##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K þ ANNUAL REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  o TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 001-31708
 CAPITOL BANCORP LTD.  MICHIGAN
    
    38-2761672(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification Number)Capitol Bancorp Center200 Washington Square NorthLansing, Michigan 48933(Address of principal executive offices)Registrants telephone number, including area code: (517) 487-6555Securities registered pursuant to Section 12(b) of the Act:
 Title of Each
    
    Name of Each
Exchange
 on Which RegisteredCommon Stock, no par value
    
    New York Stock Exchange8.50% Cumulative TrustPreferred Securities, $10Liquidation Amount
    
    New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:   None
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days. þ o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). þ o
 State the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was last sold, or the
average bid and asked price of such common security, as of the last business day of the
registrants most recently completed second fiscal quarter: $307,280,293. (Such amount was
computed based on shares held by non-affiliates as of February 25, 2004 and the common stock
closing price reported by the New York Stock Exchange on June 30, 2004. For purposes of this
computation, all executive officers, directors and 5% shareholders of registrant have been assumed
to be affiliates. Certain of such persons may disclaim that they are affiliates of registrant.) Indicate the number of shares outstanding of each of the registrants classes of common stock
as of the latest practicable date: 14,888,400 as of February 28, 2005. DOCUMENTS INCORPORATED BY REFERENCE See Cross-Reference Sheet




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##### Table of Contents



CAPITOL BANCORP LTD.
Form 10-K
Fiscal Year Ended: December 31, 2004Cross Reference Sheet Item of Form 10-K
    
    Incorporation by Reference From:Part IItem 1. Business
    
    Pages F-6  F-11, F-18  F-25, F-34  F-36 and F-47  F-48,
   Financial Information Section of Annual ReportItem 2. Properties
    
    Pages F-34 and F-45, Financial Information Section
of Annual ReportPart IIItem 5. Market for Registrants Common
Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    Pages F-2  F-4, F-48  F-49 and F-54  F-55,
Financial Information Section of Annual ReportItem 6. Selected Financial Data
    
    Page F-2, Financial Information Section of Annual ReportItem 7. Managements Discussion
and Analysis of Financial Condition
and Results of Operations
    
    Pages F-5 and F-6  F-25, Financial Information Section
of Annual ReportItem 7a. Quantitative and Qualitative
Disclosures About Market Risk
    
    Pages F-5 and F-22  F-25, Financial Information Section
of Annual ReportItem 8. Financial Statements and
Supplementary Data
    
    Pages F-2 and F-29  F-59, Financial Information Section
of Annual ReportItem 9a. Controls and Procedures
    
    Page F-26, Financial Information Section of Annual ReportPart IIIItem 10. Directors and Executive Officers
of the Registrant
    
    Proxy StatementItem 11. Executive Compensation
    
    Proxy StatementItem 12. Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters
    
    Proxy StatementItem 13. Certain Relationships and Related
Transactions
    
    Proxy StatementItem 14. Principal Accountant Fees and Services
    
    Proxy StatementPart IVItem 15. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
    
    Pages F-29  F-59, Financial Information Section of
Annual Report
 Key:Annual Report
    
    means the 2004 Annual Report of the Registrant provided to Stockholders and the Commission pursuant to Rule 14a-3(b). Capitols 2004 Annual
Report is divided into two sections: a Financial Information Section and a Marketing Section.Proxy Statement
    
    means the Proxy Statement of the Registrant on Schedule 14A to be filed pursuant to Rule 14a-101, within 120 days after December 31, 2004.
 Note:
    
    The page number references herein are based on the paper version of the referenced documents.
Accordingly, those page number references may differ from the electronically filed versions of those
documents.
 - 2 -




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##### Table of Contents



CAPITOL BANCORP LTD. 2004 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PagePART IITEM 1. Business
    
    
    5ITEM 2. Properties
    
    
    15ITEM 3. Legal Proceedings
    
    
    16ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    16PART IIITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    17ITEM 6. Selected Financial Data
    
    
    17ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18ITEM 8. Financial Statements and Supplementary Data
    
    
    18ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    18ITEM 9A. Controls and Procedures
    
    
    18ITEM 9B. Other Information
    
    
    18PART IIIITEM 10. Directors and Executive Officers of the Registrant
    
    
    19ITEM 11. Executive Compensation
    
    
    19ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    19ITEM 13. Certain Relationships and Related Transactions
    
    
    19ITEM 14. Principal Accountant Fees and Services
    
    
    19PART IVITEM 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
    
    
    20Eighteenth, Nineteenth & Twentieth Amendments to Profit Sharing/401(k) PlanEighth Amendment to Employee Stock Ownership PlanNinth Amendment to Employee Stock Ownership PlanTenth Amendment to Employee Stock Ownership PlanAnnual Report to Security HoldersSubsidiaries of the RegistrantConsent of BDO Seidman, LLP302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer303A.12(a) Certification of Chief Executive Officer
 - 3 -




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FORWARD-LOOKING STATEMENTS Some of the statements contained in this annual report that are not historical facts are
forward-looking statements. Those forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, are subject to known and unknown risks, uncertainties and
other factors which may cause the actual future results, performance or achievements of Capitol
and/or its subsidiaries and other operating units to differ materially from those contemplated in
such forward-looking statements. The words intend, expect, project, estimate, predict,
anticipate, should, will, may, believe and similar expressions also identify
forward-looking statements. Important factors which may cause actual results to differ from those
contemplated in such forward-looking statements include, but are not limited to: (i) the results of
Capitols efforts to implement its business strategy, (ii) changes in interest rates, (iii)
legislation or regulatory requirements adversely impacting Capitols banking business and/or
expansion strategy, (iv) adverse changes in business conditions or inflation, (v) general economic
conditions, either nationally or regionally, which are less favorable than expected and that result
in, among other things, a deterioration in credit quality and/or loan performance and
collectability, (vi) competitive pressures among financial institutions, (vii) changes in
securities markets, (viii) actions of competitors of Capitols banks and Capitols ability to
respond to such actions, (ix) the cost of capital, which may depend in part on Capitols asset
quality, prospects and outlook, (x) changes in governmental regulation, tax rates and similar
matters, (xi) changes in management and (xii) other risks detailed in Capitols other filings with
the Securities and Exchange Commission. If one or more of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect, actual outcomes may vary materially from
those indicated. The preparation of consolidated financial statements in conformity with generally
accepted accounting principles in the United States of America requires management to make certain
estimates and assumptions, many of which are based on assumptions relating to the above-stated
forward-looking statements, that affect the reported amounts of assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results will differ from those estimates because of the inherent
subjectivity and inaccuracy of any estimation. All subsequent written or oral forward-looking
statements attributable to Capitol or persons acting on its behalf are expressly qualified in their
entirety by the foregoing factors. Investors and other interested parties are cautioned not to
place undue reliance on such statements, which speak as of the date of such statements. Capitol
undertakes no obligation to release publicly any revisions to these forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect the occurrence of
unanticipated events. [The remainder of this page intentionally left blank] - 4 -




