10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

T	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
	OR
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-31708

CAPITOL BANCORP LTD.

(Exact name of registrant as specified in its charter)

MICHIGAN	38-2761672
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification Number)
Capitol Bancorp Center
200 Washington Square North
Lansing, Michigan	48933
(Address of principal executive offices)	(Zip Code)

(517) 487-6555

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, no par value per share	New York Stock Exchange
8.50% Cumulative Trust Preferred Securities, $10 Liquidation Amount	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  £ No  T

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes  £ No  T

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Yes  T No  £

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    £ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  £ No  T

As of June 30, 2006, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was: $514,073,551. (Such amount was computed based on shares held by non-affiliates as of January 31, 2006 and the common stock closing price reported by the New York Stock Exchange on June 30, 2006. For purposes of this computation, all executive officers, directors and 5% shareholders have been assumed to be affiliates. Certain of such persons may disclaim that they are affiliates of registrant.)

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at February 26, 2007
Common Stock, no par value per share	17,046,721 shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Annual Report to Shareholders for the Year Ended December 31, 2006 (Annual Report)	Parts I, II, and IV
Portions of Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2007 (Proxy Statement)	Part III

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CAPITOL BANCORP LTD.

Form 10-K

Fiscal Year Ended: December 31, 2006

Cross Reference Sheet

Item of Form 10-K Part I	Incorporation by Reference From:
Item 1. Business	Pages F-7 - F-11, F-21 - F-29, F-41 - F-44 and F-57 - F-58, Financial Information Section of Annual Report
Item 1A. Risk Factors	Pages F-31 - F-32, Financial Information Section of Annual Report
Item 2. Properties	Pages F-41 - F-42 and F-55, Financial Information Section of Annual Report
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	Pages F-2 - F-6, F-58-59 and F-65-66 , Financial Information Section of Annual Report
Item 6. Selected Financial Data	Page F-2, Financial Information Section of Annual Report
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	Pages F-6 - F-32, Financial Information Section of Annual Report
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	Pages F-6 and F-25 - F-29, Financial Information Section of Annual Report
Item 8. Financial Statements and Supplementary Data	Pages F-2 and F-33 - F-70, Financial Information Section of Annual Report
Item 9A. Controls and Procedures	Pages F-33 - F-35, Financial Information Section of Annual Report
Part III
Item 10. Directors, Executive Officers and Corporate Governance	Proxy Statement
Item 11. Executive Compensation	Proxy Statement
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	Proxy Statement
Item 13. Certain Relationships and Related Transactions and Director Independence	Proxy Statement
Item 14. Principal Accountant Fees and Services	Proxy Statement
Part IV
Item 15. Exhibits and Financial Statement Schedules	Pages F-33 - F-70, Financial Information Section of Annual Report

Key:

"Annual Report"	means the 2006 Annual Report of Capitol provided to Shareholders and the Commission pursuant to Rule 14a-3(b). Capitol's 2006 Annual Report is divided into two sections: a Financial Information Section and a Marketing Section and is filed as Exhibit 13 with this Form 10-K report.
"Proxy Statement"	means the Proxy Statement of Capitol for the Annual Meeting of Shareholders to be held April 25, 2007.

Note: The page number references herein are based on the paper version of the referenced documents. Accordingly, those page number references may differ from the electronically filed versions of those documents.

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CAPITOL BANCORP LTD.

2006 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I	Page
ITEM 1. Business	6
ITEM 1A. Risk Factors	22
ITEM 1B. Unresolved Staff Comments	28
ITEM 2. Properties	28
ITEM 3. Legal Proceedings	29
ITEM 4. Submission of Matters to a Vote of Security Holders	29
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
ITEM 6. Selected Financial Data	31
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	31
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk	31
ITEM 8. Financial Statements and Supplementary Data	31
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	31
ITEM 9A. Controls and Procedures	31
ITEM 9B. Other Information	32
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance	33
ITEM 11. Executive Compensation	33
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33
ITEM 13. Certain Relationships and Related Transactions and Director Independence	33
ITEM 14. Principal Accountant Fees and Services	33
PART IV
ITEM 15. Exhibits and Financial Statement Schedules	34

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FORWARD-LOOKING STATEMENTS

Some of the statements contained or incorporated by reference in this annual report on Form 10-K that are not historical facts may constitute forward-looking statements. Those forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, are subject to known and unknown risks, uncertainties and other factors which may cause the actual future results, performance or achievements of Capitol and/or its subsidiaries and other operating units to differ materially from those contemplated in such forward-looking statements. The words "intend," "expect," "project," "estimate," "predict," "anticipate," "should," "will," "may," "believe" and similar expressions also identify forward-looking statements. Important factors which may cause actual results to differ from those contemplated in such forward-looking statements include, but are not limited to: (i) the results of Capitol's efforts to implement its business strategy, (ii) changes in interest rates, (iii) legislation or regulatory requirements adversely impacting Capitol's banking business and/or expansion strategy, (iv) adverse changes in business conditions or inflation, (v) general economic conditions, either nationally or regionally, which are less favorable than expected and that result in, among other things, a deterioration in credit quality and/or loan performance and collectability, (vi) competitive pressures among financial institutions, (vii) changes in securities markets, (viii) actions of competitors of Capitol's banks and Capitol's ability to respond to such actions, (ix) the cost of capital, which may depend in part on Capitol's asset quality, prospects and outlook, (x) changes in governmental regulation, tax rates and similar matters, (xi) changes in management and (xii) other risks detailed in Capitol's other filings with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make certain estimates and assumptions, many of which are based on assumptions relating to the above-stated forward-looking statements, that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results will differ from those estimates because of the inherent subjectivity and inaccuracy of any estimation. All subsequent written or oral forward-looking statements attributable to Capitol or persons acting on its behalf are expressly qualified in their entirety by the foregoing factors. Investors and other interested parties are cautioned not to place undue reliance on such statements, which speak as of the date of such statements. Capitol undertakes no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of unanticipated events.

[The remainder of this page intentionally left blank]

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PART I

Item 1. Business.

a.General development of business:

Incorporated by reference from Pages F-7 - F-11, Financial Information Section of Annual Report, under the captions "Summary and Overview" and "Capitol's Bank Development Strategy" and Pages F-41 - F-44, Financial Information Section of Annual Report, under the caption "Note A—Nature of Operations, Basis of Presentation and Principles of Consolidation."

b.Financial information about segments:

Incorporated by reference from Pages F-10 - F-13 , Financial Information Section of Annual Report (excerpt from management's discussion and analysis of financial conditions and results of operations) and Pages F-41 - F-44, Financial Information Section of Annual Report, under the caption "Note A—Nature of Operations, Basis of Presentation and Principles of Consolidation."

c. Narrative description of business:

Incorporated by reference from Pages F-7 - F-9, Financial Information Section of Annual Report, under the caption "Summary and Overview," and "Capitol's Bank Development Strategy," Pages F-41 - F-44, Financial Information Section of Annual Report, under the caption "Note A—Nature of Operations, Basis of Presentation and Principles of Consolidation," Pages F-21 - F-25, Financial Information Section of Annual Report, under the caption "Liquidity, Capital Resources and Capital Adequacy" and Pages F-25 - F-29, Financial Information Section of Annual Report, under the caption "Trends Affecting Operations."

At December 31, 2006, Capitol and its subsidiaries employed approximately 1,354 full time equivalent employees.

In 1997, Capitol formed Capitol Trust I, a Delaware statutory business trust. Capitol Trust I's business and affairs are conducted by its property trustee, a Delaware trustee, and three individual administrative trustees who are employees and officers of Capitol. Capitol Trust I exists for the sole purpose of issuing and selling its preferred securities and common securities, using the proceeds from the sale of those securities to acquire subordinated debentures issued by Capitol and certain related services. During 2001, Capitol formed Capitol Trust II and Capitol Statutory Trust III, in conjunction with private placements of trust-preferred securities. Capitol Trust IV was similarly formed in 2002, Capitol Trust VI, Capitol Trust VII and Capitol Statutory Trust VIII were formed in 2003 and Capitol Trust IX was formed in 2004. Each of these securities has similar terms. Additional information regarding trust-preferred securities is incorporated by reference from Pages F-57 - F-58, Financial Information Section of Annual Report, under the caption "Note I—Subordinated Debt."

Supervision and Regulation:

General:

The banking industry is subject to extensive state and federal regulation and continues to undergo significant change. Proposals to change the laws and regulations governing the banking industry are frequently raised in Congress, in state legislatures and before the various bank regulatory agencies. The likelihood and timing of any changes and the impact such changes might have on Capitol are impossible to determine with any certainty. A change in applicable laws or regulations, or a change in the way such laws or regulations are interpreted by regulatory agencies or courts, may have a material impact on the business, operations and earnings of Capitol. Although Congress in recent years has sought to reduce the regulatory burden on financial institutions with respect to the approval of specific transactions, Capitol

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Item 1. Business - continued.

expects that the financial services industry will remain heavily regulated and that additional laws or regulations may be adopted. The following discussion summarizes certain aspects of the banking laws and regulations that affect Capitol. To the extent that the following information describes statutory or regulatory provisions, it is qualified entirely by reference to the particular statutory or regulatory provision.

Capitol is a bank holding company registered with the Federal Reserve Board and is subject to regulation under the Bank Holding Company Act of 1956, as amended (the "Bank Holding Company Act"). The Bank Holding Company Act requires the Federal Reserve Board's prior approval of an acquisition of assets or of ownership or control of voting shares of any bank or bank holding company if the acquisition would give the acquiring institution more than 5% of the voting shares of such bank or bank holding company. It also imposes restrictions, summarized below, on the assets or voting shares of non-banking companies that Capitol may acquire.

Consistent with the requirements of the Bank Holding Company Act, Capitol's lines of business provide its customers with banking, trust and other financial services and products. These services include commercial banking through 50 subsidiary banks, as well as trust services, mortgage origination and servicing, equipment leasing, brokerage and investment advisory services, property and casualty insurance, brokerage services, life insurance and annuity products, and portfolio management services through subsidiary banks and other subsidiaries.

Under Federal Reserve Board policy, a bank holding company is expected to serve as a source of financial strength to each of its subsidiary banks and to stand prepared to commit resources to support each of them. There are no specific quantitative rules on a holding company's potential liability. If one of Capitol's subsidiary banks were to encounter financial difficulty, the Federal Reserve Board could invoke the doctrine and require a capital contribution from Capitol. In addition, and as a separate legal matter, a holding company is required to guarantee the capital plan of an undercapitalized subsidiary bank. See "Capital Adequacy and Prompt Corrective Action" below.

Capitol's subsidiary banks are subject to the provisions of the banking laws of their respective states of organization or the National Bank Act. They are under the supervision of, and are subject to periodic examination by, their respective state banking departments (in the case of state-chartered banks) or the Office of the Comptroller of the Currency ("OCC") (in the case of national banks), and are subject to the rules and regulations of the OCC, the Federal Reserve Board and the Federal Deposit Insurance Corporation ("FDIC"). 49 of Capitol's banking subsidiaries, as of December 31, 2006, are state-chartered banks and are therefore subject to supervision, regulation and examination by state banking regulators. Elkhart Community Bank and Goshen Community Bank are members of the Federal Reserve System so they are subject to supervision and examination by the Federal Reserve Board as well as the FDIC, because the FDIC insures their deposits to the extent provided by law. Additionally, non-bank subsidiaries are supervised and examined by the Federal Reserve Board and various other federal and state agencies.

Capitol's insured depository institution subsidiaries are also subject to cross-guaranty liability under federal law. This means that if one FDIC-insured depository institution subsidiary of a multi-institution bank holding company fails or requires FDIC assistance, the FDIC may assess "commonly controlled" depository institutions for the estimated losses suffered by the FDIC. Such liability could have a material adverse effect on the financial condition of any assessed subsidiary institution and on Capitol as the common parent. While the FDIC's cross-guaranty claim is generally junior to the claims of depositors, holders of secured liabilities, general creditors and subordinated creditors, it is generally superior to the claims of shareholders and affiliates.

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Item 1. Business - continued.

Payment of Dividends:

There are various statutory restrictions on the ability of Capitol's banking subsidiaries to pay dividends or make other payments to Capitol. Each of the state-chartered banking subsidiaries is subject to dividend limits under the laws of the state in which it is chartered. In addition, Elkhart Community Bank and Goshen Community Bank are member banks of

the Federal Reserve System, subject to the dividend limits of the Federal Reserve Board. The Federal Reserve Board allows a member bank to make dividends or other capital distributions in an amount not exceeding the current calendar year's net income, plus retained net income of the preceding two years. Distributions in excess of this limit require prior approval of the Federal Reserve Board. Federal Reserve Board policy provides that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless its net income available to common shareholders has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with the holding company's capital needs, asset quality and overall financial condition.

Dividends from a national banking association may be declared only from the bank's undivided profits, and until the bank's surplus fund equals its common capital, no dividends may be declared unless at least 10% of the bank's net income for a given time period has been carried to the surplus fund, depending on the frequency of dividend payments in a given year. The OCC's approval is required if the total of all dividends declared in any calendar year exceeds the sum of the bank's net income of that year combined with its retained net income of the preceding two years.

Capital Adequacy and Prompt Corrective Action:

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") requires federal regulators to take prompt corrective action against any undercapitalized institution. FDICIA establishes five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. "Well capitalized" institutions significantly exceed the required minimum level for each capital measure (currently, risk-based and leverage). "Adequately capitalized" institutions include depository institutions that meet the required minimum level for each capital measure. "Undercapitalized" institutions consist of those that fail to meet the required minimum level for one or more relevant capital measures. "Significantly undercapitalized" characterizes depository institutions with capital levels significantly below the minimum requirements. "Critically undercapitalized" refers to depository institutions with minimal capital and at serious risk for government seizure.

Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category. A depository institution is generally prohibited from making capital distributions, including paying dividends, or paying management fees to a holding company if the institution would thereafter be undercapitalized. Institutions that are adequately but not well capitalized cannot accept, renew or rollover brokered deposits except with a waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on such deposits. Undercapitalized institutions may not accept, renew or rollover brokered deposits.

The banking regulatory agencies are permitted or, in certain cases, required to take certain actions with respect to institutions falling within one of the three undercapitalized categories. Depending on the level of an institution's capital, the agencies' corrective powers include, among other things:

· prohibiting the payment of principal and interest on subordinated debt;  

· prohibiting the holding company from making distributions without prior regulatory approval;  

· placing limits on asset growth and restrictions on activities;  

· placing additional restrictions on transactions with affiliates;  

· restricting the interest rate the institution may pay on deposits;  

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Item 1. Business - continued.

· prohibiting the institution from accepting deposits from correspondent banks; and  

· in the most severe cases, appointing a conservator or receiver for the institution.  

A banking institution that is undercapitalized is required to submit a capital restoration plan, and such a plan will not be accepted unless, among other things, the banking institution's holding company guarantees the plan up to a certain specified amount. Any such guarantee from a depository institution's holding company is entitled to a priority of payment in bankruptcy.

FDICIA also contains a variety of other provisions that may affect Capitol's operations, including reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, and the requirement that a depository institution give 90 days prior notice to customers and regulatory authorities before closing any branch.

At December 31, 2006 and 2005, the most recent notification from the Federal Reserve Board categorized Capitol and all of its depository institution subsidiaries as "well capitalized" under the regulatory framework for prompt corrective action. Information concerning capital adequacy guidelines for Capitol and its banking subsidiaries including their regulatory capital position at December 31, 2006 is incorporated herein by reference from Note P to the consolidated financial statements appearing in the Annual Report.

FDIC Insurance Assessments:

The FDIC's deposit insurance assessments currently are calculated under a risk-based system. The risk-based system places a bank in one of four risk categories, principally on the basis of its capital level and an evaluation of the bank's risk to the relevant deposit insurance fund, and bases premiums on the probability of loss to the FDIC with respect to each individual bank. Under the Federal Deposit Insurance Act, depository institutions such as Capitol's subsidiary banks may not pay interest on indebtedness, if such interest is required to be paid out of net profits, or distribute any of its capital assets while it remains in default on any assessment due to the FDIC. The adjusted assessment rates for FDIC insured institutions currently range from 0.00% to 0.27% depending on the assessment category into which a bank is placed.

On November 30, 2006, the FDIC adopted a new rule for calculating deposit insurance based on a risk-weighting. The new rule took effect on January 1, 2007, and increases the assessment amount for all insured institutions for payments due June 30, 2007 and forward. The new minimum annual assessment rate will be 0.05% for a well capitalized bank, while the maximum annual rate will be 0.43%. Also on November 30, 2006, the FDIC issued a one time credit to institutions that were in existence on December 31, 1996 and paid a deposit insurance assessment prior to that date, or are classified as a "successor" to such an institution. This credit can be used to partially offset the increased assessment rate. For assessment periods during 2007, a well capitalized institution can offset up to 100% of the assessment with this credit. For assessment periods after 2007, this credit can be used to offset up to 90% of the assessment. Capitol expects its bank subsidiaries will pay increased insurance assessments in 2007 due to the changes in assessment percentages and other factors. The FDIC retains the ability to increase regular insurance assessments and to levy special additional assessments.

Effective March 31, 2006, the FIDC merged the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF") into a single fund called the Deposit Insurance Fund. As a result of the merger, the BIF and the SAIF were abolished. The merger of the BIF and the SAIF into the Deposit Insurance Fund does not affect the authority of the Financing Corporation ("FICO") to impose and collect, with the approval of the FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended September 30, 2006, the annualized FICO assessment was equal to 1.26 basis points for each $100 in domestic deposits maintained at an institution.

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Item 1. Business - continued.

Interstate Banking:

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-Neal Act"), as amended, a bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time (not to exceed five years) and the requirement that the bank holding company not control, prior to or following the proposed acquisition, more than 10% of the total amount of deposits of insured depository institutions nationwide or, unless the acquisition is the bank holding company's initial entry into the state, more than 30% of such deposits in the state, or such lesser or greater amount set by the state. The Riegle-Neal Act also authorizes banks to merge across state lines, thereby creating interstate branches. Banks are also permitted to acquire and to establish de novo branches in other states where authorized under the laws of those states.

Transactions with Affiliates:

Transactions between Capitol's subsidiary banks and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act. The affiliates of the banks include Capitol and any entity controlled by Capitol. Generally, Sections 23A and 23B (i) limit the extent to which the subsidiary banks may engage in "covered transactions" with any one affiliate to an amount equal to 10% of such institution's capital stock and surplus, and maintain an aggregate limit on all such transactions with affiliates to an amount equal to 20% of the bank's capital stock and surplus, (ii) require that a bank's extensions of credit to such affiliates be fully collateralized (with 100% to 130% collateral coverage, depending on the type of collateral), (iii) prohibit the bank from purchasing or accepting as collateral from an affiliate any "low quality assets" (including non-performing loans) and (iv) require that all "covered transactions" be on terms substantially the same, or at least as favorable, to the bank or its subsidiary as those provided to a non-affiliate. The term "covered transaction" includes the making of loans, purchase of assets, issuance of a guarantee and other types of similar transactions.

Loans to Insiders:

The Federal Reserve Act and related regulations impose specific restrictions on loans to directors, executive officers and principal stockholders of banks. Under Section 22(h) of the Federal Reserve Act and its implementing regulations, loans to a director, an executive officer and to a principal shareholder of a bank, and some affiliated entities of any of the foregoing, may not exceed, together with all other outstanding loans to such person and affiliated entities, the bank's loan-to-one-borrower limit. Loans in the aggregate to insiders and their related interests as a class may not exceed the bank's unimpaired capital and unimpaired surplus. Section 22(h) and its implementing regulations also prohibit loans, above amounts prescribed by the appropriate federal banking agency, to directors, executive officers and principal shareholders of a bank or bank holding company, and their respective affiliates, unless such loan is approved in advance by a majority of the board of directors of the bank with any "interested" director not participating in the voting. Section 22(h) generally requires that loans to directors, executive officers and principal shareholders be made on terms and underwriting standards substantially the same as offered in comparable transactions to other persons.

Community Reinvestment Act:

Under the Community Reinvestment Act ("CRA") and related regulations, depository institutions have an affirmative obligation to assist in meeting the credit needs of their market areas, including low and moderate income areas, consistent with safe and sound banking practice. The CRA requires the adoption by each institution of a CRA statement for each of its market areas describing the depository institution's efforts to assist in its community's credit needs. Depository institutions are periodically examined for compliance with CRA and are periodically assigned ratings in this regard. Banking regulators consider a depository institution's CRA rating when reviewing applications to establish new branches, undertake new lines of business, and/or acquire part or all of another depository institution. An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiary.

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Item 1. Business - continued.

Fair Lending and Consumer Laws:

In addition to the Community Reinvestment Act, other federal and state laws regulate various lending and consumer aspects of the banking business. Governmental agencies, including the Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice, have become concerned that in some cases, prospective borrowers experience unlawful discrimination in their efforts to obtain loans from depository and other lending institutions. These agencies have brought litigation against some depository institutions alleging discrimination against borrowers. Many of these suits have been settled, in some cases for material sums, short of a full trial.

These governmental agencies have clarified what they consider to be lending discrimination and have specified various factors that they will use to determine the existence of lending discrimination under the Equal Credit Opportunity Act and the Fair Housing Act. These factors include evidence that a lender discriminated on a prohibited basis, evidence that a lender treated applicants differently based on prohibited factors in the absence of evidence that the treatment was the result of prejudice or a conscious intention to discriminate, and evidence that a lender applied an otherwise neutral non-discriminatory policy uniformly to all applicants, but the practice had a discriminatory effect, unless the practice could be justified as a business necessity.

Banks and other depository institutions also are subject to numerous consumer-oriented laws and regulations. These laws, which include the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, and the Fair Housing Act, require compliance by depository institutions with various disclosure requirements and requirements regulating the availability of funds after deposit or the making of certain loans to customers.

Gramm-Leach Bliley Act of 1999:

The Gramm-Leach-Bliley Act of 1999 (the "GLBA") was signed into law on November 12, 1999. The GLBA covers a broad range of issues, including a repeal of most of the restrictions on affiliations among depository institutions, securities firms and insurance companies. The following description summarizes some of its significant provisions.

The GLBA repeals sections 20 and 32 of the Glass-Steagall Act, thus permitting unrestricted affiliations between banks and securities firms. It also permits bank holding companies to elect to become financial holding companies. A financial holding company may engage in or acquire companies that engage in a broad range of financial services, including securities activities such as underwriting, dealing, investment, merchant banking, insurance underwriting, sales and brokerage activities. In order to become a financial holding company, the bank holding company and all of its affiliated depository institutions must be well-capitalized, well-managed and have at least a satisfactory Community Reinvestment Act rating. Capitol has determined not to become certified as a financial holding company at this time. Capitol may reconsider this determination in the future.

The GLBA provides that the states continue to have the authority to regulate insurance activities, but prohibits the states in most instances from preventing or significantly interfering with the ability of a bank, directly or through an affiliate, to engage in insurance sales, solicitations or cross-marketing activities. Although the states generally must regulate bank insurance activities in a nondiscriminatory manner, the states may continue to adopt and enforce rules that specifically regulate bank insurance activities in specific areas identified under the law. The federal bank regulatory agencies adopted insurance consumer protection regulations that apply to sales practices, solicitations, advertising and disclosures.

The GLBA repeals the broad exemption of banks from the definitions of "broker" and "dealer" for purposes of the Securities Exchange Act of 1934, as amended. It also identifies a set of specific activities, including traditional bank trust and fiduciary activities, in which a bank may engage without being deemed a "broker," and a set of activities in which a bank may engage without being deemed a "dealer." Additionally, the law makes conforming changes in the definitions 

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Item 1. Business - continued.

of "broker" and "dealer" for purposes of the Investment Company Act of 1940, as amended, and the Investment Advisers Act of 1940, as amended.

The GLBA also contains extensive customer privacy protection provisions. Under these provisions, a financial institution must provide to its customers, both at the inception of the customer relationship and on an annual basis, the institution's policies and procedures regarding the handling of customers' nonpublic personal financial information. The new law provides that, except for specific limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to "opt out" of such disclosure. An institution may not disclose to a non-affiliated third party, other than to a consumer reporting agency, customer account numbers or other similar account identifiers for marketing purposes. The GLBA also provides that the states may adopt customer privacy protections that are more strict than those contained in the GLBA.

Anti-Money Laundering and the USA Patriot Act of 2001:

In 2001, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "Patriot Act"). The Patriot Act is designed to deny terrorists and criminals the ability to obtain access to the United States' financial system and has significant implications for depository institutions, brokers, dealers, and other businesses involved in the transfer of money. The Patriot Act mandates that financial services companies implement policies and procedures with respect to additional measures designed to address the following matters: money laundering, terrorist financing, identifying and reporting suspicious activities and currency transactions and currency crimes. The Patriot Act also substantially broadened existing anti-money laundering legislation, imposed new compliance and due diligence obligations, created new crimes and penalties and compelled the production of documents located both inside and outside the United States. The U.S. Treasury Department has issued a number of regulations that apply some of these requirements to financial institutions such as Capitol's banking subsidiaries. The regulations impose new obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing. Pursuant to the Patriot Act and the related regulations, Capitol and its banking subsidiaries have established anti-money laundering compliance and due diligence programs that include, among other things, the designation of a compliance officer, employee training programs and an independent audit function to review and test the program.

Capitol maintains an Internet web site at http://www.capitolbancorp.com that includes links to Capitol's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports (the "SEC Reports"). The SEC Reports are available without charge as soon as reasonably practicable following the time that they are filed with or furnished to the SEC. Information on Capitol's website is not incorporated into this Form 10-K or Capitol's other securities filings and is not a part of those filings. The public may read and copy any materials Capitol files with the SEC at the SEC's Public Reference Room at 100 F. Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains information regarding issuers that file electronically with the SEC. That address is http://www.sec.gov. In addition, Capitol makes available on its website at http://www.capitolbancorp.com under the heading "Governance" its: (i) Code of Ethics; (ii) Governance Guidelines; and (iii) the charters of Capitol's Board committees, and also intends to disclose any amendments to its Code of Ethics, or waivers of the Code of Ethics on behalf of its Chief Executive Officer and other senior financial officers, on its website. These corporate governance materials are also available free of charge in print to shareholders who request them in writing to: Capitol Bancorp Ltd., Attention: Corporate Secretary, Capitol Bancorp Center, 200 Washington Square North, Lansing, Michigan 48933.

The following tables (Tables A to G, inclusive), present certain statistical information regarding Capitol's business.

- 12 -

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY (TABLE A)

CAPITOL BANCORP LIMITED

Net interest income, the primary component of earnings, represents the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the rates earned or paid on them. This table shows the daily average balances for the major asset and liability categories and the actual related interest income and expense (in $1,000s) and average yield/cost for the years ended December 31, 2006, 2005 and 2004.

