**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 March 31, 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 April 15, 2007 |
|-------------------------------------------|--------|----------------------------------------------|
| Common                Stock, No par value |   | 17,078,457                shares             |

----

**INDEX**

**PART      I.**
**FINANCIAL      INFORMATION**

**Forward-Looking      Statements**

|  Item                1.           |  Financial                Statements (unaudited):                                                                                                         | Page     |
|----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                   | Condensed                consolidated balance sheets - March 31, 2007 and December 31,                2006.                                                    | 3        |
|                                   | Condensed                consolidated statements of income - Three months ended March                31,2007                and 2006.                          | 4        |
|                                   | Condensed                consolidated statements of changes in stockholders' equity -                Threemonths                ended March 31, 2007 and 2006. | 5        |
|                                   | Condensed                consolidated statements of cash flows - Three months ended March                31,                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.                                                                                     | 23       |
| Item                4.                 | Controls                and Procedures.                                                                                                                        | 23       |
|  **PART                II**       |  **OTHER                INFORMATION**                                                                                                                     |     |
|  Item                1.           |  Legal                Proceedings.                                                                                                                        |  24 |
| Item                1.A.               | Risk                Factors.                                                                                                                                   | 24       |
| Item                2.                 | Unregistered                Sales of Equity Securities and Use of Proceeds.                                                                                    | 24       |
| Item                3.                 | Defaults                Upon Senior Securities.                                                                                                                | 24       |
| Item                4.                 | Submission                of Matters to a Vote of Security Holders.                                                                                            | 24       |
| Item                5.                 | Other                Information.                                                                                                                              | 24       |
| Item                6.                 | Exhibits.                                                                                                                                                      | 24       |
|  **SIGNATURES**                   |                                                                                                                                                           |  25 |
|  **EXHIBIT                INDEX** |                                                                                                                                                           |  26 |

----

| **PART                I, ITEM 1**                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| CAPITOL                BANCORP LIMITED                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Condensed                Consolidated Balance Sheets                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| As                of March 31, 2007 and December 31, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (in                thousands, except share data)                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | (Unaudited) |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | March                31 |   | December                31 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | 2007 |   | 2006 |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |
| Cash                and due from banks                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | $ | 135,538 |   | $ | 169,753 |   |
| Money                market and interest-bearing deposits                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   | 19,730 |   |   | 37,204 |   |
| Federal                funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   | 252,363 |   |   | 141,913 |   |
| Cash                and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   | 407,631 |   |   | 348,870 |   |
| Loans                held for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   | 27,862 |   |   | 34,593 |   |
| Investment                securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Available                for sale, carried at market value                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   | 15,980 |   |   | 18,904 |   |
| Held                for long-term investment, carried at amortized cost which                approximates market value                                                                                                                                                                                                                                                                                                                                                                            |   |   |   | 22,696 |   |   | 21,749 |   |
| Total                investment securities                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   | 38,676 |   |   | 40,653 |   |
| Portfolio                loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Commercial                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   | 3,238,411 |   |   | 3,103,125 |   |
| Real                estate mortgage                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   | 247,371 |   |   | 259,604 |   |
| Installment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   | 135,199 |   |   | 125,949 |   |
| Total                portfolio loans                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   | 3,620,981 |   |   | 3,488,678 |   |
| Less                allowance for loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   | (47,052 | ) |   | (45,414 | ) |
| Net                portfolio loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   | 3,573,929 |   |   | 3,443,264 |   |
| Premises                and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   | 55,312 |   |   | 54,295 |   |
| Accrued                interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   | 17,466 |   |   | 17,524 |   |
| Goodwill                and other intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   | 70,590 |   |   | 62,215 |   |
| Other                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   | 63,060 |   |   | 64,402 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |
| TOTAL                ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | $ | 4,254,526 |   | $ | 4,065,816 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| *LIABILITIES:*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |
| Noninterest-bearing                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   | $ | 615,644 |   | $ | 651,253 |   |
| Interest-bearing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   | 2,776,391 |   |   | 2,607,232 |   |
| Total                deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   | 3,392,035 |   |   | 3,258,485 |   |
| Debt                obligations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Notes                payable and short-term borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   | 173,000 |   |   | 191,154 |   |
| Subordinated                debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   | 156,058 |   |   | 101,035 |   |
| Total                debt obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   | 329,058 |   |   | 292,189 |   |
| Accrued                interest on deposits and other liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   | 27,841 |   |   | 26,751 |   |
| Total                liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   | 3,748,934 |   |   | 3,577,425 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |
| MINORITY                INTERESTS IN CONSOLIDATED SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   | 123,600 |   |   | 126,512 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |
| *STOCKHOLDERS'                EQUITY:*                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |
| Common                stock, no par value, 50,000,000 shares authorized;issued                and outstanding:   2007 - 17,074,605 shares                                                                 2006 - 16,656,481 shares |   |   |   | 267,304 |   |   | 249,244 |   |
| Retained                earnings                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   | 114,789 |   |   | 112,779 |   |
| Market                value adjustment (net of tax effect) for investment                securities available for sale (accumulatedother                comprehensive income/loss)                                                                                                                                                                                                                                                                                                                |   |   |   | (101 | ) |   | (144 | ) |
| Total                stockholders' equity                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   | 381,992 |   |   | 361,879 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   | $ | 4,254,526 |   | $ | 4,065,816 |   |

----

| CAPITOL                  BANCORP LIMITED                                                            |
|-----------------------------------------------------------------------------------------------------|
| Condensed                  Consolidated Statements of Income (Unaudited)                            |
| For                  the Three Months Ended March 31, 2007 and 2006                                 |
| (in                  thousands, except per share data)                                              |
|                                                                                                |   |   |   |   |
|                                                                                                |   | 2007 |   | 2006 |
| Interest                  income:                                                                   |   |   |   |   |   |   |
| Portfolio                  loans (including fees)                                                   |   | $ | 73,524 |   | $ | 60,143 |
| Loans                  held for sale                                                                |   |   | 946 |   |   | 523 |
| Taxable                  investment securities                                                      |   |   | 208 |   |   | 263 |
| Federal                  funds sold                                                                 |   |   | 2,544 |   |   | 1,818 |
| Other                                                                                               |   |   | 617 |   |   | 350 |
| Total                  interest income                                                              |   |   | 77,839 |   |   | 63,097 |
|                                                                                                |   |   |   |   |   |   |
| Interest                  expense:                                                                  |   |   |   |   |   |   |
| Deposits                                                                                            |   |   | 28,329 |   |   | 17,782 |
| Debt                  obligations and other                                                         |   |   | 4,829 |   |   | 3,962 |
| Total                  interest expense                                                             |   |   | 33,158 |   |   | 21,744 |
|                                                                                                |   |   |   |   |   |   |
| Net                  interest income                                                                |   |   | 44,681 |   |   | 41,353 |
|                                                                                                |   |   |   |   |   |   |
| Provision                  for loan losses                                                          |   |   | 3,932 |   |   | 2,456 |
| Net                  interest income after provision for loan losses                                |   |   | 40,749 |   |   | 38,897 |
|                                                                                                |   |   |   |   |   |   |
| Noninterest                  income:                                                                |   |   |   |   |   |   |
| Service                  charges on deposit accounts                                                |   |   | 1,105 |   |   | 1,031 |
| Trust                  and wealth-management revenue                                                |   |   | 1,037 |   |   | 867 |
| Fees                  from origination of non-portfolio residential mortgage                  loans |   |   |  1,307 |   |   |  1,289 |
| Gains                  on sale of government-guaranteed loans                                       |   |   | 800 |   |   | 360 |
| Other                                                                                               |   |   | 1,336 |   |   | 1,563 |
| Total                  noninterest income                                                           |   |   | 5,585 |   |   | 5,110 |
|                                                                                                |   |   |   |   |   |   |
| Noninterest                  expense:                                                               |   |   |   |   |   |   |
| Salaries                  and employee benefits                                                     |   |   | 26,072 |   |   | 21,550 |
| Occupancy                                                                                           |   |   | 3,497 |   |   | 2,678 |
| Equipment                  rent, depreciation and maintenance                                       |   |   | 2,642 |   |   | 1,966 |
| Other                                                                                               |   |   | 9,612 |   |   | 5,638 |
| Total                  noninterest expense                                                          |   |   | 41,823 |   |   | 31,832 |
|                                                                                                |   |   |   |   |   |   |
| Income                  before income taxes and minority interest                                   |   |   | 4,511 |   |   | 12,175 |
|                                                                                                |   |   |   |   |   |   |
| Income                  taxes                                                                       |   |   | 1,764 |   |   | 4,381 |
|                                                                                                |   |   |   |   |   |   |
| Income                  before minority interest                                                    |   |   | 2,747 |   |   | 7,794 |
|                                                                                                |   |   |   |   |   |   |
| Minority                  interest in net losses of consolidated subsidiaries                       |   |   | 3,524 |   |   | 2,159 |
|                                                                                                |   |   |   |   |   |   |
| NET                  INCOME                                                                         |   | $ | 6,271 |   | $ | 9,953 |
|                                                                                                |   |   |   |   |   |   |
| NET                  INCOME PER SHARE--Note D:                                                      |   |   |   |   |   |   |
| Basic                                                                                               |   | $ | 0.38 |   | $ | 0.64 |
|                                                                                                |   |   |   |   |   |   |
| Diluted                                                                                             |   | $ | 0.36 |   | $ | 0.61 |

