##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from to
 Commission file number 001-31708
 CAPITOL BANCORP LTD.
  Michigan
(State or other jurisdiction
of incorporation or
organization)
    
    38-2761672
(I.R.S. Employer
Identification
Number)
 Capitol Bancorp Center
200 Washington Square North, Lansing, Michigan   48933   (517) 487-6555
 
 þ o
 þ o
   o þ
    Page 1 of 29




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INDEX
 PART I. FINANCIAL INFORMATION
 Forward-Looking Statements
   
 PageItem 1. Financial Statements (unaudited):Condensed consolidated balance sheets  September 30, 2005 and December 31, 2004.
    
    
    3Condensed consolidated statements of income  Three months and nine months ended
September 30, 2005 and 2004.
    
    
    4Condensed consolidated statements of changes in stockholders equity  Nine months
ended September 30, 2005 and 2004.
    
    
    5Condensed consolidated statements of cash flows  Nine months ended September 30,
2005 and 2004.
    
    
    6Notes to condensed consolidated financial statements.
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
    
    25Item 4. Controls and Procedures.
    
    
    25PART II. OTHER INFORMATIONItem 1. Legal Proceedings.
    
    
    26Item 2. Unregistered Sales of Securities and Use of Proceeds.
    
    
    26Item 3. Defaults Upon Senior Securities.
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders.
    
    
    26Item 5. Other Information.
    
    
    26Item 6. Exhibits and Reports on Form 8-K.
    
    
    26SIGNATURES
    
    
    28EXHIBIT INDEX
    
    
    29Certification of Chief Executive Officer, Joseph D. Reid, pursuant to Section 302Certification of Chief Financial Officer, Lee W. Hendrickson, pursuant to Section 302Certification of Chief Executive Officer, Joseph D. Reid, pursuant to Section 906Certification of Chief Financial Officer, Lee W. Hendrickson, pursuant to Section 906
  Page 2 of 29




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##### Table of Contents



(Unaudited)September 30
    
    
    December 312005
    
    
    2004(in thousands)ASSETSCash and due from banks
    
    $
    165,613
    
    
    $
    123,969Money market and interest-bearing deposits
    
    
    22,538
    
    
    
    10,745Federal funds sold
    
    
    191,673
    
    
    
    96,390Cash and cash equivalents
    
    
    379,824
    
    
    
    231,104Loans held for resale
    
    
    33,632
    
    
    
    43,143Investment securities:Available for sale, carried at market value
    
    
    29,177
    
    
    
    28,172Held for long-term investment, carried at
amortized cost which approximates market value
    
    
    16,422
    
    
    
    14,191Total investment securities
    
    
    45,599
    
    
    
    42,363Portfolio loans:Commercial
    
    
    2,590,153
    
    
    
    2,444,492Real estate mortgage
    
    
    216,288
    
    
    
    177,204Installment
    
    
    82,125
    
    
    
    71,208Total portfolio loans
    
    
    2,888,566
    
    
    
    2,692,904Less allowance for loan losses
    
    
    (39,284
    )
    
    
    (37,572
    )Net portfolio loans
    
    
    2,849,282
    
    
    
    2,655,332Premises and equipment
    
    
    33,257
    
    
    
    32,661Accrued interest income
    
    
    12,043
    
    
    
    10,447Goodwill and other intangibles
    
    
    44,928
    
    
    
    41,943Other assets
    
    
    47,764
    
    
    
    34,425TOTAL ASSETS
    
    $
    3,446,329
    
    
    $
    3,091,418LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    622,897
    
    
    $
    503,902Interest-bearing
    
    
    2,176,546
    
    
    
    2,006,170Total deposits
    
    
    2,799,443
    
    
    
    2,510,072Debt obligations:Notes payable and short-term borrowings
    
    
    173,823
    
    
    
    172,534Subordinated debentures
    
    
    100,916
    
    
    
    100,845Total debt obligations
    
    
    274,739
    
    
    
    273,379Accrued interest on deposits and other liabilities
    
    
    21,778
    
    
    
    16,288Total liabilities
    
    
    3,095,960
    
    
    
    2,799,739MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES
    
    
    70,135
    
    
    
    39,520STOCKHOLDERS EQUITY:Common stock, no par value, 50,000,000 shares authorized;issued and outstanding: 2005 - 15,223,775 shares2004 - 14,828,750 shares
    
    
    205,628
    
    
    
    196,271Retained earnings
    
    
    78,428
    
    
    
    60,476Market value adjustment (net of tax effect) for
investment securities available for sale (accumulated
other comprehensive income)
    
    
    (185
    )
    
    
    (36
    )283,871
    
    
    
    256,711Less unearned compensation regarding restricted stock and other
    
    
    (3,637
    )
    
    
    (4,552
    )Total stockholders equity
    
    
    280,234
    
    
    
    252,159TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,446,329
    
    
    $
    3,091,418
 Page 3 of 29




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##### Table of Contents



Periods Ended September 30Three Month Period
    
    
    Nine Month Period2005
    
    
    2004
    
    
    2005
    
    
    2004Interest income:Portfolio loans (including fees)
    
    $
    55,886
    
    
    $
    44,492
    
    
    $
    156,470
    
    
    $
    126,560Loans held for resale
    
    
    741
    
    
    
    504
    
    
    
    2,014
    
    
    
    1,529Taxable investment securities
    
    
    222
    
    
    
    275
    
    
    
    741
    
    
    
    1,071Federal funds sold
    
    
    1,506
    
    
    
    407
    
    
    
    3,059
    
    
    
    1,053Other
    
    
    300
    
    
    
    199
    
    
    
    783
    
    
    
    547Total interest income
    
    
    58,655
    
    
    
    45,877
    
    
    
    163,067
    
    
    
    130,760Interest expense:Deposits
    
    
    14,188
    
    
    
    9,176
    
    
    
    37,231
    
    
    
    26,891Debt obligations and other
    
    
    3,626
    
    
    
    2,767
    
    
    
    10,600
    
    
    
    7,757Total interest expense
    
    
    17,814
    
    
    
    11,943
    
    
    
    47,831
    
    
    
    34,648Net interest income
    
    
    40,841
    
    
    
    33,934
    
    
    
    115,236
    
    
    
    96,112Provision for loan losses
    
    
    2,107
    
    
    
    3,553
    
    
    
    7,169
    
    
    
    9,597Net interest income after provision
for loan losses
    
    
    38,734
    
    
    
    30,381
    
    
    
    108,067
    
    
    
    86,515Noninterest income:Service charges on deposit accounts
    
    
    1,062
    
    
    