		2006							2005							2004
					Interest	(1)						Interest	(1)						Interest	(1)
		Average			Income/	Average			Average			Income/	Average			Average			Income/	Average
		Balance			Expense	Yield/Cost			Balance			Expense	Yield/Cost			Balance			Expense	Yield/Cost
ASSETS
Money market and interest-bearing deposits	$	33,123		$	1,403	4.24	%	$	20,673		$	635	3.07	%	$	9,082		$	194	2.14	%
Federal funds sold		171,445			8,703	5.08	%		144,536			4,734	3.28	%		132,518			1,620	1.22	%
Investment securities -- U.S. Treasury, government agencies, mutual funds and other		42,277			1,806	4.27	%		45,948			1,561	3.40	%		56,126			1,749	3.12	%
Loans held for sale		36,306			2,740	7.55	%		33,710			2,627	7.79	%		43,383			2,150	4.96	%
Portfolio loans (2)		3,236,538			264,701	8.18	%		2,834,973			214,882	7.58	%		2,492,379			173,376	6.96	%
Total interest-earning assets/interest income		3,519,689			279,353	7.94	%		3,079,840			224,439	7.29	%		2,733,488			179,089	6.55	%
Allowance for loan losses (deduct)		(44,000	)						(38,628	)						(34,815	)
Cash and due from banks		150,782							141,271							135,261
Premises and equipment, net		50,656							33,063							29,099
Other assets		119,987							97,893							82,719
Total assets	$	3,797,114						$	3,313,439						$	2,945,752
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings deposits	$	59,985			981	1.64	%	$	71,890			844	1.17	%	$	74,026			732	0.99	%
Time deposits under $100,000		429,108			17,983	4.19	%		338,920			10,790	3.18	%		303,660			7,919	2.61	%
Time deposits $100,000 and over		889,769			38,115	4.28	%		717,851			21,701	3.02	%		596,658			14,578	2.44	%
Other interest-bearing deposits		1,066,109			31,550	2.96	%		998,165			19,878	1.99	%		998,544			13,466	1.35	%
Notes payable and short-term borrowings		173,719			8,169	4.70	%		170,853			6,485	3.80	%		119,559			3,964	3.32	%
Subordinated debentures		100,999			8,788	8.70	%		100,892			7,881	7.81	%		98,411			6,837	6.95	%
Total interest-bearing liabilities/interest expense		2,719,689			105,586	3.88	%		2,398,571			67,579	2.82	%		2,190,858			47,496	2.17	%
Noninterest-bearing demand deposits		614,529							564,823							464,530
Accrued interest on deposits and other liabilities		25,305							20,912							17,177
Minority interests in consolidated subsidiaries		110,060							59,927							35,740
Stockholders' equity		327,531							269,206							237,447
Total liabilities and stockholders' equity	$	3,797,114						$	3,313,439						$	2,945,752
Net interest income				$	173,767						$	156,860						$	131,593
Interest Rate Spread (3)						4.06	%						4.47	%						4.38	%
Net Yield on Interest-Earning Assets (4)						4.94	%						5.09	%						4.81	%
Ratio of Average-Interest Earning Assets to Interest-Bearing Liabilities		1.29							1.28							1.25

(1) Average yield/cost is determined by dividing the actual interest income/expense by the daily average balance of the asset or liability category.

(2) Average balance of loans includes nonaccrual loans.

(3) Interest rate spread represents the average yield on interest-earning assets less the average cost of interest-bearing liabilities.

(4) Net yield is based on net interest income as a percentage of average total interest-earning assets.

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- 13 -

CHANGES IN NET INTEREST INCOME (TABLE B)

CAPITOL BANCORP LIMITED

The table below summarizes the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected Capitol's net interest income (in $1,000s). The change in interest attributable to volume is calculated by multiplying the annual change in volume by the prior year's rate. The change in interest attributable to rate is calculated by multiplying the annual change in rate by the prior year's average balance. Any variance attributable jointly to volume and rate changes has been allocated to each category based on the percentage of each to the total change in both categories.

	2006 compared to 2005								2005 compared to 2004
	Volume			Rate			Net Total		Volume			Rate		Net Total
Increase (decrease) in interest income:
Money market and interest-bearing deposits	$	471		$	297		$	768	$	328		$	113	$	441
Federal funds sold		1,004			2,965			3,969		160			2,954		3,114
Investment securities -- U.S. Treasury, government agencies, mutual funds and other		(132	)		377			245		(336	)		148		(188	)
Loans held for sale		198			(85	)		113		(556	)		1,033		477
Portfolio loans		31,981			17,838			49,819		25,125			16,381		41,506
Total		33,522			21,392			54,914		24,721			20,629		45,350
Increase (decrease) in interest expense:
Deposits:
Savings deposits		(156	)		293			137		(22	)		134		112
Time deposits under $100,000		3,286			3,907			7,193		990			1,881		2,871
Time deposits $100,000 and over		5,988			10,426			16,414		3,285			3,838		7,123
Other interest-bearing deposits		1,434			10,238			11,672		(5	)		6,417		6,412
Notes payable and short-term borrowings		110			1,574			1,684		1,885			636		2,521
Subordinated debentures		8			899			907		176			868		1,044
Total		10,670			27,337			38,007		6,309			13,774		20,083
Increase (decrease) in net interest income	$	22,852		$	(5,945	)	$	16,907	$	18,412		$	6,855	$	25,267

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- 14 -

INVESTMENT PORTFOLIO (TABLE C)

CAPITOL BANCORP LIMITED

The table below shows amortized cost and estimated market value of investment securities as of December 31, 2006, 2005 and 2004 (in $1,000s):

	2006				2005				2004
			Estimated				Estimated				Estimated
	Amortized		Market		Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value		Cost		Value
U.S. Treasury									$	330	$	329
Government agencies	$	13,403	$	13,285	$	23,276	$	23,022		27,897		27,843
Mortgage-backed securities		4,089		3,991		2,437		2,355
Municipals		1,630		1,628		1,640		1,631
		19,122		18,904		27,353		27,008		28,227		28,172
Other securities:
Federal Reserve Bank stock		864		864		536		536		535		535
Federal Home Loan Bank stock		14,148		14,148		12,960		12,960		10,878		10,878
Corporate stock		4,419		4,419		1,835		1,835		1,443		1,443
Other investments		2,318		2,318		1,335		1,335		1,335		1,335
Total other securities		21,749		21,749		16,666		16,666		14,191		14,191
Total investment securities	$	40,871	$	40,653	$	44,019	$	43,674	$	42,418	$	42,363

The table below shows the amortized cost, relative maturities and weighted average yields of investment securities at December 31, 2006 (in $1,000s):

			Estimated		Weighted
	Amortized		Market		Average
	Cost		Value		Yield
Maturity:
Due in one year or less	$	5,243	$	5,222		6.80	%
Due after one year but within five years		6,677		6,612		9.48	%
Due after five years but within ten years		3,961		3,900		9.00	%
Due after ten years		3,241		3,170		5.78	%
Without stated maturities		21,749		21,749
Total	$	40,871	$	40,653

Investment securities which do not have stated maturities (corporate stock, Federal Reserve Bank and Federal Home Loan Bank stock) do not have stated yields or rates of return and such rates of return vary from time to time.

Following is a summary of the weighted average maturities of investment securities (exclusive of securities without stated maturities) at December 31, 2006:

U.S. Agencies	3 years    and    0 months
Mortgage-backed securities	2 years    and    6 months
Municipals	3 years    and    8 months

- 15 -

LOAN PORTFOLIO AND SUMMARY OF OTHER REAL ESTATE OWNED (TABLE D)

CAPITOL BANCORP LIMITED

Portfolio loans outstanding as of December 31 are shown below (in $1,000s):

	2006				2005				2004				2003				2002
Commercial - real estate	$	2,500,831	71.68	%	$	2,176,343	72.76	%	$	1,969,746	73.15	%	$	1,600,334	71.21	%	$	1,531,637	76.91	%
Commercial - other		602,294	17.26	%		512,018	17.12	%		474,746	17.63	%		432,763	19.26	%		257,399	12.93	%
Total commercial loans		3,103,125	88.95	%		2,688,361	89.88	%		2,444,492	90.78	%		2,033,097	90.46	%		1,789,036	89.84	%
Real estate mortgage		259,604	7.44	%		212,142	7.09	%		177,204	6.58	%		143,343	6.38	%		127,855	6.42	%
Installment		125,949	3.61	%		90,686	3.03	%		71,208	2.64	%		71,000	3.16	%		74,481	3.74	%
Total portfolio loans	$	3,488,678	100.00	%	$	2,991,189	100.00	%	$	2,692,904	100.00	%	$	2,247,440	100.00	%	$	1,991,372	100.00	%

The table below summarizes (in $1,000s) the remaining maturity of portfolio loans outstanding at December 31, 2006 according to scheduled repayments of principal:

		Fixed Rate		Variable Rate		Total
Aggregate maturities of portfolio loan balances which are due in one year or less:	$	318,846	$	996,336	$	1,315,182
After one year but within five years		1,019,002		327,521		1,346,523
After five years		111,447		685,800		797,247
Nonaccrual loans		13,029		16,697		29,726
Total	$	1,462,324	$	2,026,354	$	3,488,678

The following summarizes, in general, Capitol's various loan classifications:

Commercial - real estate

Comprised of a broad mix of business use and multi-family housing properties, including office, retail, warehouse and light industrial uses. A typical loan size is generally less than $1,000,000 and, at December 31, 2006, approximately 19% of such properties were owner-occupied and approximately 16% of the commercial real estate total consisted of a combination of multi-family and residential rental income properties (including construction).

Commercial - other

Includes a range of business credit products, current asset lines of credit and equipment term loans. These products bear higher inherent economic risk than other types of lending activities. A typical loan size is generally less than $500,000, and multiple account relationships serve to reduce such risks.

Real estate mortgage

Includes single family residential loans held for permanent portfolio and home equity lines of credit. Risks are nominal, borne out by loss experience, housing economic data and loan-to-value percentages.

Installment

Includes a broad range of installment credit products, secured by automobiles, boats, etc., with typical consumer credit risks.

All loans are subject to underwriting procedures commensurate with the loan size, nature of collateral, industry trends, risks and experience factors. Appropriate collateral is required for most loans, as is documented evidence of debt repayment sources.

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- 16 -

LOAN PORTFOLIO AND SUMMARY OF OTHER REAL ESTATE OWNED (TABLE D - CONTINUED)

CAPITOL BANCORP LIMITED

The aggregate amount of nonperforming portfolio loans is summarized below as of December 31 (in $1,000s). Nonperforming loans are comprised of (a) loans accounted for on a nonaccrual basis and (b) loans contractually past due 90 days or more as to principal and interest payments (but not included in nonaccrual loans in (a) above) and consist primarily of commercial real estate loans. See Note D of the Notes to Consolidated Financial Statements for additional information regarding nonperforming loans.

	2006			2005			2004			2003			2002
Nonperforming loans:
Nonaccrual loans:     Commercial	$	25,219		$	19,734		$	20,618		$	19,852		$	15,444
Real estate mortgage		3,609			1,734			2,396			632			560
Installment		898			1,154			195			376			613
Total nonaccrual loans		29,726			22,622			23,209			20,860			16,617
Past due loans:         Commercial		3,860			3,235			3,529			4,544			5,728
Real estate mortgage		523			592			1,382			1,083			323
Installment		165			283			351			385			222
Total past due loans		4,548			4,110			5,262			6,012			6,273
Total nonperforming loans	$	34,274		$	26,732		$	28,471		$	26,872		$	22,890
Nonperforming loans as a percentage of total portfolio loans		0.98	%		0.89	%		1.06	%		1.20	%		1.15	%
Nonperforming loans as a percentage of total assets		0.84	%		0.77	%		0.92	%		0.98	%		0.95	%
Allowance for loan losses as a percentage of nonperforming loans		132.50	%		151.72	%		131.97	%		116.87	%		126.49	%

In addition to the identification of nonperforming loans involving borrowers with payment performance difficulties (i.e., nonaccrual loans and loans past due 90 days or more), management utilizes an internal loan review process to identify other potential problem loans which may warrant additional monitoring or other attention. This loan review process is a continuous activity which periodically updates internal loan classifications. At inception, all loans are individually assigned a classification which grade the credits on a risk basis, based on the type and discounted value of collateral, financial strength of the borrower and guarantors and other factors such as nature of the borrowers' business climate, local economic conditions and other subjective factors. The loan classification process is fluid and subjective.

Potential problem loans include loans which are generally performing as agreed; however, because of loan review's and/or lending staff's risk assessment, increased monitoring is deemed appropriate. In addition, some loans are identified for monitoring because of specific performance issues or other risk factors requiring closer management and development of specific remedial action plans.

At December 31, 2006, potential problem loans (which includes nonperforming loans) approximated $146 million or about 4.2% of total consolidated portfolio loans. Such totals typically approximate 4% to 5% of loans outstanding and are an important part of management's ongoing and proactive loan review activities which are designed to early-identify loans which warrant close monitoring at the bank and corporate credit-administration levels. It is important to note that these potential problem loans do not necessarily have significant loss exposure (nor are they necessarily deemed 'impaired'), but rather are identified by management in this manner to aid in loan administration and risk management. These loans are considered in management's evaluation of the adequacy of the allowance for loan losses.

The table below summarizes activity in other real estate owned (in $1,000s) for the year ended December 31:

	2006			2005			2004			2003			2002
Other real estate owned at January 1	$	3,733		$	3,855		$	4,248		$	4,605		$	3,044
Properties acquired in restructure of loans or in lieu of foreclosure		8,870			5,718			4,233			3,898			4,578
Properties sold		(2,806	)		(4,440	)		(3,833	)		(3,704	)		(2,998	)
Payments received from borrowers or tenants, credited to carrying amount		-			-			(552	)		(121	)		-
Other changes, net		(333	)		(1,400	)		(241	)		(430	)		(19	)
Other real estate owned at December 31	$	9,464		$	3,733		$	3,855		$	4,248		$	4,605

Other real estate owned is valued at the lower of cost or fair value (net of estimated selling cost) at the date of transfer/acquisition. Management performs a periodic analysis of estimated fair values to determine potential impairment of other real estate owned.

- 17 -

SUMMARY OF LOAN LOSS EXPERIENCE (TABLE E)

CAPITOL BANCORP LIMITED

The table below summarizes changes in the allowance for loan losses and related portfolio data and ratios for the year ended December 31 (in $1,000s):

	2006			2005			2004			2003			2002
Allowance for loan losses at January 1	$	40,559		$	37,572		$	31,404		$	28,953		$	23,238
Allowance for loan losses of acquired bank subsidiary								724
Loans charged off:
Commercial		(8,041	)		(9,099	)		(7,960	)		(8,068	)		(6,824	)
Real estate mortgage		(99	)		-			(96	)		(115	)		(352	)
Installment		(559	)		(544	)		(332	)		(608	)		(527	)
Total charge-offs		(8,699	)		(9,643	)		(8,388	)		(8,791	)		(7,703	)
Recoveries:
Commercial		1,062			1,522			1,007			1,277			588
Real estate mortgage		3			3			-			13			61
Installment		333			145			117			91			93
Total recoveries		1,398			1,670			1,124			1,381			742
Net charge-offs		(7,301	)		(7,973	)		(7,264	)		(7,410	)		(6,961	)
Additions to allowance charged to expense		12,156			10,960			12,708			9,861			12,676
Allowance for loan losses at December 31	$	45,414		$	40,559		$	37,572		$	31,404		$	28,953
Total portfolio loans outstanding at December 31	$	3,488,678		$	2,991,189		$	2,692,904		$	2,247,440		$	1,991,372
Ratio of allowance for loan losses to portfolio loans outstanding		1.30	%		1.36	%		1.40	%		1.40	%		1.45	%
Average total portfolio loans for the year	$	3,236,538		$	2,834,973		$	2,492,379		$	2,101,617		$	1,884,646
Ratio of net charge-offs to average portfolio loans outstanding		0.23	%		0.28	%		0.29	%		0.35	%		0.37	%

See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, for additional information regarding the allowance for loan losses and description of factors which influence management's judgment in determining the amount of the allowance for loan losses at the balance sheet date.

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- 18 -

SUMMARY OF LOAN LOSS EXPERIENCE (TABLE E - CONTINUED)

CAPITOL BANCORP LIMITED

The amount of the allowance for loan losses allocated in the following table (in $1,000s) as of December 31, are based on management's estimate of losses inherent in the portfolio at the balance sheet date, and should not be interpreted as an indication of future charge-offs:

	2006					2005					2004					2003					2002
			Percentage					Percentage					Percentage					Percentage					Percentage
	Amount		of Loans			Amount		of Loans			Amount		of Loans			Amount		of Loans			Amount		of Loans
Commercial	$	41,178		1.18	%	$	37,498		1.26	%	$	34,753		1.29	%	$	29,001		1.29	%	$	27,226		1.37	%
Real estate mortgage		2,675		0.08	%		1,866		0.06	%		1,808		0.07	%		1,408		0.06	%		1,009		0.05	%
Installment		1,561		0.04	%		1,195		0.04	%		1,011		0.04	%		995		0.05	%		718		0.03	%
Total allowance for loan losses	$	45,414		1.30	%	$	40,559		1.36	%	$	37,572		1.40	%	$	31,404		1.40	%	$	28,953		1.45	%
Total portfolio loans outstanding	$	3,488,678				$	2,991,189				$	2,692,904				$	2,247,440				$	1,991,372

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- 19 -

AVERAGE DEPOSITS (TABLE F)

CAPITOL BANCORP LIMITED

The table below summarizes the average balances of deposits (in $1,000s) and the average rates of interest for the years ended December 31, 2006, 2005 and 2004:

	2006					2005					2004
			Average					Average					Average
	Amount		Rate			Amount		Rate			Amount		Rate
Noninterest-bearing demand deposits	$	614,529				$	564,823				$	464,530
Savings deposits		59,985		1.64	%		71,890		1.17	%		74,026		0.99	%
Time deposits under $100,000		429,108		4.19	%		338,920		3.18	%		303,660		2.61	%
Time deposits $100,000 and over		889,769		4.28	%		717,851		3.02	%		596,658		2.44	%
Other interest-bearing deposits		1,066,109		2.96	%		998,165		1.99	%		998,544		1.35	%
Total deposits	$	3,059,500				$	2,691,649				$	2,437,418

The table below shows the amount of time certificates of deposit issued in amounts of $100,000 or more, by time remaining until maturity, which were outstanding at December 31, 2006 (in $1,000s):

Three months or less	$	363,192
Three months to six months		216,482
Six months to twelve months		218,808
Over 12 months		161,547
Total	$	960,029

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- 20 -

FINANCIAL RATIOS (TABLE G)

CAPITOL BANCORP LIMITED

	Year Ended December 31
	2006			2005			2004
Net income as a percentage of:
Average stockholders' equity		12.94	%		13.34	%		11.25	%
Average total assets		1.12	%		1.08	%		0.91	%
Capital ratios:
Average stockholders' equity as a percentage of average total assets		8.63	%		8.12	%		8.06	%
Average total equity (stockholders' equity and minority interests in consolidated subsidiaries) as a percentage of average total assets		11.52	%		9.93	%		9.27	%
Average total capital funds (stockholders' equity, minority interests in consolidated subsidiaries and subordinated debentures) as a percentage of average total assets		14.18	%		12.98	%		12.61	%
Dividend payout ratio (cash dividends per share as a percentage of net income per share):
Basic		35.32	%		29.75	%		34.57	%
Diluted		36.96	%		30.77	%		36.31	%

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Item 1A. Risk Factors.

An investment in Capitol's common stock is subject to the risks inherent to Capitol's business. The material risks and uncertainties that Capitol believes affect it are described below. The risks and uncertainties described below are not the only ones Capitol faces. Additional risks and uncertainties that Capitol is not aware of or focused on or currently deems immaterial may also impair business operations. This report is qualified in its entirety by these risk factors. If any of the following risks actually occur, Capitol's financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of Capitol's common stock could decline significantly, and shareholders could lose all or part of their investment.

Newly Formed Banks Are Likely to Incur Significant Operating Losses That Could Negatively Affect the Availability of Earnings to Support Future Growth.

Many of Capitol's bank subsidiaries are less than three years old and Capitol's oldest bank is twenty-five years old. Capitol engaged in significant new bank development activity in recent periods. Newly formed banks are expected to incur operating losses in their early periods of operation because of an inability to generate sufficient net interest income to cover operating costs. Newly formed banks may never become profitable. Current accounting rules require immediate write-off, rather than capitalization, of start-up costs and, as a result, future newly formed banks are expected to report larger early period operating losses. Those operating losses can be significant and can occur for longer periods than planned depending upon the ability to control operating expenses and generate net interest income, which could affect the availability of earnings retained to support future growth.

If Capitol is Unable to Manage its Growth, its Ability to Provide Quality Services to Customers Could Be Impaired and Cause its Customer and Employee Relations to Suffer.

Capitol has rapidly and significantly expanded its operations, engaged in significant new bank development activity in 2006 and anticipates that further expansion will be required to realize its growth strategy. Capitol's rapid growth has placed significant demands on its management and other resources which, given its expected future growth rate, are likely to continue. To manage future growth, Capitol will need to attract, hire and retain highly skilled and motivated officers and employees and improve existing systems and/or implement new systems for:

· transaction processing;

· operational and financial management; and

· training, integrating and managing Capitol's growing employee base.

Favorable Environment for Formation of New Banks Could Change Adversely, Which Could Severely Limit Capitol's Expansion Opportunities.

Capitol's growth strategy includes the addition of new banks. Thus far, Capitol has experienced favorable business conditions for the formation of its small, community and customer-focused banks. Those favorable conditions could change suddenly or over an extended period of time. A change in the availability of financial capital, human resources or general economic conditions could eliminate or severely limit expansion opportunities. To the extent Capitol is unable to effectively attract personnel and deploy its capital in new or existing banks, this could adversely affect future asset growth, earnings and the value of Capitol's common stock.

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Item 1A. Risk Factors - continued.

Capitol's Banks' Small Size May Make it Difficult to Compete With Larger Institutions Because Capitol is Not Able to Compete With Large Banks in the Offering of Significantly Larger Loans.

Capitol endeavors to capitalize its newly formed banks with a moderate dollar amount permitted by regulatory agencies. As a result, the legal lending limits of Capitol's banks severely constrain the size of loans that those banks can make. In addition, many of the banks' competitors have significantly larger capitalization and, hence, an ability to make significantly larger loans. The inability to offer larger loans limits the revenues that can be earned from interest amounts charged on larger loan balances.

Capitol's banks are intended to be small in size. Many operate from single locations. They are small relative to the dynamic markets in which they operate. Each of those markets has a variety of large and small competitors that have resources far beyond those of Capitol's banks. While it is the intention of Capitol's banks to operate as niche players within their geographic markets, their continued existence is dependent upon being able to attract and retain loan customers in those large markets that are dominated by substantially larger regulated and unregulated financial institutions.

If Capitol Cannot Recruit Additional Highly Qualified Personnel, Capitol's Customer Service Could Suffer, Causing its Customer Base to Decline.

Capitol's strategy is also dependent upon its continuing ability to attract and retain other highly qualified personnel. Competition for such employees among financial institutions is intense. Availability of personnel with appropriate community banking experience varies. If Capitol does not succeed in attracting new employees or retaining and motivating current and future employees, Capitol's business could suffer significantly.

Capitol and its Banks Operate in an Environment Highly Regulated by State andFederal Government; Changes in Federal and State Banking Laws and RegulationsCould Have a Negative Impact on Capitol's Business.

As a bank holding company, Capitol is regulated primarily by the Federal Reserve Board. Capitol's current bank affiliates are regulated primarily by the state banking regulators and the FDIC and, in the case of one national bank, the Office of the Comptroller of the Currency (OCC).

Federal and the Various State Laws and Regulations Govern Numerous Aspects of the Banks' Operations, Including:

· adequate capital and financial condition;

· permissible types and amounts of extensions of credit and investments;

· permissible nonbanking activities; and

· restrictions on dividend payments.

Federal and state regulatory agencies have extensive discretion and power to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies. Capitol and its banks also undergo periodic examinations by one or more regulatory agencies. Following such examinations, Capitol may be required, among other things, to change its asset valuations or the amounts of required loan loss allowances or to restrict its operations. Those actions would result from the regulators' judgments based on information available to them at the time of their examination.

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Item 1A. Risk Factors - continued.

The banks' operations are required to follow a wide variety of state and federal consumer protection and similar statutes and regulations. Federal and state regulatory restrictions limit the manner in which Capitol and its banks may conduct business and obtain financing. Those laws and regulations can and do change significantly from time to time, and any such change could adversely affect Capitol.

Regulatory Action Could Severely Limit Future Expansion Plans.

To carry out some of its expansion plans, Capitol is required to obtain permission from the Federal Reserve Board. Applications for the formation of new banks are submitted to the state and federal bank regulatory agencies for their approval.

While Capitol's prior experience with the regulatory application process has been favorable, the future climate for regulatory approval is impossible to predict. Regulatory agencies could prohibit or otherwise significantly restrict the expansion plans of Capitol, its current bank subsidiaries and future new start-up banks.

New Accounting or Tax Pronouncements or Interpretations May be Issued by the Accounting Standard-Setters, Regulators or Other Government Bodies Which Could Change Existing Accounting Methods. Changes in Accounting Could Negatively Impact Capitol's Results of Operations and Financial Condition.

Current accounting and tax rules, standards, policies, and interpretations influence the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. These laws, regulations, rules, standards, policies and interpretations are constantly evolving and may change significantly over time. Events that may not have a direct impact on Capitol, such as the bankruptcy of major U.S. companies, have resulted in legislators, regulators, and authoritative bodies, such as the Financial Accounting Standards Board, the Securities and Exchange Commission, the Public Company Accounting Oversight Board, and various taxing authorities responding by adopting and/or proposing substantive revisions to laws, regulations, rules, standards, policies, and interpretations. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. A change in accounting standards may adversely affect reported financial condition and results of operations.

Capitol's Business Continuity Plans or Data Security Systems Could Prove to be Inadequate, Resulting in a Material Interruption in, or Disruption to, its Business and a Negative Impact on the Results of Operations.

Capitol relies heavily on communications and information systems to conduct its business. Any failure, interruption or breach in security of these systems, whether due to severe weather, natural disasters, acts of war or terrorism, criminal activity or other factors, could result in failures or disruptions in general ledger, deposit, loan, customer relationship management and other systems. While Capitol has disaster recovery and other policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of Capitol's information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of Capitol's information systems could damage the reputation of Capitol and its banks, result in a loss of customer business, subject Capitol and its subsidiary banks to additional regulatory scrutiny, or expose Capitol to civil litigation and possible financial liability, any of which could have a material adverse effect on Capitol's results of operations.

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Item 1A. Risk Factors - continued.

The Banks' Allowances For Loan Losses May Prove Inadequate to Absorb ActualLoan Losses, Which May Adversely Impact Net Income or Increase Operating Losses.

Capitol believes that its consolidated allowance for loan losses is maintained at a level adequate to absorb inherent losses in the loan portfolios at the balance sheet date. Management's estimates are used to determine the allowance and are based on historical loss experience, specific problem loans, value of underlying collateral and other relevant factors. These estimates are subjective and their accuracy depends on the outcome of future events. Actual future losses may differ from current estimates. Depending on changes in economic, operating and other conditions, including changes in interest rates that are generally beyond Capitol's control, actual loan losses could increase significantly. As a result, such losses could exceed current allowance estimates. No assurance can be provided that the allowance will be sufficient to cover actual future loan losses should such losses be realized.

Loan loss experience, which is helpful in estimating the requirements for the allowance for loan losses at any given balance sheet date, has been minimal at many of Capitol's banks. Because many of Capitol's banks are young, they do not have seasoned loan portfolios, and it is likely that the ratio of the allowance for loan losses to total loans may need to be increased in future periods as the loan portfolios become more mature and loss experience evolves. If it becomes necessary to increase the ratio of the allowance for loan losses to total loans, such increases would be accomplished through higher provisions for loan losses, which may adversely impact net income or increase operating losses.

Widespread media reports of concerns about the health of the domestic economy have continued in 2006. Capitol's loan losses in recent years have varied. Further, amounts of nonperforming loans have fluctuated and it is anticipated that levels of nonperforming loans and related loan losses may increase as economic conditions, locally and nationally, evolve.

In addition, bank regulatory agencies, as an integral part of their supervisory functions, periodically review the adequacy of the allowance for loan losses. Regulatory agencies may require Capitol or its banks to increase their provision for loan losses or to recognize further loan charge-offs based upon judgments different from those of management. Any increase in the allowance required by regulatory agencies could have a negative impact on Capitol's operating results.

Capitol Could Face Unanticipated Environmental Liabilities or Costs Related to Real Property Owned or Acquired Through Foreclosure. Compliance with Federal, State and Local Environmental Laws and Regulations, Including Those Related to Investigation and Clean-Up of Contaminated Sites, Could Have a Negative Effect on Expenses and Results of Operations.

A significant portion of Capitol's affiliate bank's loan portfolio is secured by real property. During the ordinary course of business, Capitol's affiliate banks may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, Capitol's affiliate banks may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require Capitol's affiliate banks to incur substantial expenses and may materially reduce the affected property's value or limit Capitol's affiliate bank's ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase Capitol's affiliate bank's exposure to environmental liability. Although Capitol's affiliate banks have policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on results of operations.