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##### Table of Contents



PART I 
 Item 1. Business. a. General development of business: Incorporated by reference from Pages F-6  F-8, Financial Information Section of Annual
Report, under the caption Capitol Bancorp and its Banking Business, and Pages F-34  F-36,
Financial Information Section of Annual Report, under the caption Note ANature of Operations,
Basis of Presentation and Principles of Consolidation. b. Financial information about segments: Incorporated by reference from Pages F-34  F-36, Financial Information Section of Annual
Report, under the caption Note ANature of Operations, Basis of Presentation and Principles of
Consolidation. c. Narrative description of business: Incorporated by reference from Pages F-6  F-8, Financial Information Section of Annual
Report, under the caption Capitol Bancorp and its Banking Business, Pages F-34  F-36, Financial
Information Section of Annual Report, under the caption Note ANature of Operations, Basis of
Presentation and Principles of Consolidation, Pages F-9  F-11, Financial Information Section of
Annual Report, under the caption Critical Accounting Policies Affecting Capitols Financial
Statements, Pages F-22  F-25, Financial Information Section of Annual Report, under the caption
Trends Affecting Operations and Pages F-18  F-21, Financial Information Section of Annual
Report, under the caption Liquidity, Capital Resources and Capital Adequacy. At December 31, 2004, Capitol and its subsidiaries employed 864 full time equivalent
employees. In 1997, the Registrant formed Capitol Trust I, a Delaware statutory business trust. Capitol
Trust Is business and affairs are conducted by its property trustee, a Delaware trustee, and three
individual administrative trustees who are employees and officers of
Capitol. Capitol Trust
I exists for the sole purpose of issuing and selling its preferred securities and common
securities, using the proceeds from the sale of those securities to acquire subordinated debentures
issued by the Registrant and certain related services. During 2001, the Registrant formed Capitol
Trust II and Capitol Statutory Trust III, in conjunction with private placements of trust-preferred
securities, which are structured similar to Capitol Trust I. Capitol Trust IV was similarly formed
in 2002, Capitol Trust VI, Capitol Trust VII and Capitol Statutory Trust VIII were formed in 2003
and Capitol Trust IX was formed in 2004. Additional information regarding trust-preferred
securities is incorporated by reference from Pages F-47  F-48, Financial Information Section of
Annual Report, under the caption Note ISubordinated Debt. Capitol maintains an
Internet web site at www.capitolbancorp.com that includes links to
Capitols Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and any amendments to those reports (the SEC Reports). The SEC Reports are available without
charge as soon as reasonably practicable following the time that they are filed with or furnished
to the SEC. Information on Capitols website is not incorporated into this Form 10-K or Capitols
other securities filings and is not a part of those filings. The following tables (Tables A to G, inclusive), present certain statistical information
regarding Capitols business. - 5 -




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##### Table of Contents



DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS EQUITY (TABLE A)
CAPITOL BANCORP LIMITED Net interest income, the primary component of earnings, represents the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the rates earned or paid on them. This
table shows the daily average balances for the major asset and liability categories and the actual related interest income and expense (in $1,000s) and average
yield/cost for the years ended December 31, 2004, 2003 and 2002. 2004
    
    
    2003
    
    
    2002Interest
    
    
    (1)
    
    
    
    
    
    
    Interest
    
    
    (1)
    
    
    
    
    
    
    Interest
    
    
    (1)Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield/Cost
    
    
    Balance
    
    
    Expense
    
    
    Yield/Cost
    
    
    Balance
    
    
    Expense
    
    
    Yield/CostASSETSFederal funds sold
    
    $
    132,518
    
    
    $
    1,620
    
    
    
    1.22
    %
    
    $
    127,599
    
    
    $
    1,344
    
    
    
    1.05
    %
    
    $
    87,460
    
    
    $
    1,376
    
    
    
    1.57
    %Money market and interest-bearing deposits
    
    
    9,082
    
    
    
    194
    
    
    
    2.14
    %
    
    
    6,301
    
    
    
    78
    
    
    
    1.24
    %
    
    
    29,592
    
    
    
    807
    
    
    
    2.73
    %Investment securities:U.S. Treasury, government agencies, mutual funds
and other
    
    
    56,126
    
    
    
    1,749
    
    
    
    3.12
    %
    
    
    87,498
    
    
    
    2,581
    
    
    
    2.95
    %
    
    
    43,447
    
    
    
    1,792
    
    
    
    4.12
    %States and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    470
    
    
    
    20
    
    
    
    4.26
    %Loans held for resale
    
    
    43,383
    
    
    
    2,150
    
    
    
    4.96
    %
    
    
    68,888
    
    
    
    3,299
    
    
    
    4.79
    %
    
    
    51,042
    
    
    
    2,674
    
    
    
    5.24
    %Portfolio loans (2)
    
    
    2,492,379
    
    
    
    173,376
    
    
    
    6.96
    %
    
    
    2,101,617
    
    
    
    157,114
    
    
    
    7.48
    %
    
    
    1,884,646
    
    
    
    149,785
    
    
    
    7.95
    %Total interest-earning
assets/interest income
    
    
    2,733,488
    
    
    
    179,089
    
    
    
    6.55
    %
    
    
    2,391,903
    
    
    
    164,416
    
    
    
    6.87
    %
    
    
    2,096,657
    
    
    
    156,454
    
    
    
    7.46
    %Allowance for loan losses (deduct)
    
    
    (34,815
    )
    
    
    
    
    
    
    
    
    
    
    (30,018
    )
    
    
    
    
    
    
    
    
    
    
    (26,010
    )Cash and due from banks
    
    
    135,261
    
    
    
    
    
    
    
    
    
    
    
    123,781
    
    
    
    
    
    
    
    
    
    
    
    99,604Premises and equipment, net
    
    
    29,099
    
    
    
    
    
    
    
    
    
    
    
    22,696
    
    
    
    
    
    
    
    
    
    
    
    18,184Other assets
    
    
    82,719
    
    
    
    
    
    
    
    
    
    
    
    62,827
    
    
    
    
    
    
    
    
    
    
    
    46,699Total assets
    
    $
    2,945,752
    
    
    
    
    
    
    
    
    
    
    $
    2,571,189
    
    
    
    
    
    
    
    
    
    
    $
    2,235,134LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing deposits:Savings deposits
    
    $
    74,026
    
    
    
    732
    
    
    
    0.99
    %
    
    $
    65,664
    
    
    
    757
    
    
    
    1.15
    %
    
    $
    65,124
    
    
    
    1,036
    
    
    
    1.59
    %Time deposits under $100,000
    
    
    303,660
    
    
    
    7,919
    
    
    
    2.61
    %
    
    
    324,858
    
    
    
    10,052
    
    
    
    3.09
    %
    
    
    335,332
    
    
    
    12,910
    
    
    
    3.85
    %Time deposits $100,000 and over
    
    
    596,658
    
    
    
    14,578
    
    
    
    2.44
    %
    
    
    571,549
    
    
    
    17,169
    
    
    
    3.00
    %
    
    
    550,381
    
    
    
    20,546
    
    
    
    3.73
    %Other interest-bearing deposits
    
    
    998,544
    
    
    
    13,466
    
    
    
    1.35
    %
    
    
    864,400
    
    
    
    13,282
    
    
    
    1.54
    %
    
    
    654,853
    
    
    
    13,356
    
    
    
    2.04
    %Notes payable and short-term borrowings
    
    
    119,559
    
    
    
    3,964
    
    
    
    3.32
    %
    
    
    89,822
    
    
    
    3,608
    
    
    
    4.02
    %
    
    
    89,992
    
    
    
    3,981
    
    
    
    4.42
    %Subordinated debentures
    
    
    98,411
    
    
    
    6,837
    
    
    
    6.95
    %
    
    
    59,901
    
    
    
    4,622
    
    
    
    7.72
    %
    
    
    50,213
    
    
    
    4,031
    
    
    
    8.03
    %Total interest-bearing
liabilities/interest expense
    
    
    2,190,858
    
    
    
    47,496
    
    
    
    2.17
    %
    
    
    1,976,194
    
    
    
    49,490
    
    
    
    2.50
    %
    
    
    1,745,895
    
    
    
    55,860
    
    
    
    3.20
    %Noninterest-bearing demand deposits
    
    
    464,530
    
    
    
    
    
    
    
    
    
    
    
    370,726
    
    
    
    
    
    
    
    
    
    
    
    303,227Accrued interest on deposits and
other liabilities
    
    
    17,177
    
    
    
    
    
    
    
    
    
    
    
    16,075
    
    
    
    
    
    
    
    
    
    
    
    15,738Minority interests in consolidated subsidiaries
    
    
    35,740
    
    
    
    
    
    
    
    
    
    
    
    27,931
    
    
    
    
    
    
    
    
    
    
    
    45,324Stockholders equity
    
    
    237,447
    
    
    
    
    
    
    
    
    
    
    
    180,263
    
    
    
    
    
    
    
    
    
    
    
    124,950Total liabilities and
stockholders equity
    
    $
    2,945,752
    
    
    
    
    
    
    
    
    
    
    $
    2,571,189
    
    
    
    
    
    
    
    
    
    
    $
    2,235,134Net interest income

    
    
    
    
    
    $
    131,593
    
    
    
    
    
    
    
    
    
    
    $
    114,926
    
    
    
    
    
    
    
    
    
    
    $
    100,594Interest Rate Spread (3)
    
    
    
