----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

| T      | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                            |
|--------|---------------------------------------------------------------------------------------------------|
|   | SECURITIES                EXCHANGE ACT OF 1934                                                    |
|   | **For                the quarterly period ended September 30, 2007**                              |
|   | OR                                                                                                |
| £ | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                           |
|   | SECURITIES                EXCHANGE ACT OF 1934                                                    |
|   |                                                                                              |
|   | For                the transition period from ________________ to                ________________ |

**001-31708**

**CAPITOL      BANCORP LTD.**

| **Michigan**                                            |   | **38-2761672**                                   |
|---------------------------------------------------------|--------|--------------------------------------------------|
| (State                or other jurisdiction of          |   | (IRS                Employer Identification No.) |
| incorporation                or organization)           |   |                                             |
| **Capitol                Bancorp Center**               |   |                                             |
| **200                Washington Square North**          |   |                                             |
| **Lansing,                Michigan**                    |   | **48933**                                        |
| (Address                of principal executive offices) |   | (Zip                Code)                        |

**(517)      487-6555**

**Not      applicable**

| Yes   T | No   £ |
|------------------------|----------------------------|

| Large                accelerated filer   £ | Accelerated                filer   T | Non-accelerated                filer   £ |
|----------------------------------------------------------------|-----------------------------------------------------|--------------------------------------------------------------|

| Yes   £ | No   T |
|-----------------------------|-----------------------|

| Class                                     |   | Outstanding                at October 15, 2007 |
|-------------------------------------------|--------|------------------------------------------------|
| Common                Stock, No par value |   | 17,310,409                shares               |

----

**INDEX**

**PART      I.                      FINANCIAL      INFORMATION**

**Forward-Looking      Statements**

|  Item                1.           |  Financial                Statements (unaudited):                                                                                                                  | Page     |
|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                   | Condensed                consolidated balance sheets – September 30, 2007 andDecember                31, 2006.                                                    | 3        |
|                                   | Condensed                consolidated statements of income – Three months and nine                monthsended                September 30, 2007 and 2006.         | 4        |
|                                   | Condensed                consolidated statements of changes in stockholders' equity –                Ninemonths                ended September 30, 2007 and 2006. | 5        |
|                                   | Condensed                consolidated statements of cash flows – Nine months endedSeptember                30, 2007 and 2006.                                     | 6        |
|                                   | Notes                to condensed consolidated financial statements.                                                                                                    | 7        |
| Item                2.                 | Management's                Discussion and Analysis of Financial Condition and Results ofOperations.                                                                    | 11       |
| Item                3.                 | Quantitative                and Qualitative Disclosures About Market Risk.                                                                                              | 24       |
| Item                4.                 | Controls                and Procedures.                                                                                                                                 | 24       |
|  **PART                II.**      |  **OTHER                INFORMATION**                                                                                                                              |     |
|  Item                1.           |  Legal                Proceedings.                                                                                                                                 |  25 |
| Item                1.A.               | Risk                Factors.                                                                                                                                            | 25       |
| Item                2.                 | Unregistered                Sales of Equity Securities and Use of Proceeds.                                                                                             | 25       |
| Item                3.                 | Defaults                Upon Senior Securities.                                                                                                                         | 25       |
| Item                4.                 | Submission                of Matters to a Vote of Security Holders.                                                                                                     | 25       |
| Item                5.                 | Other                Information.                                                                                                                                       | 25       |
| Item                6.                 | Exhibits.                                                                                                                                                               | 25       |
|  **SIGNATURES**                   |                                                                                                                                                                    |  26 |
|  **EXHIBIT                INDEX** |                                                                                                                                                                    |  27 |

----

| **PART                I, ITEM 1**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| CAPITOL                BANCORP LIMITED                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
| Condensed                Consolidated Balance Sheets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| As                of September 30, 2007 and December 31, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| (in                thousands, except share data)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | (Unaudited) |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | September                30, |   |   | December                31, |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |  2007 |   |   | 2006 |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Cash                and due from banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   | $ | 162,375 |   |   | $ | 169,753 |   |
| Money                market and interest-bearing deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   | 26,095 |   |   |   | 37,204 |   |
| Federal                funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   |   | 194,445 |   |   |   | 141,913 |   |
|                                                                                                              Cash              and cash equivalents   |   |   | 382,915 |   |   |   | 348,870 |   |
| Loans                held for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   | 25,980 |   |   |   | 34,593 |   |
| Investment                securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |
|    Available                for sale, carried at market value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   | 15,379 |   |   |   | 18,904 |   |
|    Held                for long-term investment, carried at                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |
|                      amortized cost which approximates market value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   | 24,136 |   |   |   | 21,749 |   |
|                                                                                                              Total              investment securities |   |   | 39,515 |   |   |   | 40,653 |   |
| Portfolio                loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |
|                   Commercial                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   | 3,605,794 |   |   |   | 3,103,125 |   |
|                   Real estate mortgage                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   | 263,590 |   |   |   | 259,604 |   |
|                   Installment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   | 161,000 |   |   |   | 125,949 |   |
|                                                                                                              Total              portfolio loans       |   |   |   | 4,030,384 |   |   |   | 3,488,678 |   |
|                   Less allowance for loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   | (52,851 | ) |   |   | (45,414 | ) |
|                                                                                                 Net              portfolio loans                 |   |   |   | 3,977,533 |   |   |   | 3,443,264 |   |
| Premises                and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   | 57,802 |   |   |   | 54,295 |   |
| Accrued                interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   | 19,657 |   |   |   | 17,524 |   |
| Goodwill                and other intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   | 70,859 |   |   |   | 62,215 |   |
| Other                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   | 79,751 |   |   |   | 64,402 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
|             TOTAL                ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   | $ | 4,654,012 |   |   | $ | 4,065,816 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |
| *LIABILITIES:*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |
|    Noninterest-bearing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   | $ | 636,534 |   |   | $ | 651,253 |   |
|    Interest-bearing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   | 3,037,416 |   |   |   | 2,607,232 |   |
|                                                                                                              Total              deposits              |   |   |   | 3,673,950 |   |   |   | 3,258,485 |   |
| Debt                obligations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
|    Notes                payable and short-term borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   | 259,885 |   |   |   | 191,154 |   |
|    Subordinated                debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   | 156,106 |   |   |   | 101,035 |   |
|                                                                                                              Total              debt obligations      |   |   |   | 415,991 |   |   |   | 292,189 |   |
| Accrued                interest on deposits and other liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   | 30,534 |   |   |   | 26,751 |   |
|                                                                                                              Total              liabilities           |   |   |   | 4,120,475 |   |   |   | 3,577,425 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
| MINORITY                INTERESTS IN CONSOLIDATED SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   | 143,071 |   |   |   | 126,512 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
| *STOCKHOLDERS'                EQUITY:*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Common                stock, no par value,  50,000,000 shares                authorized;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
|    issued                and outstanding:   2007                - 17,310,409 shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |
|                                                               2006              - 16,656,481 shares                                                                                                                                                                                                                                                                                              |   |   |   | 272,078 |   |   |   | 249,244 |   |
| Retained                earnings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   | 118,455 |   |   |   | 112,779 |   |
| Market                value adjustment (net of tax effect) for                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |
|    investment                securities available for sale (accumulated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |
|    other                comprehensive income/loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   | (67 | ) |   |   | (144 | ) |
|                                                                                                              Total              stockholders' equity  |   |   | 390,466 |   |   |   | 361,879 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
|             TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   | $ | 4,654,012 |   |   | $ | 4,065,816 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
| See                notes to condensed consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |

----

| CAPITOL                BANCORP LIMITED                                                                                                                                                                                                                |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Condensed                Consolidated Statements of Income (Unaudited)                                                                                                                                                                                |
| For                the Three Months and Nine Months Ended September 30, 2007 and                2006                                                                                                                                                  |
| (in                thousands, except per share data)                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                  |   |   |
|                                                                                                                                                                                                                                                  |   |   Three-Month                Period  |   |   Nine-Month                Period  |
|                                                                                                                                                                                                                                                  |   |  2007 |   |  2006 |   |  2007 |   |  2006 |
| Interest                income:                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
|                   Portfolio loans (including fees)                                                                                                                                                                                          |   | $ | 81,117 |   | $ | 69,159 |   | $ | 231,819 |   | $ | 193,879 |
|                   Loans held for sale                                                                                                                                                                                                       |   |   | 429 |   |   | 748 |   |   | 1,765 |   |   | 2,010 |
|                   Taxable investment securities                                                                                                                                                                                             |   |   | 188 |   |   | 223 |   |   | 589 |   |   | 730 |
|                   Federal funds sold                                                                                                                                                                                                        |   |   | 2,916 |   |   | 2,341 |   |   | 8,569 |   |   | 6,169 |
|                   Other                                                                                                                                                                                                                     |   |   | 386 |   |   | 611 |   |   | 1,387 |   |   | 1,587 |
|                                 Total                interest income                  |   |   | 85,036 |   |   | 73,082 |   |   | 244,129 |   |   | 204,375 |
| Interest                expense:                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|   Deposits                                                                                                                                                                                                                                  |   |   | 32,359 |   |   | 23,946 |   |   | 90,955 |   |   | 62,125 |
|   Debt                obligations and other                                                                                                                                                                                                 |   |   | 6,009 |   |   | 4,441 |   |   | 16,283 |   |   | 12,565 |
|                                 Total                interest expense                 |   |   | 38,368 |   |   | 28,387 |   |   | 107,238 |   |   | 74,690 |
|                                 Net                interest income                    |   |   | 46,668 |   |   | 44,695 |   |   | 136,891 |   |   | 129,685 |
| Provision                for loan losses                                                                                                                                                                                                              |   |   | 7,890 |   |   | 3,441 |   |   | 15,812 |   |   | 8,712 |
|                                                Net interest income after                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   provision for loan losses |   | 38,778 |   |   | 41,254 |   |   | 121,079 |   |   | 120,973 |
| Noninterest                income:                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                  Service charges on deposit accounts                                                                                                                                                                                             |   |   | 1,232 |   |   | 1,083 |   |   | 3,524 |   |   | 3,217 |
|                  Trust and wealth-management revenue                                                                                                                                                                                             |   |   | 1,371 |   |   | 689 |   |   | 3,525 |   |   | 2,324 |
|                  Fees from origination of non-portfolio residential                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |
|     mortgage                loans                                                                                                                                                                                                 |   |   | 1,142 |   |   | 1,362 |   |   | 3,754 |   |   | 4,091 |
|                  Gains on sale of government-guaranteed loans                                                                                                                                                                                    |   | 946 |   |   | 390 |   |   | 2,296 |   |   | 1,194 |
|   Other                                                                                                                                                                                                                                     |   |   | 2,420 |   |   | 1,382 |   |   | 5,440 |   |   | 4,646 |
|                                                Total noninterest income                    |   |   | 7,111 |   |   | 4,906 |   |   | 18,539 |   |   | 15,472 |
| Noninterest                expense:                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Salaries                and employee benefits                                                                                                                                                                                             |   |   | 27,816 |   |   | 21,615 |   |   | 80,325 |   |   | 64,840 |
|   Occupancy                                                                                                                                                                                                                                 |   |   | 3,831 |   |   | 3,172 |   |   | 10,880 |   |   | 8,768 |
|   Equipment                rent, depreciation and maintenance                                                                                                                                                                               |   |   | 2,239 |   |   | 2,143 |   |   | 7,471 |   |   | 6,156 |
|   Other                                                                                                                                                                                                                                     |   |   | 10,588 |   |   | 7,180 |   |   | 29,835 |   |   | 22,792 |
|                                                Total noninterest expense                   |   |   | 44,474 |   |   | 34,110 |   |   | 128,511 |   |   | 102,556 |
|                                                 Income before income taxes            |   |   |   |   |   |   |   |   |   |   |   |
|                                                   and minority interest     |   |   | 1,415 |   |   | 12,050 |   |   | 11,107 |   |   | 33,889 |
| Income                taxes                                                                                                                                                                                                                           |   |   | 586 |   |   | 4,184 |   |   | 4,696 |   |   | 12,129 |
|                                                 Income before minority interest       |   | 829 |   |   | 7,866 |   |   | 6,411 |   |   | 21,760 |
| Minority                interest in net losses of consolidated                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|    subsidiaries                                                                                                                                                                                                                        |   |   | 5,145 |   |   | 2,923 |   |   | 12,132 |   |   | 9,249 |
|                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|       NET                INCOME                                                                                                                                                                                         |   | $ | 5,974 |   | $ | 10,789 |   | $ | 18,543 |   | $ | 31,009 |
|                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|       NET                INCOME PER SHARE -- Note D:                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                Basic                                       |   | $ | 0.35 |   | $ | 0.68 |   | $ | 1.10 |   | $ | 1.97 |
|                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                Diluted                                     |   | $ | 0.35 |   | $ | 0.66 |   | $ | 1.08 |   | $ | 1.89 |
|                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| See                notes to condensed consolidated financial statements.                                                                                                                                                                              |   |   |   |   |   |   |   |