----

| CAPITOL                  BANCORP LIMITED                                                                                                                                                                 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Condensed                  Consolidated Statements of Changes in Stockholders' Equity (Unaudited)                                                                                                        |   |
| For                  the Three Months Ended March 31, 2007 and 2006                                                                                                                                      |   |
| (in                  thousands, except share data)                                                                                                                                                       |   |
|                                                                                                                                                                                                     |   |
|                                                                                                                                                                                                     |   |   |   |   |   | Accumulated |   |   |   |
|                                                                                                                                                                                                     |   |   |   |   |   | Other |   |   |   |
|                                                                                                                                                                                                     |   | Common |   | Retained |   | Comprehensive |   |   |   |
|                                                                                                                                                                                                     |   | Stock |   | Earnings |   | Income                  (Loss) |   | Total |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |
| Three                  Months Ended March 31, 2006                                                                                                                                                       |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |
| Balances                  at January 1, 2006                                                                                                                                                             |   | $ | 216,539 |   | $ | 85,553 |   | $ | (226 | ) | $ | 301,866 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of 55,352 shares of common stock upon                    exercise of stock options, net of common                    stock surrendered to facilitate                  exercise |   |   | 931 |   |   |   |   |   |   |   |   | 931 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of 65,750 unvested shares of restrictedcommon                    stock, net of related unearned employee  compensation                                                    |   |   | -- |   |   |   |   |   |   |   |   | -- |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recognition                    of compensation expense relating to restricted                  common stock                                                                                              |   |   | 384 |   |   |   |   |   |   |   |   | 384 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax                  benefit from share-based payments                                                                                                                                                   |   |   | 518 |   |   |   |   |   |   |   |   | 518 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  dividends paid ($0.20 per share)                                                                                                                                                   |   |   |   |   |   | (3,173 | ) |   |   |   |   | (3,173 | ) |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Components                  of comprehensive income:                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income for the period                                                                                                                                                               |   |   |   |   |   | 9,953 |   |   |   |   |   | 9,953 |   |
| Market                    value adjustment for investment securities                      available for sale (net of income                  tax effect)                                                 |   |   |   |   |   |   |   |   | (60 | ) |   | (60 | ) |
| Comprehensive                  income for the period                                                                                                                                                     |   |   |   |   |   |              |   |   |   |   |   | 9,893 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |  |   |
| BALANCES                  AT MARCH 31, 2006                                                                                                                                                              |   | $ | 218,372 |   | $ | 92,333 |   | $ | (286 | ) | $ | 310,419 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Three                  Months Ended March 31, 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 22,304 shares of common stock upon                      exercise of stock options, net ofcommon                  stock surrendered to facilitate exercise                 |   |   | (135 | ) |   |   |   |   |   |   |   | (135 | ) |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recognition                    of compensation expense relating to restricted                  common stock                                                                                              |   |   | 415 |   |   |   |   |   |   |   |   | 415 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax                  benefit from share-based payments                                                                                                                                                   |   |   | 721 |   |   |   |   |   |   |   |   | 721 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                    of 24,506 shares to employee stock ownership                  plan                                                                                                           |   |   | 1,132 |   |   |   |   |   |   |   |   | 1,132 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  dividends paid ($0.25 per share)                                                                                                                                                   |   |   |   |   |   | (4,261 | ) |   |   |   |   | (4,261 | ) |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Components                  of comprehensive income:                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income for the period                                                                                                                                                               |   |   |   |   |   | 6,271 |   |   |   |   |   | 6,271 |   |
| Market                    value adjustment for investment securities                      available for sale (net of income                  tax effect)                                                 |   |   |   |   |   |   |   |   | 43 |   |   | 43 |   |
| Comprehensive                  income for the period                                                                                                                                                     |   |   |   |   |   |               |   |   |   |   |   | 6,314 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |  |   |
| BALANCES                  AT MARCH 31, 2007                                                                                                                                                              |   | $ | 267,304 |   | $ | 114,789 |   | $ | (101 | ) | $ | 381,992 |   |

----

| CAPITOL                  BANCORP LIMITED                                                                             |   |
|----------------------------------------------------------------------------------------------------------------------|--------|
| Condensed                  Consolidated Statements of Cash Flows (Unaudited)                                         |   |
| For                  the Three Months Ended March 31, 2007 and 2006                                                  |   |
| (in                  thousands)                                                                                      |   |
|                                                                                                                 |   |   |   |   |   |
|                                                                                                                 |   | 2007 |   | 2006 |   |
| OPERATING                  ACTIVITIES                                                                                |   |   |   |   |   |
| Net                  income                                                                                          |   | $ | 6,271 |   | $ | 9,953 |   |
| Adjustments                    to reconcile net income to netcash                  provided by operating activities: |   |   |   |   |   |   |   |
| Provision                  for loan losses                                                                           |   |   | 3,932 |   |   | 2,456 |   |
| Depreciation                  of premises and equipment                                                              |   |   | 2,164 |   |   | 1,660 |   |
| Amortization                  of intangibles                                                                         |   |   | 146 |   |   | 146 |   |
| Net                  accretion of investment security discounts                                                      |   |   |  |   |   | (1 | ) |
| Loss                  (gain) on sale of premises and equipment                                                       |   |   | (17 | ) |   | 12 |   |
| Minority                  interest in net losses of consolidated subsidiaries                                        |   |   | (3,524 | ) |   | (2,159 | ) |
| Compensation                  expense relating to restricted common stock                                            |   |   | 415 |   |   | 384 |   |
| Originations                  and purchases of loans held for sale                                                   |   |   | (132,370 | ) |   | (114,117 | ) |
| Proceeds                  from sales of loans held for sale                                                          |   |   | 139,101 |   |   | 113,646 |   |
| Decrease                  in accrued interest income and other assets                                                |   |   | 2,466 |   |   | 3,699 |   |
| Increase                    (decrease) in accrued interest expense ondeposits                  and other liabilities |   |   | 1,090 |   |   | (5,915 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| NET                  CASH PROVIDED BY OPERATING ACTIVITIES                                                           |   |   | 19,674 |   |   | 9,764 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| INVESTING                  ACTIVITIES                                                                                |   |   |   |   |   |   |   |
| Proceeds                    from sales of investment securities available for                  sale                  |   |   |  |   |   | 12 |   |
| Proceeds                    from calls, prepayments and maturities of investment                  securities         |   |   | 3,187 |   |   | 1,517 |   |
| Purchases                  of investment securities                                                                  |   |   | (1,096 | ) |   | (3,907 | ) |
| Net                  increase in portfolio loans                                                                     |   |   | (134,597 | ) |   | (79,826 | ) |
| Proceeds                  from sales of premises and equipment                                                       |   |   | 172 |   |   | 23 |   |
| Purchases                  of premises and equipment                                                                 |   |   | (3,336 | ) |   | (5,301 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| NET                  CASH USED BY INVESTING ACTIVITIES                                                               |   |   | (135,670 | ) |   | (87,482 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| FINANCING                  ACTIVITIES                                                                                |   |   |   |   |   |   |   |
| Net                  increase in demand deposits, NOW accounts andsavings                  accounts                  |   |   | 16,872 |   |   | 58,300 |   |
| Net                  increase in certificates of deposit                                                             |   |   | 116,678 |   |   | 94,789 |   |
| Net                  payments on debt obligations                                                                    |   |   | (18,154 | ) |   | (8,461 | ) |
| Net                  proceeds from issuance of subordinated debentures                                               |   |   | 55,000 |   |   |  |   |
| Resources                  provided by minority interests                                                            |   |   | 8,036 |   |   | 6,272 |   |
| Net                  proceeds from issuance of common stock                                                          |   |   | (135 | ) |   | 931 |   |
| Tax                  benefit from share-based payments                                                               |   |   | 721 |   |   | 518 |   |
| Cash                  dividends paid                                                                                 |   |   | (4,261 | ) |   | (3,173 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| NET                  CASH PROVIDED BY FINANCING ACTIVITIES                                                           |   |   | 174,757 |   |   | 149,176 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| INCREASE                  IN CASH AND CASH EQUIVALENTS                                                               |   |   | 58,761 |   |   | 71,458 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| Cash                  and cash equivalents at beginning of period                                                    |   |   | 348,870 |   |   | 306,108 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS AT END OF PERIOD                                                          |   | $ | 407,631 |   | $ | 377,566 |   |

