------------|--------|---------------|-----------|------------------------------------------|--------|
|                                                                           |   | CarryingValue |      | EstimatedFair                      Value |   | CarryingValue |   | EstimatedFair                      Value |   |
| Financial                      Assets:                                         |   |          |      |                                     |   |   |   |   |   |
| Cash                      and cash equivalents                                 |   | $             | 348,870   |                                     | $      | 348,870 |   | $ | 306,108 |   | $ | 306,108 |   |
| Loans                      held for sale                                       |   |          | 34,593    |                                     |   | 34,593 |   |   | 21,638 |   |   | 21,638 |   |
| Investment                      securities:                                    |   |          |      |                                     |   |   |   |   |   |   |   |   |   |
| Available                      for sale                                        |   |          | 18,904    |                                     |   | 18,904 |   |   | 25,929 |   |   | 25,929 |   |
| Held                      for long-term investment                             |   |          | 21,749    |                                     |   | 21,749 |   |   | 17,745 |   |   | 17,745 |   |
|                                                                           |   |          | 40,653    |                                     |   | 40,653 |   |   | 43,674 |   |   | 43,674 |   |
| Portfolio                      loans:                                          |   |          |      |                                     |   |   |   |   |   |   |   |   |   |
| Commercial                                                                     |   |          | 3,103,125 |                                     |   | 3,093,134 |   |   | 2,688,361 |   |   | 2,680,149 |   |
| Real                      estate mortgage                                      |   |          | 259,604   |                                     |   | 259,948 |   |   | 212,142 |   |   | 213,324 |   |
| Installment                                                                    |   |          | 125,949   |                                     |   | 121,775 |   |   | 90,686 |   |   | 90,091 |   |
| Total                      portfolio loans                                     |   |          | 3,488,678 |                                     |   | 3,474,857 |   |   | 2,991,189 |   |   | 2,983,564 |   |
| Less                      allowance for loan losses                            |   |          | (45,414   | )                                        |   | (45,414 | ) |   | (40,559 | ) |   | (40,559 | ) |
| Net                      portfolio loans                                       |   |          | 3,443,264 |                                     |   | 3,429,443 |   |   | 2,950,630 |   |   | 2,943,005 |   |
|                                                                           |   |          |      |                                     |   |   |   |   |   |   |   |   |   |
| Financial                      Liabilities:                                    |   |          |      |                                     |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                      |   |          |      |                                     |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                                                            |   |          | 651,253   |                                     |   | 651,253 |   |   | 591,229 |   |   | 591,229 |   |
| Interest-bearing:                                                              |   |          |      |                                     |   |   |   |   |   |   |   |   |   |
| Demand                      accounts                                           |   |          | 1,186,999 |                                     |   | 1,187,320 |   |   | 1,112,773 |   |   | 1,111,669 |   |
| Time                      certificates of less than$100,000                    |   |          | 460,203   |                                     |   | 461,145 |   |   | 378,364 |   |   | 378,002 |   |
| Time                      certificates of $100,000or                      more |   |          | 960,030   |                                     |   | 961,649 |   |   | 702,893 |   |   | 702,085 |   |
| Total                      interest-bearing                                    |   |          | 2,607,232 |                                     |   | 2,610,114 |   |   | 2,194,030 |   |   | 2,191,756 |   |
| Total                      deposits                                            |   |          | 3,258,485 |                                     |   | 3,261,367 |   |   | 2,785,259 |   |   | 2,782,985 |   |
| Notes                      payable and short-termborrowings                    |   |          | 191,154   |                                     |   | 191,713 |   |   | 175,729 |   |   | 175,059 |   |
| Subordinated                      debentures                                   |   |          | 101,035   |                                     |   | 103,300 |   |   | 100,940 |   |   | 103,300 |   |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            O—COMMITMENTS, GUARANTEES AND OTHER CONTINGENCIES***

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            P***
**—**
***DIVIDEND            LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL***

***REQUIREMENTS***

*de            novo*

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            P—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER            CAPITAL***

