EX-99.1 CHARTER 2 ex99-1.htm EXHIBIT 99.1 Exhibit 99.1
EXHIBIT 99.1
 
 
                         
Capitol Bancorp Center
200 Washington Square North
Lansing, MI 48933
 
2777 East Camelback Road
Suite 375
Phoenix, AZ 85016
www.capitolbancorp.com
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Analyst Contact:
 
 
 
Media Contact:
Michael M. Moran
Chief of Capital Markets
877-884-5662
 
Joal Redmond
Corporate Communications
602-977-3797

 

CAPITOL BANCORP ANNOUNCES RECORD FULL YEAR EARNINGS, UP 18%
 

YEAR-END HIGHLIGHTS:

·  
Earnings exceed $42 million, increase 18% over 2005
·  
Diluted earnings per share climb 10% to record $2.57
·  
Nine new community banks added to national network
·  
Wealth management subsidiary launched

4th QUARTER HIGHLIGHTS:

·  
Net income exceeds $11 million, a 14% increase versus last year
·  
Diluted earnings per share climb to a record $0.68
·  
Assets exceed $4 billion for first time
·  
Loans and deposits post annualized linked-quarter double-digit percentage increases

LANSING, Mich., and PHOENIX: Jan. 26, 2007: Today, Capitol Bancorp (NYSE:CBC) reported record year-end earnings for 2006 approximating $42.4 million, an 18 percent increase over 2005’s earnings which approximated $36 million. Basic and diluted earnings per share (EPS) for 2006, also records for Capitol Bancorp, were $2.69 and $2.57, respectively, even while the Corporation experienced a nearly 900,000 share increase, or approximately 6 percent expansion, in the outstanding share count to approximately 16.7 million shares at year-end 2006. For the fourth quarter 2006, Capitol Bancorp reported record earnings approximating $11.4 million, a 14 percent increase over the $10 million in earnings recorded in the preceding year. Record basic and diluted EPS for 2006’s closing quarter of $0.71 and $0.68, respectively, represent an 8 percent and 6 percent increase as compared to 2005’s fourth quarter amounts of $0.66 and $0.64.

Capitol’s balance sheet achieved double-digit growth during 2006 and a significant milestone in total assets at year-end. Total assets exceeded $4 billion at December 31, 2006, reflecting a 17 percent increase ($600 million) from the beginning of the year. Total deposits, approaching $3.3 billion, and total portfolio loans of nearly $3.5 billion, also reflect a 17 percent increase versus
Page 1 of 9

totals posted at year-end 2005. Linked quarter annualized growth in assets (22 percent), portfolio loans (22 percent) and deposits (19 percent), demonstrate the continued momentum of Capitol’s development initiatives across the country.

Capitol Bancorp’s Chairman and CEO, Joseph D. Reid, said the yearly and quarterly financial performance reinforces the Corporation’s efforts to grow its national footprint while validating the benefits of a geographically diverse platform during these challenging economic times in the Great Lakes region.

“We continue to capitalize on opportunities to attract talented bankers in diverse communities to Capitol Bancorp. During the past two years, these efforts have resulted in 18 new banks joining our national network, primarily in the vibrant West, Southwest and Southeast regions. We believe we are well-positioned to continue with a high level of organic growth in 2007,” said Reid.

He added that Capitol’s disciplined growth and management oversight were the major contributors to the Corporation’s earnings for 2006. “Solid revenue growth, reflecting both franchise expansion and balance sheet management during a protracted period of industry-wide margin pressure, continue to position our Corporation to deliver on our objective of balancing compelling shareholder returns with value-added growth,” said Reid.

Quarterly Earnings Performance
Consolidated earnings approximating $11.4 million were up 14 percent compared to $10 million generated in the fourth quarter of 2005. Record net operating revenues in excess of $50 million for the fourth quarter represent an increase of 5 percent versus 2005’s comparable period figure of $47.5 million. Basic and diluted EPS of $0.71 and $0.68, both quarterly records for the Corporation, increased 8 percent and 6 percent respectively versus $0.66 and $0.64 reported a year ago, even with increasing operating costs (+11 percent) tied to both the Corporation’s expansion and margin compression attributable to the current challenging interest rate environment. Quarterly earnings were favorably impacted by year-end adjustments, primarily driven by loan fees, approximating $1.3 million.