    1,091
    
    
    
    3,115
    
    
    
    3,336Trust fee income
    
    
    526
    
    
    
    796
    
    
    
    1,654
    
    
    
    2,535Fees from origination of non-portfolio residential
mortgage loans
    
    
    1,820
    
    
    
    1,314
    
    
    
    4,590
    
    
    
    4,211Realized gains (losses) on sale of investment
securities available for sale
    
    
    6
    
    
    
    (191
    )
    
    
    8
    
    
    
    (424
    )Other
    
    
    1,524
    
    
    
    1,531
    
    
    
    5,768
    
    
    
    4,777Total noninterest income
    
    
    4,938
    
    
    
    4,541
    
    
    
    15,135
    
    
    
    14,435Noninterest expense:Salaries and employee benefits
    
    
    19,416
    
    
    
    14,493
    
    
    
    54,768
    
    
    
    46,082Occupancy
    
    
    2,483
    
    
    
    2,173
    
    
    
    7,170
    
    
    
    6,428Equipment rent, depreciation and maintenance
    
    
    1,571
    
    
    
    1,325
    
    
    
    4,593
    
    
    
    4,266Other
    
    
    6,844
    
    
    
    5,778
    
    
    
    18,952
    
    
    
    14,917Total noninterest expense
    
    
    30,314
    
    
    
    23,769
    
    
    
    85,483
    
    
    
    71,693Income before income taxes and minority
interest
    
    
    13,358
    
    
    
    11,153
    
    
    
    37,719
    
    
    
    29,257Income taxes
    
    
    5,195
    
    
    
    4,274
    
    
    
    14,518
    
    
    
    11,301Income before minority interest
    
    
    8,163
    
    
    
    6,879
    
    
    
    23,201
    
    
    
    17,956Minority interest in net losses of
consolidated subsidiaries
    
    
    1,431
    
    
    
    560
    
    
    
    2,705
    
    
    
    810NET INCOME
    
    $
    9,594
    
    
    $
    7,439
    
    
    $
    25,906
    
    
    $
    18,766NET INCOME PER SHAREBasic
    
    $
    0.64
    
    
    $
    0.52
    
    
    $
    1.75
    
    
    $
    1.33Diluted
    
    $
    0.61
    
    
    $
    0.50
    
    
    $
    1.67
    
    
    $
    1.27
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##### Table of Contents



UnearnedAccumulated
    
    
    CompensationOther
    
    
    RegardingCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    Restricted StockStock
    
    
    Earnings
    
    
    Income
    
    
    and Other
    
    
    TotalNine Months Ended September 30, 2004Balances at January 1, 2004
    
    $
    180,957
    
    
    $
    43,135
    
    
    $
    (200
    )
    
    $
    (4,995
    )
    
    $
    218,897Issuance of 183,349 shares of common stock
in conjunction with acquisition of bank
    
    
    4,970
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,970Issuance of 346,947 shares of common stock to
acquire minority interest in subsidiaries
    
    
    8,665
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,665Issuance of 167,550 shares of common stock
upon exercise of stock options, net of
common stock surrendered to
facilitate exercise
    
    
    356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356Issuance of 13,063 shares of restricted common stock
    
    
    377
    
    
    
    
    
    
    
    
    
    
    
    (377
    )
    
    
    0Recognition of compensation expense relating to
restricted common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    968
    
    
    
    968Cash dividends paid ($0.48 per share)
    
    
    
    
    
    
    (6,863
    )
    
    
    
    
    
    
    
    
    
    
    (6,863
    )Components of comprehensive income:Net income for the period
    
    
    
    
    
    
    18,766
    
    
    
    
    
    
    
    
    
    
    
    18,766Market value adjustment for investment
securities available for sale (net of
income tax effect)
    
    
    
    
    
    
    
    
    
    
    251
    
    
    
    
    
    
    
    251Comprehensive income for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,017BALANCES AT SEPTEMBER 30, 2004
    
    $
    195,325
    
    
    $
    55,038
    
    
    $
    51
    
    
    $
    (4,404
    )
    
    $
    246,010Nine Months Ended September 30, 2005Balances at January 1, 2005
    
    $
    196,271
    
    
    $
    60,476
    
    
    $
    (36
    )
    
    $
    (4,552
    )
    
    $
    252,159Issuance of 201,731 shares of common stock to
acquire portion of minority interest in subsidiary
    
    
    6,377
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,377Issuance of 193,294 shares of common stock upon
exercise of stock options, net of common stock
surrendered to facilitate exercise
    
    
    2,980
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,980Recognition of compensation expense relating to
restricted common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    915
    
    
    
    915Cash dividends paid ($0.53 per share)
    
    
    
    
    
    
    (7,954
    )
    
    
    
    
    
    
    
    
    
    
    (7,954
    )Components of comprehensive income:Net income for the period
    
    
    
    
    
    
    25,906
    
    
    
    
    
    
    
    
    
    
    
    25,906Market value adjustment for investment
securities available for sale (net of
income tax effect)
    
    
    
    
    
    
    
    
    
    
    (149
    )
    
    
    
    
    
    
    (149
    )Comprehensive income for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,757BALANCES AT SEPTEMBER 30, 2005
    
    $
    205,628
    
    
    $
    78,428
    
    
    $
    (185
    )
    
    $
    (3,637
    )
    
    $
    280,234




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##### Table of Contents



2005
    
    
    2004(in thousands)OPERATING ACTIVITIESNet income
    
    $
    25,906
    
    
    $
    18,766Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    7,169
    
    
    
    9,597Depreciation of premises and equipment
    
    
    4,179
    
    
    
    3,520Amortization of intangibles
    
    
    431
    
    
    
    410Net amortization of investment security premiums
    
    
    63
    
    
    
    19Loss on sale of premises and equipment
    
    
    14
    
    
    
    1Minority interest in net losses of consolidated subsidiaries
    
    
    (2,705
    )
    
    
    (810
    )Compensation expense relating to restricted common stock
    
    
    915
    
    
    
    968Originations and purchases of loans held for resale
    
    
    (500,957
    )
    
    
    (558,147
    )Proceeds from sales of loans held for resale
    
    
    510,468
    
    
    
    565,950Increase in accrued interest income and other assets
    
    
    (17,568
    )
    
    
    (6,526
    )Increase in accrued interest expense on deposits and other liabilities
    
    
    5,490
    
    
    
    835NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    33,405
    
    
    
    34,583INVESTING ACTIVITIESCash and cash equivalents of acquired subsidiary
    
    
    1,357
    
    
    