    
    
    
    
    
    
    
    4.38
    %
    
    
    
    
    
    
    
    
    
    
    4.37
    %
    
    
    
    
    
    
    
    
    
    
    4.26
    %Net Yield on Interest-Earning Assets (4)
    
    
    
    
    
    
    
    
    
    
    4.81
    %
    
    
    
    
    
    
    
    
    
    
    4.80
    %
    
    
    
    
    
    
    
    
    
    
    4.80
    %Ratio of Average Interest-Earning
Assets to Interest-Bearing Liabilities
    
    
    1.25
    
    
    
    
    
    
    
    
    
    
    
    1.21
    
    
    
    
    
    
    
    
    
    
    
    1.20
   (1)
    
    Average yield/cost is determined by dividing the actual interest income/expense by the daily average balance of the asset or liability category.(2)
    
    Average balance of loans includes nonaccrual loans.(3)
    
    Interest rate spread represents the average yield on interest-earning assets less the average cost of interest-bearing liabilities.(4)
    
    Net yield is based on net interest income as a percentage of average total interest-earning assets. - 6 -




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##### Table of Contents



CHANGES IN NET INTEREST INCOME (TABLE B)
CAPITOL BANCORP LIMITED The table below summarizes the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected Capitols net interest income (in $1,000s). The change in interest attributable to volume is calculated by multiplying
the annual change in volume by the prior years rate. The change in interest attributable to rate is calculated by multiplying the annual change
in rate by the prior years average balance. Any variance attributable jointly to volume and rate changes has been allocated to each category based
on the percentage of each to the total change in both categories. 2004 compared to 2003
    
    
    2003 compared to 2002Volume
    
    
    Rate
    
    
    Net Total
    
    
    Volume
    
    
    Rate
    
    
    Net TotalIncrease (decrease) in interest income:Federal funds sold
    
    $
    53
    
    
    $
    223
    
    
    $
    276
    
    
    $
    510
    
    
    $
    (542
    )
    
    $
    (32
    )Money market and interest-bearing deposits
    
    
    44
    
    
    
    72
    
    
    
    116
    
    
    
    (430
    )
    
    
    (299
    )
    
    
    (729
    )Investment securities:U.S. Treasury, government agencies, mutual funds
and other
    
    
    (971
    )
    
    
    139
    
    
    
    (832
    )
    
    
    1,413
    
    
    
    (624
    )
    
    
    789States and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )Loans held for resale
    
    
    (1,260
    )
    
    
    111
    
    
    
    (1,149
    )
    
    
    870
    
    
    
    (245
    )
    
    
    625Portfolio loans
    
    
    27,735
    
    
    
    (11,473
    )
    
    
    16,262
    
    
    
    16,569
    
    
    
    (9,240
    )
    
    
    7,329Total
    
    
    25,601
    
    
    
    (10,928
    )
    
    
    14,673
    
    
    
    18,912
    
    
    
    (10,950
    )
    
    
    7,962Increase (decrease) in interest expense:Deposits:Savings deposits
    
    
    90
    
    
    
    (115
    )
    
    
    (25
    )
    
    
    9
    
    
    
    (288
    )
    
    
    (279
    )Time deposits under $100,000
    
    
    (626
    )
    
    
    (1,507
    )
    
    
    (2,133
    )
    
    
    (392
    )
    
    
    (2,466
    )
    
    
    (2,858
    )Time deposits $100,000 and over
    
    
    727
    
    
    
    (3,318
    )
    
    
    (2,591
    )
    
    
    765
    
    
    
    (4,142
    )
    
    
    (3,377
    )Other interest-bearing deposits
    
    
    1,920
    
    
    
    (1,736
    )
    
    
    184
    
    
    
    3,679
    
    
    
    (3,753
    )
    
    
    (74
    )Notes payable and short-term borrowings
    
    
    1,058
    
    
    
    (702
    )
    
    
    356
    
    
    
    (8
    )
    
    
    (365
    )
    
    
    (373
    )Subordinated debentures
    
    
    2,715
    
    
    
    (500
    )
    
    
    2,215
    
    
    
    753
    
    
    
    (162
    )
    
    
    591Total
    
    
    5,884
    
    
    
    (7,878
    )
    
    
    (1,994
    )
    
    
    4,806
    
    
    
    (11,176
    )
    
    
    (6,370
    )Increase (decrease) in net
interest income
    
    $
    19,717
    
    
    $
    (3,050
    )
    
    $
    16,667
    
    
    $
    14,106
    
    
    $
    226
    
    
    $
    14,332
 - 7 -




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##### Table of Contents



INVESTMENT PORTFOLIO (TABLE C)
CAPITOL BANCORP LIMITED The table below shows amortized cost and estimated market value of investment securities as of December 31, 2004, 2003 and 2002 (in $1,000s): 2004
    
    
    2003
    
    
    2002Estimated
    
    
    
    
    
    
    Estimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Market
    
    
    Amortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueU.S. Treasury
    
    $
    330
    
    
    $
    329
    
    
    $
    832
    
    
    $
    835
    
    
    $
    2,505
    
    
    $
    2,586Government agencies
    
    
    27,897
    
    
    
    27,843
    
    
    
    25,431
    
    
    
    25,597
    
    
    
    22,460
    
    
    
    22,668Mutual Funds
    
    
    
    
    
    
    
    
    
    
    57,424
    
    
    
    56,954States and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    10128,227
    
    
    
    28,172
    
    
    
    83,687
    
    
    
    83,386
    
    
    
    25,066
    
    
    
    25,355Other securities:Federal Reserve Bank stock
    
    
    535
    
    
    
    535
    
    
    
    483
    
    
    
    483
    
    
    
    424
    
    
    
    424Federal Home Loan Bank stock
    
    
    10,878
    
    
    
    10,878
    
    
    
    6,732
    
    
    
    6,732
    
    
    
    5,950
    
    
    
    5,950Corporate stock
    
    
    1,443
    
    
    
    1,443
    
    
    
    1,271
    
    
    
    1,271
    
    
    
    1,075
    
    
    
    1,075Other investments
    
    
    1,335
    
    
    
    1,335
    
    
    
    1,335
    
    
    
    1,335
    
    
    
    1,335
    
    
    
    1,335Total other securities
    
    
    14,191
    
    
    
    14,191
    
    
    
    9,821
    
    
    
    9,821
    
    
    
    8,784
    
    
    
    8,784Total investment securities
    
    $
    42,418
    
    
    $
    42,363
    
    
    $
    93,508
    
    
    $
    93,207
    
    
    $
    33,850
    
    
    $
    34,139
 The table below shows the amortized cost, relative maturities and weighted average yields of investment securities at December 31, 2004 (in $1,000s): Estimated
    
    
    WeightedAmortized
    
    
    Market
    
    
    AverageCost
    
    
    Value
    
    
    YieldMaturity:Due in one year or less
    
    $
    8,331
    
    
    $
    8,293
    
    
    
    2.23
    %Due after one year but within
five years
    
    
    11,797
    
    
    
    11,728
    
    
    
    2.94
    %Due after five years but within
ten years
    
    
    2,624
    
    
    
    2,673
    
    
    
    5.40
    %Due after ten years
    
    
    5,475
    
    
    
    5,478
    
    
    
    5.55
    %Without stated maturities
    
    
    14,191
    
    
    
    14,191Total
    
    $
    42,418
    
    
    $
    42,363
 Investment securities which do not have stated maturities (corporate stock, Federal Reserve Bank and Federal Home Loan Bank stock) do not have
stated yields or rates of return and such rates of return vary from time to time. Following is a summary of the weighted average maturities of investment securities (exclusive of securities without stated maturities) at
December 31, 2004: U.S. Treasury securities
    
    
    
    
    
    3 monthsU.S. Agencies
    
    6 years
    
    and
    
    5 months
 - 8 -




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##### Table of Contents



LOAN PORTFOLIO AND SUMMARY OF OTHER REAL ESTATE OWNED (TABLE D)
CAPITOL BANCORP LIMITED Portfolio loans outstanding as of December 31 are shown below (in $1,000s): 2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Commercial - real estate
    
    $
    1,969,746
    
    
    
    73.15
    %
    
    $
    1,600,334
    
    
    