Operating Results for 2006

Record net operating revenues exceeded $195 million for 2006, which represents an approximate 10 percent increase over 2005’s net operating revenues of approximately $178 million. Earnings exceeded $42 million for 2006 reflecting an increase of nearly 18 percent when compared to the $36 million of earnings generated in 2005. The Corporation reported basic EPS of $2.69 and diluted EPS of $2.57 for the year, both records, representing 11 percent and 10 percent increases, respectively, over 2005’s levels of $2.42 and $2.34. The Corporation’s strong bottom line was generated in light of Capitol’s historical track record of producing negative operating leverage during periods of active de novo bank development. In 2006, operating expenses increased 17 percent versus last year’s comparable period, offset in part by the existing and emerging core earnings performance tied to the Corporation’s expansion.
Page 2 of 9

Balance Sheet

Capitol's equity-to-assets ratio was 8.9 percent at the end of 2006, compared to 8.7 percent at year-end 2005. The total capital-to-assets ratio was 14.5 percent, up from 14 percent a year ago. With total capital funds approaching $600 million on the Corporation's $4.1 billion consolidated balance sheet, adequate resources are in place to support the planned expansion of Capitol Bancorp’s national franchise. 
 
Capitol attributed an increase in nonperforming loans to 0.98 percent from 0.90 percent for the previous quarter, and nonperforming assets to 1.08 percent from 0.99 percent for the previous quarter, to the ongoing weakness in the Michigan economy.

“Capitol’s banks continue to maintain an adequate consolidated allowance for loan losses,” said Reid. “A detailed analysis of the allowance for loan losses conducted on a bank-by-bank basis has resulted in higher loss reserves among our Michigan banks. Capitol’s operations in its other 13 states currently reflect strong asset quality. Due to the composition of our loan portfolio and our operating history, higher provisions are not necessarily indicative of higher losses.”

He noted that consistently strong earnings and steady EPS growth, coupled with ongoing efficient de novo development during 2006, have the Corporation well-positioned for expansion opportunities in 2007.


About Capitol Bancorp Limited
Capitol Bancorp Limited (NYSE: CBC) is a $4.1 billion national community bank development company, with a network of 50 separately chartered banks and bank operations in 14 states. It is the holder of the most individual bank charters in the country. Capitol Bancorp Limited identifies opportunities for the development of new community banks, raises capital for and mentors new community banks through their formative stages, and provides efficient services to its growing network of community banks. Each community bank has full local decision-making authority and is managed by an on-site president under the direction of a local board of directors, composed of business leaders from the bank’s community. Founded in 1988, Capitol Bancorp Limited has executive offices in Lansing, Michigan, and Phoenix, Arizona.

###

Page 3 of 9
 
CAPITOL BANCORP LIMITED
  
SUMMARY OF SELECTED FINANCIAL DATA
  
(in thousands, except share and per share data)
  
                       
   
Three Months Ended
      
Year Ended
  
   
December 31
      
December 31
  
   
2006
  
2005
      
2006
  
2005
  
                       
Condensed statements of operations:
                                
Interest income
  
$
74,978
  
$
61,372
        
$
279,353
  
$
224,439
  
Interest expense
    
30,896
   
19,748
         
105,586
   
67,579
 
Net interest income
    
44,082
   
41,624
         
173,767
   
156,860
 
Provision for loan losses
    
3,444
   
3,791
         
12,156
   
10,960
 
Noninterest income
    
6,060
   
5,913
         
21,532
   
21,048
 
Noninterest expense
    
35,248
   
31,806
         
137,804
   
117,289
 
Income before income taxes
    
14,716
   
14,733
         
57,854
   
55,157
 
                                 
Net income
  
$
11,382
  
$
10,019
        
$
42,391
  
$
35,925
  
                                 
Per share data:
                                