    4,202Proceeds from sale of investment securities available for sale
    
    
    1,757
    
    
    
    68,302Proceeds from calls, prepayments and maturities of investment
securities
    
    
    6,279
    
    
    
    5,098Purchases of investment securities
    
    
    (11,561
    )
    
    
    (18,451
    )Net increase in portfolio loans
    
    
    (201,119
    )
    
    
    (316,590
    )Proceeds from sales of premises and equipment
    
    
    83
    
    
    
    22Purchases of premises and equipment
    
    
    (4,872
    )
    
    
    (8,846
    )NET CASH USED BY INVESTING ACTIVITIES
    
    
    (208,076
    )
    
    
    (266,263
    )FINANCING ACTIVITIESNet increase in demand deposits, NOW accounts and
savings accounts
    
    
    146,955
    
    
    
    172,176Net increase in certificates of deposit
    
    
    142,416
    
    
    
    2,722Net borrowings from debt obligations
    
    
    1,289
    
    
    
    43,322Net proceeds from issuance of subordinated debentures
    
    
    
    
    
    
    9,935Resources provided by minority interests
    
    
    37,705
    
    
    
    14,761Net proceeds from issuance of common stock
    
    
    2,980
    
    
    
    356Cash dividends paid
    
    
    (7,954
    )
    
    
    (6,863
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    323,391
    
    
    
    236,409INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    148,720
    
    
    
    4,729Cash and cash equivalents at beginning of period
    
    
    231,104
    
    
    
    283,623CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    379,824
    
    
    $
    288,352




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##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LTD.
 Note A  Basis of Presentation
     Note B
 Implementation of New Accounting Standard
 Accounting for Certain Loans or Debt Securities Acquired in
a Transfer
  Page 7 of 29




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##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LTD.  Continued
 Note C
 Stock Options
 Accounting for Stock-Based Compensation
 Periods Ended September 30Three Month Period
    
    
    Nine Month Period2005
    
    
    2004
    
    
    2005
    
    
    2004Fair value assumptions:Risk-free interest rate
    
    
    
    
    
    
    3.9
    %
    
    
    4.1
    %
    
    
    3.8
    %Dividend yield
    
    
    
    
    
    
    2.5
    %
    
    
    2.2
    %
    
    
    2.3
    %Stock price volatility
    
    
    
    
    
    
    .22
    
    
    
    .27
    
    
    
    .26Expected option life
    
    
    
    
    
    7 years
    
    7 years
    
    6.5 yearsAggregate estimated fair value of
options granted (in thousands)
    
    $
    
    
    
    $
    1,074
    
    
    $
    4,781
    
    
    $
    4,275Net income (in thousands):As reported
    
    $
    9,594
    
    
    $
    7,439
    
    
    $
    25,906
    
    
    $
    18,766Less pro forma compensation
expense regarding fair value
of stock option awards, net
of related income tax effect
    
    
    
    
    
    
    (698
    )
    
    
    (3,108
    )
    
    
    (2,779
    )Pro forma
    
    $
    9,594
    
    
    $
    6,741
    
    
    $
    22,798
    
    
    $
    15,987Net income per share:Basic:As reported
    
    $
    0.64
    
    
    $
    0.52
    
    
    $
    1.75
    
    
    $
    1.33Pro forma
    
    
    0.64
    
    
    
    0.47
    
    
    
    1.54
    
    
    
    1.14Diluted:As reported
    
    
    0.61
    
    
    
    0.50
    
    
    
    1.67
    
    
    
    1.27Pro forma
    
    $
    0.61
    
    
    $
    0.45
    
    
    $
    1.47
    
    
    $
    1.08
  WeightedNumber of
    
    
    Exercise
    
    
    AverageStock Options
    
    
    Price
    
    
    ExerciseOutstanding
    
    
    Range
    
    
    PriceOutstanding at January 1
    
    
    2,584,139
    
    
    $
    10.81 to $33.01
    
    
    $
    21.06Exercised
    
    
    (312,042
    )
    
    
    11.00 to 30.21
    
    
    
    16.51Granted
    
    
    533,327
    
    
    
    30.21 to 34.84
    
    
    
    31.60Cancelled or expired
    
    
    (41,337
    )
    
    
    23.24 to 29.10Outstanding at September 30
    
    
    2,764,087
    
    
    $
    10.81 to $34.84
    
    
    $
    23.57
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##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LTD.  Continued
 Note C
 Stock Options  Continued
  Weighted AverageRemainingExercise Price
    
    Number
    
    
    Exercise
    
    
    ContractualRange
    
    Outstanding
    
    
    Price
    
    
    Life$10.00 to 14.99
    
    
    304,441
    
    
    $
    11.34
    
    
    1.8 years$15.00 to 19.99
    
    
    531,784
    
    
    
    16.67
    
    
    3.3 years$20.00 to 24.99
    
    
    498,056
    
    
    
    21.72
    
    
    4.3 years$25.00 to 29.99
    
    
    738,703
    
    
    
    27.03
    
    
    4.6 years$30.00 or more
    
    
    691,103
    
    
    $
    31.92
    
    
    6.0 yearsTotal outstanding
    
    
    2,764,087
 Note D
 Net Income Per Share
  Periods Ended September 30Three Month Period
    
    
    Nine Month Period2005
    
    
    2004
    
    
    2005
    
    
    2004Numeratornet income for the period
    
    $
    9,594,000
    
    
    $
    7,439,000
    
    
    $
    25,906,000
    
    
    $
    18,766,000Denominator:Weighted average number of common
shares outstanding, excluding unvested
shares of restricted common stock
(denominator for basic earnings per share)
    
    
    14,939,912
    
    
    
    14,311,842
    
    
    
    14,776,778
    
    
    
    14,069,446Weighted average number of unvested shares
of restricted common stock outstanding
    
    
    201,990
    
    
    
    259,300
    
    
    
    208,384
    
    
    
    263,869Effect of other dilutive securities (stock
options)
    
    
    537,597
    
    
    
    422,391
    
    
    
    485,855
    
    
    
    426,651Denominator for diluted net income per shareWeighted average number of common
shares and potential dilution
    
    
    15,679,499
    
    
    
    14,993,533
    
    
    
    15,471,017
    
    
    
    14,759,966Number of antidilutive stock options excluded
from diluted earnings per share computation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LTD.  Continued
 Note E  New Banks and Bank Development Activities
   de novo
 Note F
 Share Exchange Transaction
  Note G  Acquisition of Bank
  Page 10 of 29




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##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LTD.  Continued
 Note H  Impact of New Accounting Standards
 Share-Based Payment
  The Meaning of
Other-Than-Temporary and Its Application to Certain Investments
 Page 11 of 29




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##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LTD.  Continued
 Note H
 Impact of New Accounting Standards  Continued
  
    
    Proposed amendment to Statement No. 128, Earnings per Share.
    