    71.21
    %
    
    $
    1,531,637
    
    
    
    76.91
    %
    
    $
    1,154,757
    
    
    
    66.57
    %
    
    $
    865,382
    
    
    
    63.83
    %Commercial - other
    
    
    474,746
    
    
    
    17.63
    %
    
    
    432,763
    
    
    
    19.26
    %
    
    
    257,399
    
    
    
    12.93
    %
    
    
    380,694
    
    
    
    21.95
    %
    
    
    308,354
    
    
    
    22.74
    %Total commercial loans
    
    
    2,444,492
    
    
    
    90.78
    %
    
    
    2,033,097
    
    
    
    90.46
    %
    
    
    1,789,036
    
    
    
    89.84
    %
    
    
    1,535,451
    
    
    
    88.52
    %
    
    
    1,173,736
    
    
    
    86.57
    %Real estate mortgage
    
    
    177,204
    
    
    
    6.58
    %
    
    
    143,343
    
    
    
    6.38
    %
    
    
    127,855
    
    
    
    6.42
    %
    
    
    121,676
    
    
    
    7.01
    %
    
    
    113,324
    
    
    
    8.36
    %Installment
    
    
    71,208
    
    
    
    2.64
    %
    
    
    71,000
    
    
    
    3.16
    %
    
    
    74,481
    
    
    
    3.74
    %
    
    
    77,462
    
    
    
    4.47
    %
    
    
    68,738
    
    
    
    5.07
    %Total portfolio loans
    
    $
    2,692,904
    
    
    
    100.00
    %
    
    $
    2,247,440
    
    
    
    100.00
    %
    
    $
    1,991,372
    
    
    
    100.00
    %
    
    $
    1,734,589
    
    
    
    100.00
    %
    
    $
    1,355,798
    
    
    
    100.00
    %
 The table below summarizes (in $1,000s) the remaining maturity of portfolio loans outstanding at December 31, 2004 according to scheduled repayments
of principal: Fixed
    
    
    VariableRate
    
    
    Rate
    
    
    TotalAggregate maturities of portfolio loan balances which are due
in one year or less:
    
    $
    364,506
    
    
    $
    1,202,684
    
    
    $
    1,567,190After one year but within five years
    
    
    606,149
    
    
    
    429,582
    
    
    
    1,035,731After five years
    
    
    46,448
    
    
    
    20,326
    
    
    
    66,774Nonaccrual loans
    
    
    23,209
    
    
    
    
    
    
    
    23,209Total
    
    $
    1,040,312
    
    
    $
    1,652,592
    
    
    $
    2,692,904
 The following summarizes, in general, Capitols various loan classifications: Commercial - real estate
Comprised of a broad mix of business use and multi-family housing properties, including office, retail, warehouse and light industrial uses.
A typical loan size is generally less than $1,000,000 and, at
December 31, 2004, approximately 21% of such properties were
owner-occupied and approximately 20% of the commercial real estate total consisted of a combination of multi-family and residential rental income properties (including construction). Commercial - other
Includes a range of business credit products, current asset lines of
credit and equipment term loans. These products bear higher inherent
economic risk than other types of lending activities. A typical loan size is generally less than $500,000, and multiple account relationships serve to reduce such risks. Real Estate Mortgage
Includes single family residential loans held for permanent portfolio
and home equity lines of credit. Risks are nominal, borne out by loss experience, housing economic data and loan-to-value percentages. Installment
Includes a broad range of installment credit products, secured by automobiles, boats, etc., with typical consumer credit risks. All loans are subject to
underwriting procedures commensurate with the loan size, nature of
collateral, industry trends, risks and experience factors.
Appropriate collateral is required for most loans, as is documented evidence of debt repayment sources. - 9 -




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##### Table of Contents



LOAN PORTFOLIO AND SUMMARY OF OTHER REAL ESTATE OWNED (TABLE D CONTINUED)
CAPITOL BANCORP LIMITED The aggregate amount of nonperforming portfolio loans is summarized below as of December 31 (in $1,000s). Nonperforming loans comprise of
(a) loans accounted for on a nonaccrual basis, and (b) loans contractually past due 90 days or more as to principal and interest payments
(but not included in nonaccrual loans in (a) above) and consist primarily of commercial real estate loans. See Note D of the Notes to Consolidated
Financial Statements for additional information regarding nonperforming loans. 2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Nonperforming loans:Nonaccrual loans:
    
    Commercial
    
    $
    20,618
    
    
    $
    19,852
    
    
    $
    15,444
    
    
    $
    11,220
    
    
    $
    4,082Real estate mortgage
    
    
    2,396
    
    
    
    632
    
    
    
    560
    
    
    
    356
    
    
    
    163Installment
    
    
    195
    
    
    
    376
    
    
    
    613
    
    
    
    466
    
    
    
    171Total nonaccrual loans
    
    
    
    
    
    
    23,209
    
    
    
    20,860
    
    
    
    16,617
    
    
    
    12,042
    
    
    
    4,416Past due loans:
    
    Commercial
    
    
    3,529
    
    
    
    4,544
    
    
    
    5,728
    
    
    
    4,290
    
    
    
    1,656Real estate mortgage
    
    
    1,382
    
    
    
    1,083
    
    
    
    323
    
    
    
    787
    
    
    
    534Installment
    
    
    351
    
    
    
    385
    
    
    
    222
    
    
    
    119
    
    
    
    151Total past due loans
    
    
    
    
    
    
    5,262
    
    
    
    6,012
    
    
    
    6,273
    
    
    
    5,196
    
    
    
    2,341Total nonperforming loans
    
    
    
    
    
    $
    28,471
    
    
    $
    26,872
    
    
    $
    22,890
    
    
    $
    17,238
    
    
    $
    6,757Nonperforming loans as a percentage
of total portfolio loans
    
    
    
    
    
    
    1.06
    %
    
    
    1.20
    %
    
    
    1.15
    %
    
    
    0.99
    %
    
    
    0.50
    %Nonperforming loans as a percentage
of total assets
    
    
    
    
    
    
    0.92
    %
    
    
    0.98
    %
    
    
    0.95
    %
    
    
    0.84
    %
    
    
    0.41
    %Allowance for loan losses as a
percentage of nonperforming loans
    
    
    
    
    
    
    131.97
    %
    
    
    116.87
    %
    
    
    126.49
    %
    
    
    134.81
    %
    
    
    258.24
    %
 In addition to the identification of nonperforming loans involving borrowers with payment performance difficulties (i.e., nonaccrual loans and
loans past-due 90 days or more), management utilizes an internal loan review process to identify other potential problem loans which may
warrant additional monitoring or other attention. This loan review process is a continuous activity which periodically updates internal loan
classifications. At inception, all loans are individually assigned a classification which grade the credits on a risk basis, based on the type and
discounted value of collateral, financial strength of the borrower and guarantors and other factors such as nature of the borrowers business
climate, local economic conditions and other subjective factors. The loan classification process is fluid and subjective. Potential problem loans include loans which are generally performing as agreed; however, because of loan reviews and/or lending staffs risk
assessment, increased monitoring is deemed appropriate. In addition, some loans are identified for monitoring because of specific performance
issues or other risk factors requiring closer management and development of specific remedial action plans. At December 31, 2004, potential problem loans (including nonperforming loans) approximated $113.2 million or about 4.2% of total consolidated
portfolio loans. Such totals typically approximate 4% to 5% of loans outstanding and are an important part of managements ongoing and augmented
loan review activities which are designed to early-identify loans which warrant close monitoring at the bank and corporate credit-administration
levels. It is important to note that these potential problem loans do not necessarily have significant loss exposure (nor are they necessarily deemed
impaired), but rather are identified by management in this manner to aid in loan administration and risk management. Management believes these
loans to be adequately considered in its evaluation of the adequacy of the allowance for loan losses. The table below summarizes activity in other real estate owned (in $1,000s) for the year ended December 31: 2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Other real estate owned at January 1
    
    $
    4,248
    
    
    $
    4,605
    
    
    $
    3,044
    
    
    $
    3,094
    
    
    $
    3,614Properties acquired in restructure
of loans or in lieu of foreclosure
    
    
    4,233
    
    
    
    3,898
    
    
    
    4,578
    
    
    