Net income - basic
  
$
0.71
  
$
0.66
        
$
2.69
  
$
2.42
  
Net income - diluted
    
0.68
   
0.64
         
2.57
   
2.34
 
Book value at end of period
    
21.73
   
19.26
         
21.73
   
19.26
 
Common stock closing price at end of period
  
$
46.20
  
$
37.44
        
$
46.20
  
$
37.44
  
Common shares outstanding at end of period
    
16,656,000
   
15,776,000
         
16,656,000
   
15,776,000
 
Number of shares used to compute:
                                
Basic earnings per share
    
15,979,000
   
15,134,000
         
15,772,000
   
14,867,000
 
Diluted earnings per share
    
16,768,000
   
15,712,000
         
16,481,000
   
15,365,000
 
                                 
                                 
 
    
4th Quarter 
    
3rd Quarter
    
2nd Quarter
    
1st Quarter
    
4th Quarter
  
     
2006
    
2006
    
2006
    
2006
    
2005
  
Condensed statements of financial position:
                                
Total assets
  
$
4,065,816
  
$
3,855,633
  
$
3,722,642
  
$
3,627,124
  
$
3,475,721
  
Portfolio loans
    
3,488,678
   
3,307,222
   
3,196,209
   
3,069,600
   
2,991,189
 
Deposits
    
3,258,485
   
3,114,206
   
2,987,606
   
2,938,348
   
2,785,259
 
Stockholders' equity
    
361,879
   
327,791
   
318,308
   
310,419
   
301,866
 
Total capital
 
$
589,426
  
$
542,734
  
$
535,898
  
$
499,334
  
$
486,644
  
                                 
Key performance ratios:
                                
Return on average assets
    
1.16
%
  
1.14
%
  
1.13
%
  
1.13
%
  
1.16
%
Return on average equity
    
13.30
%
  
13.36
%
  
13.03
%
  
13.12
%
  
14.02
%
Net interest margin
    
4.82
%
  
5.08
%
  
5.17
%
  
5.06
%
  
5.21
%
Efficiency ratio
    
70.30
%
  
68.77
%
  
74.58
%
  
68.51
%
  
66.91
%
                                 
Asset quality ratios:
                                
Allowance for loan losses / portfolio loans
    
1.30
%
  
1.37
%
  
1.36
%
  
1.36
%
  
1.36
%
Total nonperforming loans / portfolio loans
    
0.98
%
  
0.90
%
  
0.87
%
  
0.87
%
  
0.89
%
Total nonperforming assets / total assets
    
1.08
%
  
0.99
%
  
0.91
%
  
0.88
%
  
0.88
%
Net charge-offs (annualized) / average portfolio loans
    
0.38
%
  
0.19
%
  
0.14
%
  
0.19
%
  
0.34
%
Allowance for loan losses / nonperforming loans
    
132.50
%
  
151.05
%
  
156.12
%
  
156.33
%
  
151.72
%
                                 
Capital ratios:
                                
Stockholders' equity / total assets
    
8.90
%
  
8.50
%
  
8.55
%
  
8.56
%
  
8.68
%
Total capital / total assets
    
14.50
%
  
14.08
%
  
14.40
%
  
13.77
%
  
14.00
%
 
 
 Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of  1995.  Forward-looking statements include expressions such as "expects," "intends," "believes" and "should" which are not necessarily statements of belief as to the expected outcomes of future events. Actual results could materially differ from those presented due to a variety of internal and external factors. Actual results could materially differ from those contained in, or implied by, such statements. Capitol Bancorp Limited undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.
 
Supplemental analyses follow providing additional detail regarding Capitol's financial position, results of operations, asset quality and other supplemental data.
Page 4 of 9

CAPITOL BANCORP LIMITED
Condensed Consolidated Statements of Income (Unaudited)
For the Three Months and Year Ended December 31, 2006 and 2005
(in thousands, except per share data)
                         
 
    
Three Months Ended
December 31 
    
Year Ended
December 31
     
2006
    
2005
    
2006
    
2005
INTEREST INCOME:
                       
Portfolio loans (including fees)
 
$
70,822
  
$
58,412
  
$
264,701
  
$
214,882
Loans held for resale
   
730
   
613
   
2,740
   
2,627
Taxable investment securities
   
226
   
267
   
956
   
1,008
Federal funds sold
   
2,534
   
1,675
   
8,703
   
4,734
Other
   
666
   
405
   
2,253
   
1,188
Total interest income
   
74,978
   
61,372
   
279,353
   
224,439
INTEREST EXPENSE:
                       