***REQUIREMENTS—Continued***

|                                                                                                  |   | December                      31 |           |
|-------------------------------------------------------------------------------------------------------|--------|----------------------------------|----------------|
|                                                                                                  |   | 2006                             |           | 2005 |   |
| Tier                      1 capital to average adjusted total assets:                                 |   |                             |           |   |   |   |   |
| Minimum                      required amount                                                          |   |                             | ³$155,110 |   |   | ³$135,864 |   |
| Actual                      amount                                                                    |   |                             | $527,355       |   |   | $438,458 |   |
| Ratio                                                                                                 |   |                             | 13.60          | % |   | 12.91 | % |
|                                                                                                  |   |                             |           |   |   |   |   |
| Tier                      1 capital to risk-weighted assets:                                          |   |                             |           |   |   |   |   |
| Minimum                      required amount(1)                                                       |   |                             | ³$145,475 |   |   | ³$123,072 |   |
| Actual                      amount                                                                    |   |                             | $527,355       |   |   | $438,458 |   |
| Ratio                                                                                                 |   |                             | 14.50          | % |   | 14.25 | % |
|                                                                                                  |   |                             |           |   |   |   |   |
| Combined                      Tier 1 and Tier 2 capital to risk-weighted                      assets: |   |                             |           |   |   |   |   |
| Minimum                      required amount(2)                                                       |   |                             | ³$290,949 |   |   | ³$246,144 |   |
| Amount                      required to meet 'Well-Capitalized'category(3)                            |   |                             | ³$363,687 |   |   | ³$307,680 |   |
| Actual                      amount                                                                    |   |                             | $572,816       |   |   | $476,944 |   |
| Ratio                                                                                                 |   |                             | 15.75          | % |   | 15.50 | % |

| (1) | The                      minimum required ratio of Tier 1 capital to risk-weighted assets                      is                      4%.                                                                                                                  |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The                      minimum required ratio of Tier 1 and Tier 2 capital to risk-weighted                      assets is 8%.                                                                                                                            |
| (3) | In                      order to be classified as a 'well-capitalized' institution,                      the ratio of                      Tier 1 and Tier 2 capital to risk-weighted assets must be 10%                      or                      more. |
|     |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            Q—PARENT COMPANY FINANCIAL INFORMATION***

***Condensed            Balance Sheets***

|                                                                                |   | -December                      31- |
|-------------------------------------------------------------------------------------|--------|------------------------------------|
|                                                                                |   | 2006                               |   | 2005 |
|                                                                                |   | (in                      $1,000s)  |
| Assets                                                                              |   |                               |   |   |   |   |
| Cash                      on deposit principally with subsidiary banks              |   | $                                  | 3,314 |   | $ | 5,129 |
| Money                      market funds on deposit principally with subsidiarybanks |   |                               | 4,113 |   |   | 6,554 |
| Time                      deposits principally with subsidiary banks                |   |                               | 10,406 |   |   | 14,747 |
| Cash                      and cash equivalents                                      |   |                               | 17,833 |   |   | 26,430 |
| Investment                      securities                                          |   |                               | 4,048 |   |   | 673 |
| Loans,                      net                                                     |   |                               | 11,314 |   |   | 2,865 |
| Investments                      in and advances to subsidiaries                    |   |                               | 418,239 |   |   | 362,843 |
| Investment                      in and advances to Amera Mortgage Corporation       |   |                               | 482 |   |   | 482 |
| Equipment,                      software and furniture, net                         |   |                               | 9,332 |   |   | 5,164 |
| Other                      assets                                                   |   |                               | 13,206 |   |   | 19,103 |
|                                                                                |   |                               |   |   |   |   |
| Total                      assets                                                   |   | $                                  | 474,454 |   | $ | 417,560 |
|                                                                                |   |                               |   |   |   |   |
| Liabilities                      and Stockholders' Equity                           |   |                               |   |   |   |   |
| Accounts                      payable, accrued expenses and other liabilities       |   | $                                  | 8,342 |   | $ | 11,556 |
| Subordinated                      debentures                                        |   |                               | 104,233 |   |   | 104,138 |
| Total                      liabilities                                              |   |                               | 112,575 |   |   | 115,694 |
| Stockholders'                      equity                                           |   |                               | 361,879 |   |   | 301,866 |
|                                                                                |   |                               |   |   |   |   |
| Total                      liabilities and stockholders' equity                     |   | $                                  | 474,454 |   | $ | 417,560 |