----

| CAPITOL                  BANCORP LIMITED                                                                                                                                                                                                                                                             |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Condensed                  Consolidated Statements of Changes in Stockholders' Equity                  (Unaudited)                                                                                                                                                                                   |   |
| For                  the Nine Months Ended September 30, 2007 and 2006                                                                                                                                                                                                                               |   |
| (in                  thousands, except share data)                                                                                                                                                                                                                                                   |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   | Other |   |   |   |   |
|                                                                                                                                                                                                                                                                                                 | Common |   |   | Retained |   |   | Comprehensive |   |   |   |   |
|                                                                                                                                                                                                                                                                                                 | Stock  |   |   | Earnings |   |   | Loss |   |   | Total |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Nine                  Months Ended September 30,                  2006                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances                  at January 1, 2006                                                                                                                                                                                                                                                         |   | $ | 216,539 |   |   | $ | 85,553 |   |   | $ | (226 | ) |   | $ | 301,866 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of 207,959 shares of common stock                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   upon                  exercise of stock options, net of common                                                                                                                                                                                                                           |   |   |   |   |   |
|   stock                  surrendered to facilitate exercise                                                                                                                                                                                                                                |   |   | 2,991 |   |   |   |   |   |   |   |   |   |   |   | 2,991 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of 80,750 unvested shares of restricted                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   common                  stock, net of related unearned employee                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   compensation                                                                                                                                                                                                                                                                             |   |   | --  |   |   |   |   |   |   |   |   |   |   |   | --  |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recognition                  of compensation expense relating to                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   restricted                  common stock                                                                                                                                                                                                                                                 |   |   | 1,255 |   |   |   |   |   |   |   |   |   |   |   | 1,255 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax                  benefit from share-based payments                                                                                                                                                                                                                                               |   |   | 1,762 |   |   |   |   |   |   |   |   |   |   |   | 1,762 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  dividends paid ($0.70 per share)                                                                                                                                                                                                                                               |   |   |   |   |   |   | (11,148 | ) |   |   |   |   |   |   | (11,148 | ) |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Components                  of comprehensive income:                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net                  income                                                                                                                                                                                                                                                        |   |   |   |   |   |   | 31,009 |   |   |   |   |   |   |   | 31,009 |   |
|    Market                  value adjustment for investment                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       securities                  available for sale (net of income                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       tax                  effect)                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   | 56 |   |   |   | 56 |   |
|          Comprehensive                  income                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 31,065 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     BALANCES                  AT SEPTEMBER 30, 2006                                                                                                                                                                                                                              |   | $ | 222,547 |   |   | $ | 105,414 |   |   | $ | (170 | ) |   | $ | 327,791 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nine                  Months Ended September 30,                  2007                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances                  at January 1, 2007                                                                                                                                                                                                                                                         |   | $ | 249,244 |   |   | $ | 112,779 |   |   | $ | (144 | ) |   | $ | 361,879 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of 371,314 shares of common stock                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   to                  acquire minority interest in subsidiaries                                                                                                                                                                                                                            |   |   | 15,927 |   |   |   |   |   |   |   |   |   |   |   | 15,927 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of 220,636 shares of common stock                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   upon                  exercise of stock options, net of                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   common                  stock surrendered to facilitate exercise                                                                                                                                                                                                                         |   |   | 2,814 |   |   |   |   |   |   |   |   |   |   |   | 2,814 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Recognition                of compensation expense relating to                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                   stock options                                                                                                                                                                                                                                                            |   |   | 116 |   |   |   |   |   |   |   |   |   |   |   |  116 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of 37,472 unvested shares of restricted                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   common                  stock, net of related unearned employee                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   compensation                                                                                                                                                                                                                                                                             |   |   | --  |   |   |   |   |   |   |   |   |   |   |   | --  |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recognition                  of compensation expense relating to                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   restricted                  common stock                                                                                                                                                                                                                                                 |   |   | 1,174 |   |   |   |   |   |   |   |   |   |   |   | 1,174 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax                  benefit from share-based payments                                                                                                                                                                                                                                               |   |   | 1,671 |   |   |   |   |   |   |   |   |   |   |   | 1,671 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of 24,506 shares of common stock to                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   employee                  stock ownership plan                                                                                                                                                                                                                                           |   |   | 1,132 |   |   |   |   |   |   |   |   |   |   |   | 1,132 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  dividends paid ($0.75 per share)                                                                                                                                                                                                                                               |   |   |   |   |   |   | (12,867 | ) |   |   |   |   |   |   | (12,867 | ) |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Components                  of comprehensive income:                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net                  income                                                                                                                                                                                                                                                        |   |   |   |   |   |   | 18,543 |   |   |   |   |   |   |   | 18,543 |   |
|    Market                  value adjustment for investment                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       securities                  available for sale (net of income                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       tax                  effect)                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   | 77 |   |   |   | 77 |   |
|          Comprehensive                  income                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 18,620 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     BALANCES                  AT SEPTEMBER 30, 2007                                                                                                                                                                                                                              |   | $ | 272,078 |   |   | $ | 118,455 |   |   | $ | (67 | ) |   | $ | 390,466 |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  notes to condensed consolidated financial statements.                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| CAPITOL                  BANCORP LTD.                                                                                                                       |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Condensed                  Consolidated Statements of Cash Flows (Unaudited)                                                                                |   |
| For                  the Nine Months Ended September 30, 2007 and 2006                                                                                      |   |
| (in                  thousands)                                                                                                              |   |
|                                                                                                                                                        |   |   |   |   |   |   |
|                                                                                                                                                        |   | 2007 |   |   | 2006 |   |
|                                                                                                                                                        |   |   |   |   |   |   |
| OPERATING                  ACTIVITIES                                                                                                                       |   |   |   |   |   |   |
|   Net                  income                                                                                                                     |   | $ | 18,543 |   |   | $ | 31,009 |   |
|   Adjustments                  to reconcile net income to net                                                                                     |   |   |   |   |   |   |   |   |
|     cash                  provided by operating activities:                                                                             |   |   |   |   |   |   |   |   |
|       Provision                  for loan losses                                                                              |   |   | 15,812 |   |   |   | 8,712 |   |
|       Depreciation                  of premises and equipment                                                                 |   |   | 6,641 |   |   |   | 5,273 |   |
|       Amortization                  of intangibles                                                                            |   |   | 201 |   |   |   | 439 |   |
|       Net                  amortization (accretion) of investment security                                                    |   |   |   |   |   |   |   |   |
|         premiums                  (discounts)                                                                       |   |   | 4 |   |   |   | (9 | ) |
|       Loss                  (gain) on sale of premises and equipment                                                          |   |   | (118 | ) |   |   | 10 |   |
|       Share-based                  compensation expense                                                                       |   |   | 1,290 |   |   |   | 1,255 |   |
|       Minority                  interest in net losses of consolidated subsidiaries                                           |   |   | (12,132 | ) |   |   | (9,249 | ) |
|   Originations                  and purchases of loans held for resale                                                                            |   |   | (418,857 | ) |   |   | (363,704 | ) |
|   Proceeds                  from sales of loans held for resale                                                                                   |   |   | 427,470 |   |   |   | 367,081 |   |
|   Increase                  in accrued interest income and other assets                                                                           |   |   | (16,631 | ) |   |   | (4,830 | ) |
|   Increase                  (decrease) in accrued interest on deposits and other                                                                  |   |   |   |   |   |   |   |   |
|                      liabilities                                                                                                             |   |   | 3,783 |   |   |   | (4,766 | ) |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                 NET                  CASH PROVIDED BY OPERATING ACTIVITIES  |   |   | 26,006 |   |   |   | 31,221 |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
| INVESTING                  ACTIVITIES                                                                                                                       |   |   |   |   |   |   |   |   |
|   Proceeds                  from sales of investment securities available for sale                                                                |   |   | 287 |   |   |   |   |   |
|   Proceeds                  from calls, prepayments and maturities of investment                                                                  |   |   |   |   |   |   |   |   |
|     securities                                                                                                                          |   |   | 7,731 |   |   |   | 10,893 |   |
|   Purchases                  of investment securities                                                                                             |   |   | (6,797 | ) |   |   | (8,301 | ) |
|   Net                  increase in portfolio loans                                                                                                |   |   | (550,081 | ) |   |   | (320,130 | ) |
|   Proceeds                  from sales of premises and equipment                                                                                  |   |   | 396 |   |   |   | 723 |   |
|   Purchases                  of premises and equipment                                                                                            |   |   | (10,426 | ) |   |   | (15,848 | ) |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                 NET                  CASH USED BY INVESTING ACTIVITIES      |   |   | (558,890 | ) |   |   | (332,663 | ) |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
| FINANCING                  ACTIVITIES                                                                                                                       |   |   |   |   |   |   |   |   |
|   Net                  increase in demand deposits, NOW accounts and                                                                              |   |   |   |   |   |   |   |   |
|     savings                  accounts                                                                                                   |   |   | 184,655 |   |   |   | 53,169 |   |
|   Net                  increase in certificates of deposit                                                                                        |   |   | 230,810 |   |   |   | 275,778 |   |
|   Net                  borrowings from (payments on) debt obligations                                                                             |   |   | 68,731 |   |   |   | (359 | ) |
|   Net                  proceeds from issuance of subordinated debentures                                                                          |   |   | 55,000 |   |   |   |   |   |
|   Resources                  provided by minority interests                                                                                       |   |   | 36,115 |   |   |   | 39,343 |   |
|   Net                  proceeds from issuance of common stock                                                                                     |   |   | 2,814 |   |   |   | 2,991 |   |
|   Tax                  benefit from share-based payments                                                                                          |   |   | 1,671 |   |   |   | 1,762 |   |
|   Cash                  dividends paid                                                                                                            |   |   | (12,867 | ) |   |   | (11,148 | ) |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                 NET                  CASH PROVIDED BY FINANCING ACTIVITIES  |   |   | 566,929 |   |   |   | 361,536 |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                 INCREASE                  IN CASH AND CASH EQUIVALENTS      |   |   | 34,045 |   |   |   | 60,094 |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents at beginning of period                                                                                           |   |   | 348,870 |   |   |   | 306,108 |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                 CASH                  AND CASH EQUIVALENTS AT END OF PERIOD |   | $ | 382,915 |   |   | $ | 366,202 |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                                                                                                                                                        |   |   |   |   |   |   |   |   |
| See                  notes to condensed consolidated financial statements.                                                                                  |   |   |   |   |   |   |   |   |