Deposits
   
26,504
   
15,982
   
88,629
   
53,213
Debt obligations and other
   
4,392
   
3,766
   
16,957
   
14,366
Total interest expense
   
30,896
   
19,748
   
105,586
   
67,579
Net interest income
   
44,082
   
41,624
   
173,767
   
156,860
PROVISION FOR LOAN LOSSES
   
3,444
   
3,791
   
12,156
   
10,960
Net income after provision for loan losses
   
40,638
   
37,833
   
161,611
   
145,900
NONINTEREST INCOME:
                       
Service charges on deposit accounts
   
1,101
   
1,005
   
4,318
   
4,120
Trust and wealth-management revenue
   
1,012
   
415
   
3,336
   
2,069
Fees from origination of non-portfolio residential mortgage loans
   
1,348
   
1,556
   
5,439
   
6,146
Realized gains on sales of investment securities available for sale
   
--
    
--
    
--
    
8
Other
   
2,599
   
2,937
   
8,439
   
8,705
Total noninterest income
   
6,060
   
5,913
   
21,532
   
21,048
NONINTEREST EXPENSE:
                       
Salaries and employee benefits
   
20,356
   
17,619
   
85,196
   
72,387
Occupancy
   
3,348
   
2,565
   
12,116
   
9,735
Equipment rent, depreciation and maintenance
   
2,233
   
1,776
   
8,389
   
6,369
Other
   
9,311
   
9,846
   
32,103
   
28,798
Total noninterest expense
   
35,248
   
31,806
   
137,804
   
117,289
Income before taxes and minority interest
   
11,450
   
11,940
   
45,339
   
49,659
Income taxes
   
3,334
   
4,714
   
15,463
   
19,232
Income before minority interest
   
8,116
   
7,226
   
29,876
   
30,427
Minority interest in net losses of consolidated subsidiaries
   
3,266
   
2,793
   
12,515
   
5,498
                         
NET INCOME
 
$
11,382
  
$
10,019
  
$
42,391
  
$
35,925
                         
NET INCOME PER SHARE:
                       
Basic
 
$
0.71
  
$
0.66
  
$
2.69
  
$
2.42
                         
Diluted
 
$
0.68
  
$
0.64
  
$
2.57
  
$
2.34
 
Page 5 of 9
 

CAPITOL BANCORP LIMITED
Condensed Consolidated Balance Sheets
(in thousands, except share data)
     
December 31
  
     
(Unaudited) 
        
   
2006 
    
2005 
  
ASSETS
              
               
Cash and due from banks
  
$
169,753
  
$
157,963
  
Money market and interest-bearing deposits
    
37,204
   
19,846
 
Federal funds sold
    
141,913
   
128,299
 
Cash and cash equivalents
    
348,870
   
306,108
 
Loans held for resale
    
34,593
   
21,638
 
Investment securities:
              
Available for sale, carried at market value
    
18,904
   
25,929
 
Held for long-term investment, carried at amortized cost which
approximates market value
    
21,749
   
17,745
 
Total investment securities
    
40,653
   
43,674
 
Portfolio loans:
              
Commercial
    
3,103,125
   
2,688,361
 
Real estate mortgage
    
259,604
   
212,142
 
Installment
    
125,949
   
90,686
 
Total portfolio loans
    
3,488,678
   
2,991,189
 
Less allowance for loan losses
    
(45,414
)
  
(40,559
)
Net portfolio loans
    
3,443,264
   
2,950,630
 
Premises and equipment
   
54,295
   
41,629
 
Accrued interest income
    
17,524
   
13,719
 
Goodwill and other intangibles
    
62,215
   
50,378
 
Other assets
    
64,402
   
47,945
 
               
TOTAL ASSETS
  
$
4,065,816
  
$
3,475,721
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
LIABILITIES:
              
Deposits:
              
Noninterest-bearing
 
$
651,253
  
$
591,229
  
Interest-bearing
   
2,607,232
   
2,194,030
 
Total deposits
    
3,258,485
   
2,785,259
 
Debt obligations:
              