----

**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                               |   |                                                                  | (41,518   | )                        |   |    10.81                to    10.21 |   |   | 17.64 |
| Granted                                 |   |                                                                  | --        |                     |   |                                                         |   |   |   |
| Cancelled                or expired     |   |                                                                  | --        |                     |   |                                                         |   |   |    |
|                                    |   |                                                                  |      |                     |   |                                                         |   |   |   |
| Outstanding                at March 31  |   |                                                                  | 2,528,573 |                     | $      |                   11.00 to $ 37.48                 |   | $ | 27.01 |

----

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**CAPITOL      BANCORP LIMITED - Continued**

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

|                                                                                        |   |                    |                                | Weighted                Average |   |                     |   |
|---------------------------------------------------------------------------------------------|--------|-------------------------|-------------------------------------|---------------------------------|--------|--------------------------|--------|
|  Exercise                Price Range                                                   |   |  NumberOutstanding |                                |  ExercisePrice             |   | RemainingContractualLife |   | AggregateIntrinsicValue |   |
|                           $10.00 to 14.99 |   |                    |                   119,692 |                            | $      | 11.22                    |   |   | 0.34                years |   | $ | 3,067,706 |   |
|                           $15.00 to 19.99      |   |                    |                   279,169 |                            |   | 16.62                    |   |   | 2.58                years |   |   | 5,647,589 |   |
|                           $20.00 to 24.99 |   |                    |                   452,562 |                            |   | 21.67                    |   |   | 2.87                years |   |   | 6,869,891 |     |
|                           $25.00 to 29.99 |   |                    |                   630,857 |                            |   | 27.02                    |   |   | 3.20                years |   |   | 6,201,324 |   |
|                           $30.00 to 34.99 |   |                    |                   697,506 |                            |   | 32.11                    |   |   | 4.44                years |   |   | 3,306,178 |   |
|                           $35.00 or more  |   |                    |                   348,787 |                            |   | 37.48                    |   |   | 5.62                years |   |   | (219,736 | ) |
|                                                                                        |   |                    |                                |                            |   |                     |   |   |   |   |   |   |   |
| Total                outstanding                                                            |   |                    | 2,528,573                           |                            |   |                     |   |   |   |   | $ | 24,872,952 |   |

***Note      D - Net Income Per Share***

|                                                                                                                                                                                     |   | Three                Months EndedMarch                31 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                                                                                                     |   | 2007                                                     |   | 2006 |
|                                                                                                                                                                                     |   |                                                     |   |   |
| Numerator—net                income for the period                                                                                                                                 |   | $                                                        | 6,271 |   | $ | 9,953 |
|                                                                                                                                                                                     |   |                                                     |   |   |   |   |
| Denominator:                                                                                                                                                                             |   |                                                     |   |   |   |   |
| Weighted                average number of sharesoutstanding,                excluding unvestedrestricted                shares (denominator for basic earnings                per share) |   |                                                     | 16,695 |   |   | 15,642 |
|                                                                                                                                                                                     |   |                                                     |   |   |   |   |
| Effect                of dilutive securities:                                                                                                                                            |   |                                                     |   |   |   |   |
| Unvested                restricted shares                                                                                                                                                |   |                                                     | 51 |   |   | 61 |
| Stock                options                                                                                                                                                             |   |                                                     | 572 |   |   | 689 |
| Total                effect of dilutive securities                                                                                                                                       |   |                                                     | 623 |   |   | 750 |
|                                                                                                                                                                                     |   |                                                     |   |   |   |   |
| Denominator                for diluted earnings per share—                                                                                                                         |   |                                                     |   |   |   |   |
| Weighted                average number of shares andpotential                dilution                                                                                                    |   |                                                     | 17,318 |   |   | 16,392 |
|                                                                                                                                                                                     |   |                                                     |   |   |   |   |
| Number                of antidilutive stock options excludedfrom                diluted earnings per share computation                                                                   |   |                                                     | -- |   |   | -- |

----

**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*

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

----

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**CAPITOL      BANCORP LIMITED - Continued**