    860
    
    
    
    324Properties sold
    
    
    (3,833
    )
    
    
    (3,704
    )
    
    
    (2,998
    )
    
    
    (233
    )
    
    
    (717
    )Payments received from borrowers or
tenants, credited to carrying amount
    
    
    (552
    )
    
    
    (121
    )
    
    
    
    
    
    
    (3
    )
    
    
    Other changes, net
    
    
    (241
    )
    
    
    (430
    )
    
    
    (19
    )
    
    
    (674
    )
    
    
    (127
    )Other real estate owned at December 31
    
    $
    3,855
    
    
    $
    4,248
    
    
    $
    4,605
    
    
    $
    3,044
    
    
    $
    3,094
 Other real estate owned is valued at the lower of cost or fair value (net of estimated selling cost) at the date of transfer/acquisition. Management performs
a periodic analysis of estimated fair values to determine potential impairment of other real estate owned. - 10 -




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##### Table of Contents



SUMMARY OF LOAN LOSS EXPERIENCE (TABLE E)
CAPITOL BANCORP LIMITED The table below summarizes changes in the allowance for loan losses and related portfolio data and ratios for the year ended December 31 (in $1,000s): 2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Allowance for loan losses at January 1
    
    
    
    
    
    $
    31,404
    
    
    $
    28,953
    
    
    $
    23,238
    
    
    $
    17,449
    
    
    $
    12,639Allowance for loan losses of acquired
bank subsidiary
    
    
    
    
    
    
    724Loans charged off:Commercial
    
    
    
    
    
    
    (7,960
    )
    
    
    (8,068
    )
    
    
    (6,824
    )
    
    
    (2,280
    )
    
    
    (2,850
    )Real estate mortgage
    
    
    
    
    
    
    (96
    )
    
    
    (115
    )
    
    
    (352
    )
    
    

    (143
    )
    
    
    (204
    )Installment
    
    
    
    
    
    
    (332
    )
    
    
    (608
    )
    
    
    (527
    )
    
    
    (506
    )
    
    
    (117
    )Total charge-offs
    
    
    (8,388
    )
    
    
    (8,791
    )
    
    
    (7,703
    )
    
    
    (2,929
    )
    
    
    (3,171
    )Recoveries:Commercial
    
    
    
    
    
    
    1,007
    
    
    
    1,277
    
    
    
    588
    
    
    
    485
    
    
    
    734Real estate mortgage
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    61
    
    
    
    37
    
    
    
    13Installment
    
    
    
    
    
    
    117
    
    
    
    91
    
    
    
    93
    
    
    
    29
    
    
    
    18Total recoveries
    
    
    1,124
    
    
    
    1,381
    
    
    
    742
    
    
    
    551
    
    
    
    765Net charge-offs
    
    
    (7,264
    )
    
    
    (7,410
    )
    
    
    (6,961
    )
    
    
    (2,378
    )
    
    
    (2,406
    )Additions to allowance charged to expense
    
    
    
    
    
    
    12,708
    
    
    
    9,861
    
    
    
    12,676
    
    
    
    8,167
    
    
    
    7,216Allowance for loan losses at December 31
    
    
    
    
    
    $
    37,572
    
    
    $
    31,404
    
    
    $
    28,953
    
    
    $
    23,238
    
    
    $
    17,449Total portfolio loans outstanding at December 31
    
    
    
    
    
    $
    2,692,904
    
    
    $
    2,247,440
    
    
    $
    1,991,372
    
    
    $
    1,734,589
    
    
    $
    1,355,798Ratio of allowance for loan losses to
portfolio loans outstanding
    
    
    
    
    
    
    1.40
    %
    
    
    1.40
    %
    
    
    1.45
    %
    
    
    1.34
    %
    
    
    1.29
    %Average total portfolio loans for the year
    
    
    
    
    
    $
    2,492,379
    
    
    $
    2,101,617
    
    
    $
    1,884,646
    
    
    $
    1,560,337
    
    
    $
    1,213,192Ratio of net charge-offs to average
portfolio loans outstanding
    
    
    
    
    
    
    0.29
    %
    
    
    0.35
    %
    
    
    0.37
    %
    
    
    0.15
    %
    
    
    0.20
    %
 See Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations, for additional information regarding the
allowance for loan losses and description of factors which influence managements judgment in determining the amount of the allowance
for loan losses at the balance-sheet date. - 11 -




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##### Table of Contents



SUMMARY OF LOAN LOSS EXPERIENCE (TABLE E CONTINUED)
CAPITOL BANCORP LIMITED The amount of the allowance for loan losses allocated in the following table (in $1,000s) as of December 31, are based on managements estimate of losses inherent in the portfolio at the balance sheet date,
and should not be interpreted as an indication of future charge-offs: 2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    PercentageAmount
    
    
    of Loans
    
    
    Amount
    
    
    of Loans
    
    
    Amount
    
    
    of Loans
    
    
    Amount
    
    
    of Loans
    
    
    Amount
    
    
    of LoansCommercial
    
    $
    34,753
    
    
    
    1.29
    %
    
    $
    29,001
    
    
    
    1.29
    %
    
    $
    27,226
    
    
    
    1.37
    %
    
    $
    20,570
    
    
    
    1.19
    %
    
    $
    16,096
    
    
    
    1.19
    %Real estate mortgage
    
    
    1,808
    
    
    
    0.07
    %
    
    
    1,408
    
    
    
    0.06
    %
    
    
    1,009
    
    
    
    0.05
    %
    
    
    1,630
    
    
    
    0.09
    %
    
    
    285
    
    
    
    0.02
    %Installment
    
    
    1,011
    
    
    
    0.04
    %
    
    
    995
    
    
    
    0.05
    %
    
    
    718
    
    
    
    0.03
    %
    
    
    1,038
    
    
    
    0.06
    %
    
    
    1,068
    
    
    
    0.08
    %Total allowance for loan losses
    
    $
    37,572
    
    
    
    1.40
    %
    
    $
    31,404
    
    
    
    1.40
    %
    
    $
    28,953
    
    
    
    1.45
    %
    
    $
    23,238
    
    
    
    1.34
    %
    
    $
    17,449
    
    
    
    1.29
    %Total portfolio loans outstanding
    
    $
    2,692,904
    
    
    
    
    
    
    $
    2,247,440
    
    
    
    
    
    
    $
    1,991,372
    
    
    
    
    
    
    $
    1,734,589
    
    
    
    
    
    
    $
    1,355,798
 - 12 -




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##### Table of Contents



AVERAGE DEPOSITS (TABLE F)
CAPITOL BANCORP LIMITED The table below summarizes the average balances of deposits (in $1,000s) and the average rates of interest for the years
ended December 31, 2004, 2003 and 2002: 2004
    
    
    2003
    
    
    2002Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    RateNoninterest-bearing demand deposits
    
    $
    464,530
    
    
    
    
    
    
    $
    370,726
    
    
    
    
    
    
    $
    303,227Savings deposits
    
    
    74,026
    
    
    
    0.99
    %
    
    
    65,664
    
    
    
    1.15
    %
    
    
    65,124
    
    
    
    1.59
    %Time deposits under $100,000
    
    
    303,660
    
    
    
    2.61
    %
    
    
    324,858
    
    
    
    3.09
    %
    
    
    335,332
    
    
    
    3.85
    %Time deposits $100,000 and over
    
    
    596,658
    
    
    
    2.44
    %
    
    
    571,549
    
    
    
    3.00
    %
    
    
    550,381
    
    
    
    3.73
    %Other interest-bearing deposits
    
    
    998,544
    
    
    
    1.35
    %
    
    
    864,400
    
    
    
    1.54
    %
    
    
    654,853
    
    
    
    2.04
    %Total deposits
    
    $
    2,437,418
    
    
    
    
    
    
    $
    2,197,197
    
    
    
    
    
    
    $
    1,908,917
 The table below shows the amount of time certificates of deposit issued in amounts of $100,000 or more, by time
remaining until maturity, which were outstanding at December 31, 2004 (in $1,000s): Three months or less
    
    
    
    
    
    $
    284,781Three months to six months
    
    
    
    
    

    
    98,197Six months to twelve months
    
    
    
    
    
    
    143,213Over 12 months
    
    
    