    Proposed amendments to Statement No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities.
    
    Proposed interpretation regarding Uncertain Tax Positions.
    
    Proposed replacement of Statement No. 141 regarding Business Combinations.
    
    Proposed replacement of Accounting Research Bulletin No. 51 regarding Consolidated
Financial Statements, Including Accounting and Reporting for Noncontrolling Interests.
    Page 12 of 29




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##### Table of Contents



PART I, ITEM 2
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 Financial Condition
   Page 13 of 29




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##### Table of Contents



Total Assets (in $1,000s)Sept 30, 2005
    
    
    Dec 31, 2004Eastern Regions:Great Lakes Region:Ann Arbor Commerce Bank
    
    $
    328,524
    
    
    $
    330,488Bank of Auburn Hills(5)
    
    
    9,259
    
    
    
    n/aBank of Michigan(1)
    
    
    17,161
    
    
    
    n/aBrighton Commerce Bank
    
    
    102,264
    
    
    
    105,890Capitol National Bank
    
    
    244,760
    
    
    
    228,656Detroit Commerce Bank
    
    
    82,418
    
    
    
    70,036Elkhart Community Bank
    
    
    78,946
    
    
    
    67,099Goshen Community Bank
    
    
    63,290
    
    
    
    54,571Grand Haven Bank
    
    
    120,678
    
    
    
    119,254Kent Commerce Bank
    
    
    85,120
    
    
    
    89,393Macomb Community Bank
    
    
    88,363
    
    
    
    94,847Muskegon Commerce Bank
    
    
    98,001
    
    
    
    94,162Oakland Commerce Bank
    
    
    123,321
    
    
    
    130,779Paragon Bank & Trust
    
    
    111,297
    
    
    
    110,128Portage Commerce Bank
    
    
    188,082
    
    
    
    180,817Great Lakes Region Total
    
    
    1,741,484
    
    
    
    1,676,120Southeast Region:First Carolina State Bank
    
    
    77,968
    
    
    
    68,598Peoples State Bank(2)
    
    
    28,711
    
    
    
    n/aSoutheast Region Total
    
    
    106,679
    
    
    
    68,598Eastern Regions Total
    
    
    1,848,163
    
    
    
    1,744,718Western Regions:Southwest Region:Arrowhead Community Bank
    
    
    81,549
    
    
    
    70,989Bank of Las Vegas
    
    
    75,162
    
    
    
    47,538Bank of Tucson
    
    
    193,813
    
    
    
    168,469Black Mountain Community Bank
    
    
    122,606
    
    
    
    100,415Camelback Community Bank
    
    
    87,250
    
    
    
    83,414Desert Community Bank
    
    
    81,141
    
    
    
    63,276East Valley Community Bank
    
    
    45,881
    
    
    
    46,549Fort Collins Commerce Bank(3)
    
    
    18,571
    
    
    
    n/aMesa Bank
    
    
    124,181
    
    
    
    96,158Red Rock Community Bank
    
    
    116,688
    
    
    
    102,832Southern Arizona Community Bank
    
    
    91,409
    
    
    
    83,140Sunrise Bank of Albuquerque
    
    
    67,868
    
    
    
    69,055Sunrise Bank of Arizona
    
    
    114,346
    
    
    
    128,192Valley First Community Bank
    
    
    75,378
    
    
    
    54,857Yuma Community Bank
    
    
    58,868
    
    
    
    59,355Southwest Region Total
    
    
    1,354,711
    
    
    
    1,174,239California Region:Bank of Escondido
    
    
    67,757
    
    
    
    50,956Bank of San Francisco(6)
    
    
    12,650
    
    
    
    n/aNapa Community Bank
    
    
    78,680
    
    
    
    79,396Point Loma Community Bank
    
    
    35,142
    
    
    
    20,857Sunrise Bank of San Diego
    
    
    64,856
    
    
    
    62,672California Region Total
    
    
    259,085
    
    
    
    213,881Northwest
Region  Bank of Bellevue(4)
    
    
    13,568
    
    
    
    n/aWestern Regions Total
    
    
    1,627,364
    
    
    
    1,388,120Other, net
    
    
    (29,198
    )
    
    
    (41,420
    )Consolidated
    
    $
    3,446,329
    
    
    $
    3,091,418
 
 n/a  Not applicable.(1)
    
    Commenced operations in January 2005 and is 51%-owned by Capitol Development
Bancorp Limited I, a controlled subsidiary of Capitol.(2)
    
    Acquired in April 2005 and is 62%-owned by Capitol.(3)
    
    Commenced operations in June 2005 and is 51%-owned by Capitol Bancorp Colorado
Limited, a wholly-owned subsidiary of Capitol.(4)
    
    Commenced operations in June 2005 and is 51%-owned by Capitol Development Bancorp
Limited II, a controlled subsidiary of Capitol.(5)
    
    Commenced operations in July 2005 and is 51%-owned by Capitol Development Bancorp
Limited II, a controlled subsidiary of Capitol.(6)
    
    Commenced operations in August 2005 and is 51%-owned by Capitol. Page 14 of 29




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##### Table of Contents



Periods Ended September 30Three Month Period
    
    
    Nine Month Period2005
    
    
    2004
    
    
    2005
    
    
    2004Allowance for loan losses at beginning of period
    
    $
    38,870
    
    
    $
    35,137
    
    
    $
    37,572
    
    
    $
    31,404Allowance for loan losses of acquired bank
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    724Loans charged-off:Commercial
    
    
    (2,304
    )
    
    
    (1,673
    )
    
    
    (6,541
    )
    
    
    (5,142
    )Real estate mortgage
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (116
    )Installment
    
    
    (129
    )
    
    
    (108
    )
    
    
    (440
    )
    
    
    (248
    )Total charge-offs
    
    
    (2,433
    )
    
    
    (1,798
    )
    
    
    (6,981
    )
    
    
    (5,506
    )Recoveries:Commercial
    
    
    709
    
    
    
    129
    
    
    
    1,426
    
    
    
    761Real estate mortgage
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    10Installment
    
    
    30
    
    
    
    6
    
    
    
    96
    
    
    
    37Total recoveries
    
    
    740
    
    
    
    135
    
    
    
    1,524
    
    
    
    808Net charge-offs
    
    
    (1,693
    )
    
    
    (1,663
    )
    