***Condensed            Statements of Income***

|                                                                                                                                           |   | -Year                      Ended December 31- |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                                                                           |   | 2006                                          |   | 2005 |   | 2004 |   |
|                                                                                                                                           |   | (in                      $1,000s)             |   |
| Income:                                                                                                                                        |   |                                          |   |   |   |   |   |   |   |   |
| Dividends                      from subsidiaries                                                                                               |   | $                                             | 30,475 |   | $ | 34,350 |   | $ | 16,075 |   |
| Intercompany                      fees                                                                                                         |   |                                          | 23,039 |   |   | 19,458 |   |   | 16,561 |   |
| Interest                                                                                                                                       |   |                                          | 199    |   |   | 816 |   |   | 468 |   |
| Other                                                                                                                                          |   |                                          | 943    |   |   | 1,413 |   |   | 99 |   |
| Total                      income                                                                                                              |   |                                          | 54,656 |   |   | 56,037 |   |   | 33,203 |   |
| Expenses:                                                                                                                                      |   |                                          |   |   |   |   |   |   |   |   |
| Interest                                                                                                                                       |   |                                          | 8,896  |   |   | 7,976 |   |   | 6,931 |   |
| Salaries                      and employee benefits                                                                                            |   |                                          | 10,482 |   |   | 13,325 |   |   | 13,370 |   |
| Occupancy                                                                                                                                      |   |                                          | 1,584  |   |   | 1,249 |   |   | 1,138 |   |
| Amortization,                      equipment rent and depreciation                                                                             |   |                                          | 2,146  |   |   | 1,839 |   |   | 1,757 |   |
| Other                                                                                                                                          |   |                                          | 1,606  |   |   | 3,153 |   |   | 4,720 |   |
| Total                      expenses                                                                                                            |   |                                          | 24,714 |   |   | 27,542 |   |   | 27,916 |   |
| Income                      before equity in undistributed net earningsof                      consolidated subsidiaries and income tax credit |   |                                          | 29,942 |   |   | 28,495 |   |   | 5,287 |   |
| Equity                      in undistributed net earnings of consolidatedsubsidiaries                                                          |   |                                          | 11,773 |   |   | 6,171 |   |   | 17,665 |   |
| Income                      before income tax credit                                                                                           |   |                                          | 41,715 |   |   | 34,666 |   |   | 22,952 |   |
| Income                      tax credit                                                                                                         |   |                                          | (676   | ) |   | (1,259 | ) |   | (3,764 | ) |
|                                                                                                                                           |   |                                          |   |   |   |   |   |   |   |   |
| Net                      income                                                                                                                |   | $                                             | 42,391 |   | $ | 35,925 |   | $ | 26,716 |   |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            Q—PARENT COMPANY FINANCIAL INFORMATION—Continued***