----

|   | **NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL                  STATEMENTS** |
|--------|--------------------------------------------------------------------------------------------|

|   | **CAPITOL                  BANCORP LIMITED** |
|--------|----------------------------------------------|

***Note        A – Basis of Presentation***

***Note        B – Implementation of New Accounting Standards***

*Accounting for Servicing of Financial Assets*

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

***Note        C – Stock Options***

|                                         | Number                  ofStock                  OptionsOutstanding |      |   | ExercisePriceRange |   |                                                 | WeightedAverageExercisePrice |
|----------------------------------------------|---------------------------------------------------------------------|-----------|--------|--------------------|--------|------------------------------------------------------|------------------------------|
|                                         |                                                                |      |   |               |   |                                                 |                         |
| Outstanding                  at January 1    |                                                                | 2,570,091 |   |               | $      | 10.81 to $ 37.48                      |                         |   | $ | 26.86 |
| Exercised                                    |                                                                | (274,841  | )      |               |   | 10.81 to                   33.01 |                         |   |   | 16.98 |
| Granted                                      |                                                                | 168,720   |   |               |   | 22.46 to                   46.20 |                         |   |   | 25.09 |
| Cancelled                  or expired        |                                                                | (1,474    | )      |               |   |                                                 |                         |   |   |   |
|                                         |                                                                |      |   |               |   |                                                 |                         |   |   |   |
| Outstanding                  at September 30 |                                                                | 2,462,496 |   |               | $      | 13.50 to $ 46.20                      |                         |   | $ | 27.84 |

----

|   | **NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL                  STATEMENTS** |
|--------|--------------------------------------------------------------------------------------------|

|   | **CAPITOL                  BANCORP LIMITED –Continued** |
|--------|---------------------------------------------------------------|

***Note        C – Stock Options--Continued***

|                                 |                     |              |      | Weighted                  Average |   |                     |   |
|--------------------------------------|--------------------------|-------------------|-----------|-----------------------------------|--------|--------------------------|--------|
| Exercise                  PriceRange |                     | NumberOutstanding |      | ExercisePrice                     |   | RemainingContractualLife |   | AggregateIntrinsicValue |   |
|                                 |                     |              |      |                              |   |                     |   |   |   |
| $                                    | 10.00 to 14.99 |              |      | 7,587                             |   | $                        | 12.12  |   |      0.32                  years |   | $ | 96,431 |   |
| $                                    | 15.00 to 19.99 |              |      | 234,996                           |   |                     | 16.59  |   |      2.33                  years |   |   | 1,936,367 |   |
| $                                    | 20.00 to 24.99 |              |      | 570,198                           |   |                     | 21.78  |   |      3.59                  years |   |   | 1,739,104 |   |
| $                                    | 25.00 to 29.99 |              |      | 586,987                           |   |                     | 27.09  |   |      2.90                  years |   |   | (1,326,591 | ) |
| $                                    | 30.00 to 34.99 |              |      | 695,221                           |   |                     | 32.10  |   |      3.94                  years |   |   | (5,054,257 | ) |
| $                                    | 35.00 or more  |              |      | 367,507                           |   |                     | 37.92  |   |      5.18                  years |   |   | (4,810,667 | ) |
|                                 |                     |              |      |                              |   |                     |   |   |   |   |   |   |   |
| Total                  outstanding   |                     |              | 2,462,496 |                              |   |                     |   |   |   | $ | (7,419,613 | ) |

***Note        D – Net Income Per Share***

|                                                                                                                                                                                            |   | Three-Month                  Period |   |   | Nine-Month                  Period |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|------------------------------------|
|                                                                                                                                                                                            |   | 2007                                |   |   | 2006                               |   |   | 2007 |   |   | 2006 |
|                                                                                                                                                                                            |   |                                |   |   |                               |   |   |   |   |   |   |
| Numerator—net                  income for the period                                                                                                                                      |   | $                                   | 5,974  |   |                               | $ | 10,789 |   |   | $ | 18,543 |   |   | $ | 31,009 |
|                                                                                                                                                                                            |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                                                                                                                                    |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of sharesoutstanding,                  excluding unvestedrestricted                  shares (denominator for basicearnings                  per share) |   |                                | 17,096 |   |                               |   | 15,757 |   |   |   | 16,919 |   |   |   | 15,702 |
|                                                                                                                                                                                            |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Effect                  of dilutive securities:                                                                                                                                                 |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Unvested                  restricted shares                                                                                                                                                     |   |                                | --     |   |                               |   | 68 |   |   |   | 11 |   |   |   | 68 |
| Stock                  options                                                                                                                                                                  |   |                                | 102    |   |                               |   | 606 |   |   |   | 266 |   |   |   | 611 |
| Total                  effect of dilutive securities                                                                                                                                            |   |                                | 102    |   |                               |   | 674 |   |   |   | 277 |   |   |   | 679 |
|                                                                                                                                                                                            |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Denominator                  for diluted earnings per share—                                                                                                                              |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of shares andpotential                  dilution                                                                                                       |   |                                | 17,198 |   |                               |   | 16,431 |   |   |   | 17,196 |   |   |   | 16,381 |
|                                                                                                                                                                                            |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Number                  of antidilutive stock options excluded                   from diluted earnings per share computation                                                               |   |                                | 1,650  |   |                               |   | -- |   |   |   | 368 |   |   |   | -- |

----

|   | **NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL                  STATEMENTS** |
|--------|--------------------------------------------------------------------------------------------|

|   | **CAPITOL                  BANCORP LIMITED –Continued** |
|--------|---------------------------------------------------------------|

***Note        E – New Banks and Other Development Activities***

*de novo*

*de novo*

*de novo*

***Note        F – Acquisition of Minority Interests***

***Note        G – Impact of New Accounting Standards***

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

*Accounting for Income Tax Benefits of Dividends on Share-Based Payment        Awards*

|                           ·   | Proposed                  amendment to Statement No. 128, *Earnings per Share;*                                     |
|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|
|                           ·   | Proposed                  replacement of Statement No. 141 regarding *Business Combinations*;                  and  |

----

|   | **NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL                  STATEMENTS** |
|--------|--------------------------------------------------------------------------------------------|

|   | **CAPITOL                  BANCORP LIMITED –Continued** |
|--------|---------------------------------------------------------------|

***Note        G – Impact of New Accounting Standards--Continued***

|                           ·   | Proposed                  replacement of Accounting Research Bulletin No. 51 regarding                  *Consolidated Financial Statements, Including Accounting and                  Reporting                  for Noncontrolling Interests*. |
|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

**PART        I, ITEM 2**

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS**

***Financial        Condition***

|                                                                        | Total                  Assets (in $1,000's) |
|-----------------------------------------------------------------------------|---------------------------------------------|
|                                                                        | September                  30, 2007         |   |   | December                  31, 2006 |
|                                                                        |                                        |   |   |   |
| *Eastern                  Regions:*                                         |                                        |   |   |   |
| Great                  Lakes Region:                                        |                                        |   |   |   |
| Ann                  Arbor Commerce Bank                                    | $                                           | 348,156 |   |   | $ | 310,407 |
| Bank                  of Auburn Hills                                       |                                        | 49,426 |   |   |   | 31,559 |
| Bank                  of Belleville                                         |                                        | 40,328 |   |   |   | 24,948 |
| Bank                  of Maumee                                             |                                        | 27,700 |   |   |   | 9,915 |
| Bank                  of Michigan                                           |                                        | 67,810 |   |   |   | 51,287 |
| Brighton                  Commerce Bank                                     |                                        | 110,335 |   |   |   | 103,909 |
| Capitol                  National Bank                                      |                                        | 218,840 |   |   |   | 256,741 |
| Detroit                  Commerce Bank                                      |                                        | 111,414 |   |   |   | 106,233 |
| Elkhart                  Community Bank                                     |                                        | 84,693 |   |   |   | 86,883 |
| Evansville                  Commerce Bank                                   |                                        | 45,238 |   |   |   | 20,772 |
| Goshen                  Community Bank                                      |                                        | 85,823 |   |   |   | 80,137 |
| Grand                  Haven Bank                                           |                                        | 133,854 |   |   |   | 129,033 |
| Kent                  Commerce Bank                                         |                                        | 80,704 |   |   |   | 86,916 |
| Macomb                  Community Bank                                      |                                        | 96,992 |   |   |   | 101,353 |
| Muskegon                  Commerce Bank                                     |                                        | 92,865 |   |   |   | 95,551 |
| Oakland                  Commerce Bank                                      |                                        | 109,722 |   |   |   | 134,437 |
| Ohio                  Commerce Bank                                         |                                        | 28,750 |   |   |   | 14,466 |
| Paragon                  Bank & Trust                                   |                                        | 95,839 |   |   |   | 98,804 |
| Portage                  Commerce Bank                                      |                                        | 191,695 |   |   |   | 179,413 |
| Great                  Lakes Region Total                                   |                                        | 2,020,184 |   |   |   | 1,922,764 |
|                                                                        |                                        |   |   |   |   |   |
| Southeast                  Region:                                          |                                        |   |   |   |   |   |
| Bank                  of Valdosta                                           |                                        | 38,949 |   |   |   | 21,626 |
| Community                  Bank of Rowan                                    |                                        | 94,637 |   |   |   | 45,503 |
| First                  Carolina State Bank                                  |                                        | 111,742 |   |   |   | 93,819 |
| Peoples                  State Bank                                         |                                        | 26,493 |   |   |   | 32,714 |
| Sunrise                  Bank of Atlanta                                    |                                        | 41,414 |   |   |   | 16,990 |
| Southeast                  Region Total                                     |                                        | 313,235 |   |   |   | 210,652 |
|                                                                        |                                        |   |   |   |   |   |
| Midwest                  Region:Summit                  Bank of Kansas City |                                        | 51,461 |   |   |   | 19,529 |
|                                                                        |                                        |   |   |   |   |   |
| Northeast                  Region:USNY                  Bank(4)             |                                        | 14,813 |   |   |   |   |
|                                                                        |                                        |   |   |   |   |   |
| Eastern                  Regions Total                                      | $                                           | 2,399,693 |   |   | $ | 2,152,945 |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Financial        Condition – Continued***