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

| ·   | 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) |
|-----------------------------------------------------------------------------|--------|---------------------------------------------|
|                                                                        |   | March                  31, 2007             |   | December                  31, 2006 |
| *Eastern                  Regions:*                                         |   |                                        |   |   |
| Great                  Lakes Region:                                        |   |                                        |   |   |
| Ann                  Arbor Commerce Bank                                    |   | $                                           | 322,415 |   | $ | 310,407 |
| Bank                  of Auburn Hills                                       |   |                                        | 34,721 |   |   | 31,559 |
| Bank                  of Belleville                                         |   |                                        | 31,613 |   |   | 24,948 |
| Bank                  of Maumee                                             |   |                                        | 12,524 |   |   | 9,915 |
| Bank                  of Michigan                                           |   |                                        | 58,592 |   |   | 51,287 |
| Brighton                  Commerce Bank                                     |   |                                        | 104,613 |   |   | 103,909 |
| Capitol                  National Bank                                      |   |                                        | 239,389 |   |   | 256,741 |
| Detroit                  Commerce Bank                                      |   |                                        | 110,130 |   |   | 106,233 |
| Elkhart                  Community Bank                                     |   |                                        | 85,285 |   |   | 86,883 |
| Evansville                  Commerce Bank                                   |   |                                        | 22,973 |   |   | 20,772 |
| Goshen                  Community Bank                                      |   |                                        | 75,816 |   |   | 80,137 |
| Grand                  Haven Bank                                           |   |                                        | 126,435 |   |   | 129,033 |
| Kent                  Commerce Bank                                         |   |                                        | 81,291 |   |   | 86,916 |
| Macomb                  Community Bank                                      |   |                                        | 94,428 |   |   | 101,353 |
| Muskegon                  Commerce Bank                                     |   |                                        | 92,498 |   |   | 95,551 |
| Oakland                  Commerce Bank                                      |   |                                        | 127,751 |   |   | 134,437 |
| Ohio                  Commerce Bank                                         |   |                                        | 17,074 |   |   | 14,466 |
| Paragon                  Bank & Trust                                   |   |                                        | 93,943 |   |   | 98,804 |
| Portage                  Commerce Bank                                      |   |                                        | 183,448 |   |   | 179,413 |
| Great                  Lakes Region Total                                   |   |                                        | 1,914,939 |   |   | 1,922,764 |
|                                                                        |   |                                        |   |   |   |   |
| Southeast                  Region:                                          |   |                                        |   |   |   |   |
| Bank                  of Valdosta                                           |   |                                        | 24,502 |   |   | 21,626 |
| Community                  Bank of Rowan                                    |   |                                        | 57,801 |   |   | 45,503 |
| First                  Carolina State Bank                                  |   |                                        | 95,181 |   |   | 93,819 |
| Peoples                  State Bank                                         |   |                                        | 28,598 |   |   | 32,714 |
| Sunrise                  Bank of Atlanta                                    |   |                                        | 24,297 |   |   | 16,990 |
| Southeast                  Region Total                                     |   |                                        | 230,379 |   |   | 210,652 |
|                                                                        |   |                                        |   |   |   |   |
| Midwest                  Region:Summit                  Bank of Kansas City |   |                                        | 31,884 |   |   | 19,529 |
|                                                                        |   |                                        |   |   |   |   |
| Eastern                  Regions Total                                      |   | $                                           | 2,177,202 |   | $ | 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) |
|---------------------------------------------------------------------------|--------|-------------------------------------------|
|                                                                      |   | March                31, 2007             |   | December                31, 2006 |
|                                                                      |   |                                      |   |   |
| Eastern                Regions Total (from preceding                page) |   | $                                         | 2,177,202 |   | $ | 2,152,945 |
|                                                                      |   |                                      |   |   |   |   |
| *Western                Regions:*                                         |   |                                      |   |   |   |   |
| Southwest                Region:                                          |   |                                      |   |   |   |   |
| 1st                Commerce Bank                                          |   |                                      | 17,062 |   |   | 14,829 |
| Arrowhead                Community Bank                                   |   |                                      | 89,413 |   |   | 79,152 |
| Asian                Bank of Arizona                                      |   |                                      | 19,225 |   |   | 20,248 |
| Bank                of Las Vegas                                          |   |                                      | 75,135 |   |   | 67,478 |
| Bank                of Tucson                                             |   |                                      | 189,445 |   |   | 187,683 |
| Black                Mountain Community Bank                              |   |                                      | 150,079 |   |   | 138,961 |
| Camelback                Community Bank                                   |   |                                      | 86,905 |   |   | 83,003 |
| Desert                Community Bank                                      |   |                                      | 93,994 |   |   | 93,914 |
| Fort                Collins Commerce Bank                                 |   |                                      | 60,148 |   |   | 54,410 |
| Mesa                Bank                                                  |   |                                      | 206,561 |   |   | 201,776 |
| Red                Rock Community Bank                                    |   |                                      | 109,102 |   |   | 108,362 |
| Southern                Arizona Community Bank                            |   |                                      | 87,618 |   |   | 85,912 |
| Sunrise                Bank of Albuquerque                                |   |                                      | 63,469 |   |   | 59,798 |
| Sunrise                Bank of Arizona                                    |   |                                      | 117,188 |   |   | 119,785 |
| Valley                First Community Bank                                |   |                                      | 69,739 |   |   | 72,333 |
| Yuma                Community Bank                                        |   |                                      | 72,126 |   |   | 74,477 |
| Southwest                Region Total                                     |   |                                      | 1,507,209 |   |   | 1,462,121 |
|                                                                      |   |                                      |   |   |   |   |
| California                Region:                                         |   |                                      |   |   |   |   |
| Bank                of Escondido                                          |   |                                      | 88,000 |   |   | 82,412 |
| Bank                of San Francisco                                      |   |                                      | 28,659 |   |   | 28,122 |
| Bank                of Santa Barbara                                      |   |                                      | 47,815 |   |   | 42,559 |
| Napa                Community Bank                                        |   |                                      | 120,147 |   |   | 99,009 |
| Point                Loma Community Bank                                  |   |                                      | 48,227 |   |   | 43,715 |
| Sunrise                Bank of San Diego                                  |   |                                      | 83,055 |   |   | 71,170 |
| Sunrise                Community Bank(2)                                  |   |                                      | 11,148 |   |   |   |
| California                Region Total                                    |   |                                      | 427,051 |   |   | 366,987 |
|                                                                      |   |                                      |   |   |   |   |
| Northwest                Region:                                          |   |                                      |   |   |   |   |
| Bank                of Bellevue                                           |   |                                      | 36,424 |   |   | 33,155 |
| Bank                of Everett                                            |   |                                      | 21,365 |   |   | 20,061 |
| Bank                of Tacoma(1)                                          |   |                                      | 16,113 |   |   |   |
| Northwest                Region Total                                     |   |                                      | 73,902 |   |   | 53,216 |
|                                                                      |   |                                      |   |   |   |   |
| Western                Regions Total                                      |   |                                      | 2,008,162 |   |   | 1,882,324 |
|                                                                      |   |                                      |   |   |   |   |
| Other,                net                                                 |   |                                      | 69,162 |   |   | 30,547 |
|                                                                      |   |                                      |   |   |   |   |
| Consolidated                Totals                                        |   | $                                         | 4,254,526 |   | $ | 4,065,816 |

| (1) | Commenced                operations in January 2007 and is 51%-owned by Capitol Development                Bancorp                LimitedVI,                a controlled subsidiary of Capitol.                 |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Commenced                operations in February 2007 and is 51%-owned by Capitol Development                Bancorp                LimitedVI,                a controlled subsidiary of                Capitol. |

----

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

**AND      RESULTS OF OPERATIONS - Continued**

***Financial      Condition - Continued***

|                                                                                                      |   | 2007   |      | 2006   |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|
| Allowance                for loan losses at January 1                                                     |   | $      | 45,414    |   | $      | 40,559 |   |
|                                                                                                      |   |   |      |   |   |   |   |
| Loans                charged-off:                                                                         |   |   |      |   |   |   |   |
| Commercial                                                                                                |   |   | (2,444    | )      |   | (1,718 | ) |
| Real                estate mortgage                                                                       |   |   |      |   |   | (25 | ) |
| Installment                                                                                               |   |   | (193      | )      |   | (112 | ) |
| Total                charge-offs                                                                          |   |   | (2,637    | )      |   | (1,855 | ) |
| Recoveries:                                                                                               |   |   |      |   |   |   |   |
| Commercial                                                                                                |   |   | 242       |   |   | 353 |   |
| Real                estate mortgage                                                                       |   |   | 1         |   |   | 1 |   |
| Installment                                                                                               |   |   | 100       |   |   | 86 |   |
| Total                recoveries                                                                           |   |   | 343       |   |   | 440 |   |
| Net                charge-offs                                                                            |   |   | (2,294    | )      |   | (1,415 | ) |
| Additions                to allowance charged to expense                                                  |   |   | 3,932     |   |   | 2,456 |   |
|                                                                                                      |   |   |      |   |   |   |   |
| Allowance                for loan losses at March 31                                                      |   | $      | 47,052    |   | $      | 41,600 |   |
|                                                                                                      |   |   |      |   |   |   |   |
| Average                total portfolio loans for period ended March                31                |   | $      | 3,555,432 |   | $      | 3,010,849 |   |
|                                                                                                      |   |   |      |   |   |   |   |
| Ratio                of net charge-offs (annualized) to averageportfolio                loans outstanding |   |   | 0.26      | %      |   | 0.19 | % |