    
    (5,457
    )
    
    
    (4,698
    )Additions to allowance charged to expense
    
    
    2,107
    
    
    
    3,553
    
    
    
    7,169
    
    
    
    9,597Allowance for loan losses at September 30
    
    $
    39,284
    
    
    $
    37,027
    
    
    $
    39,284
    
    
    $
    37,027Average total portfolio loans for the period
    
    $
    2,868,354
    
    
    $
    2,566,005
    
    
    $
    2,804,285
    
    
    $
    2,437,698Ratio of net charge-offs (annualized) to average
portfolio loans outstanding
    
    
    0.24
    %
    
    
    0.26
    %
    
    
    0.26
    %
    
    
    0.26
    %




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##### Table of Contents



September 30, 2005
    
    December 31, 2004Percentage
    
    
    
    
    
    Percentageof Total
    
    
    
    
    
    of TotalPortfolio
    
    
    
    
    
    PortfolioAmount
    
    Loans
    
    Amount
    
    LoansCommercial
    
    $
    36,420
    
    
    
    1.26
    %
    
    $
    34,753
    
    
    
    1.29
    %Real estate mortgage
    
    
    1,701
    
    
    
    0.06
    
    
    
    1,808
    
    
    
    0.07Installment
    
    
    1,163
    
    
    
    0.04
    
    
    
    1,011
    
    
    
    0.04Total allowance for loan losses
    
    $
    39,284
    
    
    
    1.36
    %
    
    $
    37,572
    
    
    
    1.40
    %Total portfolio loans outstanding
    
    $
    2,888,566
    
    
    
    
    
    
    $
    2,692,904
  Sept 30,
    
    
    Dec 31,2005
    
    
    2004Nonaccrual loans:Commercial
    
    $
    18,028
    
    
    $
    20,618Real estate mortgage
    
    
    1,562
    
    
    
    2,396Installment
    
    
    925
    
    
    
    195Total nonaccrual loans
    
    
    20,515
    
    
    
    23,209Past due (390 days) loans:Commercial
    
    
    4,061
    
    
    
    3,529Real estate mortgage
    
    
    465
    
    
    
    1,382Installment
    
    
    194
    
    
    
    351Total past due loans
    
    
    4,720
    
    
    
    5,262Total nonperforming loans
    
    $
    25,235
    
    
    $
    28,471Real estate owned and other
repossessed assets
    
    
    2,938
    
    
    
    3,907Total nonperforming assets
    
    $
    28,173
    
    
    $
    32,378




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##### Table of Contents



Total
    
    
    Allowance for
    
    
    Nonperforming
    
    
    Allowance as a PercentagePortfolio Loans
    
    
    Loan Losses
    
    
    Loans
    
    
    of Total Portfolio LoansSept 30
    
    
    Dec 31
    
    
    Sept 30
    
    
    Dec 31
    
    
    Sept 30
    
    
    Dec 31
    
    
    Sept 30
    
    
    Dec 312005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Eastern Regions:Great Lakes Region:Ann Arbor Commerce Bank
    
    $
    297,596
    
    
    $
    297,936
    
    
    $
    4,203
    
    
    $
    3,907
    
    
    $
    3,415
    
    
    $
    2,460
    
    
    
    1.41
    %
    
    
    1.31
    %Bank of Auburn Hills(5)
    
    
    2,665
    
    
    
    n/a
    
    
    
    38
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    1.43
    
    
    
    n/aBank of Michigan(1)
    
    
    10,934
    
    
    
    n/a
    
    
    
    164
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    1.50
    
    
    
    n/aBrighton Commerce Bank
    
    
    92,739
    
    
    
    95,408
    
    
    
    977
    
    
    
    969
    
    
    
    1,398
    
    
    
    1,035
    
    
    
    1.05
    
    
    
    1.02Capitol National Bank
    
    
    196,481
    
    
    
    196,519
    
    
    
    2,710
    
    
    
    2,723
    
    
    
    1,508
    
    
    
    2,053
    
    
    
    1.38
    
    
    
    1.39Detroit Commerce Bank
    
    
    79,338
    
    
    
    66,280
    
    
    
    1,012
    
    
    
    806
    
    
    
    274
    
    
    
    338
    
    
    
    1.28
    
    
    
    1.22Elkhart Community Bank
    
    
    72,868
    
    
    
    63,987
    
    
    
    838
    
    
    
    712
    
    
    
    814
    
    
    
    277
    
    
    
    1.15
    
    
    
    1.11Goshen Community Bank
    
    
    53,211
    
    
    
    48,059
    
    
    
    608
    
    
    
    644
    
    
    
    
    
    
    
    703
    
    
    
    1.14
    
    
    
    1.34Grand Haven Bank
    
    
    113,303
    
    
    
    109,612
    
    
    
    2,449
    
    
    
    2,522
    
    
    
    3,309
    
    
    
    7,264
    
    
    
    2.16
    
    
    
    2.30Kent Commerce Bank
    
    
    75,348
    
    
    
    86,090
    
    
    
    1,240
    
    
    
    1,269
    
    
    
    1,733
    
    
    
    2,445
    
    
    
    1.65
    
    
    
    1.47Macomb Community Bank
    
    
    84,842
    
    
    
    91,173
    
    
    
    1,234
    
    
    
    1,327
    
    
    
    2,169
    
    
    
    1,768
    
    
    
    1.45
    
    
    
    1.46Muskegon Commerce Bank
    
    
    90,469
    
    
    
    88,692
    
    
    
    905
    
    
    
    904
    
    
    
    1,889
    
    
    
    1,524
    
    
    
    1.00
    
    
    
    1.02Oakland Commerce Bank
    
    
    94,159
    
    
    
    107,037
    
    
    
    1,394
    
    
    
    1,850
    
    
    
    1,062
    
    
    
    2,402
    
    
    
    1.48
    
    
    
    1.73Paragon Bank & Trust
    
    
    95,964
    
    
    
    96,428
    
    
    
    1,320
    
    
    
    1,350
    
    
    
    2,554
    
    
    
    783
    
    
    
    1.38
    
    
    
    1.40Portage Commerce Bank
    
    
    175,172
    
    
    
    170,479
    
    
    
    1,946
    
    
    
    1,977
    
    
    
    2,518
    
    
    
    2,820
    
    
    
    1.11
    
    
    
    1.16Great Lakes Region Total
    
    
    1,535,089
    
    
    
    1,517,700
    
    
    
    21,038
    
    
    
    20,960
    
    
    
    22,643
    
    
    
    25,872Southeast Region:First Carolina State Bank
    
    
    62,843
    
    
    