|                                                         |   | Total                  Assets (in $1,000's) |
|--------------------------------------------------------------|--------|---------------------------------------------|
|                                                         |   | September                  30, 2007         |   |   | December                  31, 2006 |
|                                                         |   |                                        |   |   |   |
| Eastern                  Regions Total (from preceding page) |   | $                                           | 2,399,693 |   |   | $ | 2,152,945 |
|                                                         |   |                                        |   |   |   |   |   |
| *Western                  Regions:*                          |   |                                        |   |   |   |   |   |
| Southwest                  Region:                           |   |                                        |   |   |   |   |   |
| 1st                  Commerce                  Bank          |   |                                        | 27,120 |   |   |   | 14,829 |
| Arrowhead                  Community Bank                    |   |                                        | 84,037 |   |   |   | 79,152 |
| Asian                  Bank of Arizona                       |   |                                        | 24,535 |   |   |   | 20,248 |
| Bank                  of Las Vegas                           |   |                                        | 76,253 |   |   |   | 67,478 |
| Bank                  of Tucson                              |   |                                        | 174,492 |   |   |   | 187,683 |
| Black                  Mountain Community Bank               |   |                                        | 146,110 |   |   |   | 138,961 |
| Camelback                  Community Bank                    |   |                                        | 87,724 |   |   |   | 83,003 |
| Desert                  Community Bank                       |   |                                        | 97,780 |   |   |   | 93,914 |
| Fort                  Collins Commerce Bank                  |   |                                        | 56,872 |   |   |   | 54,410 |
| Larimer                  Bank of Commerce(3)                 |   |                                        | 43,365 |   |   |   |   |
| Mesa                  Bank                                   |   |                                        | 210,683 |   |   |   | 201,776 |
| Red                  Rock Community Bank                     |   |                                        | 131,154 |   |   |   | 108,362 |
| Southern                  Arizona Community Bank             |   |                                        | 86,330 |   |   |   | 85,912 |
| Sunrise                  Bank of Albuquerque                 |   |                                        | 78,530 |   |   |   | 59,798 |
| Sunrise                  Bank of Arizona                     |   |                                        | 114,392 |   |   |   | 119,785 |
| Valley                  First Community Bank                 |   |                                        | 72,816 |   |   |   | 72,333 |
| Yuma                  Community Bank                         |   |                                        | 75,123 |   |   |   | 74,477 |
| Southwest                  Region Total                      |   |                                        | 1,587,316 |   |   |   | 1,462,121 |
|                                                         |   |                                        |   |   |   |   |   |
| California                  Region:                          |   |                                        |   |   |   |   |   |
| Bank                  of Escondido                           |   |                                        | 91,995 |   |   |   | 82,412 |
| Bank                  of San Francisco                       |   |                                        | 51,417 |   |   |   | 28,122 |
| Bank                  of Santa Barbara                       |   |                                        | 66,832 |   |   |   | 42,559 |
| Napa                  Community Bank                         |   |                                        | 131,880 |   |   |   | 99,009 |
| Point                  Loma Community Bank                   |   |                                        | 58,945 |   |   |   | 43,715 |
| Sunrise                  Bank of San Diego                   |   |                                        | 89,487 |   |   |   | 71,170 |
| Sunrise                  Community Bank(2)                   |   |                                        | 18,799 |   |   |   |   |
| California                  Region Total                     |   |                                        | 509,355 |   |   |   | 366,987 |
|                                                         |   |                                        |   |   |   |   |   |
| Northwest                  Region:                           |   |                                        |   |   |   |   |   |
| Bank                  of Bellevue                            |   |                                        | 40,905 |   |   |   | 33,155 |
| Bank                  of Everett                             |   |                                        | 23,709 |   |   |   | 20,061 |
| Bank                  of Tacoma(1)                           |   |                                        | 20,514 |   |   |   |   |
| High                  Desert Bank(5)                         |   |                                        | 8,193 |   |   |   |   |
| Issaquah                  Community Bank(4)                  |   |                                        | 12,538 |   |   |   |   |
| Northwest                  Region Total                      |   |                                        | 105,859 |   |   |   | 53,216 |
|                                                         |   |                                        |   |   |   |   |   |
| Western                  Regions Total                       |   |                                        | 2,202,530 |   |   |   | 1,882,324 |
|                                                         |   |                                        |   |   |   |   |   |
| Other,                  net                                  |   |                                        | 51,789 |   |   |   | 30,547 |
|                                                         |   |                                        |   |   |   |   |   |
| Consolidated                  Totals                         |   | $                                           | 4,654,012 |   |   | $ | 4,065,816 |

| (1) | Commenced                  operations in January 2007 and is 51%-owned by Capitol Development                  Bancorp                  Limited VI,a                  controlled subsidiary of Capitol.   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Commenced                  operations in February 2007 and is 51%-owned by Capitol Development                  Bancorp Limited VI,a                  controlled subsidiary of Capitol.                   |
| (3) | Commenced                  operations in May 2007 and is 51%-owned by Capitol Bancorp Colorado                  Ltd.                  II, a controlledsubsidiary                  of Capitol.             |
| (4) | Commenced                  operations in July 2007 and is 51%-owned by Capitol Development                  Bancorp                  Limited VI,a                  controlled subsidiary of Capitol.      |
| (5) | Commenced                  operations in September 2007 and is 55%-owned by Capitol Development                  Bancorp Limited VI,a                  controlled subsidiary of                  Capitol. |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Financial        Condition – Continued***

|                                                                                                          | Periods                  Ended September 30 |      |
|---------------------------------------------------------------------------------------------------------------|---------------------------------------------|-----------|
|                                                                                                          | Three-Month                  Period         |      |   | Nine-Month                  Period |   |
|                                                                                                          | 2007                                        |      |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                          |                                        |      |   |   |   |   |   |   |   |   |   |
| Allowance                  for loan losses at beginning of period                                             | $                                           | 49,349    |   |   | $ | 43,311 |   |   | $ | 45,414 |   |   | $ | 40,559 |   |
|                                                                                                          |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                  charged-off:                                                                           |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                                                                    |                                        | (4,162    | ) |   |   | (1,766 | ) |   |   | (8,268 | ) |   |   | (4,886 | ) |
| Real                  estate mortgage                                                                         |                                        | (278      | ) |   |   | (11 | ) |   |   | (574 | ) |   |   | (59 | ) |
| Installment                                                                                                   |                                        | (182      | ) |   |   | (90 | ) |   |   | (485 | ) |   |   | (323 | ) |
| Total                  charge-offs                                                                            |                                        | (4,622    | ) |   |   | (1,867 | ) |   |   | (9,327 | ) |   |   | (5,268 | ) |
| Recoveries:                                                                                                   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                                                                    |                                        | 128       |   |   |   | 192 |   |   |   | 695 |   |   |   | 887 |   |
| Real                  estate mortgage                                                                         |                                        | --        |   |   |   | 2 |   |   |   | 3 |   |   |   | 3 |   |
| Installment                                                                                                   |                                        | 106       |   |   |   | 95 |   |   |   | 254 |   |   |   | 281 |   |
| Total                  recoveries                                                                             |                                        | 234       |   |   |   | 289 |   |   |   | 952 |   |   |   | 1,171 |   |
| Net                  charge-offs                                                                              |                                        | (4,388    | ) |   |   | (1,578 | ) |   |   | (8,375 | ) |   |   | (4,097 | ) |
| Additions                  to allowance charged to expense                                                    |                                        | 7,890     |   |   |   | 3,441 |   |   |   | 15,812 |   |   |   | 8,712 |   |
|                                                                                                          |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                  for loan losses at September 30                                                    | $                                           | 52,851    |   |   | $ | 45,174 |   |   | $ | 52,851 |   |   | $ | 45,174 |   |
|                                                                                                          |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                  total portfolio loans for period endedSeptember                  30                  | $                                           | 3,908,625 |   |   | $ | 3,244,387 |   |   | $ | 3,726,654 |   |   | $ | 3,131,358 |   |
|                                                                                                          |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio                  of net charge-offs (annualized) to averageportfolio                  loans outstanding |                                        | 0.45      | % |   |   | 0.19 | % |   |   | 0.30 | % |   |   | 0.17 | % |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Financial        Condition – Continued***

|                                               | September                  30, 2007 |      |   | December                  31, 2006 |
|----------------------------------------------------|-------------------------------------|-----------|--------|------------------------------------|
|                                               |                                |      |   | Percentage                         |   |   |   |   |   | Percentage |
|                                               |                                |      |   | of                  Total          |   |   |   |   |   | of                  Total |
|                                               |                                |      |   | Portfolio                          |   |   |   |   |   | Portfolio |
|                                               | Amount                              |      |   | Loans                              |   |   | Amount |   |   | Loans |
|                                               |                                |      |   |                               |   |   |   |   |   |   |
| Commercial                                         | $                                   | 47,598    |   |                               |   |                     1.18% |   |   | $ | 41,178 |   |   |   |                     1.18% |
| Real                  estate mortgage              |                                | 2,687     |   |                               |   | 0.07 |   |   |   | 2,675 |   |   |   | 0.08 |
| Installment                                        |                                | 2,566     |   |                               |   | 0.06 |   |   |   | 1,561 |   |   |   | 0.04 |
|                                               |                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |
| Total                  allowance for loan losses   | $                                   | 52,851    |   |                               |   |                     1.31% |   |   | $ | 45,414 |   |   |   |                     1.30% |
|                                               |                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |
| Total                  portfolio loans outstanding | $                                   | 4,030,384 |   |                               |   |   |   |   | $ | 3,488,678 |   |   |   |   |

|                                                            | September                  30, |   |   | December                  31, |
|-----------------------------------------------------------------|--------------------------------|--------|--------|-------------------------------|
|                                                            | 2007                           |   |   | 2006                          |
| Nonaccrual                  loans:                              |                           |   |   |                          |
| Commercial                                                      | $                              | 44,455 |   |                          | $ | 25,219 |
| Real                  estate mortgage                           |                           | 3,549  |   |                          |   | 3,609 |
| Installment                                                     |                           | 1,531  |   |                          |   | 898 |
| Total                  nonaccrual loans                         |                           | 49,535 |   |                          |   | 29,726 |
|                                                            |                           |   |   |                          |   |   |
| Past                  due (>90 days) loans:                  |                           |   |   |                          |   |   |
| Commercial                                                      |                           | 2,643  |   |                          |   | 3,860 |
| Real                  estate mortgage                           |                           | 394    |   |                          |   | 523 |
| Installment                                                     |                           | 166    |   |                          |   | 165 |
| Total                  past due loans                           |                           | 3,203  |   |                          |   | 4,548 |
|                                                            |                           |   |   |                          |   |   |
| Total                  nonperforming loans                      | $                              | 52,738 |   |                          | $ | 34,274 |
|                                                            |                           |   |   |                          |   |   |
| Real                  estate owned and other repossessed assets |                           | 13,161 |   |                          |   | 9,478 |
|                                                            |                           |   |   |                          |   |   |
| Total                  nonperforming assets                     | $                              | 65,899 |   |                          | $ | 43,752 |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Financial        Condition – Continued***