    
    
    
    138,655Total
    
    
    
    $
    664,846
 - 13 -




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##### Table of Contents



FINANCIAL RATIOS (TABLE G)
CAPITOL BANCORP LIMITED Year Ended December 312004
    
    
    2003
    
    
    2002Net income as a percentage of:Average stockholders equity
    
    
    11.25
    %
    
    
    12.97
    %
    
    
    13.33
    %Average total assets
    
    
    0.91
    %
    
    
    0.91
    %
    
    
    0.75
    %Capital ratios:Average stockholders equity as a
percentage of average total assets
    
    
    8.06
    %
    
    
    7.01
    %
    
    
    5.59
    %Average total equity (stockholders equity and
minority interests in consolidated subsidiaries)
as a percentage of average total assets
    
    
    9.27
    %
    
    
    8.10
    %
    
    
    7.62
    %Average total capital funds (stockholders
equity, minority interests in consolidated
subsidiaries and trust-preferred securities)
as a percentage of average total assets
    
    
    12.61
    %
    
    
    10.43
    %
    
    
    9.86
    %Dividend payout ratio (cash dividends per share
as a percentage of net income per share):Basic
    
    
    34.57
    %
    
    
    27.42
    %
    
    
    26.83
    %Diluted
    
    
    36.31
    %
    
    
    28.81
    %
    
    
    28.03
    %
 - 14 -




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##### Table of Contents



Item 2. Properties. The names and locations of Capitols banks are listed on Page F-34, Financial Information
Section of Annual Report, under the Caption Note ANature of Operations, Basis of Presentation and
Principles of Consolidation, which is incorporated herein by reference. Most of the banks locations are leased. Most of Capitols banks operate from a single
location. Most of the banks facilities are generally small (i.e., less than 10,000 square feet),
first floor offices with convenient access to parking. Ann Arbor Commerce Bank, Capitols largest
bank, occupies the largest leased facility, approximately 18,000 square feet. Elkhart Community Bank, First Carolina State Bank, Goshen Community Bank, Grand Haven Bank,
Muskegon Commerce Bank, Paragon Bank & Trust and Portage Commerce Bank own their stand-alone bank
facilities. Some of the banks have drive-up customer service capability. The banks are typically located
in or near high traffic centers of commerce in their respective communities. Customer service is
enhanced through utilization of ATMs to process some customer-initiated transactions and some of
the banks also make available a courier service to pick up transactions at customers locations. Capitols Eastern Region headquarters is located within the same building as Capitol National
Bank in Lansing, Michigan. Those headquarters include administrative, operations, accounting,
human resources, credit administration, risk management and executive staff. Data processing centers are located in both Lansing, Michigan and Tempe, Arizona. Capitols Western Region headquarters is located within the same building as Camelback
Community Bank in Phoenix, Arizona. Those headquarters include administrative, operations, credit
administration, risk management and executive staff. Certain office locations are leased from related parties. Rent expense including rent expense
under leases with related parties is incorporated by reference from Page F-45, Financial
Information Section of Annual Report, under the caption Note FPremises and Equipment. Capitols subsidiary bank, Portage Commerce Bank, leases its primary banking facility from
Portage Commerce Investors L.L.C. Messrs. Kasten and Becker are members of the limited liability
leasing entity. Rent paid by Portage Commerce Bank to the leasing entity amounted to $63,445 in
2004. In a transaction that was at market rate and approved by Capitols ethics committee, one of
Capitols subsidiary banks, Portage Commerce Bank, purchased its banking facility from Portage
Commerce Investors L.L.C. in 2004. Capitols subsidiary bank, Brighton Commerce Bank, leases its
primary banking facility from Tri-O Development. Three of Mr. OLearys adult children are members
of the leasing entity. Rent paid by Brighton Commerce Bank to the leasing entity amounted to
$230,148 in 2004. Capitol and its subsidiary bank, Capitol National Bank, paid rent and tenant
improvements of $1,567,352 in 2004 for their principal offices at Capitol Bancorp Center, 200
Washington Square North, Lansing, Michigan to Business & Trade Center Limited, a Michigan limited
partnership, under lease agreements with expiration dates of 2012 and portions which are renewable
for periods of 5 years. Joseph D. Reid and L. Douglas Johns are partners of the partnership.
Capitols subsidiary bank, East Valley Community Bank, has a lease agreement with Chandler
Properties Group, L.L.C. of which Messrs. Kasten and Devine are members. East Valley Community
Bank paid $94,367 in rent in 2004. The lease rates represent what Capitol believes to be fair
market value in the respective markets. All leasing arrangements which involve insiders have been approved by Capitols ethics committee and
reported to bank regulatory agencies prior to their commencement. - 15 -




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##### Table of Contents



Management believes Capitols and its banks offices to be in good and adequate condition and
adequately covered by insurance. 
 Item 3. Legal Proceedings. As of December 31, 2004, there were no material pending legal proceedings to which Capitol or
its subsidiaries is a party or to which any of its property was subject, except for proceedings
which arise in the ordinary course of business. In the opinion of management, pending legal
proceedings will not have a material effect on the consolidated financial position or results of
operations of Capitol. 
 Item 4. Submission of Matters to a Vote of Security Holders. During the fourth quarter of 2004, no matters were submitted to a vote by security holders. [The remainder of this page intentionally left blank] - 16 -




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##### Table of Contents



PART II 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.  A.
    Market Information: Incorporated by reference from Page F-3, Financial Information Section of Annual
Report, under the caption Information Regarding Capitols Common Stock, Pages F-48  F-49
under the caption Note JRestricted Common Stock and Stock Options and Page F-4, under the
caption Shareholder Information.  B.
    Holders: Incorporated by reference from first sentence of third paragraph on Page F-3, Financial
Information Section of Annual Report, under the caption Information Regarding Capitols
Common Stock.  C.
    Dividends: Incorporated by reference from the second paragraph on Page F-3, Financial Information
Section of Annual Report under the caption Information Regarding Capitols Common Stock.
Incorporated by reference from Page F-2, Financial Information Section of Annual Report,
under the caption Quarterly Results of Operations and subcaption Cash dividends paid per
share and Pages F-54  F-55, Financial Information Section of Annual Report, under the
caption Note PDividend Limitations of Subsidiaries and Other Capital Requirements.  D.
    Securities Authorized for Issuance Under Equity Compensation Plan: Summary of equity compensation plans as of December 31, 2004: Weighted Average
    
    
    Number AvailableNumber
    
    
    Exercise
    
    
    for FutureOutstanding
    
    
    Price
    
    
    IssuanceEquity compensation plans:Approved by shareholders
    
    
    1,454,250
    
    
    $
    23.11
    
    
    
    Not approved by shareholders
(1)
    
    
    344,671
    
    
    
    22.12
    
    
    
    Resulting from share exchanges
    
    
    785,218
    
    
    
    16.80
    
    
    
    Total
    
    
    2,584,139
    
    
    $
    21.06
    
    
    
    
   (1)
    
    Stock options issued pursuant to employment agreements with various officers of Capitol and its
subsidiaries.  E.
    There were no purchases of equity securities by the issuer or affiliated purchasers in the
fourth quarter of 2004. 
 Item 6. Selected Financial Data. Incorporated by reference from Page F-2, Financial Information Section of Annual Report, under
the caption Selected Consolidated Financial Data under the column heading As of and for the Year
Ended December 31, 2004, 2003, 2002, 2001 and 2000. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations. Incorporated by reference from Pages F-6  F-25, Financial Information Section of Annual
Report, under the caption Managements Discussion and Analysis of Financial Condition and Results
of Operations and Page F-5, Financial Information Section of Annual Report, under the caption
Cautions Regarding Forward-Looking Statements. - 17 -