    51,867
    
    
    
    632
    
    
    
    525
    
    
    
    102
    
    
    
    11
    
    
    
    1.01
    
    
    
    1.01Peoples State Bank(2)
    
    
    17,098
    
    
    
    n/a
    
    
    
    107
    
    
    
    n/a
    
    
    
    19
    
    
    
    n/a
    
    
    
    0.63
    
    
    
    n/aSoutheast Region Total
    
    
    79,941
    
    
    
    51,867
    
    
    
    739
    
    
    
    525
    
    
    
    121
    
    
    
    11Eastern Regions Total
    
    
    1,615,030
    
    
    
    1,569,567
    
    
    
    21,777
    
    
    
    21,485
    
    
    
    22,764
    
    
    
    25,883Western Regions:Southwest Region:Arrowhead Community Bank
    
    
    71,087
    
    
    
    62,737
    
    
    
    700
    
    
    
    620
    
    
    
    276
    
    
    
    29
    
    
    
    0.98
    
    
    
    0.99Bank of Las Vegas
    
    
    47,905
    
    
    
    41,134
    
    
    
    450
    
    
    
    425
    
    
    
    
    
    
    
    
    
    
    
    0.94
    
    
    
    1.03Bank of Tucson
    
    
    125,544
    
    
    
    115,694
    
    
    
    1,255
    
    
    
    1,170
    
    
    
    372
    
    
    
    455
    
    
    
    1.00
    
    
    
    1.01Black Mountain Community Bank
    
    
    98,462
    
    
    
    84,163
    
    
    
    1,244
    
    
    
    1,014
    
    
    
    438
    
    
    
    368
    
    
    
    1.26
    
    
    
    1.20Camelback Community Bank
    
    
    72,128
    
    
    
    75,146
    
    
    
    1,035
    
    
    
    1,186
    
    
    
    
    
    
    
    
    
    
    
    1.43
    
    
    
    1.58Desert Community Bank
    
    
    70,348
    
    
    
    58,751
    
    
    
    830
    
    
    
    722
    
    
    
    273
    
    
    
    107
    
    
    
    1.18
    
    
    
    1.23East Valley Community Bank
    
    
    41,381
    
    
    
    42,614
    
    
    
    525
    
    
    
    520
    
    
    
    
    
    
    
    
    
    
    
    1.27
    
    
    
    1.22Fort Collins Commerce Bank(3)
    
    
    14,241
    
    
    
    n/a
    
    
    
    147
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    1.03
    
    
    
    n/aMesa Bank
    
    
    116,130
    
    
    
    85,561
    
    
    
    1,125
    
    
    
    800
    
    
    
    
    
    
    
    
    
    
    
    0.97
    
    
    
    0.94Red Rock Community Bank
    
    
    84,371
    
    
    
    72,938
    
    
    
    1,450
    
    
    
    1,714
    
    
    
    227
    
    
    
    762
    
    
    
    1.72
    
    
    
    2.35Southern Arizona Community Bank
    
    
    73,561
    
    
    
    72,226
    
    
    
    700
    
    
    
    736
    
    
    
    20
    
    
    
    
    
    
    
    0.95
    
    
    
    1.02Sunrise Bank of Albuquerque
    
    
    55,423
    
    
    
    59,766
    
    
    
    1,012
    
    
    
    895
    
    
    
    725
    
    
    
    459
    
    
    
    1.83
    
    
    
    1.50Sunrise Bank of Arizona
    
    
    104,314
    
    
    
    118,617
    
    
    
    1,250
    
    
    
    1,400
    
    
    
    64
    
    
    
    111
    
    
    
    1.20
    
    
    
    1.18Valley First Community Bank
    
    
    53,338
    
    
    
    49,518
    
    
    
    426
    
    
    
    469
    
    
    
    
    
    
    
    
    
    
    
    0.80
    
    
    
    0.95Yuma Community Bank
    
    
    49,585
    
    
    
    41,460
    
    
    
    460
    
    
    
    465
    
    
    
    
    
    
    
    
    
    
    
    0.93
    
    
    
    1.12Southwest Region Total
    
    
    1,077,818
    
    
    
    980,325
    
    
    
    12,609
    
    
    
    12,136
    
    
    
    2,395
    
    
    
    2,291California Region:Bank of Escondido
    
    
    37,280
    
    
    
    33,166
    
    
    
    451
    
    
    
    350
    
    
    
    24
    
    
    
    
    
    
    
    1.21
    
    
    
    1.06Bank of San Francisco(6)
    
    
    3,010
    
    
    
    n/a
    
    
    
    31
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    1.03
    
    
    
    n/aNapa Community Bank
    
    
    64,995
    
    
    
    53,033
    
    
    
    740
    
    
    
    720
    
    
    
    52
    
    
    
    
    
    
    
    1.14
    
    
    
    1.36Point Loma Community Bank
    
    
    26,545
    
    
    
    8,590
    
    
    
    265
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    1.00
    
    
    
    1.02Sunrise Bank of San Diego
    
    
    56,722
    
    
    
    46,945
    
    
    
    514
    
    
    
    415
    
    
    
    
    
    
    
    297
    
    
    
    0.91
    
    
    
    0.88California Region Total
    
    
    188,552
    
    
    
    141,734
    
    
    
    2,001
    
    
    
    1,573
    
    
    
    76
    
    
    
    297Northwest Region  Bank of
Bellevue(4)
    
    
    5,565
    
    
    
    n/a
    
    
    
    62
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a
    
    
    
    1.11
    
    
    
    n/aWestern Regions Total
    
    
    1,271,935
    
    
    
    1,122,059
    
    
    
    14,672
    
    
    
    13,709
    
    
    
    2,471
    
    
    
    2,588Other, net
    
    
    1,601
    
    
    
    1,278
    
    
    
    2,835
    
    
    
    2,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consolidated
    
    $
    2,888,566
    
    
    $
    2,692,904
    
    
    $
    39,284
    
    
    $
    37,572
    
    
    $
    25,235
    
    
    $
    28,471
    
    
    
    1.36
    %
    
    
    1.40
    %
 
 n/a  Not applicable.(1)

    Commenced operations in January 2005 and is 51%-owned by Capitol Development Bancorp Limited
I, a controlled subsidiary of Capitol.(2)

    Acquired in April 2005 and is 62%-owned by Capitol.(3)

    Commenced operations in June 2005 and is 51%-owned by Capitol Bancorp Colorado Limited, a
wholly-owned subsidiary of Capitol.(4)

    Commenced operations in June 2005 and is 51%-owned by Capitol Development Bancorp Limited II,
a controlled subsidiary of Capitol.(5)

    Commenced operations in July 2005 and is 51%-owned by Capitol Development Bancorp Limited II,
a controlled subsidiary of Capitol.(6)

    Commenced operations in August 2005 and is 51%-owned by Capitol.