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Item 1A. Risk Factors - continued.

Capitol's Commercial Loan Concentration to Small Businesses and Collateralized by Commercial Real Estate Increases the Risk of Defaults by Borrowers and Substantial Credit Losses Could Result, Causing Shareholders to Lose Their Investment in Capitol's Common Stock.

Capitol's banks make various types of loans, including commercial, consumer, residential mortgage and construction loans. Capitol's strategy emphasizes lending to small businesses and other commercial enterprises. Capitol typically uses commercial real estate as a source of collateral for many of its loans. Recently, regulatory agencies have expressed concern with banks with large concentrations in commercial real estate due to the recent downturn in the real estate market in certain areas of the country possibly leading to increased risk of credit loss and extended periods of sale. Loans to small and medium-sized businesses are generally riskier than single-family mortgage loans. Typically, the success of a small or medium-sized business depends on the management talents and efforts of one or two persons or a small group of persons, and the death, disability or resignation of one or more of these persons could have a material adverse impact on the business. In addition, small and medium-sized businesses frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial variations in operating results, any of which may impair a borrower's ability to repay a loan. Substantial credit losses could result, causing shareholders to lose their entire investment in Capitol's common stock.

Actions by the Open Market Committee of the Federal Reserve Board (FRBOMC) May Adversely Affect Capitol's Net Interest Income.

Changes in Net Interest Income. Capitol's profitability is significantly dependent on net interest income. Net interest income is the difference between interest income on interest-earning assets, such as loans, and interest expense on interest-bearing liabilities, such as deposits. Therefore, any change in general market interest rates, whether as a result of changes in monetary policies of the Federal Reserve Board or otherwise, can have a significant effect on net interest income. Capitol's assets and liabilities may react differently to changes in overall market rates or conditions because there may be mismatches between the repricing or maturity characteristic of assets and liabilities. As a result, changes in interest rates can affect net interest income in either a positive or negative way.

Recently, the Federal Reserve has increased interest rates several times. Future stability of interest rates and Federal Reserve Open Market Committee policy, which impact such rates, are uncertain.

Changes in The Yield Curve. Changes in the difference between short and long-term interest rates, commonly known as the yield curve, may also harm Capitol's business. For example, short-term deposits may be used to fund longer-term loans. When differences between short-term and long-term interest rates shrink or disappear, the spread between rates paid on deposits and received on loans could narrow significantly, decreasing net interest income.

Existing Subsidiaries of Capitol May Need Additional Funds to Aid in Their Growth or To Meet Other Anticipated Needs Which Could Reduce Capitol's Funds Available For New Bank Development or Other Corporate Purposes.

Future growth of existing banks may require additional capital infusions or other investment by Capitol to maintain compliance with regulatory capital requirements or to meet growth opportunities. Such capital infusions could reduce funds available for development of new banks or other corporate purposes.

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Item 1A. Risk Factors - continued.

Capitol has Debt Securities Outstanding Which May Prohibit Future Cash Dividends on Capitol's Common Stock or Otherwise Adversely Affect Regulatory Capital Compliance.

Capitol has a credit facility with an unaffiliated bank under which borrowings of up to $25 million are permitted, subject to certain conditions. Capitol is reliant upon its bank subsidiaries' earnings and dividends to service this debt obligation which may be inadequate to service the obligations, in the event Capitol utilizes this facility.  In the event of violation of the covenants relating to the credit facility, or due to failure to make timely payments of interest and debt principal, the lender may terminate the credit facility. In addition, upon such occurrences, dividends on Capitol's common stock may be prohibited or Capitol may be otherwise unable to make future dividends payments or obtain replacement credit facilities.

Capitol also has several series of trust-preferred securities outstanding, with a liquidation amount totaling about $103.3 million, which are treated as capital for regulatory ratio compliance purposes. Although these securities are viewed as capital for regulatory purposes, they are debt securities which have numerous covenants and other provisions which, in the event of noncompliance, could have an adverse effect on Capitol. For example, these securities permit Capitol to defer the periodic payment of interest for various periods, however, if such payments are deferred, Capitol is prohibited from paying cash dividends on its common stock during deferral periods and until deferred interest is paid. Future payment of interest is dependent upon Capitol's bank subsidiaries' earnings and dividends which may be inadequate to service the obligations. Continued classification of these securities as elements of capital for regulatory purposes is subject to future changes in regulatory rules and regulations and the actions of regulatory agencies, all of which is beyond the control or influence of Capitol.

Capitol's Controls and Procedures May Fail or be Circumvented Which Could Have a Material Adverse Effect on Capitol's Business, Results of Operations and Financial Condition.

Capitol regularly reviews and updates its internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on Capitol's business, results of operations and financial condition.

Capitol's Bylaws as Well as Certain Banking Laws May Have an Anti-Takeover Effect.

Provisions of Capitol's bylaws, the Michigan Control Share Act, and certain federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire Capitol, even if doing so would be perceived to be beneficial to shareholders. The combination of these provisions effectively inhibits a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of Capitol's common stock.

Capitol's Bank Subsidiaries Have Decentralized Management Which Could Have a Negative Impact on the Rate of Growth and Profitability of Capitol and its Bank Subsidiaries.

Capitol's bank subsidiaries have independent boards of directors and management teams. This decentralized structure gives the banks control over the day-to-day management of the institution, including credit decisions, the selection of personnel, the pricing of loans and deposits, marketing decisions and the strategy in handling problem loans. This decentralized structure may impact Capitol's ability to uniformly implement corporate or enterprise-wide strategy at the bank level. It may slow Capitol's ability to react to changes in strategic direction due to outside factors such as interest rate changes and changing economic conditions. This decentralized structure may cause additional management time to be spent on internal issues and could negatively impact the growth and profitability of the banks individually and the parent company.

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The names and locations of Capitol's banks are listed on Pages F-41 - F-42, Financial Information Section of Annual Report, under the caption "Note A—Nature of Operations, Basis of Presentation and Principles of Consolidation," which is incorporated herein by reference.

Most of the banks' locations are leased. Many of Capitol's banks operate from a single location. Most of Capitol's banks' facilities are generally small (i.e., less than 10,000 square feet), first floor offices with convenient access to parking. Ann Arbor Commerce Bank, Capitol's largest bank, occupies the largest leased facility, approximately 18,000 square feet.

Community Bank of Rowan, Elkhart Community Bank, First Carolina State Bank, Goshen Community Bank, Grand Haven Bank, Muskegon Commerce Bank, Paragon Bank & Trust, Peoples State Bank and Portage Commerce Bank own their stand-alone bank primary offices.

Some of Capitol's banks have drive-up customer service capability. Capitol's banks are typically located in or near high traffic centers of commerce in their respective communities. Customer service is enhanced through utilization of ATMs to process some customer-initiated transactions, Internet banking and some of the banks also make available a courier service to pick up transactions at customers' locations.

Capitol's Lansing, Michigan executive offices are located within the same building as Capitol National Bank. Those offices include administrative, operations, legal, accounting, human resources, credit administration, risk management and executive staff.

Data processing centers are located in both Lansing, Michigan and Tempe, Arizona.

Capitol's Phoenix, Arizona executive offices are located within the same building as Camelback Community Bank. Those offices include administrative, operations, credit administration, risk management and executive staff.

Certain office locations are leased from related parties. Rent expense including rent expense under leases with related parties is incorporated by reference from Page F-55, Financial Information Section of Annual Report, under the caption "Note F—Premises and Equipment."

Capitol's subsidiary bank, Brighton Commerce Bank, leases its primary banking facility from Tri-O Development. Three of David O'Leary's adult children are members of the leasing entity; Mr. O'Leary is Capitol's Secretary and a director. Rent paid by Brighton Commerce Bank to the leasing entity amounted to $230,148 in 2006. Capitol's subsidiary bank, Ann Arbor Commerce Bank, leases its primary banking facility from South State Commerce Center L.L.C. Lyle Miller's Trust owns 10% of the membership interest and H. Nicholas Genova's IRA owns 10% of the membership interest of that LLC; Mr. Miller is Vice Chairman and a director of Capitol and Mr. Genova is a director of Capitol. Rent paid by Ann Arbor Commerce Bank amounted to $481,447 in 2006. Capitol and its subsidiary bank, Capitol National Bank, paid rent and tenant improvements of $2,023,549 in 2006 for their principal offices at Capitol Bancorp Center, 200 Washington Square North, Lansing, Michigan, to Business & Trade Center Limited, a Michigan limited partnership, under lease agreements with expiration dates of 2012 and portions which are renewable for periods of 5 years. Capitol entered into a new lease agreement with Business & Trade Center Limited effective January 1, 2006. The new lease agreement has an expiration date of 2020. Joseph D. Reid (Capitol's Chairman and CEO) and Lewis D. Johns (a director of Capitol) are partners of the partnership. East Valley Bank, a branch office of Mesa Bank, has a lease agreement with

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Item 2. Properties - continued.

Chandler Properties Group, L.L.C. of which Michael Kasten (Vice Chairman and a director of Capitol) and Michael Devine (a director of Capitol) are members. East Valley Bank paid $94,829 in rent in 2006. The lease rates represent what Capitol believes to be fair market value in the respective markets. All leasing arrangements which involve insiders have been approved by Capitol's ethics committee and reported to bank regulatory agencies prior to their commencement.

Management believes Capitol's and its banks' offices to be in good and adequate condition and adequately covered by insurance.

Item 3. Legal Proceedings.

As of December 31, 2006, there were no material pending legal proceedings to which Capitol or its subsidiaries was a party or to which any of its property was subject, except for proceedings which arise in the ordinary course of business. In the opinion of management, pending legal proceedings will not have a material effect on the consolidated financial position or results of operations of Capitol.

Item 4. Submission of Matters to a Vote of Security Holders.

During the fourth quarter of 2006, no matters were submitted to a vote by security holders.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

A. Market Information:  Incorporated by reference from Pages F-3 - F-4, Financial Information Section of Annual Report, under the caption "Information Regarding Capitol's Common Stock," Pages F-58 and F-59 under the caption "Note J—Restricted Common Stock and Stock Options" and Pages F-5 - F-6, under the caption "Shareholder Information." 

B. Holders:  Incorporated by reference from the second paragraph on Page F-4, Financial Information Section of Annual Report, under the caption "Information Regarding Capitol's Common Stock."  

C. Dividends:  Incorporated by reference from the first paragraph on Page F-4, Financial Information Section of Annual Report under the caption "Information Regarding Capitol's Common Stock." Incorporated by reference from Page F-2, Financial Information Section of Annual Report, under the caption "Quarterly Results of Operations" and subcaption "Cash dividends paid per share" and Pages F-65 and F-66, Financial Information Section of Annual Report, under the caption "Note P—Dividend Limitations of Subsidiaries and Other Capital Requirements."  

D.  Securities Authorized for Issuance Under Equity Compensation Plan:

Summary of Equity Compensation Plans as of December 31, 2006

	(a)		(b)		(c)
Plan category		Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)		Weighted-average exercise price of outstanding options warrants and rights (1)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders*		2,011,323	$	28.72		41,160
Equity compensation plans not approved by security holders(1)		44,830		20.95		--
Equity compensation plans resulting from share exchanges		513,938		20.09		--
Total		2,570,091	$	26.86		41,160

(1)	Stock options issued pursuant to employment agreements with various officers of Capitol and its subsidiaries.
*	Does not include shares of Capitol's common stock that may be issued if Capitol elects to pay awards made under the Capitol Bancorp Ltd. Management Incentive Plan in shares of Capitol's common stock.

E. Performance Graph. Incorporated by reference from Page F-3, Financial Information Section of Annual Report, under the caption "Information Regarding Capitol's Common Stock."

F. There were no purchases of equity securities by the issuer or affiliated purchasers in the fourth quarter of 2006.

G. 42,833 shares of Capitol's common stock subject to a restricted stock award made to Joseph D. Reid, Capitol's Chairman and CEO, pursuant to the terms of the Capitol Bancorp Limited Management Incentive Plan vested on January 1, 2006, resulting from the satisfaction of certain performance targets. The shares were not registered under the Securities Act of 1933.

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Item 6. Selected Financial Data.

Incorporated by reference from Page F-2, Financial Information Section of Annual Report, under the caption "Selected Consolidated Financial Data" under the column heading "As of and for the Year Ended December 31, 2006, 2005, 2004, 2003 and 2002."

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Incorporated by reference from Pages F-7 - F-32, Financial Information Section of Annual Report, under the caption "Management's Discussion and Analysis of Capitol's Business Financial Condition and Results of Operations" and Page F-6, Financial Information Section of Annual Report, under the caption "Cautions Regarding Forward-Looking Statements."

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Incorporated by reference from Pages F-25 - F-29, Financial Information Section of Annual Report, under the caption "Trends Affecting Operations" and Page F-6, Financial Information Section of Annual Report, under the caption "Cautions Regarding Forward-Looking Statements."

Item 8. Financial Statements and Supplementary Data.

See Item 15 (under subcaption "(a) 1 and 2. Financial Statements/Schedules") of this Form 10-K for specific description of financial statements incorporated by reference from Financial Information Section of Annual Report.

Incorporated by reference from Page F-2, Financial Information Section of Annual Report, under the caption "Quarterly Results of Operations."

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures:

Capitol maintains disclosure controls and procedures designed to ensure that the information Capitol must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. Capitol's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated Capitol's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, Capitol's disclosure controls and procedures are effective.

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Item 9A. Controls and Procedures - continued.

Management's Annual Report on Internal Control Over Financial Reporting:

Incorporated by reference from Page F-33, Financial Information Section of Annual Report.

Attestation Report of Independent Registered Public Accounting Firm:

Incorporated by reference from Pages F-34 and F-35, Financial Information Section of Annual Report.

Changes in Internal Control Over Financial Reporting:

No change in Capitol's internal control over financial reporting occurred during Capitol's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect Capitol's internal control over financial reporting.

Item 9B. Other Information.

Effective March 14, 2007, the Compensation Committee of Capitol's Board of Directors established base salaries for 2007 and approved bonuses for 2006 for Capitol's named executive officers. 2006 bonuses for Messrs. Hendrickson, Lewis and Thomas and Ms. Reid were $75,000 each. Mr. Reid elected to waive his right to receive his 2006 bonus as discussed below. After consultation with Clark Consulting, Inc. and comparison with market data of executives at similarly situated companies the Compensation Committee elected to increase the salaries of Mr. Hendrickson to $416,000, Mr. Lewis to $425,000, Ms. Reid to $400,000 and Mr. Thomas to $340,000.

After consultation with the Compensation Committee, Mr. Reid agreed to an amendment to his employment agreement which will reduce his total cash compensation and limit the equity incentives paid to him based on the future development of Capitol. Mr. Reid and Capitol executed the amendment to his employment agreement on March 14, 2007. Such amendment becomes effective April 26, 2007 and will remain effective unless Capitol's Board of Directors fails to ratify the Compensation Committee's approval of the amendment. Pursuant to the terms and conditions of the amendment, Mr. Reid's employment agreement was amended to reflect the following:

· reduce Mr. Reid's salary to $900,000;

· delete references to Mr. Reid's right to defer his compensation;

· change the date on which certain amounts are paid to Mr. Reid to avoid any potential issues arising under Section 409A of the Code; and

· reduce Mr. Reid's compensation for each new bank or holding company opened or acquired by Capitol (each a "New Affiliate") from an option for 30,000 shares of Capitol's common stock to a total amount of $150,000 ($50,000 in cash and a restricted stock award for shares of Capitol's common stock having a fair market value of $100,000).

· Pursuant to such amendment Mr. Reid is not entitled to receive any compensation for more than ten (10) New Affiliates in each fiscal year.

The amendment to the employment agreement is attached as Exhibit 10(s) to this Form 10-K. As a part of the overall reduction in compensation, Mr. Reid elected to waive his right to receive his bonus for the 2006 calendar year, even though Capitol achieved the performance goals that triggered his bonus, for the 2006 calendar year. Consequently, Mr. Reid will not receive his 2006 bonus. Mr. Reid's bonus for the 2006 calendar year would have been $847,811.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the captions "PROPOSAL ONE: ELECTION OF DIRECTORS," "ROLE OF THE BOARD," "CORPORATE GOVERNANCE," COMMITTEE STRUCTURE," "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE," and "EXECUTIVE OFFICERS."

Item 11. Executive Compensation.

The information required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the captions "COMPENSATION DISCUSSION & ANALYSIS OVERVIEW," "COMPENSATION COMMITTEE REPORT EQUITY," "SUMMARY COMPENSATION," "GRANTS OF PLAN-BASED AWARDS," "OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2006," "OPTION EXERCISES AND STOCK VESTED 2006," "PENSION BENEFITS 2006," "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION," "NON-EMPLOYEE DIRECTOR COMPENSATION IN 2006," and "POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL."

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the captions "STOCK OWNERSHIP," and "PROPOSAL 2: APPROVAL OF CAPITOL BANCORP LIMITED 2007 EQUITY INCENTIVE PLAN - Equity Compensation Plan Information."

Item 13. Certain Relationships and Related Transactions and Director Independence.

The information required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the caption "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS," "ROLE OF THE BOARD" and "COMMITTEE STRUCTURE."

Item 14. Principal Accountant Fees and Services.

The information required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the caption "RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM."

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) 1 and 2. Financial Statements/Schedules:

The following consolidated financial statements of Capitol Bancorp Limited and subsidiaries and reports of independent registered public accounting firm included on Pages F-33 - F-70 of the Financial Information Section of Annual Report of the Registrant to its stockholders for the year ended December 31, 2006, are incorporated by reference in Item 8:

Reports of Independent Registered Public Accounting Firm.

Consolidated balance sheets--December 31, 2006 and 2005.

Consolidated statements of income--Years ended December 31, 2006, 2005 and 2004.

Consolidated statements of changes in stockholders' equity--Years ended December 31, 2006, 2005 and 2004.

Consolidated statements of cash flows--Years ended December 31, 2006, 2005 and 2004.

Notes to consolidated financial statements.

All financial statements have been incorporated by reference from the Annual Report or are included in Management's Discussion and Analysis of Financial Condition and Results of Operations. No schedules are included here because they are either not required, not applicable or the required information is contained elsewhere.

(b) Exhibits:

A list of exhibits required to be filed as part of this report is set forth in the Exhibit Index (pages 37-39) which immediately precedes such exhibits and is incorporated herein by reference.

[The remainder of this page intentionally left blank]

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CAPITOL BANCORP LTD. Registrant By:/s/ Joseph D. Reid Joseph D. Reid Chairman and Chief Executive Officer     By:/s/ Lee W. Hendrickson    Lee W. Hendrickson Chief Financial Officer (Principal Financial and Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant on March 14, 2007, in the capacities indicated below.

/s/ Joseph D. Reid Joseph D. Reid, Chairman, Chief Executive Officer and Director	/s/ Robert C. Carr Robert C. Carr, Vice Chairman and Director
/s/ David O'Leary David O'Leary, Secretary and Director	/s/ Michael L. Kasten Michael L. Kasten, Vice Chairman and Director
/s/ Lyle W. Miller Lyle W. Miller, Vice Chairman and Director	/s/ David L. Becker David L. Becker, Director
/s/ Paul R. Ballard Paul R. Ballard, Director	/s/ Michael J. Devine    __ Michael J. Devine, Director
/s/ Douglas E. Crist Douglas E. Crist, Director	/s/ Gary A. Falkenberg Gary A. Falkenberg, Director
/s/ James C. Epolito James C. Epolito, Director	/s/ Kathleen A. Gaskin Kathleen A. Gaskin, Director
/s/ Joel I. Ferguson Joel I. Ferguson, Director	/s/ Michael F. Hannley Michael F. Hannley, Director
/s/ H. Nicholas Genova H. Nicholas Genova, Director	/s/ John S. Lewis John S. Lewis, President, Western Regions and Director
/s/ Lewis D. Johns Lewis D. Johns, Director	/s/ Kathryn L. Munro    Kathryn L. Munro, Director
/s/ Leonard Maas Leonard Maas, Director	/s/ Cristin K. Reid Cristin K. Reid, Corporate President and Director
/s/ Myrl D. Nofziger Myrl D. Nofziger, Director	/s/ Ronald K. Sable Ronald K. Sable, Director

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EXHIBIT INDEX

Exhibit No.		Description	Page Number or Incorporated by Reference from:
3		Articles of Incorporation (as amended) and Bylaws (as amended)	(1) (22) (24)
4		Instruments Defining the Rights of Security Holders
	(a)	Common Stock Certificate	(1)
	(b)	Indenture dated December 18, 1997	(11)
	(c)	Subordinated Debenture	(11)
	(d)	Amended and Restated Trust Agreement dated December 18, 1997	(11)
	(e)	Preferred Security Certificate dated December 18, 1997	(11)
	(f)	Preferred Securities Guarantee Agreement of Capitol Trust I dated December 18, 1997	(11)
	(g)	Agreement as to Expenses and Liabilities of Capitol Trust I	(11)
	(h)	Capitol Bancorp Ltd. 2000 Incentive Stock Plan	(18)
10		Material Contracts:
		Capitol Bancorp Limited 2003 Stock Plan*	(20) (22)
		Form of Stock Option Agreement for Awards pursuant to Capitol Bancorp Limited 2003 Stock Plan*	(20)
	(a)	Amended and Restated Employment Agreement of Joseph D. Reid (dated March 17, 2003 and amendment dated April 17, 2003)*	(19)
	(b)	Profit Sharing/401(k) Plan (as amended and restated April 1, 1995)*	(10)
	(b1)	First and Second Amendments to Profit Sharing/401(k) Plan*	(12)
	(b2)	Third, Fourth and Fifth Amendments to Profit Sharing/401(k) Plan*	(14)
	(b3)	Sixth, Seventh, Eighth and Ninth Amendments to Profit Sharing/401(k) Plan*	(15)
	(b4)	Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth and Fifteenth Amendments to Profit Sharing/401(k) Plan*	(17)
	(b5)	Sixteenth and Seventeenth Amendments to Profit Sharing/401(k) Plan*	(18)
	(b6)	Eighteenth, Nineteenth and Twentieth Amendments to Profit Sharing/401(k) Plan*	(21)
	(b7)	Twenty-First, Twenty-Second, Twenty-Third, Twenty-Fourth, Twenty-Fifth and Twenty-Sixth Amendments to Profit Sharing/401(k) Plan*	(23)
	(b8)	Twenty-Seventh, Twenty-Eighth, Twenty-Ninth, Thirtieth, Thirty-First, Thirty-Second, Thirty-Third, Thirty-Fourth, Thirty-Fifth, Thirty-Sixth, Thirty-Seventh, Thirty-Eighth, Thirty-Ninth, Fortieth, Forty-First and Forty Second Amendments to Profit Sharing/401(k) Plan*
	(c)	Lease Agreement with Business & Trade Center, Ltd.	(9)
	(d)	Capitol Bancorp Limited Employee Stock Ownership Plan (as amended and restated February 27, 2002)*	(25)

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Exhibit No.		Description	Page Number or Incorporated by Reference from:
10		Material Contracts—continued:
	(e)	Employment Agreements with Robert C. Carr, John C. Smythe, and Charles J. McDonald*	(2)
	(f)	Executive Supplemental Income Agreements with Robert C. Carr, Paul R. Ballard, Richard G. Dorner, James R. Kaye, Scott G. Kling, David K. Powers, John C. Smythe and Charles J. McDonald*	(10)
	(g)	Consolidation Agreement between the Corporation and Portage Commerce Bank	(4)
	(h)	Employment Agreement with Richard G. Dorner*	(4)
	(i)	Employment Agreement with David K. Powers*	(5)
	(j)	Definitive Exchange Agreement and Closing Memorandum between Capitol and United Savings Bank, FSB	(6)
	(k)	Employment Agreement with James R. Kaye*	(7)
	(l)	Definitive Exchange Agreement between the Registrant and Financial Center Corporation	(8)
	(m)	Capitol Bancorp Ltd. Management Incentive Plan*	(22)
	(n)	Employment Agreement by and between Sun Community Bancorp Limited and John S. Lewis. (Exhibit 10.7 of Sun Community Bancorp Limited)*	(13)
	(o)	Anti-dilution Agreement by and between Sun Community Bancorp Limited and Capitol Bancorp Ltd. (Exhibit 10.10 of Sun Community Bancorp Limited)	(13)
	(p)	Plan of Share Exchange dated November 16, 2001 between and among Capitol Bancorp Ltd. and Sun Community Bancorp Limited	(16)
	(q)	Restricted Stock Agreement between Capitol Bancorp Ltd. and Joseph D. Reid*	(23)
	(r)	Form of Employment Agreement with Cristin Reid English and Bruce Thomas*	(23)
	(s)	Second Amendment to Employment Agreement with Joseph D. Reid (dated March 14, 2007)*
13		Annual Report to Security Holders A.Marketing Section of 2006 Annual Report B.Financial Information Section of 2006 Annual Report
21		Subsidiaries of the Registrant
23		Consent of BDO Seidman, LLP
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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Key:
(1)	Form S-18, Reg. No. 33-24728C, filed September 15, 1988.
(2)	Form S-1, Reg. No. 33-30492, filed August 14, 1989.
(3)	Form S-1, Reg. No. 33-31323, filed September 29, 1989.
(4)	Originally filed as exhibit to Form 10-K for year ended December 31, 1990, filed March 6, 1991; refiled as exhibit to Form 10-KSB for year ended December 31, 1995, filed March 14, 1996, due to time limit for incorporation by reference pursuant to Regulation SB Item 10(f).
(5)	Form 10-K for year ended December 31, 1991, filed February 28, 1992.
(6)	Form 8-K dated July 15, 1992, as amended under Form 8 on September 14, 1992.
(7)	Form 10-KSB for year ended December 31, 1992, filed February 25, 1993.
(8)	Form S-4, Reg. No. 33-73474, filed December 27, 1993.
(9)	Form 10-KSB for year ended December 31, 1993, filed March 14, 1994.
(10)	Form 10-KSB for the year ended December 31, 1995, filed March 14, 1996.
(11)	Post Effective Amendment No.1 to Form S-3, Reg. No. 333-41215 and 333-41215-01 filed February 9, 1998.
(12)	Form 10-K for year ended December 31, 1998, filed March 17, 1999.
(13)	Amendment No. 2 to the Registration Statement on Form S-1 of Sun Community Bancorp Limited (Registration No. 333-76719) dated June 15, 1999.
(14)	Form 10-K for year ended December 31, 1999, filed March 27, 2000.
(15)	Form 10-K for year ended December 31, 2000, filed March 23, 2001.
(16)	Amendment No. 4 to the Registration Statement on Form S-4 Reg. No. 333-73624 filed February 12, 2002.
(17)	Form 10-K for year ended December 31, 2001, filed March 15, 2002.
(18)	Form 10-K for year ended December 31, 2002, filed March 28, 2003.
(19)	Form 10-Q for the period ended March 31, 2003, filed May 14, 2003.
(20)	Form 10-Q for the period ended September 30, 2004, filed October 29, 2004.
(21)	Form 10-K for the year ended December 31, 2004, filed March 16, 2005.
(22)	Form 10-Q for the period ended June 30, 2005, filed July 29, 2005.
(23)	Form 10-K for the year ended December 31, 2005, filed March 16, 2006.
(24)	Exhibit 99.1 to Form 8-K filed on February 7, 2007.
(25)	Exhibit 99.1 to Form S-8, Reg. No. 333-137092, filed September 1, 2006.
*	A management contract or compensatory plan required to be filed with this report.