Notes payable
    
191,154
   
175,729
 
Subordinated debentures
   
101,035
   
100,940
 
Total debt obligations
    
292,189
   
276,669
 
Accrued interest on deposits and other liabilities
    
26,751
   
28,089
 
Total liabilities
    
3,577,425
   
3,090,017
 
               
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES
   
126,512
   
83,838
 
               
STOCKHOLDERS' EQUITY:
              
Common stock, no par value, 50,000,000 shares authorized;
             
issued and outstanding:    2006 - 16,656,481 shares
              
                   2005 - 15,776,192 shares
    
249,244
   
216,539
 
Retained earnings
    
112,779
   
85,553
 
Market value adjustment (net of tax effect) for investment securities
available for sale (accumulated other comprehensive income)
    
(144
)
  
(226
)
Total stockholders' equity
    
361,879
   
301,866
 
               
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  
$
4,065,816
  
$
3,475,721
  
Page 6 of 9

CAPITOL BANCORP LIMITED
Allowance for Loan Losses and Asset Quality Data


ALLOWANCE FOR LOAN LOSSES ACTIVITY (in thousands):
 
   
Periods Ended December 31
  
   
Three Month Period
  
Year Ended
  
   
2006
  
2005
  
2006
  
2005
  
Allowance for loan losses at beginning of period
  
$
45,174
  
$
39,284
  
$
40,559
  
$
37,572
  
                           
Loans charged-off:
                          
Commercial
    
(3,339
)
  
(2,558
)
  
(8,225
)
  
(9,099
)
Real estate mortgage
    
(40
)
  
--
    
(99
)
  
--
  
Installment
    
(236
)
  
(104
)
  
(559
)
  
(544
)
Total charge-offs
    
(3,615
)
  
(2,662
)
  
(8,883
)
  
(9,643
)
Recoveries:
                          
Commercial
    
175
    
96
    
1,062
    
1,522
  
Real estate mortgage
    
--
    
1
    
3
    
3
  
Installment
    
52
    
49
    
333
    
145
  
Total recoveries
    
227
    
146
    
1,398
    
1,670
  
Net charge-offs
    
(3,204
)
  
(2,516
)
  
(7,301
)
  
(7,973
)
Additions to allowance charged to expense
    
3,444
    
3,791
    
12,156
    
10,960
  
                           
Allowance for loan losses at December 31
  
$
45,414
  
$
40,559
  
$
45,414
  
$
40,559
  
Average total portfolio loans for period ended December 31
  
$
3,381,488
  
$
2,926,033
  
$
3,251,538
  
$
2,834,973
  
Ratio of net charge-offs (annualized) to average portfolio loans
    
0.38
%
  
0.34
%
  
0.22
%
  
0.28
%


ASSET QUALITY (in thousands):

   
December 31
   
2006
  
2005
Nonaccrual loans:
    
Commercial
  
$
25,219
  
$
19,734
Real estate mortgage
    
3,609
    
1,734
Installment
    
898
    
1,154
Total nonaccrual loans
    
29,726
    
22,622
             
Past due (>90 days) loans:
            
Commercial
    
3,860
    
3,235
Real estate mortgage
    
523
    
592
Installment
    
165
    
283
Total past due loans
    
4,548
    
4,110
             
Total nonperforming loans
  
$
34,274
  
$
26,732
             
Real estate owned and other repossessed assets
    
9,478
    
3,745
             
Total nonperforming assets
  
$
43,752
  
$
30,477


 
Page 7 of 9



CAPITOL BANCORP LIMITED
Selected Supplemental Data


EPS COMPUTATION COMPONENTS (in thousands):
 
   
Periods Ended December 31
   
Three Month Period
  
Year Ended
   
2006
  
2005
  
2006
  
2005
                 
Numerator—net income for the period
  
$
11,382
  
$
10,019
  
$
42,391
  
$
35,925
                         
Denominator:
                        
Weighted average number of common shares outstanding, excluding
unvested shares of restricted common stock (denominator for
basic earnings per share)
    