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Incorporated by reference from Pages F-22  F-25, Financial Information Section of Annual
Report, under the caption Trends Affecting Operations and Page F-5, Financial Information Section
of Annual Report, under the caption Cautions Regarding Forward-Looking Statements. 
 Item 8. Financial Statements and Supplementary Data. See
Item 15 (under subcaption (a) 1 and 2. Financial
Statements/Schedules) of this Form 10-K for specific description of
financial statements incorporated by reference from Financial Information Section of Annual Report. Incorporated by reference from Page F-2, Financial Information Section of Annual Report, under
the caption Quarterly Results of Operations. 
 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure. None. 
 Item 9A. Controls and Procedures.  Disclosure Controls and Procedures: Capitol maintains disclosure controls and procedures designed to ensure that the information
Capitol must disclose in its filings with the Securities and Exchange Commission is recorded,
processed, summarized and reported on a timely basis. Capitols Chief Executive Officer and Chief
Financial Officer have reviewed and evaluated Capitols disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the Exchange Act) as of the end of the period covered by this report (the Evaluation Date).
Based on such evaluation, such officers have concluded that, as of the Evaluation Date, Capitols
disclosure controls and procedures are effective in bringing to their attention on a timely basis
material information relating to Capitol required to be included in Capitols periodic filings
under the Exchange Act.  Managements Annual Report on Internal Control Over Financial Reporting: Incorporated by reference from Page F-26, Financial Information Section of Annual Report.  Attestation Report of Independent Registered Public Accounting Firm: Incorporated by reference from Pages F-27  F-28, Financial Information Section of Annual
Report.  Changes in Internal Control Over Financial Reporting: No change in Capitols internal control over financial reporting occurred during Capitols
most recent fiscal quarter that has materially affected or is reasonably likely to materially
affect Capitols internal control over financial reporting. 
 Item 9B. Other Information. None. - 18 -




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##### Table of Contents



PART III 
 Item 10. Directors and Executive Officers of the Registrant. The information required by this item is hereby incorporated by reference to the material
appearing in the Proxy Statement under the captions PROPOSAL ONE: ELECTION OF DIRECTORS,
COMMITTEE STRUCTURE; Audit Committee, SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE,
and EXECUTIVE OFFICERS. The Corporate Governance Guidelines adopted by the Capitols Board of Directors, as well as
the charters of each of the Audit Committee, the Compensation Committee, the Executive Committee,
Ethics Committee, the Nominating and Governance Committee and the Technology Committee and the Code
of Ethics applicable to the principal executive officer, principal financial officer and principal
accounting officer or controller or persons performing similar functions may be accessed at the
Corporate Governance page of Capitols website at www.capitolbancorp.com. Each of these
is also available in print to any shareholder upon request to Secretary, Capitol Bancorp Limited,
Capitol Bancorp Center, 200 Washington Square North, Lansing, Michigan 48933. As permitted by SEC
rules, Capitol intends to post on its website any amendment to or waiver from any provision in the
Code of Ethics that applies to its chief executive officer, chief financial officer, the controller
or persons performing similar functions, and that relates to any element of the standards
enumerated in the rules of the SEC. 
 Item 11. Executive Compensation. The information required by this item is hereby incorporated by reference to the material
appearing in the Proxy Statement under the captions COMPENSATION COMMITTEE REPORT, COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION, BOARD COMPENSATION, EMPLOYMENT CONTRACTS,
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS, STOCK PERFORMANCE GRAPH,
EXECUTIVE COMPENSATION, STOCK OPTIONS GRANTED IN 2004, and AGGREGATE OPTIONS EXERCISED IN LAST
FISCAL YEAR AND YEAR-END OPTION VALUES. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters. The information required by this item is hereby incorporated by reference to the material
appearing in the Proxy Statement under the captions STOCK OWNERSHIP, and SECURITIES AUTHORIZED
FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS. 
 Item 13. Certain Relationships and Related Transactions. The information required by this item is hereby incorporated by reference to the material
appearing in the Proxy Statement under the caption CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS. 
 Item 14. Principal Accountant Fees and Services. The information required by this item is hereby incorporated by reference to the material
appearing in the Proxy Statement under the caption RELATIONSHIP
WITH INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM. - 19 -




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##### Table of Contents



PART IV 
 Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) 1 and 2. Financial Statements/Schedules: The following consolidated financial statements of Capitol Bancorp Limited and
subsidiaries and reports of independent registered public accounting firm included on Pages
F-27  F-59 of the Financial Information Section of Annual Report of the Registrant to its
stockholders for the year ended December 31, 2004, are incorporated by reference in Item 8: Reports of Independent Registered Public Accounting Firm. Consolidated balance sheetsDecember 31, 2004 and 2003. Consolidated statements of incomeYears ended December 31, 2004, 2003 and 2002. Consolidated statements of changes in stockholders equityYears ended December 31,
2004, 2003 and 2002. Consolidated statements of cash flowsYears ended December 31, 2004, 2003 and 2002. Notes to consolidated financial statements. All financial statements and schedules have been incorporated by reference from the
Annual Report or are included in Managements Discussion and Analysis of Financial Condition
and Results of Operations. No schedules are included here because they are either not
required, not applicable or the required information is contained elsewhere. (b). Reports on Form 8-K: During the fourth quarter of 2004, the Registrant filed two reports on Form 8-K. A
report on Form 8-K was filed by the Registrant on October 21, 2004, reporting third quarter
earnings for the period ended September 30, 2004. A report on Form 8-K was filed on October
26, 2004 by the Registrant, announcing the Registrants 49th consecutive
quarterly cash dividend. (c). Exhibits: A list of exhibits required to be filed as part of this report is set forth in the
Exhibit Index (pages 22-24) which immediately precedes such exhibits and is incorporated
herein by reference. - 20 -




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. CAPITOL BANCORP LTD.RegistrantBy:
    
    /s/ Joseph D. Reid
    
    By:
    
    /s/ Lee W. HendricksonJoseph D. Reid
    
    
    
    Lee W. HendricksonChairman and
    
    
    
    Chief Financial OfficerChief Executive Officer
    
    
    
    (Principal Financial andAccounting Officer)
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant as Directors of the Corporation on March
16, 2005. /s/ Joseph D. Reid
    
    /s/ Robert C. CarrJoseph D. Reid, Chairman,
    
    Robert C. Carr, Vice Chairman, ExecutiveChief Executive Officer and Director
    
    Vice President, Treasurer and Director/s/ David OLeary
    
    /s/ Michael L. KastenDavid OLeary, Secretary and Director
    
    Michael L. Kasten, Vice Chairman andDirector/s/ Lyle W. Miller
    
    /s/ Louis G. AllenLyle W. Miller, Vice Chairman and
    
    Louis G. Allen, DirectorDirector/s/ Paul R. Ballard
    
    /s/ David L. BeckerPaul R. Ballard, Director
    
    David L. Becker, Director/s/ Douglas E. Crist
    
    /s/ Michael J. DevineDouglas E. Crist, Director
    
    Michael J. Devine, Director/s/ James C. Epolito
    
    /s/ Gary A. FalkenbergJames C. Epolito, Director
    
    Gary A. Falkenberg, Director/s/ Joel I. Ferguson
    
    /s/ Kathleen A. GaskinJoel I. Ferguson, Director
    
    Kathleen A. Gaskin, Director/s/ H. Nicholas Genova
    
    /s/ Michael F. HannleyH. Nicholas Genova, Director
    
    Michael F. Hannley, Director/s/ Lewis D. Johns
    
    /s/ John S. LewisLewis D. Johns, Director
    
    John S. Lewis, President, WesternRegions and Director/s/ Leonard Maas
    
    /s/ Kathryn L. MunroLeonard Maas, Director
    
    Kathryn L. Munro, Director/s/ Myrl D. Nofziger
    
    /s/ Cristin Reid EnglishMyrl D. Nofziger, Director
    
    Cristin Reid English, Chief OperatingOfficer and Director/s/ Ronald K. SableRonald K. Sable, Director
 - 21 -




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##### Table of Contents



EXHIBIT INDEX Page Number orIncorporated byExhibit No.
    