----

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

**AND      RESULTS OF OPERATIONS - Continued**

***Financial      Condition - Continued***

|                                             |   | March                31, 2007 |      | December                31, 2006 |   |
|--------------------------------------------------|--------|-------------------------------|-----------|----------------------------------|--------|
|                                             |   |                          |      | Percentage                       |   |   |   | Percentage |   |
|                                             |   |                          |      | of                Total          |   |   |   | of                Total |   |
|                                             |   |                          |      | Portfolio                        |   |   |   | Portfolio |   |
|                                             |   | Amount                        |      | Loans                            |   | Amount |   | Loans |   |
|                                             |   |                          |      |                             |   |   |   |   |   |
| Commercial                                       |   | $                             | 42,354    |                             |   | 1.17 | % | $ | 41,178 |   |   | 1.18 | % |
| Real                estate mortgage              |   |                          | 2,443     |                             |   | 0.07 |   |   | 2,675 |   |   | 0.08 |   |
| Installment                                      |   |                          | 2,255     |                             |   | 0.06 |   |   | 1,561 |   |   | 0.04 |   |
|                                             |   |                          |      |                             |   |   |   |   |   |   |   |   |   |
| Total                allowance for loan losses   |   | $                             | 47,052    |                             |   | 1.30 | % | $ | 45,414 |   |   | 1.30 | % |
|                                             |   |                          |      |                             |   |   |   |   |   |   |   |   |   |
| Total                portfolio loans outstanding |   | $                             | 3,620,981 |                             |   |   |   | $ | 3,488,678 |   |   |   |   |