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Financial        Condition – Continued***

|                                        |   | Total                            |      |   | Allowance                  for |   |      | Nonperforming             |   |   | Allowance                  as a Percentage |   |
|---------------------------------------------|--------|----------------------------------|-----------|--------|--------------------------------|--------|-----------|---------------------------|--------|--------|--------------------------------------------|--------|
|                                        |   | Portfolio                  Loans |      |   | Loan                  Losses   |   |      | Loans                     |   |   | of                  Total Portfolio Loans  |   |
|                                        |   | Sept                  30,        |      |   | Dec                  31,       |   |      | Sept                  30, |   |   | Dec                  31,                   |   |   | Sept                  30, |   |   | Dec                  31, |   |   | Sept                  30, |   |   | Dec                  31, |   |
|                                        |   | 2007                             |      |   | 2006                           |   |      | 2007                      |   |   | 2006                                       |   |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                        |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Eastern                  Regions:*         |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Great                  Lakes Region:        |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ann                  Arbor Commerce Bank    |   | $                                | 329,047   |   |                           | $      | 288,408   |                      |   | $      | 4,537                                      |   |   | $ | 4,393 |   |   | $ | 4,603 |   |   | $ | 4,441 |   |   |   | 1.38 | % |   |   | 1.52 | % |
| Bank                  of Auburn Hills       |   |                             | 33,878    |   |                           |   | 26,432    |                      |   |   | 717                                        |   |   |   | 410 |   |   |   | 1,517 |   |   |   | 629 |   |   |   | 2.12 | % |   |   | 1.55 | % |
| Bank                  of Belleville         |   |                             | 36,398    |   |                           |   | 17,410    |                      |   |   | 540                                        |   |   |   | 260 |   |   |   |   |   |   |   |   |   |   |   | 1.48 | % |   |   | 1.49 | % |
| Bank                  of Maumee             |   |                             | 21,528    |   |                           |   | 3,327     |                      |   |   | 342                                        |   |   |   | 50 |   |   |   |   |   |   |   |   |   |   |   | 1.59 | % |   |   | 1.50 | % |
| Bank                  of Michigan           |   |                             | 60,242    |   |                           |   | 44,630    |                      |   |   | 904                                        |   |   |   | 669 |   |   |   | 627 |   |   |   |   |   |   |   | 1.50 | % |   |   | 1.50 | % |
| Brighton                  Commerce Bank     |   |                             | 103,318   |   |                           |   | 94,987    |                      |   |   | 1,018                                      |   |   |   | 995 |   |   |   | 18 |   |   |   | 522 |   |   |   | 0.99 | % |   |   | 1.05 | % |
| Capitol                  National Bank      |   |                             | 191,022   |   |                           |   | 196,074   |                      |   |   | 2,824                                      |   |   |   | 2,833 |   |   |   | 2,300 |   |   |   | 3,365 |   |   |   | 1.48 | % |   |   | 1.44 | % |
| Detroit                  Commerce Bank      |   |                             | 108,340   |   |                           |   | 103,153   |                      |   |   | 1,150                                      |   |   |   | 1,335 |   |   |   | 1,954 |   |   |   | 1,328 |   |   |   | 1.06 | % |   |   | 1.29 | % |
| Elkhart                  Community Bank     |   |                             | 80,259    |   |                           |   | 77,515    |                      |   |   | 1,112                                      |   |   |   | 1,010 |   |   |   | 1,568 |   |   |   | 676 |   |   |   | 1.39 | % |   |   | 1.30 | % |
| Evansville                  Commerce Bank   |   |                             | 39,617    |   |                           |   | 14,711    |                      |   |   | 582                                        |   |   |   | 232 |   |   |   |   |   |   |   |   |   |   |   | 1.47 | % |   |   | 1.58 | % |
| Goshen                  Community Bank      |   |                             | 69,846    |   |                           |   | 63,653    |                      |   |   | 887                                        |   |   |   | 862 |   |   |   | 24 |   |   |   | 233 |   |   |   | 1.27 | % |   |   | 1.35 | % |
| Grand                  Haven Bank           |   |                             | 125,526   |   |                           |   | 120,025   |                      |   |   | 2,463                                      |   |   |   | 2,643 |   |   |   | 5,762 |   |   |   | 2,682 |   |   |   | 1.96 | % |   |   | 2.20 | % |
| Kent                  Commerce Bank         |   |                             | 77,429    |   |                           |   | 83,065    |                      |   |   | 1,356                                      |   |   |   | 1,237 |   |   |   | 1,140 |   |   |   | 2,256 |   |   |   | 1.75 | % |   |   | 1.49 | % |
| Macomb                  Community Bank      |   |                             | 92,454    |   |                           |   | 87,737    |                      |   |   | 2,022                                      |   |   |   | 1,670 |   |   |   | 11,574 |   |   |   | 3,738 |   |   |   | 2.19 | % |   |   | 1.90 | % |
| Muskegon                  Commerce Bank     |   |                             | 82,783    |   |                           |   | 81,799    |                      |   |   | 1,355                                      |   |   |   | 1,231 |   |   |   | 1,417 |   |   |   | 3,906 |   |   |   | 1.64 | % |   |   | 1.50 | % |
| Oakland                  Commerce Bank      |   |                             | 101,288   |   |                           |   | 114,876   |                      |   |   | 1,874                                      |   |   |   | 1,636 |   |   |   | 2,873 |   |   |   | 2,862 |   |   |   | 1.85 | % |   |   | 1.42 | % |
| Ohio                  Commerce Bank         |   |                             | 16,899    |   |                           |   | 739       |                      |   |   | 254                                        |   |   |   | 11 |   |   |   |   |   |   |   |   |   |   |   | 1.50 | % |   |   | 1.49 | % |
| Paragon                  Bank & Trust   |   |                             | 83,380    |   |                           |   | 82,259    |                      |   |   | 1,286                                      |   |   |   | 1,298 |   |   |   | 1,634 |   |   |   | 2,132 |   |   |   | 1.54 | % |   |   | 1.58 | % |
| Portage                  Commerce Bank      |   |                             | 180,097   |   |                           |   | 167,005   |                      |   |   | 1,769                                      |   |   |   | 1,729 |   |   |   | 811 |   |   |   | 1,380 |   |   |   | 0.98 | % |   |   | 1.04 | % |
| Great                  Lakes Region Total   |   |                             | 1,833,351 |   |                           |   | 1,667,805 |                      |   |   | 26,992                                     |   |   |   | 24,504 |   |   |   | 37,822 |   |   |   | 30,150 |   |   |   | 1.47 | % |   |   | 1.47 | % |
|                                        |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southeast                  Region:          |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  of Valdosta           |   |                             | 34,356    |   |                           |   | 18,870    |                      |   |   | 515                                        |   |   |   | 283 |   |   |   |   |   |   |   |   |   |   |   | 1.50 | % |   |   | 1.50 | % |
| Community                  Bank of Rowan    |   |                             | 81,306    |   |                           |   | 36,534    |                      |   |   | 1,220                                      |   |   |   | 534 |   |   |   |   |   |   |   |   |   |   |   | 1.50 | % |   |   | 1.46 | % |
| First                  Carolina State Bank  |   |                             | 91,876    |   |                           |   | 73,884    |                      |   |   | 1,052                                      |   |   |   | 800 |   |   |   | 997 |   |   |   | 150 |   |   |   | 1.15 | % |   |   | 1.08 | % |
| Peoples                  State Bank         |   |                             | 12,788    |   |                           |   | 15,154    |                      |   |   | 224                                        |   |   |   | 263 |   |   |   | 45 |   |   |   |   |   |   |   | 1.75 | % |   |   | 1.74 | % |
| Sunrise                  Bank of Atlanta    |   |                             | 38,426    |   |                           |   | 14,553    |                      |   |   | 581                                        |   |   |   | 215 |   |   |   |   |   |   |   |   |   |   |   | 1.51 | % |   |   | 1.48 | % |
| Southeast                  Region Total     |   |                             | 258,752   |   |                           |   | 158,995   |                      |   |   | 3,592                                      |   |   |   | 2,095 |   |   |   | 1,042 |   |   |   | 150 |   |   |   | 1.39 | % |   |   | 1.32 | % |
|                                        |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Midwest                  Region:            |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Summit                  Bank of Kansas City |   |                             | 34,911    |   |                           |   | 15,645    |                      |   |   | 597                                        |   |   |   | 235 |   |   |   |   |   |   |   |   |   |   |   | 1.71 | % |   |   | 1.50 | % |
|                                        |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northeast                  Region:          |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| USNY                  Bank(4)               |   |                             | 8,520     |   |                           |   |      |                      |   |   | 127                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1.49 | % |   |   |   |   |
|                                        |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                  Regions Total      |   | $                                | 2,135,534 |   |                           | $      | 1,842,445 |                      |   | $      | 31,308                                     |   |   | $ | 26,834 |   |   | $ | 38,864 |   |   | $ | 30,300 |   |   |   | 1.47 | % |   |   | 1.46 | % |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Financial        Condition – Continued***