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EX-10.(B8)

Exhibit 10 (b8-1)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 27

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective January 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Fort Collins Commerce Bank	Bank	Colorado	1/1/2006

      Dated: January 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English    Cristin Reid English Chief Operating Officer

      Dated: January 1, 2006 FORT COLLINS COMMERCE BANK     By:/s/ Mark Kross Mark Kross President

Exhibit 10 (b8-2)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 28

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective January 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Bank of Belleville	Bank	Illinois	1/1/2006

      Dated: January 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: January 1, 2006 BANK OF BELLEVILLE     By:/s/ Kevin Pesko Kevin Pesko President

Exhibit 10 (b8-3)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 29

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective January 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Summit Bank of Kansas City	Bank	Missouri	1/1/2006

      Dated: January 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: January 1, 2006 SUMMIT BANK OF KANSAS CITY     By:/s/ Rick Viar Rick Viar President

Exhibit 10 (b8-4)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 30

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective January 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Bank of Santa Barbara	Bank	California	1/1/2006

      Dated: January 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: January 1, 2006 BANK OF SANTA BARBARA     By:/s/ Andy Clark Andy Clark President

Exhibit 10 (b8-5)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 31

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective January 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Bank of San Francisco	Bank	California	1/1/2006

      Dated: January 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: January 1, 2006 BANK OF SAN FRANCISCO     By:/s/ Ed Obuchowski Ed Obuchowski President

Exhibit 10 (b8-6)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 32

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective January 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Capitol Wealth, Inc.	Holding Company	North Carolina	1/1/2006

      Dated: January 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: January 1, 2006 CAPITOL WEALTH, INC.     By:/s/ Bob Hogan Bob Hogan President

Exhibit 10 (b8-7)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 33

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective January 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Commerce Bank of Southwest Florida	Bank	Florida	1/1/2006

      Dated: January 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: January 1, 2006 COMMERCE BANK OF SOUTHWEST FLORIDA     By:/s/ Mark Morris Mark Morris President and CEO

Exhibit 10 (b8-8)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 34

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective February 21, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Community Bank of Rowan	Bank	North Carolina	2/21/2006

      Dated: February 21, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: February 21, 2006 COMMUNITY BANK OF ROWAN     By:/s/ Bruce Jones Bruce Jones President

Exhibit 10 (b8-9)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 35

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective April 27, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Asian Bank of Arizona	Bank	Arizona	4/27/2006

      Dated: April 27, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: April 27, 2006 ASIAN BANK OF ARIZONA     By:/s/ Leslie Gin Leslie Gin President

Exhibit 10 (b8-10)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 36

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective June 21, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Bank of Valdosta	Bank	Georgia	6/21/2006

      Dated: June 21, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: June 21, 2006 BANK OF VALDOSTA     By:/s/ Matthew Stanaland Matthew Stanaland President

Exhibit 10 (b8-11)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 37

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective June 21, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Sunrise Bank of Atlanta	Bank	Georgia	6/21/2006

      Dated: June 21, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: June 21, 2006 SUNRISE BANK OF ATLANTA     By:/s/ Charles Green Charles Green President

Exhibit 10 (b8-12)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 38

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective July 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Evansville Commerce Bank	Bank	Indiana	7/1/2006

      Dated: July 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: July 1, 2006 EVANSVILLE COMMERCE BANK     By:/s/ Thomas Austerman Thomas Austerman President

Exhibit 10 (b8-13)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 39

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective July 1, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Bank of Everett	Bank	Washington	7/1/2006

      Dated: July 1, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: July 1, 2006 BANK OF EVERETT     By:/s/ Michael Deller     Michael Deller President & CEO

Exhibit 10 (b8-14)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 40

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective November 2, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Ohio Commerce Bank	Bank	Ohio	11/2/2006

      Dated: November 2, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: November 2, 2006 OHIO COMMERCE BANK     By:/s/ Gary Vacarro Gary Vacarro President

Exhibit 10 (b8-15)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 41

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective October 2, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Bank of Maumee	Bank	Ohio	10/2/2006

      Dated: October 2, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: October 2, 2006 BANK OF MAUMEE     By:/s/ Lee Dunn Lee Dunn President

Exhibit 10 (b8-16)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 42

 The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective October 18, 2006 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
1st Commerce Bank	Bank	Nevada	10/18/2006

      Dated: October 18, 2006 CAPITOL BANCORP LIMITED     By:/s/ Cristin Reid English Cristin Reid English Chief Operating Officer

      Dated: October 18, 2006 1^st COMMERCE BANK     By:/s/ Al Gourrier Al Gourrier President

EX-10.(S)

Exhibit 10(s)

SECOND AMENDMENT TO EMPLOYMENT AGREEMENT

THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made effective as of the 26th day of April, 2007, by and between Joseph D. Reid (the “Executive”) and Capitol Bancorp Ltd., a Michigan corporation (the “Company”).

BACKGROUND

On March 31, 2003, the Company and the Executive entered into an Employment Agreement dated effective March 13, 2003 which was subsequently amended on April 22, 2003 (the “Employment Agreement”). The Company and the Executive now wish to amend the Employment Agreement as provided herein.

NOW, THEREFORE, in consideration of the foregoing and the terms and conditions set forth below, the parties agree as follows:

TERMS AND CONDITIONS

1. AMENDMENT TO SECTION 2(a)(i). The first sentence of Section 2(a)(i) of the Employment Agreement is hereby deleted in its entirety and amended to read as follows:

“During the Employment Period, the Executive shall serve as the Chief Executive Officer of the Company and shall have such duties and responsibilities as are assigned to him by the Board.”

2. AMENDMENT TO SECTION 2(b)(i).Section 2(b)(i) of the Employment Agreement is hereby deleted in its entirety and amended to read as follows:

“During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal Nine Hundred Thousand Dollars ($900,000), which shall be paid in accordance with the Company’s normal payroll practices for senior executives as in effect from time to time.”

3. AMENDMENT TO SECTION 2(b)(ii). Section 2(b)(ii) of the Employment Agreement is hereby deleted in its entirety and amended to read as follows:

“Annual Bonus. In addition to Annual Base Salary,for each fiscal year ending during the Employment Period, the Executive shall be eligible for an annual cash bonus (the “Annual Bonus”) in an amount specified on Exhibit A attached hereto pursuant to the terms of the Company’s Management Incentive Plan, as amended (“MIP”) (or any predecessor or successor plan thereof), as determined by the Compensation Committee of the Board, upon complete achievement of the targets set forth on Exhibit A attached hereto. Each such Annual Bonus shall be paid no later than the 15^th day of the third month of the fiscal year following the fiscal year for which the Annual Bonus is awarded. The amount of any Annual Bonus

1

which exceeds the maximum bonus payable pursuant to the MIP in any one fiscal year, if any, shall be carried over (on a “first-in, first-out” basis) and added to the Annual Bonus (if any) determined for any of the next three fiscal years, whether or not any one or more of such fiscal years ends before or after the end of the Employment Period.”

4. AMENDMENT TO SECTION 4(a)(i). Section 4(a)(i) of the Employment Agreement is hereby deleted in its entirety and amended to read as follows:

“(i)the Company shall pay to the Executive, in a lump sum in cash within 75 days after the Date of Termination, the aggregate of the following amounts:

    A.the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the most recent Annual Bonus (which shall not include the long-term incentive bonus contemplated by Section 2(b)(iii)) and (II) the Annual Bonus paid or payable, (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the “Highest Annual Bonus”) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (3) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the “Accrued Obligations”); and

   B.the amount equal to the product of (1) three times the sum of (x) the Executive’s Annual Base Salary and (y) the Highest Annual Bonus;”

5. AMENDMENT TO SECTION 4(d). Section 4(d) of the Employment Agreement is hereby deleted in its entirety and amended to read as follows:

“Cause, Etc.; Other than for Good Reason. If the Executive’s employment during the Employment Period shall be terminated for Cause or if the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, and (y) Other Benefits, in each case to the extent theretofore unpaid. In such case, the amounts contemplated by (x) and (y) shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.”

2

6. AMENDMENT TO SECTION 4(e)(i)C. Section 4(e)(i)C. of the Employment Agreement is hereby deleted in its entirety and amended to read as follows:

“an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Company’s Retirement Plan immediately prior to the Effective Date), over (b) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan as of the Date of Termination.”

7. AMENDMENT TO EXHIBIT B.  Exhibit B of the Employment Agreement is hereby deleted in its entirety and amended to read as Exhibit B attached hereto.

8. CONSTRUCTION. Unless otherwise defined herein, capitalized terms shall have the meanings set forth in the Employment Agreement. The terms of this Amendment amend and modify the Employment Agreement as if fully set forth in the Employment Agreement. If there is any conflict between the terms, conditions and obligations of this Amendment and the Employment Agreement, this Amendment’s terms, conditions and obligations shall control. All other provisions of the Employment Agreement not specifically modified by this Amendment are preserved. This Amendment may be executed in counterparts (including via facsimile or .pdf), each of which shall be deemed an original, and all of which together shall constitute one and the same document.

SIGNATURES ON THE FOLLOWING PAGE

3

IN WITNESS WHEREOF, the parties have executed this Amendment on March 14, 2007.

THE EXECUTIVE:       /s/ Joseph D. Reid     JOSEPH D. REID THE COMPANY:   CAPITOL BANCORP LTD.   By:       /s/ David O'Leary     Name:  David O'Leary Title:    Secretary

SIGNATURE PAGE TO FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

EXHIBIT B

LONG-TERM INCENTIVE BONUS

I.	RESTRICTED STOCK/CASH:
EXECUTIVE:		Joseph D. Reid.
COMPANY:		Capitol Bancorp Ltd.
PLAN:		Capitol Bancorp Ltd. Management Incentive Plan, Capitol Bancorp Ltd. 2003 Stock Plan or any other plan adopted by the Company in which the Executive may participate.
EFFECTIVE DATE:		January 1, 2007.
TARGET BONUS & PERFORMANCE GOALS:		During the Employment Period, for each (a) new bank or holding company formed or opened for business by the Company or any of its affiliated companies (excluding the Company’s Capitol Development Companies) or (b) holding company or separate bank directly acquired (including the acquisition of a controlling interest therein) by the Company or any of its affiliated companies or banks by purchase transaction (each a “New Affiliate”), the Company shall promptly grant, issue and deliver to the Executive the following: (i) $50,000 in cash and (ii) a restricted stock award for shares of the Company’s common stock having a fair market value of $100,000 (each a “Restricted Stock Award”). Each Restricted Stock Award shall vest in equal monthly increments over four (4) years and fully vest upon (1) the Executive’s death, (2) the Executive’s Disability, (3) termination of the Executive’s employment by the Executive for Good Reason or by the Company without Cause or (4) a Change of Control of the Company.
LIMITATION:		In no event shall the Executive be entitled to receive any compensation for more than ten (10) New Affiliates in each fiscal year.
II.	CASH:
EXECUTIVE:		Joseph D. Reid.
COMPANY:		Capitol Bancorp Ltd.

Exhibit B - 1

PLAN:	Capitol Bancorp Ltd. Management Incentive Plan, Capitol Bancorp Ltd. 2003 Stock Plan or any other plan adopted by the Company in which the Executive may participate.
TARGET BONUS:	Two times (2X) the Executive’s Annual Base Salary paid to the Executive during the 5th year of this Agreement.
PERFORMANCE GOALS:	The Long-Term Cash Bonus contemplated in this Exhibit B shall be subject to the Company’s complete achievement of the following performance goals:
	1. Average Growth of the Company’s Earnings Per Share (“EPS”) equal to or greater than 15% for the Initial Measuring Period, provided, however, in determining the EPS growth rate newly affiliated institutions which become operative during the Initial Measuring Period shall not be included in the EPS computation for the first twelve (12) months of their respective operation nor shall special charges associated with the acquisition of a bank, a holding company or a controlling interest in a bank or a holding company during the Initial Measuring Period be included in the EPS computation; and
	2. Average Growth of the Company’s total assets, as reflected on the Company’s year-end audited financial statements for fiscal year ending December 31, 2007, equal to or greater than 15% for the Initial Measuring Period.
INITIAL MEASURING PERIOD:	The five year period beginning on January 1, 2003 and ending on December 31, 2007.
VESTING DATE:	December 31, 2007. If the Executive is not employed on the vesting date, the entire cash bonus will be forfeited.
DATE PAID:	No later than March 15, 2008.

Exhibit B - 2

EX-13

Exhibit 13

TABLE OF CONTENTS

From The Chairman

3   Chairman’s Letter

AFFILIATED BANKS

8    1st Commerce Bank

9   Ann Arbor Commerce Bank

10 Arrowhead Community Bank

11 Asian Bank of Arizona

12 Bank of Auburn Hills

13 Bank of Belleville

14 Bank of Bellevue

15 Bank of Escondido

16 Bank of Everett

17 Bank of Las Vegas

18 Bank of Maumee

19 Bank of Michigan

20 Bank of San Francisco

21 Bank of Santa Barbara

22 Bank of Tucson

23 Bank of Valdosta

24 Black Mountain Community Bank

25 Brighton Commerce Bank

26 Camelback Community Bank

27 Capitol National Bank

28 Community Bank of Rowan

29 Desert Community Bank

30 Detroit Commerce Bank

31 East Valley Bank

32 Elkhart Community Bank

33 Evansville Commerce Bank

34 First Carolina State Bank

35 Fort Collins Commerce Bank

36 Goshen Community Bank

37 Grand Haven Bank

38 Kent Commerce Bank

39 Macomb Community Bank

40 Mesa Bank

41 Muskegon Commerce Bank

42 Napa Community Bank

43 Oakland Commerce Bank

44 Ohio Commerce Bank

45 Paragon Bank & Trust

46 Peoples State Bank

47 Point Loma Community Bank

48 Portage Commerce Bank

49 Red Rock Community Bank

50 Southern Arizona Community Bank

51 Summit Bank of Kansas City

52 Sunrise Bank of Albuquerque

53 Sunrise Bank of Arizona

54 Sunrise Bank of Atlanta

55 Sunrise Bank of San Diego

56 Valley First Community Bank

57 Yuma Community Bank

NON-BANK AFFILIATES

58 Amera Mortgage Corporation

59 Capitol Wealth

FINANCIAL INFORMATION

AFFILIATED BANKS

EASTERN REGIONS

Bruce A. Thomas, President

GREAT LAKES REGION

John C. Smythe, President

Illinois

Bank of Belleville

Indiana

Elkhart Community Bank

Evansville Commerce Bank

Goshen Community Bank

Michigan

Ann Arbor Commerce Bank

Bank of Auburn Hills

Bank of Michigan

Brighton Commerce Bank

Capitol National Bank

Detroit Commerce Bank

Grand Haven Bank

Kent Commerce Bank

Macomb Community Bank

Muskegon Commerce Bank

Oakland Commerce Bank

Paragon Bank & Trust

Portage Commerce Bank

Ohio

Bank of Maumee

Ohio Commerce Bank

MIDWEST REGION

Stanley E. Ricketts, President

Missouri

Summit Bank of Kansas City

NORTHEAST REGION

In Development

SOUTHEAST REGION

Bruce D. Jones, President  

Georgia

Bank of Valdosta

Peoples State Bank

Sunrise Bank of Atlanta 

North Carolina

Community Bank of Rowan

First Carolina State Bank

WESTERN REGIONS

John S. Lewis, President

Arizona

Arrowhead Community Bank

Asian Bank of Arizona

Bank of Tucson

Camelback Community Bank

East Valley Bank

Mesa Bank

Southern Arizona Community Bank

Sunrise Bank of Arizona

Valley First Community Bank

Yuma Community Bank

CALIFORNIA REGION

Scott R. Andrews, President

Bank of Escondido

Bank of San Francisco

Bank of Santa Barbara

Napa Community Bank 

Point Loma Community Bank

Sunrise Bank of San Diego

NORTHWEST REGION

Thomas S. Giovanelli, President

Washington

Bank of Bellevue

Bank of Everett

SOUTHWEST REGION

Stephen D. Todd, President

Colorado

Fort Collins Commerce Bank

Nevada

1st Commerce Bank

Bank of Las Vegas

Black Mountain Community Bank

Desert Community Bank

Red Rock Community Bank

New Mexico

Sunrise Bank of Albuquerque

TEXAS REGION

Clinton D. Dunn, President

T O  O U R  S H A R E H O L D E R S

From The Chairman

 

JOSEPH D. REID

Chairman & CEO

DEAR SHAREHOLDER:

For years, Capitol Bancorp has committed itself to pursuing a strategy that balances expansion with quality earnings growth and compelling bottom-line performance.  I am proud to report that this commitment produced another outstanding year of performance and growth for the company during 2006. 

This past year saw Capitol Bancorp achieve a number of significant milestones.  Earnings surpassed approximately $42 million, an 18 percent increase over 2005 and a record for our company.  Basic and diluted earnings per share also reached record levels - at $2.69 and $2.57 respectively.  The company was able to achieve these results despite a six percent expansion in outstanding share count.  Finally, total assets increased 17 percent over the course of 2006 to eclipse $4 billion for the first time in Capitol Bancorp’s history.

Perhaps more importantly, Capitol Bancorp achieved these financial results simultaneously with another significant milestone: the opening of our 50th community bank.  To reach this target - which we set at the outset of the year - we opened nine new banks during 2006: Community Bank of Rowan in North Carolina, Asian Bank of Arizona, Evansville Commerce Bank in Indiana, Bank of Valdosta and Sunrise Bank of Atlanta in Georgia, Bank of Everett in Washington, Bank of Maumee and Ohio Commerce Bank in Ohio, and 1st Commerce Bank in Nevada.  As 2007 began, Capitol Bancorp had four applications for additional affiliate banks under consideration.

Due in large part to this growth, Capitol Bancorp’s total deposits approached $3.3 billion while total portfolio loans grew to $3.5 billion - both representing 17 percent increases over 2005.  The growth that Capitol Bancorp achieved across all of these areas in 2006 continues to reinforce our commitment to expanding our geographic footprint with discipline while managing our balance sheet with prudence.

THE FIRST FIFTY ANNUAL REPORT 2006

3

FROM THE CHAIRMAN -continued-

BRUCE A. THOMAS

President - Eastern Regions

CREATING VALUE FOR INVESTORS

One of the principal ways that we generate value for shareholders is through our unique development model, which allows us to drive growth while spreading risk between shareholders and local investors.   

To offset the losses customarily experienced by de novo banks in their first two years, Capitol Bancorp culls development funds from multiple sources.  We start by raising money from local entrepreneurs, who serve as initial customers and engage the potential customer base in the target market.  These funds absorb 49 percent of the bank’s initial losses.  We draw the other 51 percent of the necessary funding from our company-wide development incubators, which we control in the form of stock that carries 100 percent voting rights but constitutes only a small amount of the entities’ economic interests.  In this way, Capitol Bancorp is able to limit its losses on every invested dollar in its de novo banks to between five and ten cents.

After three years, when the bank begins to earn money, Capitol Bancorp traditionally offers the opportunity of a share exchange to the local investors in which their privately-held shares may be exchanged for shares of Capitol’s publicly-traded shares.  As a result, the company is able to tap the emerging revenue streams that its affiliates provide as they are hitting their stride.

Our ability to enable Capitol’s independent community banks to enjoy the economies of scale of a large organization remains another of the keys to our model’s success.  At the corporate level, this means providing consolidated back office support across our entire network as efficiently as possible.  With this in mind, and in anticipation of the growth that we planned to achieve, Capitol Bancorp began in 2004 the process of upgrading its core operating system.  This initiative remains the largest technology project Capitol has ever undertaken.  Thanks to more than two years of intensive work on the part of all of our employees, we were able to complete the project in December of 2006.  More robust and scalable than its predecessor, the new system will enable us to continue to support our banks, expand our network, and add new products in an efficient and cost-effective fashion.  

Simultaneously we organized and launched Capitol Wealth Advisors, a new wealth management unit that provides our bank customers with investment services and online trading functionality.  Capitol Wealth was conceived in part to create increased value for shareholders by deepening our relationships with our strong customer base and expanding our opportunities for fee income.  We expect this additional, fee-driven revenue stream to help offset the pressure that market conditions continue to exert on our more traditional margin revenue streams.

THE FIRST FIFTY ANNUAL REPORT 2006

4

FROM THE CHAIRMAN -continued-

JOHN S. LEWIS

President - Western Regions

LEADERSHIP AT EVERY LEVEL

Our ability to maintain a team of talented and dedicated individuals remains integral to our ability to pursue our strategy and achieve our goals.  With this in mind, we made a number of moves during the past year to strengthen our leadership structure throughout the organization. 

At the board level, the company welcomed Richard A. Henderson, president of Henderson & Associates, as a new director.  Mr. Henderson’s entrepreneurial vision and his long-standing commitment to the local business community align closely with our core values, and his expertise will be invaluable as we continue to pursue our strategy of disciplined development. 

At the corporate level, Cristin K. Reid was appointed corporate president.  In this role, she shares responsibility for all operational aspects of the company with John S. Lewis, president of the Western Regions banks and Bruce A. Thomas, president of the Eastern Regions banks.

These and other moves that we made over the course of the year ensure that we have quality people at every level of our organization. 

CULTIVATING OUR MOST IMPORTANT ASSETS

While 2006 saw our assets eclipse the $4 billion mark, our most important asset continues to be one that doesn’t appear as a line item on our balance sheet: our people.  As part of our continued commitment to cultivating our employees’ talents and bringing value to their lives, we launched a number of initiatives during the past year.

Our new employee recognition program, On the Spot, encourages everyone in the company to take a few minutes to acknowledge the good work of our colleagues when they demonstrate our Core Values.  We also introduced the Lifestyles Education & Activities Program (LEAP), a comprehensive employee wellness program designed to help each of our employees maintain healthy lifestyles through exercise, improved eating habits and an appropriate balance between their work and personal lives. 

In terms of professional development, our Capitol University continued to expand its curriculum, forging a partnership with Lansing Community College which enables employees at any location in the Capitol Bancorp network to receive college credits from this accredited community college.

THE FIRST FIFTY ANNUAL REPORT 2006

5

FROM THE CHAIRMAN -continued-

CRISTIN K. REID

Corporate President

FOCUS FOR THE FUTURE

With so many significant accomplishments behind us, we cannot help but look to those that lay ahead with optimism, confidence and conviction. 

First and foremost, our strategy is to continue doing what we do best.  We will continue to grow our affiliated bank group by partnering with exceptional banking professionals to open “single store” community banks in markets across the country.  In fact, by employing our precision-honed model, we expect our affiliate network to grow to 100 banks within the next five years.

We will continue to place customer relationships at the core of each bank’s value proposition because we know that people prefer to interact directly with the bank’s decision-makers.  Each bank will continue to be operated by a local board and officer team - with local authority over credit decisions, pricing, staffing, and strategic planning - so that we can deliver a level of responsiveness, personal service, and community integration that multibranch banks cannot duplicate.

We will continue to support our network with efficient back office accounting, information technology and risk management services that pass on economies of scale and enable local management to focus on serving their communities’ needs.  We will help meet those evolving needs by developing additional product opportunities that can be rolled out nationwide and that also produce additional revenue potential for our banks.

As Capitol Bancorp moves into 2007, we do so with the people, the energy and the momentum needed not only to sustain our strong performance and growth, but also to take us to new places.  As an entrepreneurial company, we’ll continue to navigate through uncharted territory with the goal of keeping the community banking model firmly integrated in the economic fabric of cities and towns across the country.  There are many new states, new communities and new opportunities ahead of us. 

Joseph D. Reid, Chairman & CEO

THE FIRST FIFTY ANNUAL REPORT 2006

CAPITOL BANCORP LIMITED

BOARD OF DIRECTORS

Louis G. Allen

Retired Banker

Paul R. Ballard

Retired President & CEO

Portage Commerce Bank

David L. Becker

Retired Founder

Becker Insurance Agency, P.C.

Robert C. Carr

Vice Chairman

Capitol Bancorp Limited

Douglas E. Crist

President

Developers of SW Florida, Inc.

Michael J. Devine

Attorney at Law

James C. Epolito

President & CEO

Michigan Economic

Development Corporation

Gary A. Falkenberg

Gary A. Falkenberg, D.O., P.C.

Joel I. Ferguson

Chairman

Ferguson Development, LLC

Kathleen A. Gaskin

Associate Broker/State Appraiser

Tomie Raines, Inc. Realtors

H. Nicholas Genova

Chairman & CEO

Washtenaw News Co. Inc.

& H. N. Genova Development

Michael F. Hannley

President & CEO

Bank of Tucson

Richard A. Hendersen

President

Hendersen & Associates P.C.

Lewis D. Johns

President

Mid-Michigan Investment Co.

Michael L. Kasten, Vice Chairman

Managing Partner

Kasten Investments, LLC

John S. Lewis

President, Western Regions

Capitol Bancorp Limited

Leonard Maas

President

L&M Maas Investments, LLC

Lyle W. Miller, Vice Chairman

President

L.W. Miller Holding Co.

Myrl D. Nofziger

President

Hoogenboom Nofziger

David J. O’Leary, Secretary

Chairman

O’Leary Paint Company

Cristin K. Reid

Corporate President

Capitol Bancorp Limited

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Ronald K. Sable

President

Concord Solutions Ltd.

6

FINANCIAL HIGHLIGHTS

7

1ST COMMERCE BANK

Southwest Region

AL G. GOURRIER

President

North Las Vegas along with Las Vegas and Henderson comprise one of the fastest growing metropolitan areas in the country. Our economy is strong with expectations of tremendous growth in future years. We plan to be a part of that growth as well as a strong contributor to the future landscape of the community in which we do business.

We started planning for 1st Commerce in early 2006 and the bank opened a few short months later as Capitol Bancorp’s 49th affiliate. Before opening, we identified our team members, settled on our location, appointed local business leaders to our Board of Directors and received regulatory approval to open the bank.

Off to a great start, we look for strong growth in 2007 and for many years to come. We are leveraging the diverse skills of our seasoned 10 person staff, which combines more than 125 years of local banking experience. Each of our officers are active in local organizations that make our community stronger while also providing networking opportunities to develop business and spread the good news about our burgeoning bank.

Clearly, we are benefiting from the good reputation of the four Capitol Bancorp affiliate banks preceding us in southern Nevada. Evidence of this was the relative ease in which we were able to raise capital to launch the bank and recruit local business leaders to serve on our Board. Our Board members are committed to providing the practical advice and the meaningful business referrals that will ensure our bank’s success.

With my 13 years of local banking experience and formal financial education we, collectively, plan to grow 1st Commerce Bank prudently. I was with our affiliate bank, Desert Community Bank, as executive vice president and chief credit officer, when I was selected to lead the organization of 1st Commerce and serve as the bank’s president. I have a bachelor’s degree in finance and a master’s degree in business administration from the University of Nevada, Las Vegas, and I completed the American Bankers Association’s prestigious Stonier Graduate School of Banking at Georgetown University.

At 1st Commerce Bank, in addition to becoming a successful bank, we aim to be a cornerstone of our community by providing 1st Class Service with a 1st Class Commitment.

~ Al G. Gourrier, President

5135 Camino Al Norte, Suite 100 | North Las Vegas, NV  89031 | 702-942-2050

www.1stcommercebank.com

Founded: October 18, 2006

BOARD OF DIRECTORS

Russell S. Bono

Realtor

Award Realty

Michael J. Devine

Attorney at Law

Al G. Gourrier

President

1st Commerce Bank

John S. Lewis

President - Western Regions

Capitol Bancorp Limited

Rian M. Ross

Owner

Southwest Commercial Real Estate

Harry H. Shull

Owner

Celebrate Homes

Avronell L. Thomas

Senior Vice President

ACN Communication

John J. Zanoni

President

Zanoni & Company LLP

OFFICERS

John S. Lewis

Chairman

Al G. Gourrier

President

Michael J. Devine

Secretary

John R. Kley

Executive Vice President

& CCO

Marcel M. Baker

Vice President

Michael V. Pizzi

Vice President

8

ANN ARBOR COMMERCE BANK

Great Lakes Region

RICHARD G. DORNER

President & CEO

Ann Arbor Commerce Bank was the third bank in the newly evolving Capitol Bancorp family of community banks when it debuted in 1990.  The first year of operation exceeded projections and we continued to grow at a rapid pace.

During our 17 years, we have responded to local and world events, and various economic cycles.  We have navigated through increasing and decreasing interest rates, strong and weak mortgage markets, bulls and bears, and economic expansions and recessions.  We understand that our customers and the community at large have also been proactive to the waxing and waning developments throughout the years. We introduced Internet technology while retaining the traditional banking channels and personal service options our customers expect from their bank.  In 1998 we moved from a small “well-worn” facility to our landmark building. 