***Condensed            Statements of Cash Flows***

|                                                                                                                       |   | -Year                      Ended December 31- |    |
|----------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                                                                                       |   | 2006                                          |    | 2005 |   | 2004 |   |
|                                                                                                                       |   | (in                      $1,000s)             |    |
| OPERATING                      ACTIVITIES                                                                                  |   |                                          |    |   |   |   |   |   |   |   |
| Net                      income                                                                                            |   | $                                             | 42,391  |   | $ | 35,925 |   | $ | 26,716 |   |
| Adjustments                      to reconcile net income to net cash providedby                      operating activities: |   |                                          |    |   |   |   |   |   |   |   |
| Equity                      in undistributed net earnings of subsidiaries                                                  |   |                                          | (11,773 | ) |   | (6,171 | ) |   | (17,665 | ) |
| Depreciation                      and amortization of intangibles                                                          |   |                                          | 1,459   |   |   | 1,245 |   |   | 1,197 |   |
| Loss                      on sale of equipment and furniture                                                               |   |                                          | 3       |   |   | 3 |   |   |   |   |
| Decrease                      in amounts due from subsidiaries and other assets                                            |   |                                          | 23,388  |   |   | 7,938 |   |   | 10,597 |   |
| Increase                      (decrease) in accounts payable, accrued expensesand                      other liabilities   |   |                                          | (3,214  | ) |   | 1,772 |   |   | 718 |   |
| NET                      CASH PROVIDED BY OPERATING ACTIVITIES                                                             |   |                                          | 52,254  |   |   | 40,712 |   |   | 21,563 |   |
|                                                                                                                       |   |                                          |    |   |   |   |   |   |   |   |
| INVESTING                      ACTIVITIES                                                                                  |   |                                          |    |   |   |   |   |   |   |   |
| Net                      cash investments in subsidiaries                                                                  |   |                                          | (36,193 | ) |   | (31,723 | ) |   | (27,887 | ) |
| Net                      payments from Amera Mortgage Corporation                                                          |   |                                          |         |   |   | 315 |   |   | 62 |   |
| Purchases                      of investment securities                                                                    |   |                                          | (2,000  | ) |   | (673 | ) |   |   |   |
| Net                      increase in loans                                                                                 |   |                                          | (8,449  | ) |   | (1,635 | ) |   | (326 | ) |
| Proceeds                      from sales of equipment and furniture                                                        |   |                                          |         |   |   | 4 |   |   |   |   |
| Purchases                      of equipment and furniture                                                                  |   |                                          | (5,098  | ) |   | (4,034 | ) |   | (662 | ) |
| NET                      CASH USED BY INVESTING ACTIVITIES                                                                 |   |                                          | (51,740 | ) |   | (37,746 | ) |   | (28,813 | ) |
|                                                                                                                       |   |                                          |    |   |   |   |   |   |   |   |
| FINANCING                      ACTIVITIES                                                                                  |   |                                          |    |   |   |   |   |   |   |   |
| Net                      proceeds from issuance of common stock                                                            |   |                                          | 3,573   |   |   | 2,510 |   |   | 954 |   |
| Net                      proceeds from issuance of subordinated debentures                                                 |   |                                          |    |   |   |   |   |   | 9,935 |   |
| Tax                      benefit from share-based payments                                                                 |   |                                          | 2,481   |   |   |   |   |   |   |   |
| Cash                      dividends paid                                                                                   |   |                                          | (15,165 | ) |   | (10,848 | ) |   | (9,375 | ) |
| NET                      CASH PROVIDED (USED) BY FINANCINGACTIVITIES                                                       |   |                                          | (9,111  | ) |   | (8,338 | ) |   | 1,514 |   |
| DECREASE                      IN CASH AND CASHEQUIVALENTS                                                                  |   |                                          | (8,597  | ) |   | (5,372 | ) |   | (5,736 | ) |
| Cash                      and cash equivalents at beginning of year                                                        |   |                                          | 26,430  |   |   | 31,802 |   |   | 37,538 |   |
|                                                                                                                       |   |                                          |    |   |   |   |   |   |   |   |
| CASH                      AND CASH EQUIVALENTS AT END OF YEAR                                                              |   | $                                             | 17,833  |   | $ | 26,430 |   | $ | 31,802 |   |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            R—ACQUISITION OF MINORITY INTERESTS AND ACQUISITION            OF***

**BANK**

|  Entity                                               |   |  Effective                      Date                                   |   | Number                      of CommonShares                      Issued |
|------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|
| Bank                      of Escondido                     |   |                             December 31, 2006 |   | 189,000                                                                 |
| Capitol                      Development Bancorp Limited I |   |                             November 30, 2006 |   | 366,000                                                                 |

|  Entity                                           |   |  Effective                      Date                                   |   | Number                      of CommonShares                      Issued |
|--------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|
| Napa                      Community Bank               |   |                             August 31, 2005   |   | 202,000                                                                 |
| Bank                      of Las Vegas                 |   |                             November 30, 2005 |   | 179,000                                                                 |
| First                      California Southern Bancorp |   |                             December 31, 2005 |   | 229,000                                                                 |

----

**NOTES            TO CONSOLIDATED FINANCIAL STATEMENTS**

**Capitol            Bancorp Limited**

***NOTE            S—PENDING SHARE EXCHANGE TRANSACTIONS***

----