|                                                                         |   | Total                            |      |   | Allowance                  for |   |      | Nonperforming             |   |   | Allowance                  as a Percentage |   |
|------------------------------------------------------------------------------|--------|----------------------------------|-----------|--------|--------------------------------|--------|-----------|---------------------------|--------|--------|--------------------------------------------|--------|
|                                                                         |   | Portfolio                  Loans |      |   | Loan                  Losses   |   |      | Loans                     |   |   | of                  Total Portfolio Loans  |   |
|                                                                         |   | Sept                  30,        |      |   | Dec                  31,       |   |      | Sept                  30, |   |   | Dec                  31,                   |   |   | Sept                  30, |   |   | Dec                  31, |   |   | Sept                  30, |   |   | Dec                  31, |   |
|                                                                         |   | 2007                             |      |   | 2006                           |   |      | 2007                      |   |   | 2006                                       |   |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                         |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                  Regions Total (frompreceding                  page) |   | $                                | 2,135,534 |   |                           | $      | 1,842,445 |                      |   | $      | 31,308                                     |   |   | $ | 26,834 |   |   | $ | 38,864 |   |   | $ | 30,300 |   |   |   | 1.47 | % |   |   | 1.46 | % |
|                                                                         |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Western                  Regions:*                                          |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southwest                  Region:                                           |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1st                  Commerce                  Bank                          |   |                             | 20,658    |   |                           |   | 9,588     |                      |   |   | 300                                        |   |   |   | 125 |   |   |   |   |   |   |   |   |   |   |   | 1.45 | % |   |   | 1.30 | % |
| Arrowhead                  Community Bank                                    |   |                             | 74,681    |   |                           |   | 71,252    |                      |   |   | 751                                        |   |   |   | 720 |   |   |   | 435 |   |   |   | 855 |   |   |   | 1.01 | % |   |   | 1.01 | % |
| Asian                  Bank of Arizona                                       |   |                             | 20,062    |   |                           |   | 14,499    |                      |   |   | 375                                        |   |   |   | 200 |   |   |   |   |   |   |   |   |   |   |   | 1.87 | % |   |   | 1.38 | % |
| Bank                  of Las Vegas                                           |   |                             | 62,006    |   |                           |   | 62,818    |                      |   |   | 751                                        |   |   |   | 705 |   |   |   |   |   |   |   |   |   |   |   | 1.21 | % |   |   | 1.12 | % |
| Bank                  of Tucson                                              |   |                             | 151,616   |   |                           |   | 160,009   |                      |   |   | 1,300                                      |   |   |   | 1,472 |   |   |   | 192 |   |   |   | 199 |   |   |   | 0.86 | % |   |   | 0.92 | % |
| Black                  Mountain Community Bank                               |   |                             | 135,050   |   |                           |   | 127,844   |                      |   |   | 1,545                                      |   |   |   | 1,529 |   |   |   |   |   |   |   |   |   |   |   | 1.14 | % |   |   | 1.20 | % |
| Camelback                  Community Bank                                    |   |                             | 79,455    |   |                           |   | 78,922    |                      |   |   | 765                                        |   |   |   | 733 |   |   |   |   |   |   |   | 46 |   |   |   | 0.96 | % |   |   | 0.93 | % |
| Desert                  Community Bank                                       |   |                             | 87,876    |   |                           |   | 83,284    |                      |   |   | 824                                        |   |   |   | 830 |   |   |   | 35 |   |   |   | 137 |   |   |   | 0.94 | % |   |   | 1.00 | % |
| Fort                  Collins Commerce Bank                                  |   |                             | 54,135    |   |                           |   | 52,147    |                      |   |   | 813                                        |   |   |   | 695 |   |   |   |   |   |   |   |   |   |   |   | 1.50 | % |   |   | 1.33 | % |
| Larimer                  Bank of Commerce(3)                                 |   |                             | 40,359    |   |                           |   |      |                      |   |   | 615                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1.52 | % |   |   |   |   |
| Mesa                  Bank                                                   |   |                             | 199,228   |   |                           |   | 189,863   |                      |   |   | 1,805                                      |   |   |   | 1,794 |   |   |   | 2,864 |   |   |   |   |   |   |   | 0.91 | % |   |   | 0.94 | % |
| Red                  Rock Community Bank                                     |   |                             | 100,416   |   |                           |   | 100,010   |                      |   |   | 988                                        |   |   |   | 1,084 |   |   |   | 81 |   |   |   | 151 |   |   |   | 0.98 | % |   |   | 1.08 | % |
| Southern                  Arizona Community                    Bank     |   |                             | 75,802    |   |                           |   | 77,845    |                      |   |   | 740                                        |   |   |   | 775 |   |   |   |   |   |   |   | 16 |   |   |   | 0.98 | % |   |   | 1.00 | % |
| Sunrise                  Bank of Albuquerque                                 |   |                             | 70,876    |   |                           |   | 53,027    |                      |   |   | 922                                        |   |   |   | 778 |   |   |   |   |   |   |   |   |   |   |   | 1.30 | % |   |   | 1.47 | % |
| Sunrise                  Bank of Arizona                                     |   |                             | 105,563   |   |                           |   | 112,720   |                      |   |   | 1,081                                      |   |   |   | 1,126 |   |   |   | 299 |   |   |   | 246 |   |   |   | 1.02 | % |   |   | 1.00 | % |
| Valley                  First Community Bank                                 |   |                             | 68,157    |   |                           |   | 66,256    |                      |   |   | 578                                        |   |   |   | 611 |   |   |   |   |   |   |   |   |   |   |   | 0.85 | % |   |   | 0.92 | % |
| Yuma                  Community Bank                                         |   |                             | 61,594    |   |                           |   | 58,577    |                      |   |   | 480                                        |   |   |   | 500 |   |   |   | 65 |   |   |   |   |   |   |   | 0.78 | % |   |   | 0.85 | % |
| Southwest                  Region Total                                      |   |                             | 1,407,534 |   |                           |   | 1,318,661 |                      |   |   | 14,633                                     |   |   |   | 13,677 |   |   |   | 3,971 |   |   |   | 1,650 |   |   |   | 1.04 | % |   |   | 1.04 | % |
|                                                                         |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| California                  Region:                                          |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  of Escondido                                           |   |                             | 51,670    |   |                           |   | 37,398    |                      |   |   | 500                                        |   |   |   | 370 |   |   |   | 153 |   |   |   | 19 |   |   |   | 0.97 | % |   |   | 0.99 | % |
| Bank                  of San Francisco                                       |   |                             | 40,824    |   |                           |   | 26,415    |                      |   |   | 612                                        |   |   |   | 375 |   |   |   |   |   |   |   |   |   |   |   | 1.50 | % |   |   | 1.42 | % |
| Bank                  of Santa Barbara                                       |   |                             | 52,280    |   |                           |   | 40,198    |                      |   |   | 732                                        |   |   |   | 533 |   |   |   |   |   |   |   |   |   |   |   | 1.40 | % |   |   | 1.33 | % |
| Napa                  Community Bank                                         |   |                             | 99,092    |   |                           |   | 78,467    |                      |   |   | 1,052                                      |   |   |   | 1,020 |   |   |   | 1,460 |   |   |   |   |   |   |   | 1.06 | % |   |   | 1.30 | % |
| Point                  Loma Community Bank                                   |   |                             | 47,144    |   |                           |   | 38,018    |                      |   |   | 658                                        |   |   |   | 510 |   |   |   |   |   |   |   |   |   |   |   | 1.40 | % |   |   | 1.34 | % |
| Sunrise                  Bank of San Diego                                   |   |                             | 77,489    |   |                           |   | 65,250    |                      |   |   | 725                                        |   |   |   | 540 |   |   |   | 69 |   |   |   |   |   |   |   | 0.94 | % |   |   | 0.83 | % |
| Sunrise                  Community Bank(2)                                   |   |                             | 14,549    |   |                           |   |      |                      |   |   | 202                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1.39 | % |   |   |   |   |
| California                  Region Total                                     |   |                             | 383,048   |   |                           |   | 285,746   |                      |   |   | 4,481                                      |   |   |   | 3,348 |   |   |   | 1,682 |   |   |   | 19 |   |   |   | 1.17 | % |   |   | 1.17 | % |
|                                                                         |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northwest                  Region:                                           |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  of Bellevue                                            |   |                             | 34,027    |   |                           |   | 28,037    |                      |   |   | 580                                        |   |   |   | 370 |   |   |   |   |   |   |   |   |   |   |   | 1.70 | % |   |   | 1.32 | % |
| Bank                  of Everett                                             |   |                             | 20,260    |   |                           |   | 8,269     |                      |   |   | 290                                        |   |   |   | 122 |   |   |   |   |   |   |   |   |   |   |   | 1.43 | % |   |   | 1.48 | % |
| Bank                  of Tacoma(1)                                           |   |                             | 14,857    |   |                           |   |      |                      |   |   | 215                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1.45 | % |   |   |   |   |
| High                  Desert Bank(5)                                         |   |                             | 4,140     |   |                           |   |      |                      |   |   | 60                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1.45 | % |   |   |   |   |
| Issaquah                  Community Bank(4)                                  |   |                             | 2,105     |   |                           |   |      |                      |   |   | 30                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1.43 | % |   |   |   |   |
| Northwest                  Region Total                                      |   |                             | 75,389    |   |                           |   | 36,306    |                      |   |   | 1,175                                      |   |   |   | 492 |   |   |   |   |   |   |   |   |   |   |   | 1.56 | % |   |   | 1.36 | % |
|                                                                         |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Western                  Region Total                                        |   |                             | 1,865,971 |   |                           |   | 1,640,713 |                      |   |   | 20,289                                     |   |   |   | 17,517 |   |   |   | 5,653 |   |   |   | 1,669 |   |   |   | 1.08 | % |   |   | 1.07 | % |
|                                                                         |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other,                  net                                                  |   |                             | 28,879    |   |                           |   | 5,520     |                      |   |   | 1,254                                      |   |   |   | 1,063 |   |   |   | 8,221 |   |   |   | 2,305 |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                             |      |   |                           |   |      |                      |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                  Totals                                         |   | $                                | 4,030,384 |   |                           | $      | 3,488,678 |                      |   | $      | 52,851                                     |   |   | $ | 45,414 |   |   | $ | 52,738 |   |   | $ | 34,274 |   |   |   | 1.31 | % |   |   | 1.30 | % |

| (1) | Commenced                  operations in January 2007 and is 51%-owned by Capitol Development                  Bancorp                  Limited VI, a controlledsubsidiary                  of Capitol. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Commenced                  operations in February 2007 and is 51%-owned by Capitol Development                  Bancorp Limited VI, a controlledsubsidiary                  of Capitol.                 |
| (3) | Commenced                  operations in May 2007 and is 51%-owned by Capitol Bancorp Colorado                  Ltd.                  II, a controlledsubsidiary                  of Capitol.           |
| (4) | Commenced                  operations in July 2007 and is 51%-owned by Capitol Development                  Bancorp                  Limited VI, a controlledsubsidiary                  of Capitol.    |
| (5) | Commenced                  operations in September 2007 and is 55%-owned by Capitol Development                  Bancorp Limited VI, a controlledsubsidiary                  of Capitol.                |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Results        of Operations***