Ann Arbor retains the charm of a college town while producing the energy of a major business center.  It is dynamic, growing and open to change yet content with what has withstood the test of time. Our community has consistently received recognition as one of the best places to live in the United States.  It is a cultural center and an incubator for new ideas ranging from leading-edge medical facilities to the University of Michigan’s emphasis on bio-diversity and life sciences. Recent economic expansions include the addition of Google’s AdWords division and Toyota’s decision to locate its Technical Center USA in our community. Throughout the years, we have kept our focus on meeting the ever-changing needs of our community.

The concept of Capitol Bancorp is as unique as each individual bank within the company model.  During our third year of operation, we became Capitol Bancorp’s largest bank and we have continued to retain that position despite the fact that Ann Arbor’s population is around 115,000 and four community banks have followed our lead.  We did not set out to be the largest, but our core philosophy of “take care of the customer” has served us well.

We accept the challenge to retain our competitive position and respond to today’s rapidly changing business environment. The Capitol Bancorp model promotes individuality, innovation, entrepreneurship and local decision making.  Our goal is to be of sufficient size to maximize our efficiency, profitability and safety and soundness, while maintaining and nurturing the relationships we have spent years cultivating with our customers and our community. 

~Richard G. Dorner, President & CEO

2950 State Street South | Ann Arbor, MI 48104 | 734-887-3100

www.annarborcommerce.com

Founded: October 1, 1990

BOARD OF DIRECTORS

Henry E. Alvarez, CPA

President & Managing Principal

Curtis, Bailey, Exelby & Sposito, P.C.

Richard G. Dorner

President & CEO

Ann Arbor Commerce Bank

Brian K. English

General Counsel

Capitol Bancorp Limited

James A. Fajen

Attorney at Law

Fajen & Miller, P.L.L.C.

James W. Finn

Chairman & CEO

Finn’s-JM&J Insurance Agency, Inc.

H. Nicholas Genova

Chairman & CEO

Washtenaw News Co. Inc.

Richard M. Greene

Consultant

Richard Greene Point Training

Marilyn D. Katz-Pek

Partner Emerita

Biotechnology Business Consultants LLC

James C. Keen Sr.

CEO

Cliff Keen Athletic

David W. Lutton

President

Charles Reinhart Company Realtors

David M. O’Leary

President

O’Leary Paint Company

Fritz Seyferth

Principal

Fritz Seyferth & Associates

Carl Van Appledorn, M.D.

President & COO

Urological Surgery Associates, P.C.

Warren E. Wright

Chairman & Partner

Renosol Corporation

OFFICERS

James A. Fajen

Chairman

Richard G. Dorner

President & CEO

Warren E. Wright

Secretary

Clifford G. Sheldon

Executive Vice President & Cashier

John J. Wilkins

Executive Vice President & CCO

Mary Hays

Senior Vice President

James L. Jeszke

Senior Vice President

Mary Gyorke

First Vice President

John Nixon III

Capitol Wealth Advisors, First Vice President

Noelle C. Grigg

Vice President

Patrick J. McKeon

Vice President

Bryan T. Singer

Vice President

Kathleen Slocum

Capitol Wealth Advisors, Vice President

9

ARROWHEAD COMMUNITY BANK

Southwest Region

ARLENE KULZER

President & CEO

Since launching Arrowhead Community Bank six years ago, an integral part of our approach to building business has been to support local nonprofit organizations. We believe that what is good for our community is good for our bank.

The bank’s strategic marketing plan was developed around a culture of community service and volunteerism. Time and money are carefully allocated for the volunteer activities of our staff, and a significant portion of the marketing budget is devoted to sponsor and support various civic, educational and nonprofit activities. We communicate our social vision in our advertising, bank statement inserts, via the bank’s website and in our daily activities.

Arrowhead’s management and staff provide leadership, financial support and creative services to support local nonprofits, in addition to providing service charge-free, interest-bearing accounts.  Board members, officers and employees volunteer their time, energy and professional skills for the betterment of the community. We promote volunteerism by modeling volunteerism. Community involvement is a top criterion when interviewing potential bank officers and directors. As a result, we have been successful in developing partnerships with local businesses, nonprofits, volunteer centers, vendors and clients to maximize the impact of our corporate giving programs.  Our business partners have stepped forward as the bank’s team members reach out to the local business community to promote our projects.

This type of community commitment has paid dividends for our bank and our business partners. Over the years, Arrowhead Community Bank has received numerous awards and accolades for volunteerism. In 2005, Arizona Governor Janet Napolitano presented Arrowhead with her Volunteer Service Award for Small Business.  That year, our staff and our strategic business partners built two Habitat for Humanity homes in the West Valley community of El Mirage. The Volunteer Center of Maricopa County has recognized the Arrowhead team three times for its community commitment with awards for volunteerism in the small business category.

This culture of community involvement has made Arrowhead one of the most recognized banks in the West Valley. The Western Maricopa County Coalition has recognized our bank for outstanding contributions to the area’s image, lifestyle and economic development by presenting our bank with its prestigious Best of the West Award for Small Businesses.

What is good for the community is good for our bank and vice versa!

~ Arlene Kulzer, President & CEO

17235 North 75th Avenue, Suite B100 | Glendale, AZ 85308 | 623-776-0800

www.arrowheadcommunitybank.com

Founded: September 21, 2000

BOARD OF DIRECTORS

Shelley L. Bade

RPA, Principal

SL Bade & Associates, LLC

Janet G. Betts

Attorney at Law

Jennings, Strouss & Salmon

W. Patrick Daggett

CPA

Daggett McConachie &

Moore, CPAs, LLP

Michael J. Devine

Attorney at Law

Richard J. Hilde

Owner & CEO

EPW, Inc.

Arlene Kulzer

President & CEO

Arrowhead Community Bank

Dennis E. Landauer

CPA

James J. McCue

Aviation Consultant

Sherwin Industries

Terrance C. Mead

Attorney at Law

Mead & Associates, P.C.

Gloria M. Munoz

Director of Housing Programs

NFWSC

John C. Ogden

Retired, CEO

SunCor Development Company

Carol A. Poore

Vice Provost

ASU at the West Campus

Richard A. Shelton

Agent

RE/MAX Desert Showcase

OFFICERS

John C. Ogden

Chairman

Michael J. Devine

Vice Chairman

Arlene Kulzer

President & CEO

James J. McCue

Secretary

Dennis E. Landauer

Chair, Directors Loan Committee

Amy Lou Blunt

Executive Vice President & CCO

Mary Catherine Mireles

Senior Vice President & COO

Deborah M. Charlesworth

Senior Vice President

Richard L. Oliver

Capitol Wealth Advisors

Senior Vice President

William H. Smith

Senior Vice President

Stacey J. Morrison

Vice President

10

ASIAN BANK OF ARIZONA

Southwest Region

LESLIE M. GIN

President

Asian Bank of Arizona debuted last spring as Capitol Bancorp’s 43rd affiliate bank. The bank’s official opening ceremony took place on June 16, 2006, amid the roar of dragon dances, the beauty and charm of local Asian pageant winners, and more than 400 attendees. 

Key to establishing Asian Bank’s identity and market niche is our superior location. Geographically, our bank is in the heart of the culturally diverse Valley of the Sun. Most importantly, we have one of the most visible anchor positions in the architecturally stunning COFCO Chinese Cultural Center, the most prominent Asian landmark in the entire valley.  

Our motto, “We Speak Your Language,” is clearly reflected in our bilingual staff as well as the cultural sensitivity to our customer base.  At present, we have staff members who speak the Asian languages of Mandarin Chinese, Cantonese, Toishan, Tagalog, Korean and Vietnamese. These communications skills have served our bank well, especially with elderly clientele and those who are more recent arrivals to America. Reinforcing the commitment to our Asian communities, we have unveiled our Community Art Wall.  Every few months, a different Asian community is offered the opportunity to display its cultural artwork on the main wall in the bank’s lobby. Thus far, we have proudly exhibited the artwork of the Philippines, China, India and Thailand to the respectful appreciation of clients, prospects and visitors.

We are branding our bank in Arizona by advertising in all local Asian publications and by partnering with international Asian businesses. For instance, we are collaborating with the largest Asian wholesale food supplier in the Phoenix area on its 2007 Lunar New Year calendar. In return, Asian Bank of Arizona’s logo is prominently displayed on the calendar, which is distributed by the food supplier to all of its customers,including the many Asian restaurants in the Valley of the Sun. We expect to reap new business opportunities from this co-branding marketing strategy.

Thanks to Asian Bank’s central location in the ever-expanding metropolitan Phoenix area, several local associations such as the Philippine American Chamber of Commerce of Arizona and the National Association of Asian American Professionals hold their monthly meetings in our bank.  This open door policy is another way of creating name recognition while providing a worthwhile service for potential clients throughout the bustling Valley of the Sun. 

~ Leslie M. Gin, President

668 N. 44th St., Suite 123 | Phoenix, AZ  85008 | 602-263-8888

www.asianbankaz.com

Founded: April 27, 2006

BOARD OF DIRECTORS

Jay A. Bansal

Attorney at Law

Law Offices of JA Bansal

Michael J. Devine

Attorney at Law

Leslie M. Gin

President

Asian Bank of Arizona

Robert E. Hite, Jr.

President

Securitech, Inc.

John S. Lewis

President, Western Regions

Capitol Bancorp Limited

Gary K. Ong

President

G. O. Enterprises Ltd.

Kwan C. Tang

Principal

Tony Tang Architect Ltd.

Keith Wong

President

EastBridge Investment Group Corp.

OFFICERS

John S. Lewis

Chairman

Michael J. Devine

Secretary

Leslie M. Gin

President

C. David Turpie

Executive Vice President & CCO

Beverly F. Santiago

Vice President

Steven C. Soong

Vice President

11

BANK OF AUBURN HILLS

Great Lakes Region

NEAL J. SEARLE

President

Having just completed our first full year of operation, the employees of Bank of Auburn Hills were busy in 2006 publicizing our bank and building our business. The bank kicked off the year by joining Automation Alley, a prominent group of preferred businesses for the growing technology sector in southeastern Michigan.

We are networking and branding the bank through our affiliations with the area’s chambers of commerce. For instance, the Pontiac Chamber featured the bank in a cover story of its monthly magazine early in the year and the bank was a sponsor of a membership event with the Auburn Hills Chamber.

Additionally, I have been elected to the board of directors of the Auburn Hills Chamber and our marketing officer, Connie Foster, has joined the Advisory Council for the Pontiac chapter of the Southeastern Michigan Boys & Girls Club.

Part of our bank’s philosophy is to support local organizations that provide a helping hand for our less fortunate neighbors. With this in mind, we were pleased to announce that 100 percent of our employees participated in the 2006-07 United Way campaign.  Our employees also supported the Gleaners Food Bank, donated food, clothing and toys to Lighthouse of Oakland County Inc. and made cash donations to the Salvation Army.

On the business side, we originated and closed 16 Small Business Administration (SBA) loans during the year as well as three small business loans through the Michigan Strategic Fund Capital Access Program. As a creative business bank, we believe in utilizing government loan programs to help our small business clients achieve their goals.

In 2006 we hired a commercial lender and a residential mortgage lender to bolster our loan staff. As a result of these and other staff additions, the bank has moved into a third suite at its current location.  A new building will be constructed in 2007 enabling us to provide more convenience to our clients while giving us the opportunity to further promote our unique business model and image.  We look forward to helping our clients achieve their financial dreams for years to come.

~ Neal J. Searle, President

1988 N. Opdyke Rd. | Auburn Hills, MI 48326 | 248-370-8200

www.bankofauburnhills.com

Founded: July 13, 2005

BOARD OF DIRECTORS

Erwin H. Billig

Chairman

MSX International

Kenneth D. Currie

Business Consultant

Currie and Associates

Frederick Gordon

Attorney

Jason M. Horton

Executive Vice President

REDICO

Richard L. Horvath

VP Finance & Administration

Atlas Copco Tools & Assembly Systems, Inc.

Brian G. McGinnity

Director and EVP Finance

Hirotec America

Michael M. Moran

Chief of Capital Markets

Capitol Bancorp Limited

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Frank Salucci

CPA

Capital Resources of Michigan, Inc.

Neal J. Searle

President

Bank of Auburn Hills

John C. Smythe

President of Great Lakes Region

Capitol Bancorp Limited

ADVISORY DIRECTORS

David L. Polk, CPA

Principal, Polk & Associates PLC

Gary M. Wetstein, CPA

Retired Chairman of BDO Seidman, LLP

William N. Widmyer

Business Consultant &

Real Estate Investor

Marc I. Wittenberg, M.D.

South Oakland Anesthesia

Associates, P.C.

OFFICERS

Joseph D. Reid

Chairman

Frederick Gordon

Vice Chairman

Brian G. McGinnity

Secretary

Neal J. Searle

President

Brian R. Inglis

Senior Vice President & CCO

Cheryl Lynn Gault

Vice President

12

BANK OF BELLEVILLE

Great Lakes Region

KEVIN M. PESKO

President

After debuting in November 2005, Bank of Belleville hosted a week-long series of grand opening activities in February 2006. One event was memorable as Illinois banking officials joined Belleville officials at our charter-signing and ribbon cutting ceremony. The highlight of the week, however, was the spectacular dinner reception at the bank, attended by more than 200 investors, customers and local dignitaries.

This festive week kicked off our first year of community banking in Belleville - and what a year it was. The bank is positioned to serve businesses and consumers throughout the greater Belleville area with a veteran staff and an excellent board of directors comprised of local business leaders.  During 2006, the bank added Claire S. Leopold as its newest board member, Jo Ann Bohnenstiehl as its second commercial loan officer, Pam Herbeck as its manager of mortgage loans and Ryan Steffensmeier as its senior credit analyst.

We are marketing the uniqueness of the bank with our involvement in the local Chamber, community activities and by hosting visitors for special events at our bank. For instance, we hosted a monthly meeting of a group of non-competing area CEOs allowing them to exchange successful business strategies. We also welcomed local CPAs for a continuing education seminar on business ethics and human resources. During our anniversary month of November, we hosted the Belleville Chamber’s “After Hours” event that was attended by more than 200 local business people.  

Last April, I was honored to receive the prestigious Carol Kimmel Community Service Award from my alma mater, Southern Illinois University. I am grateful for the recognition and pleased with how positively it reflects on our bank.

For the second year in a row, the bank sponsored the Belleville Main Street horse-drawn trolley providing complimentary rides for weekend holiday shoppers in downtown Belleville. Bank families also rode in the trolley during the annual “Santa Claus Parade” to kick off the season.  This is quickly becoming a signature event for our bank and we could not be happier that it takes place during such an important time of the year for families.

Bank of Belleville is a proud member of the Capitol Bancorp family. Our employees and our board members embody our Core Values. Together, we are working to maximize our bank’s potential!

~ Kevin M. Pesko, President

720 W. Main Street, Suite 100 | Belleville, IL 62220 | 618-233-6400

www.bankofbelleville.com

Founded: November 4, 2005

BOARD OF DIRECTORS

Dennis E. Bielke

Retired Banker

Community Volunteer

Michael G. Guignon, M.D.

President & Physician

Michael Guignon, M.D., P.C.

Gary R. Hoelscher

President

Hoelscher Engineering, P.C.

Edward A. Hoering III

Principal, CPA

Ganim, Meder, Childers & Hoering, P.C.

Claire S. Leopold

President

Nester Realty Inc.

Kevin M. Pesko

President

Bank of Belleville

Wyatt Rawlings III

Owner

Wyatt Rawlings III CPA, LLC

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

George J. Renner III

Funeral Director

George Renner & Sons

Funeral Homes Inc.

Stanley E. Ricketts

President, Midwest Region

Capitol Bancorp Limited

Douglas D. Sitton

SVP/Manager

Woolpert Inc.

OFFICERS

Joseph D. Reid

Chairman

Kevin M. Pesko

President

Ronald R. Stephens

Executive Vice President & CCO

Jean L. Waeltz

Vice President & COO

Jo Ann Bohnenstiehl

Vice President

Ramona A. Friederich

Vice President

Pamela S. Herbeck

Vice President

13

BANK OF BELLEVUE

Northwest Region

ANDREW P. BARLASS

President & CEO

Bank of Bellevue completed its first full year of operation during 2006.  Our focus has been, and will continue to be, to grow the bank by developing long-lasting relationships.  We do this by working with clients to meet their financial needs by providing customized products, top-level service and financial advice from a staff with more than 220 years of experience.

During the year, we added a very experienced commercial real estate lender and expanded our mortgage business through our partnership with Amera Mortgage. As a result, we funded a significant number of residential loans during 2006. This allowed us to increase our commercial real estate lending program to include development, construction, bridge and permanent financing for a broad array of commercial real estate projects.  We are targeting this loan category for significant growth in 2007.

One of our new product lines that we now offer is wealth management. Through our association with Capitol Wealth Advisors, we provide a comprehensive array of wealth management advice, service and products to help grow, manage and preserve wealth. 

During the year, our employees further increased their involvement in the community.  Once again, the entire staff very generously participated in a community “Adopt a Family” program during the holidays.  We also were involved in the United Way Campaign for the first time and the staff’s contributions were very generous. 

Our involvement in the Bellevue Chamber of Commerce was expanded in an effort to support our community and gain more visibility for the bank. In addition to employees serving on several committees, Bank of Bellevue participated in the Chamber’s Eastside Expo for Business and the Women in Business Forum.                                          

We also jointly sponsored two seminars with a local business consultant to discuss ways to grow a business.

Finally, in our quest to promote Bank of Bellevue’s “High Service Levels,” during the summer two employees hiked to the top of Mount Adams in Washington and planted a bank banner on the crest.   It was a good photo opportunity we used for marketing purposes.

We look forward to another successful year as we continue to expand our client relationships and be involved in our community.

~ Andrew P. Barlass, President & CEO

155 - 108th Ave., NE, Suite 100 | Bellevue, WA  98004 | 425-467-5900

www.bankofbellevue.com

Founded: June 15, 2005

BOARD OF DIRECTORS

Andrew P. Barlass

President & CEO

Bank of Bellevue

Richard J. DePosit

CPA

DePosit & Associates

Alvin L. Eerkes

Retired Senior Commercial Banker

Bank of America

Thomas S. Giovanelli

President, Northwest Region

Capitol Bancorp Limited

William M. Hill

President

Western Integrated Technologies

Susan C. Ho

Director of Land Development

Lakeville Construction Inc.

Louie J. Micheli

President

Phillips Real Estate Services

H. Cyrus Oskoui

President

Columbia Athletic Clubs

Peter W. Powell

President

Powell Development Company

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

OFFICERS

Thomas S. Giovanelli

Chairman

Richard J. DePosit

Vice Chairman

Andrew P. Barlass

President & CEO

John S. Williams

Senior Vice President & CCO

Rita E. Dillon

Senior Vice President

Peter J. Barnes

Capitol Wealth Advisors

Vice President

Patrick G. Cleary

Vice President

Sheryl D. Knowlton

Vice President

W. Scott Simmons

Vice President

14

BANK OF ESCONDIDO

California Region

MICHAEL R. PETERS

President & CEO

Bank of Escondido has completed its third full year of operation, exceeding our earnings goals by 20 percent. Recently, our shareholders also received a significant return on their investment by accepting a share exchange for Capitol Bancorp stock.

Our success is a direct result of our ability to attract top-notch bankers who are successful in their areas of expertise. We develop new business through our networking and relationship style of banking. Several of our officers have worked together for more than 20 years, reflecting the value of the teamwork approach to accomplishing our goals. We have enhanced our management team while also providing professional development opportunities for several key employees.

We continue to improve client services by expanding cash management, internet banking and bill pay, as well as the launch of our full-service Small Business Administration (SBA) loan department. Construction lending remains a good market for us and we continue to gain market share in commercial and business lending.

Located in the economic center of Escondido, Bank of Escondido has been instrumental in the success of the Downtown Business Association (DBA), a nonprofit organization focused on developing the downtown area. I serve on the DBA board and chair its Economic Development Committee. This organization has had a direct impact on making the downtown area a better place to work, be entertained and conduct business.

Bank of Escondido is a proud sponsor of “Cruisin’ Grand,” a weekly event that brings classic cars and car enthusiasts to downtown Escondido. This event attracts more than 5,000 people to the downtown business district every Friday night from April through September. In addition to benefiting Escondido businesses, “Cruisin’ Grand” provides great exposure for the bank, as our downtown location is on Grand Avenue at a prime intersection.

We proudly give back to our community through employee involvement in charitable organizations. For example, we are very active with the Escondido Boys & Girls Club, contributing both time and financial assistance to successful events that raise more than $250,000 in donations each year. Another rewarding experience for bank employees this past year was purchasing and delivering Thanksgiving meals to the homebound throughout our community.

The future remains bright for Bank of Escondido as we capitalize on business development opportunities. We are building our bank through a serious commitment to our community and significant relationships with entrepreneurs and consumers.

~ Michael R. Peters, President & CEO

200 West Grand Avenue | Escondido, CA  92025 | 760-520-0400

www.bankescondido.com

Founded: October 14, 2003

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Robert M. Cahan

President

Cahan Properties

Richard J. Fleck

President

Southland Paving, Inc.

Marvin L. Gilbert

President

North County Insurance

L. Richard Greenstein, M.D.

Anesthesiologist

Anesthesiologist Consultants of California

Ronald G. Guiles

Senior Partner

GEM Educational Consultants

Mark E. Hayes

Owner

Mark E. Hayes, CPA

John S. Lewis

President, Western Regions

Capitol Bancorp Limited

Joan M. Meyer, D.P.M.

Podiatric Medicine

and Surgery

Michael F. Murphy

President

Computer Protection Technology, Inc.

Michael R. Peters

President & CEO

Bank of Escondido

OFFICERS

John S. Lewis

Chairman

Christopher S. Burt

Secretary & Executive Vice President

Michael R. Peters

President & CEO

Abel D. Tellez

Executive Vice President

Michael C. Churchwell

Executive Vice President & CCO

Linda I. Blakley

Senior Vice President

David G. Mitchell

Vice President

Kirsten J. Younkin

Vice President

15

BANK OF EVERETT

Northwest Region

MICHAEL R. DELLER

President & CEO

On June 30, 2006, Bank of Everett opened its doors. It followed a very successful stock offering for which subscriptions exceeded expectations.   We leveraged that position by offering a special money market account that saw most of that excess converted to deposits and most of the investors to new customers. 

We have assembled a very talented team whose members average more than 22 years in banking.  These experienced professionals complement the local business leaders that dominate our Board of Directors. 

Located in the heart of downtown Everett, our bank offers a different look and feel.  From the moment you walk into the building, you know you are in for a unique banking experience. Instead of the familiar line of teller windows and closed doors, we chose to create an open space where all of our bankers - from customer service representatives to the president - are fully accessible. Our theme is, “at a teller line you have a transaction, at a customer service center you have a relationship.” 

Bank of Everett is actually the third financial institution in Everett to use that name. The first Bank of Everett opened in 1891 and failed in the panic of 1893, a serious decline in the national economy that led to a series of bank failures. The second bank of that name opened in 1963 and was acquired some 20 years later.  The bank’s location and name are nostalgic for long time residents, who shopped in the same building years ago when it was a JCPenney’s™ store. Constructed in 1924, the building served as the city’s tallest building for many years.  In the remodeling, we have remembered its heritage as well as that of the city with many historic photos adorning the walls of the bank.

We are very committed to our community, with staff and board members involved in a myriad of local agencies and organizations including the YMCA, Big Brothers & Big Sisters, Boys & Girls Club, Rotary Club, Christmas House, Volunteers of America and other organizations for the homeless, the hungry and economic development.

The team at Bank of Everett was proud to be counted as Capitol Bancorp’s 47th bank when it opened in 2006. Now we are excited to grow safely and soundly with the other banks that comprise Capitol’s First 50.

~ Michael R. Deller, President & CEO

2722 Colby Ave., Suite 100 | Everett, WA  98201 | 425-740-2888

www.bankofeverett.com

Founded: June 30, 2006

BOARD OF DIRECTORS

Robert W. Bauer

CPA

BauerEvans, Inc., P.S.

Thomas R. Collins

Partner

Anderson Hunter Law Firm

Richard H. Cooper

CEO

The Everett Clinic

Michael R. Deller

President & CEO

Bank of Everett

Thomas S. Giovanelli

President, Northwest Region

Capitol Bancorp Limited

Randy K. Hansen

President

PSG Washington, Inc.

Thomas P. Hoban Jr.

CEO

Coast Real Estate

Wallace S. Rodland

Owner

Rodland Toyota, Inc.

Mary B. Sievers

Executive Director

EverTrust Foundation

Brenda D. Stonecipher

City Council Member

City of Everett

OFFICERS

Thomas S. Giovanelli

Chairman

Wallace S. Rodland

Vice Chairman

Shannan L. Ramey

Secretary

Michael R. Deller

President & CEO

Raymond O. Corwin

Senior Vice President

Malcolm R. Harding

Senior Vice President & CCO

Jeffrey R. Mitchell

Senior Vice President & COO

Kenneth V. Pascoe

Senior Vice President

Michele L. Sayed

Vice President

16

BANK OF LAS VEGAS

Southwest Region

VINCENT J. CIMINISE

President & CEO

The Bank of Las Vegas name has a rich tradition in our community, so we were fortunate that this name became available when we were organizing the bank five years ago.  We have two employees and a board member who worked for the original Bank of Las Vegas.  Our name always sparks a positive conversation with new customers.  We believe that we have done a good job carrying forward the positive image attached to the Bank of Las Vegas name.  The original Bank of Las Vegas was an integral part of Las Vegas’ history.  It is our goal to make the new Bank of Las Vegas an integral part of Las Vegas’ future.

One way we are doing this is by being committed to the community. For the second year in a row we assisted a local “at risk” school by purchasing needed clothing items for their students. During the holidays, employees and customers donated toys to the City Mission of Las Vegas. We also supported Catholic Charities of Southern Nevada’s holiday food drive. Additionally, the bank sponsored a squadron from Nellis Air Force Base stationed in Iraq, sending them coffee, candy and phone cards.

The bank also made cash contributions to Child Haven, which assists children displaced due to domestic issues, and the Nevada Society for the Prevention of Cruelty to Animals, a local animal sanctuary. The bank was recognized for its participation in the annual United Way of Southern Nevada Campaign. Additionally, the bank and our employees support many other charities.

We also had noteworthy business achievements in 2006. We expanded our team to help us grow to the next level. We added two new board members with strong ties to the community. We also hope to reap rewards from the business organizations we became affiliated with last year. In an effort to increase our profile and generate additional business, we targeted mailings to prospective customers, which proved to be a worthwhile endeavor.

In February 2007 we celebrated the bank’s fifth anniversary.  Bank of Las Vegas is back and our community is better off because of it.

~ Vincent J. Ciminise, President & CEO

6001 S. Decatur Boulevard, Suite P | Las Vegas, NV  89118 | 702-939-2400

www.bankoflasvegas.com |

Founded: February 11, 2002

BOARD OF DIRECTORS

Vincent J. Ciminise

President & CEO

Bank of Las Vegas

Darlene Copsey

Secretary & Treasurer

The Alpha Group Ltd.

Michael J. Devine

Attorney at Law

Leo N. Durant

Owner

LND Construction

Scott R. Gragson

Managing Partner

GKT Acquisitions

Donald K. Hamrick

General Manager

Chapman Dodge

Darryl J. Hardy

Vice President

Hardy Painting & Drywall

Alan R. Houldsworth

Partner

Houldsworth & Company, CPAs

Ronald H. Reynolds

Senior Partner

Callister & Reynolds

Philip T. Saunders

Retired Executive

General Motors Corporation

Michael H. Singer

Owner & President

Michael H. Singer, Ltd.