|                                                          |   | March                31, |   | December                31, |
|---------------------------------------------------------------|--------|--------------------------|--------|-----------------------------|
|                                                          |   | 2007                     |   | 2006                        |
| Nonaccrual                loans:                              |   |                     |   |                        |   |   |
| Commercial                                                    |   | $                        | 27,764 |                        | $ | 25,219 |
| Real                estate mortgage                           |   |                     | 3,225  |                        |   | 3,609 |
| Installment                                                   |   |                     | 1,003  |                        |   | 898 |
| Total                nonaccrual loans                         |   |                     | 31,992 |                        |   | 29,726 |
|                                                          |   |                     |   |                        |   |   |
| Past                due (>90                days) loans:   |   |                     |   |                        |   |   |
| Commercial                                                    |   |                     | 4,376  |                        |   | 3,860 |
| Real                estate mortgage                           |   |                     | 314    |                        |   | 523 |
| Installment                                                   |   |                     | 77     |                        |   | 165 |
| Total                past due loans                           |   |                     | 4,767  |                        |   | 4,548 |
|                                                          |   |                     |   |                        |   |   |
| Total                nonperforming loans                      |   | $                        | 36,759 |                        | $ | 34,274 |
|                                                          |   |                     |   |                        |   |   |
| Real                estate owned and other repossessed assets |   |                     | 9,114  |                        |   | 9,478 |
|                                                          |   |                     |   |                        |   |   |
| Total                nonperforming assets                     |   | $                        | 45,873 |                        | $ | 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  |   |
|                                                                    |   | March                31,       |      | Dec                31,       |   | March                31, |   | Dec                31,                   |   | March                31, |   | Dec                31, |   | March                31, |   | Dec                31, |   |
|                                                                    |   | 2007                           |      | 2006                         |   | 2007                     |   | 2006                                     |   | 2007 |   | 2006 |   | 2007 |   | 2006 |   |
| *Eastern                Regions:*                                       |   |                           |      |                         |   |                     |   |                                     |   |   |   |   |   |   |   |   |   |
| Great                Lakes Region:                                      |   |                           |      |                         |   |                     |   |                                     |   |   |   |   |   |   |   |   |   |
| Ann                Arbor Commerce Bank                                  |   | $                              | 297,711   |                         | $      | 288,408                  |   | $                                        | 4,496  |   | $ | 4,393 |   | $ | 3,913 |   | $ | 4,441 |   | 1.51 | % |   | 1.52 | % |
| Bank                of Auburn Hills                                     |   |                           | 30,670    |                         |   | 26,432                   |   |                                     | 460    |   |   | 410 |   |   | 946 |   |   | 629 |   | 1.50 | % |   | 1.55 | % |
| Bank                of Belleville                                       |   |                           | 21,359    |                         |   | 17,410                   |   |                                     | 320    |   |   | 260 |   |   |   |   |   |   |   | 1.50 | % |   | 1.49 | % |
| Bank                of Maumee                                           |   |                           | 8,653     |                         |   | 3,327                    |   |                                     | 131    |   |   | 50 |   |   |   |   |   |   |   | 1.51 | % |   | 1.50 | % |
| Bank                of Michigan                                         |   |                           | 53,024    |                         |   | 44,630                   |   |                                     | 798    |   |   | 669 |   |   |   |   |   |   |   | 1.50 | % |   | 1.50 | % |
| Brighton                Commerce Bank                                   |   |                           | 93,740    |                         |   | 94,987                   |   |                                     | 950    |   |   | 995 |   |   |   |   |   | 522 |   | 1.01 | % |   | 1.05 | % |
| Capitol                National Bank                                    |   |                           | 199,866   |                         |   | 196,074                  |   |                                     | 3,217  |   |   | 2,833 |   |   | 4,775 |   |   | 3,365 |   | 1.61 | % |   | 1.44 | % |
| Detroit                Commerce Bank                                    |   |                           | 102,497   |                         |   | 103,153                  |   |                                     | 1,315  |   |   | 1,335 |   |   | 1,283 |   |   | 1,328 |   | 1.28 | % |   | 1.29 | % |
| Elkhart                Community Bank                                   |   |                           | 77,149    |                         |   | 77,515                   |   |                                     | 1,058  |   |   | 1,010 |   |   | 1,573 |   |   | 676 |   | 1.37 | % |   | 1.30 | % |
| Evansville                Commerce Bank                                 |   |                           | 21,266    |                         |   | 14,711                   |   |                                     | 319    |   |   | 232 |   |   |   |   |   |   |   | 1.50 | % |   | 1.58 | % |
| Goshen                Community Bank                                    |   |                           | 64,440    |                         |   | 63,653                   |   |                                     | 879    |   |   | 862 |   |   |   |   |   | 233 |   | 1.36 | % |   | 1.35 | % |
| Grand                Haven Bank                                         |   |                           | 120,656   |                         |   | 120,025                  |   |                                     | 2,646  |   |   | 2,643 |   |   | 3,157 |   |   | 2,682 |   | 2.19 | % |   | 2.20 | % |
| Kent                Commerce Bank                                       |   |                           | 75,725    |                         |   | 83,065                   |   |                                     | 1,283  |   |   | 1,237 |   |   | 881 |   |   | 2,256 |   | 1.69 | % |   | 1.49 | % |
| Macomb                Community Bank                                    |   |                           | 87,541    |                         |   | 87,737                   |   |                                     | 1,895  |   |   | 1,670 |   |   | 6,075 |   |   | 3,738 |   | 2.16 | % |   | 1.90 | % |
| Muskegon                Commerce Bank                                   |   |                           | 83,305    |                         |   | 81,799                   |   |                                     | 1,143  |   |   | 1,231 |   |   | 1,282 |   |   | 3,906 |   | 1.37 | % |   | 1.50 | % |
| Oakland                Commerce Bank                                    |   |                           | 113,165   |                         |   | 114,876                  |   |                                     | 1,780  |   |   | 1,636 |   |   | 1,851 |   |   | 2,862 |   | 1.57 | % |   | 1.42 | % |
| Ohio                Commerce Bank                                       |   |                           | 3,260     |                         |   | 739                      |   |                                     | 46     |   |   | 11 |   |   |   |   |   |   |   | 1.41 | % |   | 1.49 | % |
| Paragon                Bank & Trust                                 |   |                           | 82,956    |                         |   | 82,259                   |   |                                     | 1,362  |   |   | 1,298 |   |   | 2,428 |   |   | 2,132 |   | 1.64 | % |   | 1.58 | % |
| Portage                Commerce Bank                                    |   |                           | 173,104   |                         |   | 167,005                  |   |                                     | 1,784  |   |   | 1,729 |   |   | 1,396 |   |   | 1,380 |   | 1.03 | % |   | 1.04 | % |
| Great                Lakes Region Total                                 |   |                           | 1,710,087 |                         |   | 1,667,805                |   |                                     | 25,882 |   |   | 24,504 |   |   | 29,560 |   |   | 30,150 |   | 1.51 | % |   | 1.47 | % |
|                                                                    |   |                           |      |                         |   |                     |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southeast                Region:                                        |   |                           |      |                         |   |                     |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                of Valdosta                                         |   |                           | 22,383    |                         |   | 18,870                   |   |                                     | 335    |   |   | 283 |   |   |   |   |   |   |   | 1.50 | % |   | 1.50 | % |
| Community                Bank of Rowan                                  |   |                           | 48,177    |                         |   | 36,534                   |   |                                     | 704    |   |   | 534 |   |   |   |   |   |   |   | 1.46 | % |   | 1.46 | % |
| First                Carolina State Bank                                |   |                           | 73,922    |                         |   | 73,884                   |   |                                     | 822    |   |   | 800 |   |   | 266 |   |   | 150 |   | 1.11 | % |   | 1.08 | % |
| Peoples                State Bank                                       |   |                           | 13,160    |                         |   | 15,154                   |   |                                     | 262    |   |   | 263 |   |   |   |   |   |  |   | 1.99 | % |   | 1.74 | % |
| Sunrise                Bank of Atlanta                                  |   |                           | 21,555    |                         |   | 14,553                   |   |                                     | 327    |   |   | 215 |   |   |   |   |   |   |   | 1.52 | % |   | 1.48 | % |
| Southeast                Region Total                                   |   |                           | 179,197   |                         |   | 158,995                  |   |                                     | 2,450  |   |   | 2,095 |   |   | 266 |   |   | 150 |   | 1.37 | % |   | 1.32 | % |
|                                                                    |   |                           |      |                         |   |                     |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Midwest                Region:Summit                Bank of Kansas City |   |                           | 22,757    |                         |   | 15,645                   |   |                                     | 329    |   |   | 235 |   |   |    |   |   |    |   | 1.45 | % |   | 1.50 | % |
|                                                                    |   |                           |      |                         |   |                     |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                Regions Total                                    |   | $                              | 1,912,041 |                         | $      | 1,842,445                |   | $                                        | 28,661 |   | $ | 26,834 |   | $ | 29,826 |   | $ | 30,300 |   | 1.50 | % |   | 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  |   |
|                                                                         |   | March                  31,       |      | Dec                  31,       |   | March                  31, |   | Dec                  31,                   |   | March                  31, |   | Dec                  31, |   | March                  31, |   | Dec                  31, |   |
|                                                                         |   | 2007                             |      | 2006                           |   | 2007                       |   | 2006                                       |   | 2007 |   | 2006 |   | 2007 |   | 2006 |   |
| Eastern                  Regions Total (frompreceding                  page) |   | $                                | 1,912,041 |                           | $      | 1,842,445                  |   | $                                          | 28,661 |   | $ | 26,834 |   | $ | 29,826 |   | $ | 30,300 |   | 1.50 | % |   | 1.46 | % |
|                                                                         |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Western                  Regions:*                                          |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southwest                  Region:                                           |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1st                  Commerce Bank                                           |   |                             | 12,094    |                           |   | 9,588                      |   |                                       | 157    |   |   | 125 |   |   |   |   |   |   |   | 1.30 | % |   | 1.30 | % |
| Arrowhead                  Community Bank                                    |   |                             | 73,514    |                           |   | 71,252                     |   |                                       | 680    |   |   | 720 |   |   | 193 |   |   | 855 |   | 0.92 | % |   | 1.01 | % |
| Asian                  Bank of Arizona                                       |   |                             | 16,494    |                           |   | 14,499                     |   |                                       | 220    |   |   | 200 |   |   |   |   |   |   |   | 1.33 | % |   | 1.38 | % |
| Bank                  of Las Vegas                                           |   |                             | 63,770    |                           |   | 62,818                     |   |                                       | 715    |   |   | 705 |   |   |   |   |   |   |   | 1.12 | % |   | 1.12 | % |
| Bank                  of Tucson                                              |   |                             | 155,990   |                           |   | 160,009                    |   |                                       | 1,485  |   |   | 1,472 |   |   | 195 |   |   | 199 |   | 0.95 | % |   | 0.92 | % |
| Black                  Mountain Community Bank                               |   |                             | 131,231   |                           |   | 127,844                    |   |                                       | 1,570  |   |   | 1,529 |   |   |   |   |   |  |   | 1.20 | % |   | 1.20 | % |
| Camelback                  Community Bank                                    |   |                             | 81,107    |                           |   | 78,922                     |   |                                       | 800    |   |   | 733 |   |   | 11 |   |   | 46 |   | 0.99 | % |   | 0.93 | % |
| Desert                  Community Bank                                       |   |                             | 85,400    |                           |   | 83,284                     |   |                                       | 850    |   |   | 830 |   |   | 69 |   |   | 137 |   | 1.00 | % |   | 1.00 | % |
| Fort                  Collins Commerce Bank                                  |   |                             | 57,233    |                           |   | 52,147                     |   |                                       | 744    |   |   | 695 |   |   |   |   |   |   |   | 1.30 | % |   | 1.33 | % |
| Mesa                  Bank                                                   |   |                             | 191,730   |                           |   | 189,863                    |   |                                       | 1,805  |   |   | 1,794 |   |   | 346 |   |   |   |   | 0.94 | % |   | 0.94 | % |
| Red                  Rock Community Bank                                     |   |                             | 99,100    |                           |   | 100,010                    |   |                                       | 998    |   |   | 1,084 |   |   | 125 |   |   | 151 |   | 1.01 | % |   | 1.08 | % |
| Southern                  Arizona Community Bank                             |   |                             | 75,552    |                           |   | 77,845                     |   |                                       | 765    |   |   | 775 |   |   |   |   |   | 16 |   | 1.01 | % |   | 1.00 | % |
| Sunrise                  Bank of Albuquerque                                 |   |                             | 60,836    |                           |   | 53,027                     |   |                                       | 869    |   |   | 778 |   |   |   |   |   |  |   | 1.43 | % |   | 1.47 | % |
| Sunrise                  Bank of Arizona                                     |   |                             | 108,241   |                           |   | 112,720                    |   |                                       | 1,115  |   |   | 1,126 |   |   |   |   |   | 246 |   | 1.03 | % |   | 1.00 | % |
| Valley                  First Community Bank                                 |   |                             | 64,301    |                           |   | 66,256                     |   |                                       | 560    |   |   | 611 |   |   |   |   |   |   |   | 0.87 | % |   | 0.92 | % |
| Yuma                  Community Bank                                         |   |                             | 60,281    |                           |   | 58,577                     |   |                                       | 520    |   |   | 500 |   |   |   |   |   |   |   | 0.86 | % |   | 0.85 | % |
| Southwest                  Region Total                                      |   |                             | 1,336,874 |                           |   | 1,318,661                  |   |                                       | 13,853 |   |   | 13,677 |   |   | 939 |   |   | 1,650 |   | 1.04 | % |   | 1.04 | % |
|                                                                         |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| California                  Region:                                          |   |                             |           |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  of Escondido                                           |   |                             | 41,975    |                           |   | 37,398                     |   |                                       | 420    |   |   | 370 |   |   | 18 |   |   | 19 |   | 1.00 | % |   | 0.99 | % |
| Bank                  of San Francisco                                       |   |                             | 26,068    |                           |   | 26,415                     |   |                                       | 378    |   |   | 375 |   |   |   |   |   |   |   | 1.45 | % |   | 1.42 | % |
| Bank                  of Santa Barbara                                       |   |                             | 42,877    |                           |   | 40,198                     |   |                                       | 600    |   |   | 533 |   |   |   |   |   |   |   | 1.40 | % |   | 1.33 | % |
| Napa                  Community Bank                                         |   |                             | 77,912    |                           |   | 78,467                     |   |                                       | 1,005  |   |   | 1,020 |   |   | 1,503 |   |   |  |   | 1.29 | % |   | 1.30 | % |
| Point                  Loma Community Bank                                   |   |                             | 39,887    |                           |   | 38,018                     |   |                                       | 547    |   |   | 510 |   |   |   |   |   |   |   | 1.37 | % |   | 1.34 | % |
| Sunrise                  Bank of San Diego                                   |   |                             | 62,930    |                           |   | 65,250                     |   |                                       | 520    |   |   | 540 |   |   |   |   |   |   |   | 0.83 | % |   | 0.83 | % |
| Sunrise                  Community Bank(2)                                   |   |                             | 3,303     |                           |   |                       |   |                                       | 45     |   |   |   |   |   |   |   |   |   |   | 1.36 | % |   |   |   |
| California                  Region Total                                     |   |                             | 294,952   |                           |   | 285,746                    |   |                                       | 3,515  |   |   | 3,348 |   |   | 1,521 |   |   | 19 |   | 1.19 | % |   | 1.17 | % |
|                                                                         |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northwest                  Region:                                           |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  of Bellevue                                            |   |                             | 34,501    |                           |   | 28,037                     |   |                                       | 488    |   |   | 370 |   |   |   |   |   |   |   | 1.41 | % |   | 1.32 | % |
| Bank                  of Everett                                             |   |                             | 18,052    |                           |   | 8,269                      |   |                                       | 255    |   |   | 122 |   |   |   |   |   |   |   | 1.41 | % |   | 1.48 | % |
| Bank                  of Tacoma(1)                                           |   |                             | 8,605     |                           |   |                       |   |                                       | 118    |   |   |   |   |   |  |   |   |  |   | 1.37 | % |   |   |   |
| Northwest                  Region Total                                      |   |                             | 61,158    |                           |   | 36,306                     |   |                                       | 861    |   |   | 492 |   |   |   |   |   |   |   | 1.41 | % |   | 1.36 | % |
|                                                                         |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Western                  Regions Total                                       |   |                             | 1,692,984 |                           |   | 1,640,713                  |   |                                       | 18,229 |   |   | 17,517 |   |   | 2,460 |   |   | 1,669 |   | 1.08 | % |   | 1.07 | % |
|                                                                         |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other,                  net                                                  |   |                             | 15,956    |                           |   | 5,520                      |   |                                       | 162    |   |   | 1,063 |   |   | 4,473 |   |   | 2,305 |   |   |   |   |                      |   |
|                                                                         |   |                             |      |                           |   |                       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                  Totals                                         |   | $                                | 3,620,981 |                           | $      | 3,488,678                  |   | $                                          | 47,052 |   | $ | 45,414 |   | $ | 36,759 |   | $ | 34,274 |   | 1.30 | % |   | 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.               |