*Summary*

*Analytical        Review*

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Results        of Operations – Continued***

*de novo*

|                                                                                          | Three-Month                  Period |   |   | Nine-Month                  Period |
|-----------------------------------------------------------------------------------------------|-------------------------------------|--------|--------|------------------------------------|
|                                                                                          | 2007                                |   |   | 2006                               |   |   | 2007 |   |   | 2006 |
|                                                                                          |                                |   |   |                               |   |   |   |   |   |   |
| Preopening                  and start-up costs                                                | $                                   | 1,602  |   |                               | $ | -- |   |   | $ | 2,898 |   |   | $ | 3,063 |
| Advertising                                                                                   |                                | 792    |   |                               |   | 752 |   |   |   | 2,454 |   |   |   | 2,133 |
| Directors'                  fees                                                              |                                | 725    |   |                               |   | 515 |   |   |   | 2,084 |   |   |   | 1,661 |
| Travel,                  lodging and meals                                                    |                                | 706    |   |                               |   | 608 |   |   |   | 2,049 |   |   |   | 1,599 |
| Paper,                  printing and supplies                                                 |                                | 643    |   |                               |   | 560 |   |   |   | 2,010 |   |   |   | 1,721 |
| FDIC                  insurance premiums andother                  regulatory fees            |                                | 696    |   |                               |   | 237 |   |   |   | 1,917 |   |   |   | 641 |
| Professional                  fees                                                            |                                | 551    |   |                               |   | 572 |   |   |   | 1,671 |   |   |   | 1,724 |
| Bank                  services (ATMs, telephonebanking                  and Internet banking) |                                | 517    |   |                               |   | 406 |   |   |   | 1,578 |   |   |   | 1,089 |
| Loan                  and collection expense                                                  |                                | 392    |   |                               |   | 315 |   |   |   | 1,436 |   |   |   | 857 |
| Taxes                  other than income taxes                                                |                                | 448    |   |                               |   | 385 |   |   |   | 1,376 |   |   |   | 1,103 |
| Communications                                                                                |                                | 432    |   |                               |   | 354 |   |   |   | 1,265 |   |   |   | 1,003 |
| Postage                                                                                       |                                | 283    |   |                               |   | 252 |   |   |   | 825 |   |   |   | 752 |
| Courier                  service                                                              |                                | 253    |   |                               |   | 230 |   |   |   | 729 |   |   |   | 641 |
| Dues                  and memberships                                                         |                                | 203    |   |                               |   | 195 |   |   |   | 649 |   |   |   | 578 |
| Contracted                  labor                                                             |                                | 98     |   |                               |   | 140 |   |   |   | 364 |   |   |   | 404 |
| Insurance                  expense                                                            |                                | 119    |   |                               |   | 138 |   |   |   | 333 |   |   |   | 347 |
| Other                                                                                         |                                | 2,128  |   |                               |   | 1,521 |   |   |   | 6,197 |   |   |   | 3,476 |
| Total                                                                                         | $                                   | 10,588 |   |                               | $ | 7,180 |   |   | $ | 29,835 |   |   | $ | 22,792 |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Results        of Operations–Continued***

|                                        |   | Nine                  months ended September 30 |    |
|---------------------------------------------|--------|-------------------------------------------------|---------|
|                                        |   |                                            |    |   |   |   |   | Return                  on |   |   | Return                  on |   |
|                                        |   | Total                  Revenues                 |    |   | Net                  Income |   |   | Average                  Equity(1) |   |   | Average                  Assets(1) |   |
|                                        |   | 2007                                            |    |   | 2006 |   |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                        |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Eastern                  Regions:*         |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Great                  Lakes Region:        |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ann                  Arbor Commerce Bank    |   | $                                               | 19,058  |   |   | $ | 17,675 |   |   | $ | 2,790 |   |   | $ | 2,947 |   |   |   | 14.25 | % |   |   | 14.82 | % |   |   | 1.13 | % |   |   | 1.28 | % |
| Bank                  of Auburn Hills       |   |                                            | 2,418   |   |   |   | 1,194 |   |   |   | (215 | ) |   |   | (348 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Bank                  of Belleville         |   |                                            | 1,648   |   |   |   | 816 |   |   |   | (434 | ) |   |   | (477 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Bank                  of Maumee             |   |                                            | 946     |   |   |   | n/a |   |   |   | (856 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Bank                  of Michigan           |   |                                            | 3,603   |   |   |   | 2,160 |   |   |   | (38 | ) |   |   | (277 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Brighton                  Commerce Bank     |   |                                            | 6,166   |   |   |   | 5,848 |   |   |   | 455 |   |   |   | 643 |   |   |   | 6.60 |   |   |   | 9.08 |   |   |   | 0.57 |   |   |   | 0.82 |   |
| Capitol                  National Bank      |   |                                            | 13,499  |   |   |   | 13,127 |   |   |   | 1,587 |   |   |   | 2,103 |   |   |   | 11.20 |   |   |   | 14.57 |   |   |   | 0.89 |   |   |   | 1.16 |   |
| Detroit                  Commerce Bank      |   |                                            | 6,786   |   |   |   | 6,453 |   |   |   | 413 |   |   |   | 795 |   |   |   | 5.96 |   |   |   | 12.90 |   |   |   | 0.51 |   |   |   | 1.16 |   |
| Elkhart                  Community Bank     |   |                                            | 5,149   |   |   |   | 4,744 |   |   |   | 650 |   |   |   | 774 |   |   |   | 9.88 |   |   |   | 12.29 |   |   |   | 1.03 |   |   |   | 1.28 |   |
| Evansville                  Commerce Bank   |   |                                            | 1,851   |   |   |   | 276 |   |   |   | (540 | ) |   |   | (708 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Goshen                  Community Bank      |   |                                            | 4,490   |   |   |   | 3,846 |   |   |   | 330 |   |   |   | 319 |   |   |   | 5.90 |   |   |   | 6.25 |   |   |   | 0.58 |   |   |   | 0.62 |   |
| Grand                  Haven Bank           |   |                                            | 7,248   |   |   |   | 7,251 |   |   |   | 500 |   |   |   | 987 |   |   |   | 6.10 |   |   |   | 12.17 |   |   |   | 0.52 |   |   |   | 1.04 |   |
| Kent                  Commerce Bank         |   |                                            | 5,045   |   |   |   | 5,033 |   |   |   | 100 |   |   |   | 355 |   |   |   | 2.27 |   |   |   | 5.55 |   |   |   | 0.16 |   |   |   | 0.58 |   |
| Macomb                  Community Bank      |   |                                            | 5,088   |   |   |   | 5,779 |   |   |   | (842 | ) |   |   | 252 |   |   |   | n/a |   |   |   | 3.86 |   |   |   | n/a |   |   |   | 0.35 |   |
| Muskegon                  Commerce Bank     |   |                                            | 5,427   |   |   |   | 5,652 |   |   |   | (746 | ) |   |   | 175 |   |   |   | n/a |   |   |   | 2.75 |   |   |   | n/a |   |   |   | 0.24 |   |
| Oakland                  Commerce Bank      |   |                                            | 7,234   |   |   |   | 7,154 |   |   |   | (102 | ) |   |   | 883 |   |   |   | n/a |   |   |   | 11.98 |   |   |   | n/a |   |   |   | 0.98 |   |
| Ohio                  Commerce Bank         |   |                                            | 1,031   |   |   |   | n/a |   |   |   | (568 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Paragon                  Bank & Trust   |   |                                            | 6,157   |   |   |   | 5,945 |   |   |   | (25 | ) |   |   | 687 |   |   |   | n/a |   |   |   | 8.24 |   |   |   | n/a |   |   |   | 0.91 |   |
| Portage                  Commerce Bank      |   |                                            | 11,580  |   |   |   | 11,022 |   |   |   | 1,740 |   |   |   | 2,021 |   |   |   | 14.36 |   |   |   | 16.69 |   |   |   | 1.26 |   |   |   | 1.50 |   |
| Great                  Lakes Region Total   |   |                                            | 114,424 |   |   |   | 103,975 |   |   |   | 4,199 |   |   |   | 11,131 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southeast                  Region:          |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  of Valdosta           |   |                                            | 1,802   |   |   |   | 206 |   |   |   | (326 | ) |   |   | (649 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Community                  Bank of Rowan    |   |                                            | 4,228   |   |   |   | 1,052 |   |   |   | (229 | ) |   |   | (950 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| First                  Carolina State Bank  |   |                                            | 5,517   |   |   |   | 4,621 |   |   |   | 404 |   |   |   | 621 |   |   |   | 4.57 |   |   |   | 7.36 |   |   |   | 0.55 |   |   |   | 1.00 |   |
| Peoples                  State Bank         |   |                                            | 1,705   |   |   |   | 1,808 |   |   |   | 226 |   |   |   | 84 |   |   |   | 6.15 |   |   |   | 5.68 |   |   |   | 1.08 |   |   |   | 0.43 |   |
| Sunrise                  Bank of Atlanta    |   |                                            | 2,757   |   |   |   | 335 |   |   |   | (260 | ) |   |   | (733 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Southeast                  Region Total     |   |                                            | 16,009  |   |   |   | 8,022 |   |   |   | (185 | ) |   |   | (1,627 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Midwest                  Region:            |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Summit                  Bank of Kansas City |   |                                            | 2,408   |   |   |   | 488 |   |   |   | (352 | ) |   |   | (553 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
|                                        |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northeast                  Region:          |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| USNY                  Bank(5)               |   |                                            | 149     |   |   |   |   |   |   |   | (743 | ) |   |   |   |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
|                                        |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                  Regions Total      |   | $                                               | 132,990 |   |   | $ | 112,485 |   |   | $ | 2,919 |   |   | $ | 8,951 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Results        of Operations – Continued***