Herman A. Vander Veldt

Vice President & General Manager

Realty Mortgage Corporation

OFFICERS

Michael J. Devine

Vice Chairman

Vincent J. Ciminise

President & CEO

Roger S. Mellies

Executive Vice President & CCO

Carol A. Clemens

Senior Vice President

William C. Russell

Senior Vice President

Lynne S. Adams

Vice President

Randall S. Daugherty

Vice President

Stephen C. Herman

Vice President

Debbie V. Clarke

Vice President

Thomas A. Coleman

Vice President

Steve C. Herman

Vice President

Annelise M. Strader

Vice President

17

BANK OF MAUMEE

Great Lakes Region

H. LEE DUNN, JR.

President & CEO

Opening on the cusp of the fourth quarter of 2006, Bank of Maumee is Capitol Bancorp’s 48th affiliate bank. Our 16 employees are seasoned financial services professionals with more than 255 years of combined experience.  Indicative of the interest in our new bank was the success of attracting nearly 300 local investors and capitalizing the bank at $9.5 million.

During the organizational process, we invested long hours cultivating centers of influence, such as accountants, attorneys, stockbrokers and insurance representatives. We gave tours, shared breakfasts and lunches and held many meetings in our new facility long before the bank opened. This provided the opportunity to describe our vision and lay the groundwork to recruit investors and potential customers. Since the bank opened, these many individuals have been strong business referral sources.

As we envisioned, customers appreciate our relationship-driven personal service and rapid response time, plus the wide array of loan and deposit products we offer. As anticipated, they value working with seasoned professionals and taking advantage of the convenience of electronic banking, our ATM network and courier service. 

Bank of Maumee is a modern financial institution whose officers and employees are dedicated to providing banking with old-fashioned courtesy and charisma. Customers entering the bank are greeted with the aroma of fresh-baked Otis Spunkmeyer cookies and hot coffee. They have responded well to the enthusiastic welcome by seasoned veterans who greet them by name. When they come into our bank, they can expect to see the bank president available in the lobby or in a more private setting when discretion is desired.

Our board members and customers say that it is exciting to be part of a new community bank that provides excellent customer service.  They are impressed with all the products that we offer, ranging from Small Business Administration loans to a sophisticated online banking system. Our officers are well known in the community and have excellent banking credentials. They are proud to be a part of our dynamic organization.

At Bank of Maumee, we are setting the standard for excellence that we know will bring us customers for life!

 ~ H. Lee Dunn, Jr., President & CEO

3425 Briarfield Blvd., Suite 100 | Maumee, OH  43537 | 419-868-1750

www.bankofmaumee.com

Founded: October 2, 2006

BOARD OF DIRECTORS

Robert Alexander

President & CEO

YMCA of Greater Toledo

Thomas Beutler

CPA, CVA

Tebay, Mosley Associates, LLC

Value Defined, LLC

Peter Dewhirst

Attorney at Law

Shindler, Neff, Holmes, Schlageter

& Mohler, LLP

H. Lee Dunn, Jr.

President & CEO

Bank of Maumee

Brian K. English

General Counsel

Capitol Bancorp Limited

C. Edward Harmon

President

Spartan Logistics

Brian J. Pribis CPA, MT, CVA

Partner

Sobb Roberts & Pribis, Inc.

James L. Regan

President

Regan Insurance Agency

Peter S. Shawaker, CCIM, SIOR

Commercial Realtor

Michael Realty Company

Olivia K. Summons

Director of Public Relations

Toledo Refinery

Sunoco, Inc.

ADVISORY DIRECTORS

Thomas P. Cox, MD MBA FAAFB

Arrowhead Family Physicians &

Associate Medical Director

Paramount Healthcare

Juan A. Hinojosa

Owner

Mondo Mechanical

OFFICERS

Brian K. English

Chairman

Richard D. Heltzel

Secretary

H. Lee Dunn, Jr.

President & CEO

Kevin T. Rahe

Executive Vice President & SLO

Richard D. Heltzel

Senior Vice President & CCO

Meredith A. Delman

Vice President

Veronica Fish

Vice President

Alan W. Hazlett

Vice President

Susan C. Martin

Vice President

William L. Pitzen

Vice President

18

BANK OF MICHIGAN

Great Lakes Region

MICHAEL G. SARAFA

President & CEO

In less than two years since its debut, Bank of Michigan has received positive publicity for its financial achievements. Consequently, more people in southeastern Michigan want to do business with Bank of Michigan.

We have worked hard to position the bank at the forefront of the local financial education scene by offering business clients and retailers antifraud seminars and money service compliance training. In return, our bank received accolades from the media and regulatory agencies for our leadership in these vital areas of community service.

Partnering with one of our sister banks, Oakland Commerce, we rolled out an innovative and secure funds transport service that we provide to business clients based on their average deposits. This aggressive approach to deposit gathering has delivered immediate results for both banks.

We further enhanced our staff of experienced professionals. Sonya Kory-Haio joined the bank as senior vice president of business development after 17 solid years in Oakland County’s strong financial services market. Our new vice president/commercial lender, Barry Boozan, came to us highly recommended after five years of service with another Capitol Bancorp affiliated bank. And Roxanne Weimer, who has 15 years in banking, joined the bank as operations manager. 

Additionally, we were able to successfully identify a strong residential mortgage originator. Jack Abbo, a 12-year veteran, joined the team to head up our mortgage department. 

Complementing the business and community leaders on our Board of Directors is well-known Farmington Hills CPA Al Yaldo. Since his arrival in 2006, he has made significant contributions with referrals, advice and counsel. 

We serve area nonprofits both as volunteers and as a trusted business partner. For instance, I am delighted to continue as a board member for the Covenant House of Michigan, one of the most respected nonprofits in metropolitan Detroit. On the business side, our bank has experienced success in offering nonprofits the new NOW Charity Checking Account with a higher interest rate for large deposits. 

Community and nonprofit work will always be a major focus as our team builds on a succession of meaningful business development achievements.

~ Michael G. Sarafa, President & CEO

30095 Northwestern Highway | Farmington Hills, MI  48334 | 248-865-1300

www.bankofmi.com

Founded: January 10, 2005

BOARD OF DIRECTORS

Ronald G. Acho

Senior Partner

Cummings, McClorey, Davis & Acho

Anthony G. Antone

Vice President of Development

Kojaian Management Corporation

Patrick J. Gregory

CPA, Managing Director

UHY Advisors, Inc.

Burt S. Kassab

Vice President

Kullen & Kassab, P.C.

Martin F. Manna

Managing Partner

Interlink Media

Nick M. Sandiha

Managing Member

Sandiha Holdings, LLC

Michael G. Sarafa

President & CEO

Bank of Michigan

Bruce A. Thomas

President, Eastern Regions

Capitol Bancorp Limited

Al S. Yaldo

CPA/Vice President

Shimoun, Yaldo & Associates, PC

OFFICERS

Bruce A. Thomas

Chairman

Burt S. Kassab

Vice Chairman

Martin F. Manna

Secretary

Michael G. Sarafa

President & CEO

Thomas M. Linden

Executive Vice President & CCO

Sonya Kory-Haio

Senior Vice President

Cindy L. Jensen

Senior Vice President

Jack Abbo

Vice President

Barry J. Boozan

Vice President

Roxanne C. Wiemer

Vice President

19

BANK OF SAN FRANCISCO

California Region

EDWARD C. OBUCHOWSKI

President

Founded in 2005 as the 38th Capitol Bancorp affiliate bank, Bank of San Francisco focuses on providing exceptional banking services to business, nonprofit and private banking clients throughout the Bay Area. 

During our first full year of operation in 2006, we were honored to have a well-known regional law firm move its banking relationship to us. This choice was based on our local decision-making capability, our passion for service and our ability to handle the banking needs of the firm as well as its principals. This firm has quickly become a trusted partner. In addition to supplying us with meaningful business referrals, two of its partners have joined the bank’s Advisory Board and the firm recently co-hosted a seminar for our respective clients and prospects.   

The 15-member Advisory Board was assembled in 2006. Its talented and dynamic members serve as ambassadors for our bank.  Already, we have received several qualified referrals from the group. Additionally, our bank board members, investors, clients and referral network are helping us spread the word about Bank of San Francisco to the Bay Area’s business and nonprofit communities.

In line with our commitment to the nonprofit community, we introduced our interest checking account with a competitive, tiered rate structure. Nonprofit administrators no longer have to worry about transferring funds from their checking account to a money market or sweep account. These clients appreciate the simplicity and competitiveness of the account. 

As part of our commitment to be a value-added resource for our clients and prospects, we hosted several popular luncheon seminars in 2006. Topics included employment law, wealth management tips for business owners and international issues facing privately-held American companies.

Being a new bank devoted to the principles of economic development, our management team was asked to be part of a case study for a group of students in an entrepreneurship class at San Francisco State University.  Through this case study the chancellor of the California State University system, which has 23 campuses and more than 400,000 students, became aware of our bank. The chancellor highlighted our bank and commended the students in a marketing video being aired statewide. 

It is through community involvement opportunities such as these that Bank of San Francisco’s reputation is being built in our community and throughout California. We look forward to building off of this solid foundation.

~ Edward C. Obuchowski, President

575 Market Street, Suite 2400 | San Francisco, CA  94105 | 415-744-6700

www.bankofsf.com

Founded: August 1, 2005

BOARD OF DIRECTORS

Roberta Achtenberg

Chair, Board of Trustees

The California State University

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Joseph P. Cristiano

Former President & CEO

Kelly-Moore Paint Company

and Chairman, The MCM Group

James R. Dobberstein

Managing Director & Principal

Shea Labagh Dobberstein CPAs

Arthur F. Evans

Chairman

A. F. Evans Company, Inc.

Susan S. Morse, CFA, CFP

Senior Advisor & Chief Compliance Officer

Mosaic Financial Partners, Inc.

Edward C. Obuchowski

President

Bank of San Francisco

David J. O’Leary

Chairman

O’Leary Paint Company

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

George J. Vukasin, Jr.

Executive Vice President

Peerless Coffee & Tea

OFFICERS

Joseph D. Reid

Chairman

Scott R. Andrews

Vice Chairman

Edward C. Obuchowski

President

Raymond C. Brown

Executive Vice President, CCO

Wendy A. Ross

Executive Vice President

Macie L. Caldwell

Senior Vice President

Edward G. Damgen

Senior Vice President

Ikuo Ogata

Senior Vice President

Z. Faye Burns

Vice President

Lisa Lau

Vice President, Secretary

Timothy R. Rosenthal

Vice President

20

BANK OF SANTA BARBARA

California Region

ANDY L. CLARK

President

Bank of Santa Barbara has been very well received by the local business community since the bank opened in December 2005.

We exceeded our goals in both loans and deposits and our overall growth was double what we projected.  We have developed a diversified portfolio of high quality loans. 

In early 2006, we added three directors to our board: Craig Makela, president of Santa Barbara Olive Company; Tom Caesar, principal in Hub International Insurance; and David Grotenhuis, partner of Santa Barbara Capital, a local real estate development company. All three gentlemen have been heavily involved in the local business community for many years. They have significantly enhanced our strong board and have contributed to the early success of the bank.

During 2006, our bank made monetary, volunteer and sponsorship contributions to 35 local nonprofit organizations. These contributions represent our commitment to the Santa Barbara community and our appreciation for what these organizations do in our community.  In addition, our bank received the “Best New Campaign” award for 2005-06 from the United Way of Santa Barbara County.  We also made loans to two local nonprofit charitable organizations during the year. 

We co-sponsored the premier screening of a documentary about the business book, Good to Great, which sold more than 2 million copies. The event was attended by local entrepreneurs and business leaders.

During 2006, we embarked on a very successful radio advertising campaign that featured a different local leader each week and honored them for their contributions to improving the quality of life in our local community.

The contractor that worked on the interior of our bank was recognized for excellence on our project by receiving the “Best Commercial Tenant Improvements under $500,000” award from the Santa Barbara Contractors Association at its annual awards banquet.

Andrew Chung, vice president and relationship manager, was appointed to the loan committee of California Coastal Rural Development Corp., an organization affiliated with the State of California that provides loan guarantees for small businesses.

As you can see, 2006 was a busy year for Bank of Santa Barbara. We have high expectations for 2007 and we are just getting started!

~ Andy L. Clark, President

12 East Figueroa Street | Santa Barbara, CA  93101 | 805-730-7860

www.banksb.com

Founded: December 19, 2005

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Greggory M. Bigger

President

Santa Barbara Bancorp

Ronald M. Blitzer

President

Nations Food Packaging

Thomas E. Caesar

Senior Vice President

Hub International Insurance

Andy L. Clark

President

Bank of Santa Barbara

David W. Grotenhuis

Partner

Santa Barbara Capital

Michael F. Hannley

President & CEO

Bank of Tucson

John L. Kavanagh

President

Kavanagh Corporation

Craig A. Makela

President

Santa Barbara Olive Company

Frank E. McGinity, CPA

Partner

McGinity Nodar & Daley, LLP

Dr. Timothy O’Connor

President

Ventura Radiation

Oncology Group

Robert M. Ornstein, Esq.

Senior Consultant

Visionworks Associates, LLC

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Michael D. White

President

MDW Companies

OFFICERS

Joseph D. Reid

Chairman

Scott R. Andrews

Chief Executive Officer

Andy L. Clark

President

Robert  H. Rothenberg

Executive Vice President, Secretary

Greggory M. Bigger

Senior Vice President

Andrew E. Chung

Vice President

Paveena Luangprasert

Vice President

Frances P. Meehan

Vice President

21

BANK of TUCSON

Southwest Region

MICHAEL F. HANNLEY

President & CEO

Bank of Tucson had its beginnings in January 1996 when Capitol Bancorp Chairman and CEO, Joseph D. Reid, and I first discussed establishing a business bank in Tucson. Since that time, our bank has become a model of efficiency and high performance.  We are proud of the success we have achieved over the past 11 years.

Tucson is a vibrant community with significant opportunity for business development.  Tucson has multiple regional and national banks aggressively competing for deposit and loan opportunities. All have a similar array of products and technology -  yet Bank of Tucson’s performance has set it apart from the others.

Our experienced, talented and community-focused employees distinguish us from the competition. Our bank’s management team has continually viewed our employees as its most important asset in creating value for the bank.  Expectations of excellence and being extraordinary in all facets of banking are achieved in ordinary ways.  In addition to being specialists in their areas of responsibility, each employee has been cross-trained to support other job functions, thus providing an important added value for our customers.

Since its inception, Bank of Tucson has operated like a family-owned business that is profit driven. The bank hires employees who always strive to fulfill the needs of its current and prospective customers.   These employees are people who live, work and invest themselves in our community.  This bank is truly a great institution built on great people who thrive on being the best.  Tell them they can’t do something, and they’ll strive to prove you wrong every time.

It is said that it is truly a pleasure to walk into Bank of Tucson to cash a check, speak with a teller, be greeted by a loan officer or say hello to the president. This is the true secret to our success…our staff.

~ Michael F. Hannley, President & CEO

4400 East Broadway Boulevard | Tucson, AZ  85711 | 520-321-4500

Nogales | 610 N. Morley Ave. | Nogales, AZ  85621 | 520-397-9220

www.bankoftucson.com

Founded: June 27, 1996

BOARD OF DIRECTORS

Bruce I. Ash

Vice President

Paul Ash Management Company, LLC

Slivy Edmonds Cotton

Senior Managing Director

Portico & The Edmonds Group

Michael F. Hannley

President & CEO

Bank of Tucson

Michael J. Harris

Associate Broker

Long Realty Company

Richard F. Imwalle

Chairman

Bank of Tucson

David Jeong

CPA

Jeong & Lizardi, P.C.

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Burton J. Kinerk

Attorney at Law

Kinerk, Beal, Schmidt, Dyer & Sethi, P.C.

Harold H. Kitay

Commercial Developer/Owner

Whirlygig Properties, LLC

Humberto S. Lopez

President

HSL Properties, Inc.

Lyn M. Papanikolas

Realtor

Long Realty Company

OFFICERS

Richard F. Imwalle

Chairman

Michael L. Kasten

Vice Chairman

Michael F. Hannley

President & CEO

Harold H. Kitay

Secretary

C. David Foust

Executive Vice President & CCO

Sandi L. Smithe

Executive Vice President & COO

David A. Esquivel

Senior Vice President

Catherine C. Garcia

Senior Vice President

Richard K. Mullen

Senior Vice President

Richard A. Garcia

Vice President

Lucian V. Moga

Vice President

Guillermo Monge

Capitol Wealth Advisors

Vice President

Robert D. Placzek

Vice President

Patricia A. Taylor

Vice President

22

BANK OF VALDOSTA

Southeast Region

MATTHEW D. STANALAND

President

Opening its doors in June 2006, Bank of Valdosta debuted as Capitol Bancorp’s 45th affiliate bank. Our veteran staff of 11 local bankers has more than 100 years of banking experience. 

From the early organizational stage through the capitalization process and bank’s opening, the people of Valdosta have welcomed this new bank with open arms. They like our convenient location and our entrepreneurial spirit. 

The bank held a ribbon cutting and grand opening celebration in September.  More than 250 people, including many clients and civic and business leaders, attended the event. Our guests enjoyed food and refreshments and were given a guided tour of our offices.

As the newest community bank in our area, we are calling on referrals and other relationships as we build our client base. It is our goal to be a banking leader in the community. We are focused on providing relationship banking to businesses, their owners and management teams, as well as to entrepreneurs, professionals and consumers.

Our officers plan to remain active volunteers with community organizations, including the United Way of Valdosta/Lowndes County. This past year, Bank of Valdosta was also proud to report that we had 100 percent participation in the local United Way campaign.

Prior to the bank’s opening, our building was remodeled to better suit our needs.  Located near the South Georgia Medical Center, Valdosta State University and across the street from the South Georgia Regional Library, the bank is in a high-volume traffic area that we feel positions it for steady growth. 

One of the bank’s board members, William Culbreth, is the president of Culbreth, Minick, and Associates Inc., a CPA firm in Valdosta.  He is a tremendous asset to the bank and well-respected in the community.  Also a bank client, he enjoys our friendly staff.  The bank provides quality customer service to all its clients without sacrificing credit quality in order to maximize shareholder value. 

Bank of Valdosta is the first local bank to provide a courier service for its business clients.  With the guidance and business referrals of our board of directors and the contributions of our dedicated staff, we plan to grow our bank as we expand our active role in the economic development of the city of Valdosta and Lowndes County.

~ Matthew D. Stanaland, President

301 Woodrow Wilson Dr. | Valdosta, GA  31602-2537 | 229-242-3522

www.bankofvaldosta.com

Founded: June 21, 2006

BOARD OF DIRECTORS

William A. Culbreth

President

Culbreth, Minick & Associates, Inc.

Walter F. Gill, Jr.

President

Pinnacle Prime Contractors, Inc.

Dr. Thomas W. Hobby

Valdosta Medical Clinic

Bruce D. Jones

President & CEO

Community Bank of Rowan

Joseph D. Reid III

Director of Bank Development

Capitol Bancorp Limited

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Patrick T. Reid

Attorney

Reid & Reid

Matthew D. Stanaland

President

Bank of Valdosta

Thomas R. Warren

Retired

Private Investor

Sherry C. Wetherington

President

Only Options, Inc.

OFFICERS

Joseph D. Reid

Chairman

Patrick T. Reid

Vice Chairman

William A. Culbreth

Secretary

Matthew D. Stanaland

President

Earl W. Douglas

Senior Lending Officer & CCO

Penny L. Brogdon

Vice President

Beverly G. Edwards

Vice President

R. Jeremy Ragan

Vice President

Stephen P. Sainz

Vice President

23

BLACK MOUNTAIN COMMUNITY BANK

Southwest Region

PETER M. ATKINSON

President & CEO

We are fortunate to be located in the Las Vegas Valley, which has proved its resiliency during every national recession since 1980. Our tourist industry recovered from the tragedy of 9/11 in just a few months. Additionally, the people that live in our state have been very supportive of the banking industry, especially community banks.

Clearly the business community in southern Nevada values our style of banking. Capitol Bancorp’s opening of five banks in the Las Vegas Metropolitan Valley since 1999 is evidence of its success. Black Mountain Community Bank was Capitol Bancorp’s 26th bank and the third in southern Nevada when it opened in March 2000. The opening of CBC’s 50th bank little more than six years later is more evidence of the public’s acceptance of our style of banking on the national stage.

When our bank debuted, there were just eight employees, seven of whom are still here. We hired our 25th employee during the fourth quarter of 2006. We just negotiated for additional office space, which will be our fourth expansion since opening. It is an exciting time.

There is a company in our area that for years has advertised, “We want only to be the best.” What a great slogan. We strive to have our customers see us as the best.  We are not only bankers, even though we spend time working through the Nevada Bankers Association for the benefit of our industry; and we are not only business-people, even though we serve on the boards and committees with organizations, such as the Henderson Chamber of Commerce and the Henderson Development Association.  We are a part of our community. We truly want to make it a better place to live and work. Whether this means serving on a booster club for the high school band or the local gymnastic team, delivering Christmas presents from our Christmas angel trees, or getting our customers involved in raising money for a local need, we welcome the chance to contribute.

The really good news is that Black Mountain Community Bank is a proud member of a family of banks in an industry that prides itself on being a good citizen and accepting the responsibility that goes with it. We look forward to serving our community in the years to come.

~ Peter M. Atkinson, President & CEO 

1700 West Horizon Ridge Parkway, Suite 101 | Henderson, NV  89012 | 702-990-5900

www.bmcb.com

Founded: March 27, 2000

BOARD OF DIRECTORS

Kristine E. Anaya

CPA

Anaya & Company, Ltd.

Peter M. Atkinson

President & CEO

Black Mountain Community Bank

Michael J. Devine

Attorney at Law

Betty A. Kincaid

Investor

Michael J. Mixer

Corporate Broker

Colliers International

Colleen C. O’Callaghan-Miele

Vice President & Circulations Manager

H.B.C. Publications

Phillip N. Ralston

Chief Financial Officer & Treasurer

American Nevada Company

Christopher G. Samson

President & Owner

FN Investments, Inc.

OFFICERS

Michael J. Devine

Chairman & Secretary

Peter M. Atkinson

President & CEO

David S. Rennick

Executive Vice President & CCO

Kathy M. Lucero

Senior Vice President

Dennis L. Monson

Senior Vice President

Shari A. Smith

Senior Vice President

Grenell Martin

First Vice President

RaMon McBride

Vice President

Stephen E. Norris

Vice President

24

BRIGHTON COMMERCE BANK

Great Lakes Region

GARY T. NICKERSON SR.

President & CEO

At the core of Brighton Commerce Bank’s success is our outstanding customer service.  This quality service, combined with experienced mortgage and commercial banking personnel and access to comprehensive trust and investment services through Capitol Wealth Advisors, provides our customers with a complete banking experience.

To enhance customer service and deposit gathering, we installed a full-service ATM deposit system last summer at the St. Joseph Urgent Health Care Facility and Cancer Center. We are now attracting deposits from physicians and their staff. Our first full-service ATM is located at our bank’s drive-in.  We also have two cash ATM machines strategically positioned to serve our customers at the popular Mount Brighton Recreation Area and a busy service station on Grand River Avenue.  We have plans to set up a third full-service ATM in Livingston County in 2007.

In 2006, we launched a new fraud tracking system and provided regular messages to customers about scams, including identity theft.  By creating more awareness about high-tech financial crimes, we benefit our customers as well as our bank. In the area of wealth management, we held several Capitol Wealth seminars for real estate agents, home builders and professional groups. We are also offering lockbox services for our business customers.  This service, in addition to remote deposit capture, complements the Internet Banking and Cash Management services we presently offer entrepreneurs.

Our community commitment is unparalleled in our market.  There has been 100 percent employee participation in the local United Way campaign every year since the bank’s inception in 1997 and the bank recognizes that commitment through an additional annual corporate gift to the United Way.  We also have a team of officers and directors involved in the annual United Way Day of Caring. Board member Jim Winchel was chair of the 2006 United Way of Livingston County Campaign, following in the steps of board members Scott Griffith and Piet Lindhout, who are past chairs.

This past fall, we helped raise more than $15,000 for our local food bank as the second year sponsor of the popular Birdie Day/Golf Ball Drop and $11,000 for the St. Joseph Mercy Livingston Hospice in partnership with our vice chairman Mike Corrigan.

The Brighton Commerce Bank team is proud of our 10 years of service.  We are building on this success with new products and services to further grow our market share.

~ Gary T. Nickerson Sr., President & CEO

8700 North Second Street | Brighton, MI 48116 | 810-220-1199

www.brightoncommerce.com

Founded: January 8, 1997

BOARD OF DIRECTORS

Robert C. Carr

Vice Chairman

Capitol Bancorp Limited

John C. Codere

President

Brighton Block & Concrete

Michael B. Corrigan

President

Corrigan Oil Company, Inc.

Scott C. Griffith

President

ERA Griffith Realty

William LaMarra

Chairman & CEO

Excelda Manufacturing

Piet W. Lindhout

CEO

Lindhout Associates Architects, AIA

Lyle W. Miller

President

L. W. Miller Holding Company

Gary T. Nickerson Sr.

President & CEO

Brighton Commerce Bank

Kacee M. Reid

Attorney at Law

Kacee M. Reid, PLC

Mitchell J. Stanley

President

Mickey Stanley & Associates

James A. Winchel

President

Colt Park Agency, Inc.

OFFICERS

Robert C. Carr

Chairman

Michael B. Corrigan

Vice Chairman

Gary T. Nickerson Sr.

President & CEO

Linda K. Lavely

Senior Vice President

Joseph M. Petrucci

Senior Vice President & CCO

John Szydzik

Senior Vice President & Cashier

William R. Anderson

Vice President

Mark R. DuShane

Capitol Wealth Advisors,

Vice President

Sandra T. Radtke-Gerkin

Vice President

25

CAMELBACK COMMUNITY BANK

Southwest Region

GAIL E. GRACE

President & CEO

Camelback Community Bank experienced solid growth in loans and deposits in 2006. We plan to build on that success in 2007 by adding business bill pay, remote deposit and lockbox services to the products we currently offer our business customers.

Our ongoing efforts to improve the bank’s performance actually began in 2005 when our staff first came together to create a vision - “Relationships that last a lifetime!”  Last February the staff met off-site to kick off our marketing and strategic business planning process. Our focus is on team building and relationship banking. We have created a very successful referral incentive plan which resulted in new and expanded business relationships. We have also formed committees to better manage and track our key initiatives.   

The team members at our bank know their involvement in local organizations is helping meet the many needs of our diverse community. During 2006, our employees and our bank were involved in, made monetary contributions to and sponsored many programs and nonprofit organizations that provide services for the less fortunate individuals and families in the community. Our employees are also involved in the annual United Way campaign.  Additionally, the bank solidifies its community commitment by allowing nonprofit boards and committees to hold their meetings in our board room.

We are very proud of our business partners on the bank’s board of directors. Their business advice and referrals help improve the bank’s performance, while their community involvement reflects well on all of us. In 2006, two of our founding board members were honored for their community contributions. Shirley Agnos was recognized with the inaugural Community Leadership Award from the Tumbleweed Center for Youth Development, which provides programs for homeless, abused and abandoned youth.  Board vice chairman Dan Robledo was also recognized by Chicanos Por La Causa for his contributions to the community development organization that is active throughout the state.

Launched in 1998, Camelback Community Bank is the third oldest Capitol Bancorp affiliate bank in Arizona. By building solid relationships that last a lifetime, the Camelback team is strengthening our bank and our community.

~ Gail E. Grace, President & CEO

2777 East Camelback Road, Suite 100 | Phoenix, AZ  85016 | 602-224-5800

www.camelbackbank.com

Founded: May 20, 1998

BOARD OF DIRECTORS

Shirley A. Agnos

President Emerita

Arizona Town Hall

Cord D. Armstrong, CPA

Manager

Miller Wagner Business Services, Inc.