    
    
    Description
    
    Reference from:3
    
    
    
    Articles of Incorporation andBylaws
    
    
    (1
    )4
    
    
    
    Instruments Defining the Rightsof Security Holders:(a)
    
    Common Stock Certificate
    
    
    (1
    )(b)
    
    Indenture dated December 18, 1997
    
    
    (12
    )(c)
    
    Subordinated Debenture
    
    
    (12
    )(d)
    
    Amended and Restated Trust Agreementdated December 18, 1997
    
    
    (12
    )(e)
    
    Preferred Security Certificate datedDecember 18, 1997
    
    
    (12
    )(f)
    
    Preferred Securities Guarantee Agreementof Capitol Trust I dated December 18, 1997
    
    
    (12
    )(g)
    
    Agreement as to Expenses and Liabilitiesof Capitol Trust I
    
    
    (12
    )(h)
    
    Capitol Bancorp Ltd. 2000 IncentiveStock Plan
    
    
    (19
    )10
    
    
    
    Material Contracts:Capitol Bancorp Limited 2003 Stock Plan
    
    
    (22
    )Form of Stock Option Agreement for Awards pursuantto Capitol Bancorp Limited 2003 Stock Plan
    
    
    (22
    )(a)
    
    Amended and Restated Employment Agreementof Joseph D. Reid (dated March 17, 2003 andamendment dated April 17, 2003)
    
    
    (20
    )(b)
    
    Profit Sharing/401(k) Plan(as amended and restated April 1, 1995)
    
    
    (11
    )(b1)
    
    First and Second Amendments to Profit Sharing/401(k) Plan
    
    
    (13
    )(b2)
    
    Third, Fourth and Fifth Amendments to ProfitSharing/401(k) Plan
    
    
    (15
    )(b3)
    
    Sixth, Seventh, Eighth and Ninth Amendmentsto Profit Sharing/401(k) Plan
    
    
    (16
    )(b4)
    
    Tenth, Eleventh, Twelfth, Thirteenth,Fourteenth and Fifteenth Amendments toProfit Sharing/401(k) Plan
    
    
    (18
    )(b5)
    
    Sixteenth and Seventeenth Amendments toProfit Sharing/401(k) Plan
    
    
    (19
    )(b6)
    
    Eighteenth, Nineteenth and TwentiethAmendments to Profit Sharing/401(k) Plan(c)
    
    Lease Agreement with Business &Trade Center, Ltd.
    
    
    (9
    )(d)
    
    Employee Stock Ownership Plan(as amended and restated February 10, 1994)
    
    
    (10
    )(d1)
    
    Second and Third Amendments to EmployeeStock Ownership Plan
    
    
    (13
    )(d2)
    
    Fourth Amendment to Employee StockOwnership Plan
    
    
    (15
    )
 - 22 -




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##### Table of Contents



Page Number orIncorporated byExhibit No.
    
    
    
    Description
    
    Reference from:10
    
    
    
    Material Contractscontinued:(d3)
    
    Fifth Amendment to Employee StockOwnership Plan
    
    
    (16
    )(d4)
    
    Sixth Amendment to Employee StockOwnership Plan
    
    
    (21
    )(d5)
    
    Seventh Amendment to Employee StockOwnership Plan
    
    
    (21
    )(d6)
    
    Eighth Amendment to Employee StockOwnership Plan(d7)
    
    Ninth Amendment to Employee StockOwnership Plan(d8)
    
    Tenth Amendment to Employee StockOwnership Plan(e)
    
    Employment Agreements withRobert C. Carr, John C. Smythe,and Charles J. McDonald
    
    
    (2
    )(f)
    
    Executive Supplemental IncomeAgreements with Robert C. Carr,Paul R. Ballard, Richard G. Dorner,James R. Kaye, Scott G. Kling,David K. Powers, John C. Smythe andCharles J. McDonald
    
    
    (11
    )(g)
    
    Consolidation Agreement between theCorporation and Portage Commerce Bank
    
    
    (4
    )(h)
    
    Employment Agreement withRichard G. Dorner
    
    
    (4
    )(i)
    
    Employment Agreement withDavid K. Powers
    
    
    (5
    )(j)
    
    Definitive Exchange Agreement andClosing Memorandum between the Registrantand United Savings Bank, FSB
    
    
    (6
    )(k)
    
    Employment Agreement with James R. Kaye
    
    
    (7
    )(l)
    
    Definitive Exchange Agreementbetween the Registrant andFinancial Center Corporation
    
    
    (8
    )(m)
    
    Employment Agreement by and between SunCommunity Bancorp Limited and Joseph D.Reid. (Exhibit 10.1 of Sun CommunityBancorp Limited)
    
    
    (14
    )(n)
    
    Employment Agreement by and between SunCommunity Bancorp Limited and John S.Lewis. (Exhibit 10.7 of Sun CommunityBancorp Limited)
    
    
    (14
    )(o)
    
    Anti-dilution Agreement by and between SunCommunity Bancorp Limited and CapitolBancorp Ltd. (Exhibit 10.10 of SunCommunity Bancorp Limited)
    
    
    (14
    )(p)
    
    Plan of Share Exchange dated November16, 2001 between and among Capitol BancorpLtd, and Sun Community Bancorp Limited
    
    
    (17
    )
 - 23 -




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##### Table of Contents



Page Number orIncorporated byExhibit No.
    
    
    
    Description
    
    Reference from:13
    
    
    
    Annual Report to Security HoldersA.     Marketing Section of 2004 Annual ReportB.     Financial Information Section of 2004Annual Report21
    
    
    
    Subsidiaries of the Registrant23
    
    
    
    Consent of BDO Seidman, LLP31.1
    
    
    
    Certification of Chief Executive Officer,Joseph D. Reid, pursuant to Section 302of the Sarbanes-Oxley Act of 2002.31.2
    
    
    
    Certification of Chief Executive Officer,Lee W. Hendrickson, pursuant to Section 302of the Sarbanes-Oxley Act of 2002.32.1
    
    
    
    Certification of Chief Executive Officer,Joseph D. Reid, pursuant to Section 906of the Sarbanes-Oxley Act of 2002.32.2
    
    
    
    Certification of Chief Financial Officer,Lee W. Hendrickson, pursuant to Section 906of the Sarbanes-Oxley Act of 2002.33
    
    
    
    Certification of Chief Financial Officer,Joseph D. Reid, pursuant to Section
303A.12(a) of the New York Stock Exchange Listed Company Manual.
 Key:(1)
    
    Form S-18, Reg. No. 33-24728C, filed September 15, 1988.(2)
    
    Form S-1, Reg. No. 33-30492, filed August 14, 1989.(3)
    
    Form S-1, Reg. No. 33-31323, filed September 29, 1989.(4)
    
    Originally filed as exhibit to Form 10-K for year ended December 31, 1990, filed March 6,1991; refiled as exhibit to Form 10-KSB for year ended December 31, 1995, filed March 14,1996, due to time limit for incorporation by reference pursuant to Regulation SB Item 10(f).(5)
    
    Form 10-K for year ended December 31, 1991, filed February 28, 1992.(6)
    
    Form 8-K dated July 15, 1992, as amended under Form 8 on September 14, 1992.(7)
    
    Form 10-KSB for year ended December 31, 1992, filed February 25, 1993.(8)
    
    Form S-4, Reg. No. 33-73474, filed December 27, 1993.(9)
    
    Form 10-KSB for year ended December 31, 1993, filed March 14, 1994.(10)
    
    Form 10-KSB for year ended December 31, 1994, filed March 15, 1995.(11)
    
    Form 10-KSB for the year ended December 31, 1995, filed March 14, 1996.(12)
    
    Post Effective Amendment No.1 to Form S-3, Reg. No. 333-41215 and 333-41215-01filed February 9, 1998.(13)
    
    Form 10-K for year ended December 31, 1998, filed March 17, 1999.(14)
    
    Amendment No. 2 to the Registration Statement on Form S-1 of Sun Community BancorpLimited (Registration No. 333-76719) dated June 15, 1999.(15)
    
    Form 10-K for year ended December 31, 1999, filed March 27, 2000.(16)
    
    Form 10-K for year ended December 31, 2000, filed March 23, 2001.(17)
    
    Amendment No. 4 to the Registration Statement on Form S-4 Reg. No. 333-73624 filedFebruary 12, 2002.(18)
    
    Form 10-K for year ended December 31, 2001, filed March 15, 2002.(19)
    
    Form 10-K for year ended December 31, 2002, filed March 28, 2003.(20)
    
    Form 10-Q for the period ended March 31, 2003, filed May 14, 2003.(21)
    
    Form 10-K for year ended
December 31, 2003, filed March 12, 2004.(22)
    
    Form 10-K for year ended September 30, 2004, filed October 29, 2004.
 - 24 -