|                                                                         |   | Nine                  months ended September 30 |    |
|------------------------------------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                                         |   |                                            |    |   |   |   |   | Return                  on |   |   | Return                  on |   |
|                                                                         |   | Total                  Revenues                 |    |   | Net                  Income |   |   | Average                  Equity(1) |   |   | Average                  Assets(1) |   |
|                                                                         |   | 2007                                            |    |   | 2006 |   |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                         |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                  Regions Total (frompreceding                  page) |   | $                                               | 132,990 |   |   | $ | 112,485 |   |   | $ | 2,919 |   |   | $ | 8,951 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Western                  Regions:*                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southwest                  Region:                                           |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1st                  Commerce                  Bank                          |   |                                            | 1,188   |   |   |   | n/a |   |   |   | (423 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Arrowhead                  Community Bank                                    |   |                                            | 6,231   |   |   |   | 6,057 |   |   |   | 774 |   |   |   | 917 |   |   |   | 12.48 | % |   |   | 15.10 | % |   |   | 1.22 | % |   |   | 1.39 | % |
| Asian                  Bank of Arizona                                       |   |                                            | 1,301   |   |   |   | 374 |   |   |   | (404 | ) |   |   | (519 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Bank                  of Las Vegas                                           |   |                                            | 4,542   |   |   |   | 3,920 |   |   |   | 493 |   |   |   | 517 |   |   |   | 7.30 |   |   |   | 7.12 |   |   |   | 0.90 |   |   |   | 1.09 |   |
| Bank                  of Tucson                                              |   |                                            | 11,972  |   |   |   | 11,220 |   |   |   | 3,496 |   |   |   | 3,386 |   |   |   | 27.52 |   |   |   | 29.68 |   |   |   | 2.60 |   |   |   | 2.59 |   |
| Black                  Mountain Community Bank                               |   |                                            | 9,233   |   |   |   | 7,920 |   |   |   | 1,976 |   |   |   | 1,989 |   |   |   | 18.83 |   |   |   | 21.67 |   |   |   | 1.85 |   |   |   | 2.08 |   |
| Camelback                  Community Bank                                    |   |                                            | 5,129   |   |   |   | 4,686 |   |   |   | 722 |   |   |   | 819 |   |   |   | 10.90 |   |   |   | 13.42 |   |   |   | 1.09 |   |   |   | 1.33 |   |
| Desert                  Community Bank                                       |   |                                            | 6,076   |   |   |   | 5,375 |   |   |   | 891 |   |   |   | 946 |   |   |   | 12.60 |   |   |   | 15.16 |   |   |   | 1.25 |   |   |   | 1.50 |   |
| Fort                  Collins Commerce Bank                                  |   |                                            | 3,517   |   |   |   | 2,386 |   |   |   | 495 |   |   |   | (37 | ) |   |   | 7.74 |   |   |   | n/a |   |   |   | 1.23 |   |   |   | n/a |   |
| Larimer                  Bank of Commerce(4)                                 |   |                                            | 1,201   |   |   |   | n/a |   |   |   | (586 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Mesa                  Bank                                                   |   |                                            | 14,979  |   |   |   | 14,014 |   |   |   | 3,109 |   |   |   | 3,322 |   |   |   | 22.60 |   |   |   | 25.71 |   |   |   | 1.99 |   |   |   | 1.31 |   |
| Red                  Rock Community Bank                                     |   |                                            | 6,990   |   |   |   | 6,310 |   |   |   | 1,266 |   |   |   | 1,630 |   |   |   | 12.72 |   |   |   | 17.76 |   |   |   | 1.51 |   |   |   | 2.12 |   |
| Southern                  Arizona Community                    Bank     |   |                                            | 5,197   |   |   |   | 4,928 |   |   |   | 823 |   |   |   | 833 |   |   |   | 12.25 |   |   |   | 12.65 |   |   |   | 1.23 |   |   |   | 1.29 |   |
| Sunrise                  Bank of Albuquerque                                 |   |                                            | 4,605   |   |   |   | 3,481 |   |   |   | 470 |   |   |   | 337 |   |   |   | 9.61 |   |   |   | 6.79 |   |   |   | 0.92 |   |   |   | 0.80 |   |
| Sunrise                  Bank of Arizona                                     |   |                                            | 7,111   |   |   |   | 7,781 |   |   |   | 444 |   |   |   | 1,076 |   |   |   | 5.11 |   |   |   | 11.26 |   |   |   | 0.52 |   |   |   | 1.23 |   |
| Valley                  First Community Bank                                 |   |                                            | 4,006   |   |   |   | 4,247 |   |   |   | 259 |   |   |   | 542 |   |   |   | 4.36 |   |   |   | 9.93 |   |   |   | 0.50 |   |   |   | 0.97 |   |
| Yuma                  Community Bank                                         |   |                                            | 4,498   |   |   |   | 4,389 |   |   |   | 746 |   |   |   | 830 |   |   |   | 12.92 |   |   |   | 16.03 |   |   |   | 1.38 |   |   |   | 1.63 |   |
| Southwest                  Region Total                                      |   |                                            | 97,776  |   |   |   | 87,088 |   |   |   | 14,551 |   |   |   | 16,588 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| California                  Region:                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  of Escondido                                           |   |                                            | 4,326   |   |   |   | 3,791 |   |   |   | 369 |   |   |   | 606 |   |   |   | 3.48 |   |   |   | 8.09 |   |   |   | 0.58 |   |   |   | 1.08 |   |
| Bank                  of San Francisco                                       |   |                                            | 2,195   |   |   |   | 1,108 |   |   |   | (358 | ) |   |   | (552 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Bank                  of Santa Barbara                                       |   |                                            | 3,090   |   |   |   | 1,333 |   |   |   | (205 | ) |   |   | (616 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Napa                  Community Bank                                         |   |                                            | 7,032   |   |   |   | 5,127 |   |   |   | 1,066 |   |   |   | 1,054 |   |   |   | 11.02 |   |   |   | 12.48 |   |   |   | 1.21 |   |   |   | 1.70 |   |
| Point                  Loma Community Bank                                   |   |                                            | 3,071   |   |   |   | 2,315 |   |   |   | 69 |   |   |   | 63 |   |   |   | 1.30 |   |   |   | 1.21 |   |   |   | 0.18 |   |   |   | 0.21 |   |
| Sunrise                  Bank of San Diego                                   |   |                                            | 5,358   |   |   |   | 4,187 |   |   |   | 372 |   |   |   | 676 |   |   |   | 4.68 |   |   |   | 8.33 |   |   |   | 0.59 |   |   |   | 1.31 |   |
| Sunrise                  Community Bank(3)                                   |   |                                            | 726     |   |   |   | n/a |   |   |   | (805 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| California                  Region Total                                     |   |                                            | 25,798  |   |   |   | 17,861 |   |   |   | 508 |   |   |   | 1,231 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northwest                  Region                                            |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  of Bellevue                                            |   |                                            | 2,410   |   |   |   | 1,418 |   |   |   | (66 | ) |   |   | (320 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Bank                  of Everett                                             |   |                                            | 1,403   |   |   |   | 188 |   |   |   | (433 | ) |   |   | (481 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Bank                  of Tacoma(2)                                           |   |                                            | 868     |   |   |   | n/a |   |   |   | (884 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| High                  Desert Bank(6)                                         |   |                                            | 4       |   |   |   |   |   |   |   | (330 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Issaquah                  Community Bank(5)                                  |   |                                            | 125     |   |   |   | n/a |   |   |   | (394 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |
| Northwest                  Region Total                                      |   |                                            | 4,810   |   |   |   | 1,606 |   |   |   | (2,107 | ) |   |   | (801 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Western                  Regions Total                                       |   |                                            | 128,384 |   |   |   | 106,555 |   |   |   | 12,952 |   |   |   | 17,018 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other,                  net                                                  |   |                                            | 1,294   |   |   |   | 807 |   |   |   | 2,672 |   |   |   | 5,040 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                  Totals                                         |   | $                                               | 262,668 |   |   | $ | 219,847 |   |   | $ | 18,543 |   |   | $ | 31,009 |   |   |   | 6.48 | % |   |   | 13.13 | % |   |   | 0.57 | % |   |   | 1.06 | % |

| (1) | Annualized                  for period presented.                                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Commenced                  operations in January 2007 and is 51%-owned by Capitol Development                  Bancorp                  Limited VI, a controlledsubsidiary                  of Capitol. |
| (3) | Commenced                  operations in February 2007 and is 51%-owned by Capitol Development                  Bancorp Limited VI, a controlledsubsidiary                  of Capitol.                 |
| (4) | Commenced                  operations in May 2007 and is 51%-owned by Capitol Bancorp Colorado                  Ltd.                  II, a controlledsubsidiary                  of Capitol.           |
| (5) | Commenced                  operations in July 2007 and is 51%-owned by Capitol Development                  Bancorp                  Limited VI, a controlledsubsidiary                  of Capitol.    |
| (6) | Commenced                  operations in September 2007 and is 55%-owned by Capitol Development                  Bancorp Limited VI, a controlledsubsidiary                  of Capitol.                |

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Liquidity        and Capital Resources***

----

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**AND        RESULTS OF OPERATIONS – Continued**

***Trends        Affecting Operations***

***Impact        of New Accounting Standards***

***Critical        Accounting Policies***

----

**PART        I, ITEM 3**

**QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT**

**MARKET        RISK**

**PART        I, ITEM 4**

**CONTROLS        AND PROCEDURES**

----

**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                  1.A. | Risk                    Factors. There                    were no material changes from the risk factors set forth in Part I,                    Item 1A, "Risk Factors," of Capitol's Form 10-K for the year ended                    December 31, 2006, during the nine months ended September 30,                    2007.  Refer to that section of Capitol's Form 10-K for                    disclosures regarding the risks and uncertainties related to                    Capitol's                    business.  |
| Item                  2.   | Unregistered                    Sales of Equity Securities and Use of Proceeds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                       |     (a)          None.    (b)          Not                    applicable.    (c)          None.                                                                                                                                                                                                                                   |
| Item                  3.   | Defaults                  Upon Senior Securities. None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Item                  4.   | Submission                  of Matters to a Vote of Security Holders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Item                  5.   | Other                  Information. None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Item                  6.   | Exhibits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

| (a)                          | (b)                                                                                                                                                                             |
|------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit                  No. | Description                  of Exhibit                                                                                                                                         |
| 31.1                         | Certification                  of Chief Executive Officer, Joseph D. Reid,pursuant                  to Section 302 of the Sarbanes-Oxley Act of2002.                       |
| 31.2                         | Certification                  of Chief Financial Officer,Lee                  W. Hendrickson, pursuant to Section 302 of theSarbanes-Oxley                  Act of 2002.  |
| 32.1                         | Certification                  of Chief Executive Officer, Joseph D. Reid,pursuant                  to Section 906 of the Sarbanes-Oxley Act of2002.                       |
| 32.2                         | Certification                  of Chief Financial Officer,Lee                  W. Hendrickson, pursuant to Section 906 of theSarbanes-Oxley                  Act of 2002.  |

----

**SIGNATURES**

|                                                             CAPITOL                  BANCORP LTD.                                                            (Registrant)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                             /s/                  Joseph D.                  Reid                                                                                                                                                                                  Joseph                  D. Reid                                                            Chairman                  and                  CEO                                                            (duly                  authorized to sign on behalf of the                                                               registrant)   |
|                                                             /s/                  Lee W.                  Hendrickson                                                                                                                                                                Lee                  W.                  Hendrickson                                                            Chief                  Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

----

| Exhibit                  No. | Description                  of Exhibit                                                                                                                                      |
|------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                         | 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.       |

----