Michael J. Devine

Attorney at Law

Gail E. Grace

President & CEO

Camelback Community Bank

S. Jill Hastings, J.D.

Principal

Pension Strategies, LLC

Robert V. Lester

President

Progressive Financial Concepts

Tammy A. Linn

President, Arizona Character

Education Foundation

Executive Director, United Way of

Yavapai County

Susan C. Mulligan

Community Volunteer

Barbara J. Ralston

Chair

Camelback Community Bank

Dan A. Robledo

Senior Vice President &

Arizona Operations Manager

Land America Financial Group

Robert S. Roda, DDS

Roda & Sluyk, Ltd.

Kenneth Van Winkle, Jr.

Attorney at Law

Lewis and Roca, LLP

OFFICERS

Barbara J. Ralston

Chair

Dan A. Robledo

Vice Chairman

Gail E. Grace

President & CEO

Shirley A. Agnos

Secretary

James A. Klussman

Executive Vice President & CCO

Timothy J. Hoekstra

Senior Vice President

Deanna L. Brock

Vice President

Todd W. Grady

Vice President

Jennifer S. Higgins

Vice President

Amy L. Hotaling

Vice President

William F. Von Hatten

Vice President

26

CAPITOL NATIONAL BANK

Great Lakes Region

PAULA D. CUNNINGHAM

President

Being the first of Capitol Bancorp’s first 50 banks, Capitol National Bank has enjoyed many unique opportunities.  Much of our continuing success can be attributed to the first employees ever hired by the bank. Our first bank president, Robert Carr, is now our chairman and also serves as vice chairman of Capitol Bancorp. Our vice president of operations, Lori Garcia and loan officer, Toni Raleigh, have been at the bank for 25 years. Our first customers still bank with us today. Our strength, success and reputation are built around our people. Our directors, staff and customers are our greatest asset.

The Core Values of Loyalty, Integrity, Community Commitment, Maximizing Potential and Entrepreneurship are as much a blueprint for success as any one initiative that we have launched. 

In mid-Michigan, Capitol National Bank is synonymous with community involvement.  Whether we are partnering with St. Vincent Home for Children, the Boys & Girls Club of Lansing or the American Red Cross, our reputation as community bankers precedes us. We have been building solid relationships for 25 years.The members of our Board of Directors have been actively involved in providing referrals and developing business. They were the creators of “Wine, Women and Wisdom,” the signature networking and business development event for Capitol National Bank and several other banks in the Capitol Bancorp system. 

The past year is indicative of our staff’s service, success and professionalism. Intern Amy Marsh served for one week with relief workers at a hurricane relief center on the Gulf Coast during her semester break from Michigan State University. Our business development staff and loan officers invited CPAs and attorneys to a Small Business Administration (SBA) seminar the bank hosted. Board member John Smythe, the immediate past president of our bank and chairman of our affiliate Amera Mortgage, was honored to be named president of Capitol Bancorp’s Great Lakes Region. Ted Terzian, vice president of wealth management, earned the Certified Senior Advisor designation from the Society of Certified Senior Advisors.

All of these individuals and the rest of our talented staff serve on nonprofit boards, volunteer in the community and are committed to working hard to ensure our bank’s success. As a result of their tireless efforts, we are confident that we will continue to grow our business while we provide outstanding customer service and fulfill our Core Values.

~ Paula D. Cunningham, President

200 Washington Square North | Lansing, MI  48933 | 517-484-5080

Delta Branch | 644 Migaldi Lane | Lansing, MI  48917 | 517-627-8881

Meridian Branch | 4792 Marsh Road | Okemos, MI  48864 | 517-347-1006

www.capitolnational.com

Founded: November 22, 1982

BOARD OF DIRECTORS

Robert C. Carr

Vice Chairman

Capitol Bancorp Limited

Nan Elizabeth Casey

Attorney at Law

Fraser Law Firm

Charles J. Clark

President

Clark Construction Company

Paula D. Cunningham

President

Capitol National Bank

Patrick F. Hayes

President

F. D. Hayes Electric Company

Richard A. Henderson

President

Henderson & Associates, P.C.

J. Christopher Holman

Publisher

The Greater Lansing Business Monthly

Lewis D. Johns II

Vice President

Mid-Michigan Investment Company

Kevin A. Kelly

Executive Director

Michigan State Medical Society

Charles J. McDonald

Cashier - Great Lakes Region

Capitol Bancorp Limited

Kelly D. Miller

Vice President

Bank Performance

Capitol Bancorp Limited

John D. O’Leary

Co-President

O’Leary Paint Company

Cristin K. Reid

Corporate President

Capitol Bancorp Limited

Patricia A. Reynolds

Former President

Capital Region Community Foundation

John C. Smythe

President, Great Lakes Region

Capitol Bancorp Limited

OFFICERS

Robert C. Carr

Chairman

Paula D. Cunningham

President

Patrick F. Hayes

Secretary

John C. Smythe

CEO

John R. Farquhar

Senior Vice President

David E. Feldpausch

Senior Vice President

Nancy J. Fox

Vice President

Lori M. Garcia

Vice President

Michael S. Heath

Capitol Wealth Advisors, Vice President

Theodore M. Terzian

Capitol Wealth Advisors, Vice President

Ronda M. Thompson

Vice President

27

COMMUNITY BANK OF ROWAN

Southeast Region

BRUCE D. JONES

President & CEO

This past year has been an exciting year for our employees, directors and 300 shareholders.  Community Bank of Rowan began serving the South Rowan community by opening its first office in China Grove in February 2006.  In May, the bank opened its main office with a total renovation of the two-story, 10,000-square-foot building located at the gateway to historic downtown Salisbury.

The bank has experienced outstanding growth in 2006 and we believe 2007 will be a banner year.  The bank has been approved by the U.S. Small Business Administration to be a “Preferred Lender,” allowing us to better focus on our small-business niche.  Also, with the strong economy in Rowan County and the surrounding area, we are concentrating on growing the bank’s mortgage, construction, commercial and income property loan portfolios.

Commercial deposit growth will remain a primary focus.  Our commercial customers have access to cash management, Internet banking, bill pay, remote deposit and lockbox services that the big banks offer, but we pride ourselves in taking the time to understand their needs in order to provide better service.  We also have all of the bank products delivered with the personal touch that our customers expect from their community bank.

Community banking is our passion and the entire team of employees and directors at Community Bank of Rowan is committed to offering a high level of service while treating our customers as individuals.  When customers call our bank they speak to employees who are empowered to deliver results. Our officers have the experience to make credit decisions in a timely manner. This immediately separates our bank from the competition.

We also believe we have the responsibility to volunteer with organizations that improve our community. Our officers are active with several local organizations, including the Rowan Regional Medical Center, Rowan County Chamber of Commerce, Habitat for Humanity and the Rowan County Economic Development Commission.

Our name says it all -- Community Bank of Rowan, a place where you can stop by to visit with neighbors, have a cup of Starbucks™ coffee or just read the newspaper.

Friends helping friends - we wouldn’t want it any other way.

~ Bruce D. Jones, President & CEO

322 E. Innes Street | Salisbury, NC  28144 | 704-639-0730

China Grove Office | 313 E. Centerview Street | China Grove, NC  28023 | 704-857-3300

www.communitybankofrowan.com

Founded: February 21, 2006

BOARD OF DIRECTORS

Gregory M. Alcorn

Owner & CEO

Global Contact Services

John T. Bost

Developer

Jim L. Bost Construction Co., Inc.

Bost Development Co., Inc.

B & R Realty

Dr. James L. Comadoll

Orthopedic Surgeon/President

RoMedical Care PA

John W. Ellis II

Area Manager

Baxter Bio Surgery

William M. Graham

Attorney

Wallace and Graham, PA

Dianne Y. Greene

Broker & Owner

Century 21 Towne & Country

Bruce D. Jones

President & CEO

Community Bank of Rowan

Bobby Clay Lindsay Jr.

President

Summit Developers, Inc.

Patrick T. Reid

Attorney

Reid & Reid

Dr. Eric C. Troyer, MD

Physician

Troyer Family Practice

OFFICERS

Bruce D. Jones

Chairman

President & CEO

John W. Ellis II

Secretary

Seamus M. Donaldson

Senior Vice President & CCO

Robert C. Sieg

Senior Vice President

David L. Flanary

Vice President

Judy K. Haire

Vice President

Nancy C. Hildreth

Vice President

Crystal L. Hodges

Vice President

Brad  R. Martin

Vice President

Jeff S. Wetmore

Vice President

28

DESERT COMMUNITY BANK

Southwest Region

JAMES W. HOWARD

President & CEO

When Desert Community Bank opened in 1999, it was Capitol Bancorp’s first bank in southern Nevada. Community acceptance to the Capitol Bancorp banking model was fast and the bank’s stock sold quickly. This encouraged the development of the next four banks in Nevada, as the trail had been successfully blazed.

As our investors and customers have prospered, so has our bank.  We are proud of the bank’s business achievements.

Along the way, our staff has grown as well. Our five-person loan operations department, led by senior vice president Michelle Scalzo, was recently relocated to an adjacent building in anticipation of future  expansion to accommodate the continued growth.

Our bank was one of the first Capitol Bancorp banks to convert to a new core operating system which enables expanded service capabilities. Senior vice president Eileen Hagler oversaw the implementation at our bank and then assisted the other Capitol Bancorp banks in Nevada.

We are also pleased for Al Gourrier, our former chief credit officer. He has gone on to become the president of 1st Commerce Bank, the fifth bank in Nevada. We wish him great success.

During 2006, we were proud to welcome Larry Kifer to the Board of Directors. Larry is chairman and CEO of an investment and consulting business and is the 2007 chairman of the Las Vegas Chamber of Commerce. We expect his contributions to the growth of our bank will be felt for many years to come.

Our community bank is actively involved in improving the quality of life in our city. For example, in 2006, the bank donated a van to the 100 Black Men of Las Vegas, a youth-mentoring organization having challenges transporting members to their activities. We gladly fulfilled this need with appreciation toward the good that this organization does for the community.

At Desert Community Bank, we remain mindful of the Armed Forces. Our thoughts are with all of the men and women in the military, especially those serving overseas.

Country and community reign supreme at Desert Community Bank. Their success means that with hard work and diligence we too will continue to be successful.

~ James W. Howard, President & CEO

3740 South Pecos-McLeod | Las Vegas, NV  89121-4260 | 702-938-0500

www.desertcommunity.com

Founded: August 6, 1999

BOARD OF DIRECTORS

Robert A. Albano

President

Rinker Materials Corporation

Robert J. Andrews

COO

Ryan’s Express

Michael J. Devine

Attorney at Law

Rose M. K. Dominguez

Realtor

AC Sales Real Estate Services

Garry L. Hayes

President

Law Office of Garry L. Hayes

James W. Howard

President & CEO

Desert Community Bank

Larry W. Kifer

Chairman & CEO

Lilack, Inc.

Leland D. Pace

Partner

Stewart, Archibald & Barney, LLP

Thomas A. Smith

President & CEO

Group Two, Inc.

Stephen D. Stiver

Retired President

Stiver Car Care

OFFICERS

Michael J. Devine

Chairman/Acting Secretary

Garry L. Hayes

Vice Chairman

James W. Howard

President & CEO

Gerald T. Buttaccio

Executive Vice President & CCO

Robert J. Beck

Senior Vice President

Rodney K. Chaney

Senior Vice President

Eileen S. Hagler

Senior Vice President

Michelle  Scalzo

Senior Vice President

John J. Gentile

Vice President

Larry A. Moulton

Vice President

29

DETROIT COMMERCE BANK

Great Lakes Region

HAROLD G. CURRY

President & CEO

Detroit Commerce Bank debuted as Capitol Bancorp’s 16th affiliate bank in 1998. Each year since then we have made significant staff and business improvements that have enhanced our performance, while strengthening our community image. In 2006, we achieved tremendous business success as assets, loans and earnings reached record highs.

Our commitment to the community can be seen in our involvement with local business and nonprofit organizations. For instance, last year we supported business associations, such as the Jefferson East Business Association, which also serves as an office for the City of Detroit’s Neighborhood Commercial Revitalization program and the Michigan Small Business and Technology Center. This involvement expanded the bank’s name recognition while our staff marketed our banking services to hundreds of business and individual prospects.

One of the reasons our bank received an “Outstanding” rating in its latest FDIC Community Reinvestment Act exam is our solid record providing financial education seminars for nonprofit organizations and the people they serve. In 2006, we were gratified by a successful financial seminar we provided for more than 90 young urban adults who are members of the Midnight Golf Program in Detroit. In addition to teaching these young people the game of golf and golf etiquette, this program provides life-skills training as well as opportunities to meet with mentors who are bankers, entrepreneurs and professionals.

We also proudly serve our community by fostering economic development in the following ways:

   •   We provided construction financing for dozens of new single-family residences for low-to-moderate income families through various government-supported programs.

   •   We made contributions to nonprofit organizations which focus on helping children, the disabled and the less fortunate become more productive citizens and achieve success in life.

   •   In serving on various nonprofit boards, our officers and board members volunteer their time and expertise to help these community-based organizations achieve their objectives. 

The team members at Detroit Commerce Bank are excited about our myriad of prospects in 2007 and beyond as we expand our services to clients and reach out to serve our community.  We are building upon our significant successes by providing the highest level of personalized customer service available in our market.

~ Harold G. Curry, President & CEO

645 Griswold Street, Suite 70 | Detroit, MI  48226-4011 | 313-967-9700

www.detroitcommerce.com

Founded: December 14, 1998

BOARD OF DIRECTORS

James P. Allen, Sr. Esq.

Attorney at Law

Allen Brothers, PLLC

Ralph J. Burrell

President

SymCon

Dr. Vivian L. Carpenter

President

Supreme Communications Group

Harold G. Curry

President & CEO

Detroit Commerce Bank

Donald M. Davis Jr.

Vice President & Chief Officer 

Human Resources Support

Health Alliance Plan

Edward Deeb

President

Michigan Business &

Professional Association

Dr. Curtis L. Ivery

Chancellor

Wayne County Community

College District

Gregory Kelser

Product Analyst

ESPN, Fox Sports Net

Kelly D. Miller

Vice President/Bank Performance

Eastern Regions

Capitol Bancorp Limited

Martha K. Richardson

President

Service Marketing Specialists, Inc.

James F. Stapleton

President

B & R Consultants

Edward Tinsley

Proprietor

Longfellow Group

Neal F. Zalenko

Retired Senior Partner

VIrchow, Krause & Company LLP

OFFICERS

Edward Tinsley

Chairman

Harold G. Curry

President & CEO

Donald M. Davis Jr.

Secretary

Mark V. McCulloch

Senior Vice President

Joyce A. Sutton

First Vice President

James R. Blanks

Vice President

Valora L. Jackson

Vice President

Mary Seaberg King

Vice President

Ryan R. Vinco

Vice President

30

EAST VALLEY BANK

Southwest Region

NEIL R. BARNA

President & CEO

Commitment to excellence remains our call to action at East Valley Bank. Commitment to providing a great place to work. Commitment to providing a great place to bank.  Commitment to community involvement.  Commitment to a vision: “Our clientele is our sales force.”  All play a role in providing a quality banking experience for our clients and an outstanding environment for the team of professionals servicing those clients. 

Providing a great place to work enables East Valley Bank to nurture young professionals on a career path in banking.  With the decline of community banks in favor of the mega-banks and their cost-cutting efforts, the security of traditional careers in banking is gone.  East Valley Bank provides the stability necessary to secure those career paths.

Providing a great place to bank is personified by the professionals at East Valley Bank.  East Valley Bank provides access to decision makers, prompt decision-making, and quality products.  All play a vital role in our effort to provide unsurpassed service while building long-term banking relationships with our clients.  When was the last time you received an answer from your loan officer within 48 hours?  What if you received an immediate answer to your question during the same visit?  This is not a goal or a vision but an everyday reality at East Valley Bank.

The committed staff at East Valley Bank takes pride in supporting a variety of charitable and civic groups within our community. The bank commits monetarily to events and organizations that support those in need and promote a growing and evolving community.  We are proud of our record of support and encourage employees to get involved.  We recognize that client support of the bank goes hand in hand with our efforts to give back to our community.

Providing an experience that prompts clients to give business referrals and become an advocate for our bank is the vision of East Valley Bank and our pledge to success.

Commitment to excellence - our promise to you.

~ Neil R. Barna, President & CEO

1940 North Alma School Road | Chandler, AZ  85224 | 480-726-6500

www.eastvalleybank.com

Founded: June 30, 1999

BOARD OF DIRECTORS

Neil R. Barna

President & CEO

East Valley Bank

Michael J. Devine

Attorney at Law

John S. Lewis

President, Western Regions

Capitol Bancorp Limited

OFFICERS

John S. Lewis

Chairman

Michael J. Devine

Vice Chairman

Neil R. Barna

President & CEO

Staci L. Charles

Executive Vice President

Rita E. Leaf

Executive Vice President & CCO

Sandra S. Zazula

Executive Vice President & Secretary

Christine Bond

Vice President

Susan E. Haverstrom

Vice President

James A. McCann

Vice President

31

ELKHART COMMUNITY BANK

Great Lakes Region

STEVEN L. BROWN

President

Embraced by the community since its inception in 1999, Elkhart Community Bank experienced another successful year in 2006. A by-product of the bank’s success, however, has been a growing need for more space for our staff. We feel our board of directors acted prudently in 2006 to address this facility need.

In order to keep costs down and maintain our efficient delivery mechanism, the board elected to purchase the 4,000 square-foot Four Arts Building adjacent to the bank. The building is currently being remodeled to accommodate several needs. Its kitchen is being updated so that it can serve as the lunchroom for our staff. Our board will hold its meetings there and we plan to move our file room to the building.

Previously, the building was used as a meeting place for nonprofit organizations. Once the remodeling is completed, we want these organizations to continue to hold their monthly meetings there. So, in addition to solving our facility needs, it provides us with another opportunity to demonstrate our community commitment.

From an operations standpoint, a highlight of the year was our successful migration to a new core operating system. This new state-of-the art system positions us for future growth and affords us better information management to enhance customer service.

Our dedication to providing excellent customer service is the bedrock of our successful community bank.  Elkhart Community’s awareness in our market improves each year as we reaffirm our commitment to our “Smaller Bank, Bigger Service” motto. Because of our dedication to our Core Values, we are proudly known to the citizens of Elkhart as the bank whose employees take the time to care.

We are looking forward to another stellar year. We have developed alliances with local associations such as the Chamber of Commerce and the Elkhart County Builders Association.  Our officers and board members are volunteers on several local boards and active with community service organizations.  

Most importantly, at Elkhart Community Bank we are grateful for the relationships we have built and give thanks to our customers for their business support.

~ Steven L. Brown, President

303 South Third Street | Elkhart, IN  46516 | 574-295-9600

www.elkhartbank.com

Founded: September 9, 1999

BOARD OF DIRECTORS

Nancy B. Banks

Community Volunteer

R. Steven Bennett

President

Pilgrim International

Kenneth W. Brink

President

Elkhart Cattle and Land, LLC

Steven L. Brown

President

Elkhart Community Bank

Robert C. Carr

Vice Chairman

Capitol Bancorp Limited

Lain R. Downs

Executive Director

The Centre, PC

Curtis T. Hill Jr.

Attorney at Law

Elkhart County Prosecuting Attorney Office

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Richard L. Max Sr.

President & General Manager

Heart City Enterprises - House of Herbs

Myrl D. Nofziger

President

Hoogenboom Nofziger

Brian J. Smith, CPA

President

The Heritage Group

Jack E. Welter

President

Elkhart Plastics, Inc.

OFFICERS

Robert C. Carr

Chairman & CEO

Myrl D. Nofziger

Vice Chairman & Secretary

Steven L. Brown

President

Tripp Bradford

Capitol Wealth Advisors

Vice President

Lori A. Faltynski

Vice President

Duane S. Klein

Vice President & CCO

Vincent J. VonDerVellen

Vice President

32

EVANSVILLE COMMERCE BANK

Great Lakes Region

THOMAS L. AUSTERMAN

President

The core mission of the team at Evansville Commerce Bank is to “Help People Live Their Dreams.” We do this by helping customers build their savings, by lending money, financing home purchases, providing investment advice and volunteering in community projects.

We have assembled a team of experienced banking professionals and have located our bank in a historic building in downtown Evansville. Our top officers are proven winners, each averaging more than 15 years in banking. Our offices are located on the street level of a grand old building that first opened in 1930.

Since our debut in May 2006, we have hosted several educational and networking events to attract customers and prospects to our offices. We welcomed more than 90 women entrepreneurs and business owners to the bank with two “Women, Wisdom and Wine” networking events.  We also held several “Lunch and Learn” sessions for real estate professionals from whom we hope to cultivate additional business referrals. At each of these events, we were able to talk to our guests or make a presentation and provide them with information about our bank, showcasing our professional staff and an impressive menu of financial products and services.

As a commercial bank, we are proudly involved with financing economic development in the Evansville area. As a community bank, we are committed to making Evansville a better place to live and work.

In that latter role, our employees participate in more than 30 community associations and charity organizations. For instance, last year we organized a team of employees and relatives that helped raise money for cancer research by participating in the Susan G. Komen Foundation Race for the Cure.

Last year also marked our first foray into the annual United Way campaign. I am proud to note that we reported 100 percent participation from our employees in the campaign. Being seasoned professionals, our employees understand the importance of supporting organizations like the United Way which funds many much-needed local charities.

Our goal is to be the most reliable, the most responsive and the most caring bank possible. We sincerely believe that as a result of delivering superior service, we can in fact deliver the best value in a way that truly does “Help People Live Their Dreams!” 

~ Thomas L. Austerman, President

20 N.W. 4th St. | Evansville, IN  47708 | 812-492-1800

www.evansvillecommercebank.com

Founded: May 30, 2006

BOARD OF DIRECTORS

Thomas L. Austerman

President

Evansville Commerce Bank

Dr. John W. Beman

Retired

Marie A. Bussing-Burks

Professor

University of Southern Indiana

College of Business

Gail A. Dunn

Community Affairs Director

Dunn Hospitality

Katherine L. Kleindorfer

Consultant

Drew F. Peyronnin

Executive Vice President

Peyronnin Construction Company

Reed S. Schmitt

Partner

Frick Powell Whinrey

Cravens & Schmitt, LLP

Frank J. Schultheis

Chairman & Partner

Evansville Holding Inc.

Insuremax Insurance Co.

Laurence R. Steenberg

President

BST Corporation

Bruce A. Thomas

President of Eastern Regions

Capitol Bancorp Limited

Kristen K. Tucker

Vice President

Tucker Publishing Group

Robert B. Wright

President

Wright Motors, Inc.

OFFICERS

Bruce A. Thomas

Chairman

Nina K. Fink

Recording Secretary

Thomas L. Austerman

President

Christopher M. Pfister

Executive Vice President

R. Jeanne Kelly

Vice President

Sonya G. Kincaid

Vice President

Karen J. Sosh

Vice President

33

FIRST CAROLINA STATE BANK

Southeast Region

TIMOTHY N. TAYLOR

President & CEO

The past year was a time of transition for First Carolina State Bank. I joined the bank as president and CEO at the start of the year. Being a Rocky Mount native with more than 22 years of banking experience in the market, it is especially pleasing to report that First Carolina State Bank continued its sixth year of profitable growth in 2006.

The hard work of our employees is making a difference as we become more efficient and expand our sphere of influence in Nash and Edgecombe Counties. Our main focus is providing business and individual customers with a full array of financial products and services. Additionally, in 2006 our team successfully completed implementation of a new core operating system. This new technology enhances our product delivery and improves our ability to provide quality customer service. We also expanded our involvement in organizations that help make our communities better places to live and work.

Our core systems conversion was unique to CBC because our bank had previously been using an operating system supplied by a third party. Now we are fully integrated with the CBC operating system.

We are proud of our employees and officers who volunteer in the community. For instance, Marlou Coker, lending officer at the Tarboro office, served as the luminary chairperson for the 2006 Edgecombe County Relay for Life. Her involvement contributed approximately $13,000 to the grand total of $200,000 raised for the American Cancer Society.

First Carolina State Bank recently welcomed Beverley Simmons as retail banking manager. In addition to being a highly-regarded 18-year banker, she is dedicated to helping improve the quality of local public education. She has been a volunteer with the Community in Schools program for 15 years, serving as a tutor for at risk students.

In 2006, we allocated staff, time and resources to ensure the quality and efficiency of our bank to better meet the needs of our market. The results included new staff in both our commercial loan and retail bank areas, a more focused business development strategy and the implementation of a sales and referral program for our bank.

Through our transition in 2006 we have positioned First Carolina State Bank for continued success in growing the bank while meeting the needs of our customers and our community in 2007 and beyond.

~ Timothy N. Taylor, President & CEO

171 North Winstead Avenue | Rocky Mount, NC  27804 | 252-937-2152

Tarboro | 2100 North Main Street | Tarboro, NC  27886 | 252-823-8230

www.firstcarolinastatebank.com

Founded: November 27, 2000

BOARD OF DIRECTORS

Samuel E. Anderson

Commercial Agent

Fountain Roberson & Anderson

Peggy M. Braswell

Retired

Richard C. Davenport

President

Calvin Davenport, Inc.

Kathe M. Henke

Retired

Bruce D. Jones

President

Community Bank of Rowan

W. H. Kimball

Retired Vice President of Sales

Kenan Transport

David A. Parker

Retired President

First Carolina State Bank

James E. Rabil

President

Chambliss & Rabil Contractors, Inc.

Charles D. Smith

President

First Carolina Communications, Inc.

Dr. Randall C. Stewart

President & Physical Therapist

Carolina Physical Therapy

Contractors, Inc.

Timothy N. Taylor

President & CEO

First Carolina State Bank

OFFICERS

Dr. Randall C. Stewart

Chairman

David A. Parker

Vice Chairman

Timothy N. Taylor

President & CEO

Kathe M. Henke

Secretary

James R. Rose Jr.

Executive Vice President

Reuben M. Harris

Senior Vice President

Samuel W. Johnson

Capitol Wealth Advisors,

Senior Vice President

Albert E. Boone

Vice President

William D. Edgar, Jr.

Vice President

John R. Johnson

Vice President

Beverley R. Simmons

Vice President

Edward G. Taylor

Vice President

34

FORT COLLINS COMMERCE BANK

Southwest Region

  MARK A. KROSS President     C. GERARD NALEZNY CEO  

Fort Collins Commerce Bank debuted in June 2005 as Capitol Bancorp’s 36th affiliate bank.  In addition to being the newest state chartered bank in Fort Collins, we believe it is currently the city’s only community-based bank.

Fort Collins Commerce Bank is rooted in the community. We have 100 local investors, a local board of directors and a local management team. The bank is founded on Capitol Bancorp’s community bank model and we gain a competitive advantage with Capitol’s backroom support.

From the start, our core value has been to “Do The Right Thing.” The four pillars of our organization are:

       • Do right by our clients,

       • Do right by our employees,

       • Do right by our shareholders; and

       • Do right by our community.

This philosophy is clearly paying dividends for our bank. Since we launched the bank, we have been successful in building our book of business. We have a solid loan portfolio. Along the way, we have kept our bank “safe and sound” by focusing on asset and loan quality. In 2006, our first full year of business, we were able to turn a profit.

Like just about every community in the county, Fort Collins has many banks and the competition is fierce. That said, we believe there are too few banking professionals. This is where our bank gains its comparative advantage.  We have the best team of banking professionals we have had the honor of working with. Our strong board of directors is composed of local business leaders who understand our business model and eagerly contribute to our business development efforts.

Our bank’s success has proven that Colorado is a great place to launch a community bank.  At least three other groups are interested in partnering with Capitol to each organize a community bank in other communities in this state.

Fort Collins Commerce Bank achieved several important financial milestones in 2006; the coming year also holds many challenges and opportunities. In seeking to do the right thing in all we do, 2007 should be a break-through year.

~ C. Gerard Nalezny, CEO

~ Mark A. Kross, President

3700 South College, Unit 102 | Fort Collins, CO  80525 | 970-204-1010

www.fortcollinscommercebank.com

Founded: June 27, 2005

BOARD OF DIRECTORS

Margaret Brown

Attorney

Fischer, Brown & Gunn, PC

Rhys P. Christensen

Broker/Partner

Realtec

Thomas W. Hoogendyk

CPA

Hoogendyk and Associates

Danielle C. Korkegi

President

Cellular Junction, Inc.