***Results      of Operations***

----

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

**AND      RESULTS OF OPERATIONS - Continued**

***Results      of Operations - Continued***

*de      novo*

|                                                                                      |   | Three                months ended March 31 |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------------|
|                                                                                      |   | 2007                                       |   | 2006 |
| Preopening                and start-up costs                                              |   | $                                          | 928 |   | $ | 596 |
| Advertising                                                                               |   |                                       | 736 |   |   | 633 |
| Directors'                fees                                                            |   |                                       | 683 |   |   | 581 |
| Paper,                printing and supplies                                               |   |                                       | 652 |   |   | 546 |
| Loan                and collection expense                                                |   |                                       | 613 |   |   | 268 |
| Travel,                lodging and meals                                                  |   |                                       | 585 |   |   | 424 |
| Regulatory                fees                                                            |   |                                       | 571 |   |   | 194 |
| Bank                services (ATMs, telephonebanking                and Internet banking) |   |                                       | 557 |   |   | 334 |
| Professional                fees                                                          |   |                                       | 506 |   |   | 636 |
| Taxes                other than income taxes                                              |   |                                       | 489 |   |   | 378 |
| Communications                                                                            |   |                                       | 405 |   |   | 310 |
| Postage                                                                                   |   |                                       | 263 |   |   | 243 |
| Courier                service                                                            |   |                                       | 236 |   |   | 194 |
| Other                                                                                     |   |                                       | 2,388 |   |   | 301 |
| Total                                                                                     |   | $                                          | 9,612 |   | $ | 5,638 |

----

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

**AND      RESULTS OF OPERATIONS - Continued**

***Results      of Operations***
***-***
***Continued***

|                                                                    |   | Three                months ended March 31 |   |
|-------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                    |   |                                       |   |   |   | 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                                  |   | $                                          | 6,182  |   | $ | 5,791 |   | $ | 839 |   | $ | 926 |   |   | 13.35 | % |   | 13.99 | % |   | 1.07 | % |   | 1.21 | % |
| Bank                of Auburn Hills                                     |   |                                       | 757    |   |   | 235 |   |   | 11 |   |   | (151 | ) |   | 0.61 |   |   | n/a |   |   | 0.14 |   |   | n/a |   |
| Bank                of Belleville                                       |   |                                       | 421    |   |   | 198 |   |   | (157 | ) |   | (188 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Bank                of Maumee                                           |   |                                       | 185    |   |   | n/a |   |   | (344 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Bank                of Michigan                                         |   |                                       | 1,080  |   |   | 644 |   |   | (120 | ) |   | (150 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Brighton                Commerce Bank                                   |   |                                       | 1,961  |   |   | 1,892 |   |   | 142 |   |   | 211 |   |   | 6.21 |   |   | 8.96 |   |   | 0.55 |   |   | 0.80 |   |
| Capitol                National Bank                                    |   |                                       | 4,534  |   |   | 4,282 |   |   | 484 |   |   | 777 |   |   | 10.32 |   |   | 16.29 |   |   | 0.81 |   |   | 1.28 |   |
| Detroit                Commerce Bank                                    |   |                                       | 2,317  |   |   | 2,093 |   |   | 240 |   |   | 135 |   |   | 10.72 |   |   | 7.00 |   |   | 0.91 |   |   | 0.63 |   |
| Elkhart                Community Bank                                   |   |                                       | 1,697  |   |   | 1,472 |   |   | 145 |   |   | 264 |   |   | 6.72 |   |   | 12.96 |   |   | 0.69 |   |   | 1.39 |   |
| Evansville                Commerce Bank                                 |   |                                       | 423    |   |   | n/a |   |   | (209 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Goshen                Community Bank                                    |   |                                       | 1,487  |   |   | 1,219 |   |   | 140 |   |   | 82 |   |   | 7.68 |   |   | 4.96 |   |   | 0.74 |   |   | 0.49 |   |
| Grand                Haven Bank                                         |   |                                       | 2,401  |   |   | 2,290 |   |   | 233 |   |   | 285 |   |   | 8.51 |   |   | 11.04 |   |   | 0.75 |   |   | 0.93 |   |
| Kent                Commerce Bank                                       |   |                                       | 1,777  |   |   | 1,495 |   |   | (18 | ) |   | 58 |   |   | n/a |   |   | 2.83 |   |   | n/a |   |   | 0.30 |   |
| Macomb                Community Bank                                    |   |                                       | 1,791  |   |   | 1,770 |   |   | (257 | ) |   | (28 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Muskegon                Commerce Bank                                   |   |                                       | 1,823  |   |   | 1,792 |   |   | (570 | ) |   | 153 |   |   | n/a |   |   | 7.10 |   |   | n/a |   |   | 0.64 |   |
| Oakland                Commerce Bank                                    |   |                                       | 2,471  |   |   | 2,112 |   |   | (79 | ) |   | 332 |   |   | n/a |   |   | 14.09 |   |   | n/a |   |   | 1.17 |   |
| Ohio                Commerce Bank                                       |   |                                       | 211    |   |   | n/a |   |   | (184 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Paragon                Bank & Trust                                 |   |                                       | 1,789  |   |   | 1,957 |   |   | 62 |   |   | 269 |   |   | 2.26 |   |   | 9.79 |   |   | 0.26 |   |   | 1.05 |   |
| Portage                Commerce Bank                                    |   |                                       | 3,753  |   |   | 3,577 |   |   | 529 |   |   | 645 |   |   | 13.21 |   |   | 16.14 |   |   | 1.18 |   |   | 1.44 |   |
| Great                Lakes Region Total                                 |   |                                       | 37,060 |   |   | 32,819 |   |   | 887 |   |   | 3,620 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southeast                Region:                                        |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                of Valdosta                                         |   |                                       | 469    |   |   | n/a |   |   | (123 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Community                Bank of Rowan                                  |   |                                       | 1,131  |   |   | 99 |   |   | (87 | ) |   | (563 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| First                Carolina State Bank                                |   |                                       | 1,728  |   |   | 1,513 |   |   | 157 |   |   | 219 |   |   | 5.40 |   |   | 8.20 |   |   | 0.68 |   |   | 1.07 |   |
| Peoples                State Bank                                       |   |                                       | 584    |   |   | 579 |   |   | 70 |   |   | 18 |   |   | 5.89 |   |   | 2.12 |   |   | 1.00 |   |   | 0.24 |   |
| Sunrise                Bank of Atlanta                                  |   |                                       | 774    |   |   | n/a |   |   | (64 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Southeast                Region Total                                   |   |                                       | 4,686  |   |   | 2,191 |   |   | (47 | ) |   | (326 | ) |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Midwest                Region:Summit                Bank of Kansas City |   |                                       | 512    |   |   | 107 |   |   | (129 | ) |   | (174 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
|                                                                    |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eastern                Regions Total                                    |   | $                                          | 42,258 |   | $ | 35,117 |   | $ | 711 |   | $ | 3,120 |   |   |   |   |   |   |   |   |   |   |   |   |   |