15,979
    
15,134
    
15,772
    
14,867
Dilutive effect of unvested shares of of restricted common stock
    
95
    
88
    
86
    
86
Dilutive effect of stock options
    
694
    
490
    
623
    
412
                         
Denominator for diluted net income per share—
                        
Weighted average number of common shares and potential dilution
    
16,768
    
15,712
    
16,481
    
15,365
                         
Number of antidilutive stock options excluded from diluted earnings per share
computation
    
--
    
--
    
--
    
1,085



AVERAGE BALANCES (in thousands):
 
   
Periods Ended December 31
   
Three Month Period
  
Year Ended
   
2006
  
2005
  
2006
  
2005
                 
Portfolio loans
  
$
3,381,488
  
$
2,926,033
  
$
3,251,538
  
$
2,834,973
Earning assets
    
3,654,472
    
3,196,908
    
3,519,689
    
3,079,840
Total assets
    
3,939,730
    
3,446,668
    
3,797,114
    
3,313,439
Deposits
    
3,172,965
    
2,797,029
    
3,059,500
    
2,691,649
Stockholders’ equity
    
342,360
    
285,870
    
327,531
    
269,206


 
Page 8 of 9



Capitol Bancorp’s National Network of Community Banks
Eastern Regions
  
Great Lakes Region:
  
Ann Arbor Commerce Bank
Ann Arbor, Michigan
Bank of Auburn Hills
Auburn Hills, Michigan
Bank of Belleville
Belleville, Illinois
Bank of Maumee
Maumee, Ohio
Bank of Michigan
Farmington Hills, Michigan
Brighton Commerce Bank
Brighton, Michigan
Capitol National Bank
Lansing, Michigan
Detroit Commerce Bank
Detroit, Michigan
Elkhart Community Bank
Elkhart, Indiana
Evansville Commerce Bank
Evansville, Indiana
Goshen Community Bank
Goshen, Indiana
Grand Haven Bank
Grand Haven, Michigan
Kent Commerce Bank
Grand Rapids, Michigan
Macomb Community Bank
Clinton Township, Michigan
Muskegon Commerce Bank
Muskegon, Michigan
Oakland Commerce Bank
Farmington Hills, Michigan
Ohio Commerce Bank
Beachwood, Ohio
Paragon Bank & Trust
Holland, Michigan
Portage Commerce Bank
Portage, Michigan
Midwest Region:
  
Summit Bank of Kansas City
Lee’s Summit, Missouri
Southeast Region:
  
Bank of Valdosta
Valdosta, Georgia
Community Bank of Rowan
Salisbury, North Carolina
First Carolina State Bank
Rocky Mount, North Carolina
Peoples State Bank
Jeffersonville, Georgia
Sunrise Bank of Atlanta
Atlanta, Georgia
 
  
Western Regions
  
Southwest Region:
  
1st Commerce Bank
North Las Vegas, Nevada
Arrowhead Community Bank
Glendale, Arizona
Asian Bank of Arizona
Phoenix, Arizona
Bank of Las Vegas
Las Vegas, Nevada
Bank of Tucson
Tucson, Arizona
Black Mountain Community Bank
Henderson, Nevada
Camelback Community Bank
Phoenix, Arizona
Desert Community Bank
Las Vegas, Nevada
Fort Collins Commerce Bank
Fort Collins, Colorado
Mesa Bank
Mesa, Arizona
Red Rock Community Bank
Las Vegas, Nevada
Southern Arizona Community Bank
Tucson, Arizona
Sunrise Bank - Dallas LPO
Dallas, Texas
Sunrise Bank - Houston LPO
Houston, Texas
Sunrise Bank of Albuquerque
Albuquerque, New Mexico
Sunrise Bank of Arizona
Phoenix, Arizona
Valley First Community Bank
Scottsdale, Arizona
Yuma Community Bank
Yuma, Arizona
California Region:
  
Bank of Escondido
Escondido, California
Bank of San Francisco
San Francisco, California
Bank of Santa Barbara
Santa Barbara, California
Napa Community Bank
Napa, California
Point Loma Community Bank
Point Loma, California
Sunrise Bank of San Diego
San Diego, California
Northwest Region:
  
Bank of Bellevue
Bellevue, Washington
Bank of Everett
Everett, Washington
Bank of Tacoma
Tacoma, Washington




Page 9 of 9