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##### Table of Contents



Results of Operations
      Page 19 of 29




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Nine months ended September 30Return on
    
    
    Return onTotal Revenues
    
    
    Net Income
    
    
    Average Equity(1)
    
    
    Average Assets(1)2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Eastern Regions:Great Lakes Region:Ann Arbor Commerce Bank
    
    $
    17,894
    
    
    $
    16,157
    
    
    $
    3,423
    
    
    $
    3,161
    
    
    
    16.91
    %
    
    
    16.32
    %
    
    
    1.39
    %
    
    
    1.31
    %Bank of Auburn Hills(6)
    
    
    196
    
    
    
    n/a
    
    
    
    (278
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aBank of Michigan(2)
    
    
    367
    
    
    
    n/a
    
    
    
    (745
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aBrighton Commerce Bank
    
    
    5,423
    
    
    
    4,576
    
    
    
    836
    
    
    
    794
    
    
    
    12.17
    
    
    
    12.93
    
    
    
    1.03
    
    
    
    1.10Capitol National Bank
    
    
    11,958
    
    
    
    10,212
    
    
    
    2,853
    
    
    
    2,605
    
    
    
    20.44
    
    
    
    20.34
    
    
    
    1.59
    
    
    
    1.55Detroit Commerce Bank
    
    
    4,666
    
    
    
    2,760
    
    
    
    437
    
    
    
    66
    
    
    
    8.68
    
    
    
    1.78
    
    
    
    .75
    
    
    
    .16Elkhart Community Bank
    
    
    3,858
    
    
    
    2,859
    
    
    
    506
    
    
    
    525
    
    
    
    8.65
    
    
    
    9.90
    
    
    
    .93
    
    
    
    1.21Goshen Community Bank
    
    
    2,907
    
    
    
    2,372
    
    
    
    24
    
    
    
    373
    
    
    
    .49
    
    
    
    7.83
    
    
    
    .06
    
    
    
    1.03Grand Haven Bank
    
    
    6,357
    
    
    
    5,235
    
    
    
    803
    
    
    
    (112
    )
    
    
    10.49
    
    
    
    n/a
    
    
    
    .88
    
    
    
    n/aKent Commerce Bank
    
    
    4,643
    
    
    
    3,957
    
    
    
    477
    
    
    
    408
    
    
    
    7.68
    
    
    
    6.65
    
    
    
    .73
    
    
    
    .68Macomb Community Bank
    
    
    4,878
    
    
    
    4,242
    
    
    
    567
    
    
    
    596
    
    
    
    8.58
    
    
    
    9.06
    
    
    
    .80
    
    
    
    .87Muskegon Commerce Bank
    
    
    5,361
    
    
    
    4,602
    
    
    
    991
    
    
    
    1,082
    
    
    
    13.72
    
    
    
    15.68
    
    
    
    1.39
    
    
    
    1.66Oakland Commerce Bank
    
    
    6,588
    
    
    
    5,681
    
    
    
    1,504
    
    
    
    520
    
    
    
    19.18
    
    
    
    6.96
    
    
    
    1.58
    
    
    
    .54Paragon Bank & Trust
    
    
    6,347
    
    
    
    5,208
    
    
    
    599
    
    
    
    790
    
    
    
    7.00
    
    
    
    9.47
    
    
    
    .72
    
    
    
    .99Portage Commerce Bank
    
    
    10,308
    
    
    
    8,556
    
    
    
    2,263
    
    
    
    2,045
    
    
    
    18.95
    
    
    
    20.18
    
    
    
    1.61
    
    
    
    1.61Great Lakes Region Total
    
    
    91,751
    
    
    
    76,417
    
    
    
    14,260
    
    
    
    12,853Southeast Region:First Carolina State Bank
    
    
    3,294
    
    
    
    1,591
    
    
    
    454
    
    
    
    326
    
    
    
    5.65
    
    
    
    4.23
    
    
    
    .83
    
    
    
    .65Peoples State Bank(3)
    
    
    902
    
    
    
    n/a
    
    
    
    71
    
    
    
    n/a
    
    
    
    4.06
    
    
    
    n/a
    
    
    
    .54
    
    
    
    n/aSoutheast Region Total
    
    
    4,196
    
    
    
    1,591
    
    
    
    525
    
    
    
    326Eastern Regions Total
    
    
    95,947
    
    
    
    78,008
    
    
    
    14,785
    
    
    
    13,179Western Regions:Southwest Region:Arrowhead Community Bank
    
    
    5,158
    
    
    
    3,748
    
    
    
    857
    
    
    
    505
    
    
    
    16.28
    
    
    
    11.63
    
    
    
    1.44
    
    
    
    1.04Bank of Las Vegas
    
    
    2,953
    
    
    
    2,068
    
    
    
    443
    
    
    
    77
    
    
    
    8.98
    
    
    
    1.72
    
    
    
    1.06
    
    
    
    .18Bank of Tucson
    
    
    9,230
    
    
    
    7,425
    
    
    
    2,790
    
    
    
    2,159
    
    
    
    28.03
    
    
    
    24.39
    
    
    
    2.13
    
    
    
    1.84Black Mountain Community Bank
    
    
    6,361
    
    
    
    4,471
    
    
    
    1,589
    
    
    
    980
    
    
    
    20.70
    
    
    
    15.27
    
    
    
    1.80
    
    
    
    1.41Camelback Community Bank
    
    
    4,405
    
    
    
    4,083
    
    
    
    892
    
    
    
    286
    
    
    
    14.06
    
    
    
    4.39
    
    
    
    1.46
    
    
    
    .47Desert Community Bank
    
    
    4,179
    
    
    
    3,044
    
    
    
    763
    
    
    
    427
    
    
    
    13.17
    
    
    
    7.49
    
    
    
    1.38
    
    
    
    .97East Valley Community Bank
    
    
    2,786
    
    
    
    2,383
    
    
    
    209
    
    
    
    150
    
    
    
    5.76
    
    
    
    4.83
    
    
    
    .58
    
    
    
    .46Fort Collins Commerce Bank(4)
    
    
    361
    
    
    
    n/a
    
    
    
    (344
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aMesa Bank
    
    
    7,536
    
    
    
    4,963
    
    
    
    1,843
    
    
    
    1,098
    
    
    