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

**AND      RESULTS OF OPERATIONS - Continued**

***Results      of Operations - Continued***

|                                                                     |   | Three                months ended March 31 |   |
|--------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                     |   |                                       |   |   |   | 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) |   | $                                          | 42,258 |   | $ | 35,117 |   | $ | 711 |   | $ | 3,120 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Western                Regions:*                                        |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Southwest                Region:                                         |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1st                Commerce Bank                                         |   |                                       | 331    |   |   | n/a |   |   | (116 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Arrowhead                Community Bank                                  |   |                                       | 2,064  |   |   | 1,869 |   |   | 314 |   |   | 226 |   |   | 14.84 | % |   | 11.59 | % |   | 1.53 | % |   | 1.05 | % |
| Asian                Bank of Arizona                                     |   |                                       | 387    |   |   | n/a |   |   | (77 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Bank                of Las Vegas                                         |   |                                       | 1,445  |   |   | 1,167 |   |   | 130 |   |   | 113 |   |   | 5.81 |   |   | 4.82 |   |   | .0.74 |   |   | .77 |   |
| Bank                of Tucson                                            |   |                                       | 4,028  |   |   | 3,438 |   |   | 1,158 |   |   | 1,058 |   |   | 28.12 |   |   | 29.34 |   |   | 2.55 |   |   | 2.52 |   |
| Black                Mountain Community Bank                             |   |                                       | 3,097  |   |   | 2,474 |   |   | 643 |   |   | 634 |   |   | 19.17 |   |   | 21.81 |   |   | 1.82 |   |   | 1.99 |   |
| Camelback                Community Bank                                  |   |                                       | 1,622  |   |   | 1,468 |   |   | 180 |   |   | 207 |   |   | 8.32 |   |   | 10.31 |   |   | 0.85 |   |   | 1.04 |   |
| Desert                Community Bank                                     |   |                                       | 1,941  |   |   | 1,608 |   |   | 252 |   |   | 297 |   |   | 11.04 |   |   | 14.90 |   |   | 1.11 |   |   | 1.50 |   |
| Fort                Collins Commerce Bank                                |   |                                       | 1,183  |   |   | 639 |   |   | 137 |   |   | (32 | ) |   | 6.67 |   |   | n/a |   |   | 0.97 |   |   | n/a |   |
| Mesa                Bank                                                 |   |                                       | 5,000  |   |   | 4,373 |   |   | 1,059 |   |   | 1,037 |   |   | 22.66 |   |   | 25.69 |   |   | 2.08 |   |   | 2.27 |   |
| Red                Rock Community Bank                                   |   |                                       | 2,256  |   |   | 1,980 |   |   | 438 |   |   | 465 |   |   | 13.54 |   |   | 15.76 |   |   | 1.65 |   |   | 1.88 |   |
| Southern                Arizona Community Bank                           |   |                                       | 1,688  |   |   | 1,586 |   |   | 293 |   |   | 290 |   |   | 13.27 |   |   | 13.46 |   |   | 1.38 |   |   | 1.37 |   |
| Sunrise                Bank of Albuquerque                               |   |                                       | 1,385  |   |   | 1,123 |   |   | 74 |   |   | 120 |   |   | 4.75 |   |   | 7.17 |   |   | 0.49 |   |   | .83 |   |
| Sunrise                Bank of Arizona                                   |   |                                       | 2,394  |   |   | 2,532 |   |   | 142 |   |   | 413 |   |   | 4.94 |   |   | 13.25 |   |   | 0.48 |   |   | 1.47 |   |
| Valley                First Community Bank                               |   |                                       | 1,367  |   |   | 1,402 |   |   | 150 |   |   | 161 |   |   | 7.74 |   |   | 9.24 |   |   | 0.85 |   |   | .86 |   |
| Yuma                Community Bank                                       |   |                                       | 1,493  |   |   | 1,278 |   |   | 239 |   |   | 188 |   |   | 12.52 |   |   | 11.48 |   |   | 1.32 |   |   | 1.24 |   |
| Southwest                Region Total                                    |   |                                       | 31,681 |   |   | 26,937 |   |   | 5,016 |   |   | 5,177 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| California                Region:                                        |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                of Escondido                                         |   |                                       | 1,428  |   |   | 1,238 |   |   | 157 |   |   | 199 |   |   | 4.54 |   |   | 8.21 |   |   | 0.77 |   |   | 1.09 |   |
| Bank                of San Francisco                                     |   |                                       | 549    |   |   | 269 |   |   | (81 | ) |   | (237 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Bank                of Santa Barbara                                     |   |                                       | 974    |   |   | 316 |   |   | (81 | ) |   | (223 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Napa                Community Bank                                       |   |                                       | 2,238  |   |   | 1,630 |   |   | 348 |   |   | 276 |   |   | 11.19 |   |   | 10.27 |   |   | 1.28 |   |   | 1.33 |   |
| Point                Loma Community Bank                                 |   |                                       | 901    |   |   | 774 |   |   | 6 |   |   | 18 |   |   | 0.33 |   |   | 1.05 |   |   | 0.05 |   |   | .19 |   |
| Sunrise                Bank of San Diego                                 |   |                                       | 1,661  |   |   | 1,366 |   |   | 105 |   |   | 231 |   |   | 3.99 |   |   | 8.61 |   |   | 0.53 |   |   | 1.34 |   |
| Sunrise                Community Bank(3)                                 |   |                                       | 50     |   |   | n/a |   |   | (428 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| California                Region Total                                   |   |                                       | 7,801  |   |   | 5,593 |   |   | 26 |   |   | 264 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Northwest                Region                                          |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                of Bellevue                                          |   |                                       | 707    |   |   | 366 |   |   | (89 | ) |   | (141 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Bank                of Everett                                           |   |                                       | 444    |   |   | n/a |   |   | (191 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Bank                of Tacoma(2)                                         |   |                                       | 184    |   |   | n/a |   |   | (473 | ) |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |   | n/a |   |
| Northwest                Region Total                                    |   |                                       | 1,335  |   |   | 366 |   |   | (753 | ) |   | (141 | ) |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Western                Regions Total                                     |   |                                       | 40,817 |   |   | 32,896 |   |   | 4,289 |   |   | 5,300 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other,                net                                                |   |                                       | 349    |   |   | 195 |   |   | 1,271 |   |   | 1,533 |   |   |  |   |   |   |   |   |  |   |   |   |   |
|                                                                     |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                Totals                                       |   | $                                          | 83,424 |   | $ | 68,207 |   | $ | 6,271 |   | $ | 9,953 |   |   | 6.74 | % |   | 13.12 | % |   | 0.61 | % |   | 1.13 | % |

| (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.               |

----

**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 three months ended March 31, 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. None.                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 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 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.  |

----

**SIGNATURES**

| CAPITOL                BANCORP LTD.(Registrant) /s/                Joseph D. Reid              Joseph                D. ReidChairman                and CEO(duly                authorized to sign on behalf of theregistrant)  /s/                Lee W. Hendrickson           Lee                W. HendricksonChief                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.        |

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