    28.77
    
    
    
    20.73
    
    
    
    2.27
    
    
    
    1.79Red Rock Community Bank
    
    
    5,202
    
    
    
    4,462
    
    
    
    1,200
    
    
    
    358
    
    
    
    13.02
    
    
    
    3.90
    
    
    
    1.53
    
    
    
    .44Southern Arizona Community Bank
    
    
    4,467
    
    
    
    4,106
    
    
    
    938
    
    
    
    976
    
    
    
    14.24
    
    
    
    15.81
    
    
    
    1.42
    
    
    
    1.56Sunrise Bank of Albuquerque
    
    
    3,952
    
    
    
    3,937
    
    
    
    732
    
    
    
    674
    
    
    
    14.25
    
    
    
    14.84
    
    
    
    1.42
    
    
    
    1.27Sunrise Bank of Arizona
    
    
    7,718
    
    
    
    8,756
    
    
    
    1,515
    
    
    
    1,847
    
    
    
    16.57
    
    
    
    22.22
    
    
    
    1.63
    
    
    
    1.88Valley First Community Bank
    
    
    3,390
    
    
    
    2,358
    
    
    
    517
    
    
    
    188
    
    
    
    10.53
    
    
    
    4.21
    
    
    
    1.02
    
    
    
    .50Yuma Community Bank
    
    
    3,372
    
    
    
    2,906
    
    
    
    743
    
    
    
    643
    
    
    
    15.01
    
    
    
    15.00
    
    
    
    1.68
    
    
    
    1.69Southwest Region Total
    
    
    71,070
    
    
    
    58,710
    
    
    
    14,687
    
    
    
    10,368California Region:Bank of Escondido
    
    
    2,708
    
    
    
    1,350
    
    
    
    311
    
    
    
    (244
    )
    
    
    4.44
    
    
    
    n/a
    
    
    
    .70
    
    
    
    n/aBank of San Francisco(7)
    
    
    95
    
    
    
    n/a
    
    
    
    (451
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aNapa Community Bank
    
    
    4,135
    
    
    
    2,884
    
    
    
    892
    
    
    
    327
    
    
    
    12.01
    
    
    
    5.20
    
    
    
    1.61
    
    
    
    .69Point Loma Community Bank
    
    
    1,401
    
    
    
    31
    
    
    
    (378
    )
    
    
    (429
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aSunrise Bank of San Diego
    
    
    4,164
    
    
    
    4,124
    
    
    
    821
    
    
    
    826
    
    
    
    10.23
    
    
    
    11.66
    
    
    
    1.73
    
    
    
    1.53California Region Total
    
    
    12,503
    
    
    
    8,389
    
    
    
    1,195
    
    
    
    480Northwest Region  Bank of
Bellevue(5)
    
    
    142
    
    
    
    n/a
    
    
    
    (362
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aWestern Regions Total
    
    
    83,715
    
    
    
    67,099
    
    
    
    15,520
    
    
    
    10,848Other, net
    
    
    (1,460
    )
    
    
    88
    
    
    
    (4,399
    )
    
    
    (5,261
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aConsolidated
    
    $
    178,202
    
    
    $
    145,195
    
    
    $
    25,906
    
    
    $
    18,766
    
    
    
    13.19
    %
    
    
    10.76
    %
    
    
    1.06
    %
    
    
    .86
    %
 
 n/a  Not applicable.(1)
    
    Annualized for period presented.(2)
    
    Commenced operations in January 2005 and is 51%-owned by Capitol Development Bancorp Limited I,
a controlled subsidiary of Capitol.(3)
    
    Acquired in April 2005 and is 62%-owned by Capitol.(4)
    
    Commenced operations in June 2005 and is 51%-owned by Capitol Bancorp Colorado Limited, a
wholly-owned subsidiary of Capitol.(5)
    
    Commenced operations in June 2005 and is 51%-owned by Capitol Development Bancorp Limited II,
a controlled subsidiary of Capitol.(6)
    
    Commenced operations in July 2005 and is 51%-owned by Capitol Development Bancorp Limited II,
a controlled subsidiary of Capitol.(7)
    
    Commenced operations in August 2005 and is 51%-owned by Capitol. Page 20 of 29




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##### Table of Contents



Liquidity and Capital Resources
        Page 21 of 29




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##### Table of Contents



de novo
  de novo
  Page 22 of 29




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##### Table of Contents



Trends Affecting Operations
    de novo
   Impact of New Accounting Standards
  Share-Based Payment
 Page 23 of 29




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##### Table of Contents



not
 Critical Accounting Policies
   Page 24 of 29




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##### Table of Contents



PART I, ITEM 3
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
  
 PART I, ITEM 4
 CONTROLS AND PROCEDURES
    Page 25 of 29




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
 Capitol and its subsidiaries are parties to certain ordinary, routine litigation incidental to
their business. In the opinion of management, liabilities arising from such litigation would
not have a material effect on Capitols consolidated financial position or results of
operations.
 
 Item 2.
    
    Unregistered Sales of Securities and Use of Proceeds.
    
 Item 3.
    
    Defaults Upon Senior Securities.
 None.
 
 Item 4.
    
    Submission of Matters to a Vote of Security Holders.
 None.
 
 Item 5.
    
    Other Information.
 None.
 
 Item 6.
    
    Exhibits and Reports on Form 8-K.
  Exhibit No.
    
    Description of Exhibit31.1
    
    
    Certification of Chief Executive Officer, Joseph D. Reid,
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    
    Certification of Chief Financial Officer, Lee W.
Hendrickson, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer, Joseph D. Reid,
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    
    Certification of Chief Financial Officer, Lee W.
Hendrickson, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 Page 26 of 29




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##### Table of Contents



PART II. OTHER INFORMATION  Continued
  On July 21, 2005, a report on Form 8-K was filed, reporting second quarter
earnings.On July 26, 2005, a report on Form 8-K was filed, reporting a third quarter
2005 dividend.
  Page 27 of 29




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##### Table of Contents



SIGNATURES
  CAPITOL BANCORP LTD.(Registrant)/s/ Joseph D. ReidJoseph D. ReidChairman and CEO(duly authorized to sign on
behalf of the registrant)/s/ Lee W. HendricksonLee W. HendricksonChief Financial Officer
  Page 28 of 29




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INDEX TO EXHIBITS
 Exhibit No.
    
    Description of Exhibit31.1
    
    Certification of Chief Executive Officer, Joseph D. Reid,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer, Lee W. Hendrickson,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer, Joseph D. Reid,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer, Lee W. Hendrickson,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 Page 29 of 29