Mark A. Kross

President

Fort Collins Commerce Bank

C. Gerard Nalezny

CEO

Fort Collins Commerce Bank

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Richard F. Spillman

CPA

Hunt, Spillman & Associates, PC

Stephen D. Todd

President

Southwest Region

Capitol Bancorp Limited

Jack D. Vahrenwald

Attorney

Allen, Vahrenwald & Johnson, LLC

ADVISORY DIRECTOR

Spiro Palmer

Owner/President

Palmer Flowers

OFFICERS

Joseph D. Reid

Chairman

C. Gerard Nalezny

Vice Chairman,

CEO & Secretary

Mark A. Kross

President

Patricia L. McLaren

Vice President

35

GOSHEN COMMUNITY BANK

Great Lakes Region

DOUGLAS A. JOHNSTON

President

Goshen Community Bank had good results in 2006 and we look forward to improving our performance by implementing a new team-building strategy.

Looking back at 2006, we launched several marketing initiatives that paid dividends while distinguishing our bank with audiences that we might not otherwise reach.

During the first half of the year, we marketed our bank every day to the captive audiences attending movies in downtown Goshen. We had 15-second commercials running before every movie at the popular 10-screen cinema. I did the voiceovers, talking about the bank’s community commitment or our mortgage department, while mentioning the chocolate we give away to customers and the fact that the bank is located just across the street from the movie theater. Approximately 40,000 tickets were sold during the six months and we were the only bank advertising there. In addition to the success of this venture, we also landed a major commercial loan from a customer who heard about our bank while at the movies!

Up until 2006, I wrote our bank’s business plan each year. Last year, I opened up the process to the bank’s employees, board members and advisory board members. The new process is designed so that all parties buy into the plan and take responsibility for achieving the goals while enjoying a team atmosphere at our bank.

We launched our “Women, Wisdom and Wine” networking and business development series in 2006. It was so successful that we plan to make it a quarterly event this year.

Last year, we welcomed Goshen’s former long-time automobile dealership owner Jeff Showalter to the bank. He is our business development officer. Well-known throughout the community, Jeff has done an excellent job of opening doors to new business opportunities.

We are proud of our community commitment. In 2006, we supported 80 nonprofit organizations that make the Goshen area a better place to live and work.

In 2007, we are turning it up a notch. We have started a new quarterly referral contest. Three teams have been formed with employees and board members on each team. The winner of the contest will be the team which refers the most business each quarter.  We expect good results from this program and another excellent  performance from our team as we grow our bank as judiciouslyas possible.

~ Douglas A. Johnston, President

511 West Lincoln Avenue | Goshen, IN  46526 | 574-533-2006

www.goshenbank.com

Founded: September 29, 2000

BOARD OF DIRECTORS

Robert C. Carr

Vice Chairman

Capitol Bancorp Limited

David L. Cripe

Doctor of Optometry & Senior Partner

Drs. Cripe & Stephens

Carol M. Ebersole

Executive Director

Goshen Health Foundation

Stephen L. Fidler

President

Kuert Concrete, Inc.

Christopher J. Graff

President & Chairman

Marque, Inc.

Gregory A. Hoogenboom

Vice President of Development

Hoogenboom Nofziger Real

Estate Mgmt. Co., LLC

Douglas A. Johnston

President

Goshen Community Bank

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Matthew J. Pletcher, CPA

Partner

Insight Business Solutions

Fred M. Ramser

Managing Partner

LMA Development

Dr. Douglas A. Stanley

Owner

Douglas A. Stanley, D.D.S.

Alan L. Weldy

Attorney & Partner

Yoder, Ainlay, Ulmer &

Buckingham, LLP

OFFICERS

Robert C. Carr

Chairman & CEO

Michael L. Kasten

Vice Chairman

Douglas A. Johnston

President

Gregory A. Hoogenboom

Secretary

Chris R. Wolfe

Senior Vice President

Lori J. Cline

Vice President

Leah L. Stevens

Vice President

Deborah K. Wilson

Vice President

36

GRAND HAVEN BANK

Great Lakes Region

THOMAS A. CRESWELL

President & CEO

Grand Haven Bank was established in 1995 with a goal of being the bank of choice in Grand Haven.  In 11 years of serving the community, we believe we continue to accomplish that ongoing goal.

The strength of our bank comes from our employees and board members. Our veteran team members give us a historical perspective while our newer members provide a fresh outlook. This creates a very effective blend of skills, talents and abilities benefiting both our customers and the community as a whole.

Grand Haven is the only city designated by Congress as “Coast Guard City USA,” in recognition of an enduring relationship with the Coast Guard and their families.  During the 2006 Coast Guard festival in Grand Haven, the bank sponsored a street dance in front of the bank where thousands of people enjoyed an evening of music and dancing.   We used our sponsorship to thank our existing customers and entertain prospects by providing food and refreshments at the bank.  It provided us with meaningful customer contact while we proudly supported the Coast Guard with our sponsorship.

Grand Haven Bank employees strive to make a positive difference in the lives of our customers and community.  In addition to the Coast Guard festival, we held two successful “Women, Wisdom and Wine” events that focused on women business owners. This successful group of entrepreneurs is a growing force in our community. We provided a forum for these business and other community leaders to network and continue to provide resources and tools to help them build their businesses.  We are proud to have partnered with many of these business owners and look forward to teaming up with them in the future.

Our employees and board members are proud of our volunteer efforts in classrooms, coaching sports, raising money for charitable causes and supporting deserving families in the community. Our “Amazing Bank” team-building activities for employees during the fourth quarter had a strong customer and community focus that enhanced the business skills of our employees even further.

Grand Haven Bank is a hometown bank focused on service and keeping our community strong. That, in turn, keeps our bank strong.

~ Thomas A. Creswell, President & CEO

333 Washington Avenue | Grand Haven, MI  49417 | 616-846-1930

www.grandhavenbank.com

Founded: May 1, 1995

BOARD OF DIRECTORS

Jeffrey  W. Beswick

Attorney at Law

Varnum, Riddering, Schmidt & Howlett, LLP

Stanley L. Boelkins

Appraiser

Boelkins & Associates

Thomas A. Creswell

President & CEO

Grand Haven Bank

Lee W. Hendrickson

Chief Financial Officer

Capitol Bancorp Limited

Mark A. Kleist

Attorney at Law

Scholten Fant, P.C.

Steven L. Maas

President

Maas Asset Management, Inc.

Michael A. McKeough

President

McKeough Land Company, Inc.

Calvin D. Meeusen

Certified Public Accountant

Calvin D. Meeusen, CPA, PLLC

Timothy S. Parker

Vice President of Operations

Harbor Industries, Inc.

James M. Van Dyke

President

The Abbit Management Corp.

Bernard J. Wade

President

Advanced Signs, Inc.

Gerald A. Witherell

Associate Broker

RE/MAX of Grand Haven

OFFICERS

Gerald A. Witherell

Chairman

Calvin D. Meeusen

Vice Chairman

Thomas A. Creswell

President & CEO

Steven L. Maas

Secretary

Karen K. Benson

Vice President

Douglas F. Jones

Vice President, CCO

Thomas R. Ladd

Vice President

Betsy S. Lobdell

Vice President

Sherry J. Patterson

Vice President

37

KENT COMMERCE BANK

Great Lakes Region

MARK J. DEWITT

President & CEO

Founded in 1998 as the 12th bank in the Capitol Bancorp system, Kent Commerce Bank has earned and maintained a place of importance in the lives of our clients and team members.  Likewise, our clients and team members are first with Kent Commerce Bank.

Over the past nine years, the keys to our success have been focused on our core values and strengthening the relationships we have established with our customers and the nonprofit organizations which serve our community.

The quality and commitment of our team was evident in 2006 as we successfully implemented new “core” banking technology that provides us with the tools to better serve our clientele.  We are proud that we grew our assets and total loans last year in a very competitive market, while also improving the quality of our assets.  Over the past year, Kent Commerce Bank added more than 50 commercial clients and more than 100 retail clients. New products and services continued to improve our market opportunities and strengthen our client relationships. We have enhanced our bank’s commercial lending team, operations department and retail staff with financial professionals. We also added a trust and investment officer for our wealth management program, through Capitol Wealth Advisors.

Our community commitment was realized last year through our involvement with the Grand Rapids Youth Commonwealth, United Way, Toys for Tots and the D.A. Blodgett Home for Children.  Additionally, each year we honor the people and businesses that support our bank with our annual Customer Appreciation Days.

It is important to our team members that we give our very best effort each and every day.  Our pledge of service excellence applies equally to the manner in which we relate to our clients, our community and our colleagues. We look forward to growing with our clients and our community in 2007 and for many years to come. 

~ Mark J. DeWitt, President & CEO

4050 Lake Drive SE | Grand Rapids, MI  49546 | 616-974-0200

www.kentcommerce.com

Founded: January 12, 1998

BOARD OF DIRECTORS

James M. Badaluco, SIOR

Executive Vice President

S. J. Wisinski & Company

Paul R. Ballard

Retired President & CEO

Portage Commerce Bank

Robert E. Bruggink, PE

President

Moore & Bruggink, Inc.

Sharon  M. Buursma

Healthcare Consultant

Varnum Consulting

Mark J. DeWitt

President & CEO

Kent Commerce Bank

Kevin J. Einfeld

President

BDR Executive Custom Homes, Inc.

Gary D. Hensch, CPA

President

Redstone Group, Inc.

R. Ted Hudson

Owner

Prestige Property, Inc.

Harold A. Marks, CPA

Partner

Prangley Marks, LLP

Calvin D. Meeusen, CPA

Managing Partner

Calvin Meeusen Company, CPA, PLLC

Kelly Miller

Vice President, Eastern Regions

Capitol Bancorp Limited

Valerie R. Overheul

President & CEO

Summit Training Source, Inc.

Mary L. Ursul

Vice President

Professionals Direct, Inc.

Michael C. Walton

Attorney at Law

Rhoades, McKee, Boer, Goodrich & Titta

OFFICERS

Michael C. Walton

Chairman

Paul R. Ballard

Vice Chairman

Mark J. DeWitt

President & CEO

Kevin J. Einfeld

Secretary

Michael P. Boelens

Vice President

John J. Coder

Vice President

Linda S. Crawford

Vice President

David H. Moored

Vice President

38

MACOMB COMMUNITY BANK

Great Lakes Region

JAMES R. KAYE

President & CEO

The past year was a time of celebration as well as a time of challenge for Macomb Community Bank.

In September, we celebrated the bank’s 10th anniversary with a customer appreciation party. It was a great way to thank our friends and neighbors for their business. The day-long event provided us with an opportunity to spend time with our clients and learn more about them as well as our community. We also used the occasion to call upon the generosity of our community by raising money for The Children’s Leukemia Foundation of Michigan. The celebration was such a tremendous success that it will become an annual event.    

The automotive industry is once again presenting economic challenges. The key to meeting these challenges is understanding our clients’ business and their goals. Our team members continuously look for opportunities to improve the financial well-being of our clients. We are dedicated to working with them to ensure they continue to flourish regardless of the overall economic climate.

The members of our board of directors remain an integral part of our growth strategy and success. In addition to being valuable resources for business referrals, they are also vital sources for information about our community. Our board members are active year-round in a variety of philanthropic endeavors and have been publicly honored for their dedication and service to our community.

Community involvement and personal service are the tenets by which we operate. They served us well in our first 10 years of operation and shall continue to do so as we enter the next decade of growth and prosperity.

With Capitol Bancorp’s support, and our most valuable resource, our employees, Macomb Community Bank will continue to serve the financial needs of Macomb County while building the foundation for continued growth in the years ahead.

Macomb Community Bank was the eighth bank in the Capitol Bancorp family when it opened in 1996. We look forward to continuing to provide “banking the way it should be - your way.”

~ James R. Kaye, President & CEO

16000 Hall Road, Suite 102 | Clinton Township, MI  48038 | 586-228-1600

www.macombcommunity.com

Founded: September 18, 1996

BOARD OF DIRECTORS

Robert C. Carr

Vice Chairman

Capitol Bancorp Limited

Christina C. D’Alessandro

Vice President

Villa Custom Homes

Tony J. Gallo

CEO

Gallo Companies

James R. Kaye

President & CEO

Macomb Community Bank

David F. Keown

Certified Building Official

Washington Township

Peter J. Lucido

Attorney & Counselor at Law

Law Offices of Peter J. Lucido

Robert Pelachyk

President & CEO

Heller Machine Tools

Delia Rendon Martin

Co-Owner

Martin Enterprises

Barbara W. Rossmann

President & CEO

St. Joseph’s Mercy of Macomb

John C. Smythe

President of Great Lakes Region

Capitol Bancorp Limited

OFFICERS

Robert C. Carr

Chairman

James R. Kaye

President & CEO

Christina C. D’Alessandro

Secretary

Michael S. Ufford

Senior Vice President

Frank J. Buscemi

Vice President

Nicolet B. Cassidy

Vice President

Andrew G. Harper

Vice President

Bradley A. Nicholson

Vice President

Julie B. Pellerito

Vice President & CCO

39

MESA BANK

Southwest Region

NEIL R. BARNA

President & CEO

“Our Clientele is our Sales Force!”

In 2005, the team at Mesa Bank determined that this statement represents the depth of our commitment to our customers.  We use it in our marketing campaigns, in our communications, and in our daily efforts to serve our clients. In 2006, Mesa Bank experienced an increase of more than 30 percent in loans outstanding, a testament to our commitment to provide solutions for our clients rather than the product-oriented sales approach of the large banks in our market. 

We make giving back to our community a priority. Staff involvement in events, board of directors’ influence in activities, and donations to worthy causes all play a part in our strategy.  Without exception, giving back to our community has strengthened our relationships with our clients - our “Sales Force” for Mesa Bank!

Just to name a few, Mesa Bank supported the following organizations and events in 2006:

• The Mesa Family YMCA Strong Kids campaign which is responsible for raising $180,000 for youth lacking the financial ability to participate in YMCA programs.  Additionally, we supported the capital campaign of East Valley YMCA to be constructed in Mesa in 2008.

• The Mesa Hohokam Foundation, which contributed nearly $100,000 for community programs supporting youth sports and development.

• Mesa Bank also hosted its second annual Client Appreciation Day during baseball spring training.

• The Mesa United Way recognized the bank and employees with the very first Heart of Mesa Award in recognition of the company best representing the vision of the United Way effort.

•  Mesa’s Sculptures in the Street where bronze statues add another dimension to our community.  This program beautifies downtown Mesa and has become a visitor destination for many. The program was founded by board member Wayne Pomeroy and has gained tremendous momentum and support.

Mesa Bank is proud to be a significant member of the community.  Our efforts make reaching out to our clients even easier.  Our “Sales Force” is as proud as we are!

~ Neil R. Barna, President & CEO

63 East Main Street, Suite 100 | Mesa, AZ  85201 | 480-649-5100

Mesa Falcon Field  | 1733 North Greenfield Road, Suite 101 | Mesa, AZ  85205 | 480-324-3500

www.mesabankers.com

Founded: October 20, 1998

BOARD OF DIRECTORS

Neil R. Barna

President & CEO

Mesa Bank

Stephen D. Chader

Operating Principal

Keller Williams Integrity First

Michael J. Devine

Attorney at Law

Dr. Debra L. Duvall

Superintendent

Mesa Public Schools

Robert R. Evans

President

Baron Resources, Inc.

Stewart A. Hogue

Principal

SALK Management, LLC

Philip S. Kellis

Partner

Dobson Ranch Inn

Ruth L. Nesbitt

Community Volunteer

Wayne C. Pomeroy

Owner

Pomeroy’s Men’s Stores

Daniel P. Skinner

Owner & Manager

LeBaron & Carroll LSI, Inc.

Joseph A. Tameron

CPA & Partner

Skinner, Tameron & Company, LLP

Terry D. Turk

President

Sun American Mortgage Company

James K. Zaharis

President

The Zaharis Group

OFFICERS

Stewart A. Hogue

Chairman

Robert R. Evans

Chairman Emeritus

Michael J. Devine

Vice Chairman

Neil R. Barna

President & CEO

Staci L. Charles

Executive Vice President

Rita E. Leaf

Executive Vice President & CCO

Sandra S. Zazula

Executive Vice President & Secretary

Daniel R. Laux

Senior Vice President

Christine Bond

Vice President

Susan E. Haverstrom

Vice President

James G. LeCheminant

Vice President

Conrad B. Morin

Vice President

Richard O. Wright

Vice President

40

MUSKEGON COMMERCE BANK

Great Lakes Region

ROBERT J. MCCARTHY

President & CEO

While Muskegon Commerce Bank was the 11th bank in the Capitol Bancorp group of community banks when it debuted in 1997, the past year has been like a grand “re-opening” for our bank. Our new office, which opened in Norton Shores in 2006, stands in testament to our bank’s success.

Muskegon Commerce Bank first debuted in a 1,500 square-foot office and moved after one year to a 5,000 square-foot building that was originally constructed as a restaurant. Last year, construction was completed on our new 12,000 square-foot building that has been designed specifically to meet our current and future needs. The bank applied for and received a $250,000 State of Michigan Brownfield Tax Credit in conjunction with the construction of our new building.

In 2006, we also secured our most meaningful deposit relationship as a local municipality chose our bank over several other depository institutions to handle its operating accounts and to act as the primary collection point for property tax payments. We plan to further maximize this relationship with excellent service in 2007.Our officers and directors continue to be involved in community events and nonprofit work in the Muskegon area.  Chairman of the Board Chris Kelly recently completed his term as chairman of the Muskegon Chamber of Commerce and continues to chair the boards of the Muskegon Air Fair and the Muskegon Summer Celebration. 

One of our founding directors, Jim Tyler, serves as the president of the Muskegon County Catholic Education Foundation Board, of which I am also a member. This foundation recently began a $15 million endowment campaign that will benefit local education for many years to come. 

I am also treasurer of the Muskegon Chamber and am co-chairing a fundraising campaign to build a new headquarters for the Chamber in 2007.  This will mark the first time in the Chamber’s more than 100-year history that it has owned its own building and its location will be in the heart of Muskegon’s revitalized downtown area.

Muskegon Commerce Bank has been a proud Capitol Bancorp affiliate since 1997. We look forward to celebrating the bank’s 10th anniversary in December 2007 and to welcoming the community to our brand new building throughout the year!

~ Robert J. McCarthy, President & CEO

281 Seminole Road | Muskegon, MI  49444 | 231-737-4431

www.muskegoncommerce.com

Founded: December 3, 1997

BOARD OF DIRECTORS

Philip J. Andrie

President

Andrie, Inc.

William C. Cooper

President & Owner

AMG Business Center

Edgar W. Hunt

Retired Bank President

First of America Bank

Christopher L. Kelly

Attorney at Law

Parmenter O’Toole

Daniel J. Kuznar

Owner

Quality Tool & Stamping Company, Inc.

Holly Lookabaugh-Deur

Owner

Generation Care

Donald Martines

President

West Michigan Grinding &

Machine Co. - Ace Tooling

Robert J. McCarthy

President & CEO

Muskegon Commerce Bank

Kelly D. Miller

Vice President Bank Performance

Capitol Bancorp Limited

James Stanford Tyler

President

Tyler Sales Company, Inc.

William Vanderweele, Jr.

President

Weber Lumber

OFFICERS

Christopher L. Kelly

Chairman

Daniel J. Kuznar

Vice Chairman

Robert J. McCarthy

President, CEO & Secretary

Jerry L. Bayak

Chief Credit Officer

Terri K. Swarts

Chief Operating Officer

David C. Christopher

Vice President

James A. Mikesell

Vice President

41

NAPA COMMUNITY BANK

California Region

DENNIS J. PEDISICH

President & CEO

Napa Community Bank’s identity is better recognized than ever.  We have accomplished this with a team effort on the part of our dedicated employees and the business leaders which serve on our board of directors and advisory board.

Significant to our success is the marketing roadmap we create each year. It guides our marketing, advertising, promotional, and product and professional development activities throughout the year. Simply put, the roadmap is an analysis that helps us schedule and track selected community events in which we are involved, staff training exercises, advertising opportunities, and monthly statement messages and brochures.

Customer outreach occurs monthly. In January, for example, the bank hosts our signature Super Bowl tailgate party for customers. In March, we celebrate the bank’s anniversary with birthday events and promotions. Other monthly events include the bank’s focus luncheons and community and business development events, including Chamber mixers, golf tournament sponsorships and the annual Napa Valley Business Expo.

This past year, we presented a small business workshop for area entrepreneurs at the Napa Valley College Small Business Development Center. This workshop included lively discussions as the attendees received advice about business and borrowing money from two of our veteran banking professionals.

The bank hosted two networking and business development events for local businesswomen who are customers and prospects. In addition to offering the attendees a fresh perspective on business, social and entertainment ideas, the event provided us with an audience for marketing our products and services.

We also market the bank and generate goodwill at fundraising golf tournaments. We purchased a refreshment tent bearing the Napa Community Bank logo that we set up at golf courses on tournament day. This endeavor has been well received and the money raised is donated to local nonprofits. It also reinforces our community commitment and our positive influence in the market.

During 2006, we began displaying a large banner on the exterior of our building that reads, “Why Did the Customer Cross the Road?”  The responses -- such as:  “To get to the right bank,” “To get out of line,” and “Because we want your business” -- were changed every couple of weeks. 

We are proud to say that more and more people are crossing the road to bring their business to Napa Community Bank.  We worked hard to earn it, and we are working even harder to keep it. 

~ Dennis J. Pedisich, President & CEO

700 Trancas Street | Napa, CA  94558 | 707-227-9300

www.napacommunitybank.com

Founded: March 1, 2002

BOARD OF DIRECTORS

Kevin S. Alfaro

Partner

G & J Seiberlich & Co., LLP

Thomas M. Andrews

Owner & CFO

Andrews & Thornley Construction, Inc.

Geni A. Bennetts, M.D.

Medical Consulting

Charles H. Dickenson

Partner

Dickenson, Peatman & Fogarty

Jeffrey L. Epps

President

Epps Chevrolet

Betty L. O’Shaughnessy

Owner

O’Shaughnessy Estate Winery

John R. Pappas

D.D.S., M.D.

Oral & Maxillo-Facial Surgery

ADVISORY DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Richard A. Bennett

Retired

Superior Court Judge

Joseph P. Cristiano

Former President & CEO

Kelly-Moore Paint Company

and Chairman, The MCM Group

William H. Dodd

Napa County Board of Supervisors

Doug W. Hill

Vineyard Manager

Oak Knoll Farming, Inc.

Paul J. Krsek

Managing Partner

K & A Asset Management

Harold D. Morrison

President

Bridgeford Flying Service

David J. O’Leary

Chairman

O’Leary Paint Company

Dennis J. Pedisich

President & CEO

Napa Community Bank

Salvador S. Ramos

Vineyard Supervisor

Jaeger Vineyards

OFFICERS

Geni A. Bennetts, MD

Chair

Jeffrey L. Epps

Vice Chair

Dennis J. Pedisich

President & CEO

Charles H. Dickenson

Secretary

Douglas C. Haigh

Executive Vice President & CCO

James A. Barrett

Senior Vice President

James K. Fehring

Vice President   

Joen M. McDaniel

Vice President 

42

OAKLAND COMMERCE BANK

Great Lakes Region

LARRY R. NICHOLS

President & CEO

I am delighted to begin 2007 by joining the team at Oakland Commerce Bank. It was clear from my first day that I had found a group of bank board members and bankers grounded in a strong tradition of personal customer service. This foundation of customer care will guide our future development. 

Thirty years ago I began my career at Genesee Bank, a Flint-based financial institution that was acquired in 1985 by National Bank of Detroit (NBD) (now Chase Bank). I began as a credit analyst and was promoted to numerous roles in commercial banking, with the culmination of the opportunity to lead this organization - Oakland Commerce Bank.

During my career, I managed commercial lending groups as well as small business and consumer lending groups for NBD.  I also held management positions with National City Bank, and most recently, Huntington National Bank. I received my bachelor’s degree and master’s degree in business administration from the University of Michigan-Flint.  I also completed the Banking and Financial Services Executive Program at University of Michigan in Ann Arbor and graduated from the National Commercial Lending School at the University of Oklahoma. 

I look forward to blending my experiences and leadership skills with my colleagues at Oakland Commerce Bank in order to provide solutions to the financial needs in the communities we serve. We will continue strengthening our relationship with our customers and the communities in which we live and work.

Since my arrival at Oakland Commerce, I have been assessing our bank’s strengths. Our team’s greatest asset is the personal service we provide our customers. By adding associates in key areas, such as commercial and mortgage lending and wealth management, our team will be better positioned to focus on building a more diversified portfolio.

Oakland Commerce Bank is a “preferred lender” with the U.S. Small Business Administration.  This is a coveted designation and we will make the most of it as an enhancement to our services for our small business customers.

Located in Oakland County, which has the highest per capita household income in the State of Michigan, our bank has been one of Capitol Bancorp’s business leaders.  My goal is to build on this great bank’s tradition. The future is bright for Oakland Commerce Bank as we extend our reach into Oakland County with a fortified team and a more diversified product offering.

~ Larry R. Nichols, President & CEO

31731 Northwestern Highway | Farmington Hills, MI  48334 | 248-855-0550

www.oaklandcommerce.com

Founded: July 7, 1992

BOARD OF DIRECTORS

Mark A. Aiello

Attorney at Law

Foley & Lardner LLP

Donald A. Bosco

President

Donald A. Bosco Building, Inc.

Mark B. Churella

President & CEO

FDI Group

Leon S. Cohan

Counsel to the Firm

Barris, Scott, Denn & Driker

Michael J. Devine

Attorney at Law

Michael Evangelista

Owner, Secretary & Treasurer

Tony Angelo Cement

Construction Company

Jeffrey L. Hauswirth

CPA, CVA, Principal

Jenkins, Magnus, Volk & Carroll, P.C.

James R. Kaye

President & CEO

Macomb Community Bank

David F. Lau

President

Lau & Lau Associates, LLC

Jeffrey M. Leib

President

Law Offices of Jeffrey M. Leib

Larry R. Nichols

President & CEO

Oakland Commerce Bank

Julius L. Pallone

Consultant

Insurance

Francine  Pegues

Marketing Director

Blue Cross Blue

Shield of Michigan

OFFICERS

Michael J. Devine

Chairman

Larry R. Nichols

President & CEO

Robert J. Malek

Executive Vice President & CCO

Thomas K. Perkins

Senior Vice President

Stephen M. Henry

First Vice President

James F. Miller

Vice President & Secretary

Michael W. Nolan

Vice President

43

OHIO COMMERCE BANK

Great Lakes Region

GARY A. VACCARO

President & CEO

Ohio Commerce Bank opened for business in November 2006 with the belief that quality service delivered by an experienced banking team will make a difference in the greater Cleveland banking market. 

Located in Beachwood, Ohio, an east-side Cleveland suburb, Ohio Commerce aims to provide consistent professional service that large regional bank competitors cannot deliver on a daily basis. A significant segment of the local business community desires a high-quality service level and will value the Ohio Commerce banking experience.

The bank’s three executive officers have over 90 years of banking experience in the greater Cleveland market area.  Dell Duncan, our chief operating officer, was a founder and past president of the Beachwood Chamber of Commerce, which is the second largest Chamber in the greater Cleveland area. The bank utilized the Chamber’s incubator space during its early organization phase. The bank’s board of directors comprises successful area business experts and one local city council official.  Their referrals and business contacts have been instrumental in the early success of the bank.

Our “first grand opening event” hosted for shareholders, Beachwood city officials and selected Chamber members, was well attended and has led to a number of new customers. The bank’s deposit base has grown steadily after two months of operation in 2006 indicating a good local acceptance for the Ohio Commerce relationship-banking concept.  

The bank debuted in temporary second floor space in our building and we are moving in April of 2007 to our larger ground-floor location.  Once we are situated in our permanent office, we will hold a more elaborate “second grand opening” event to better solidify our presence in the community.  Each occasion provides an opportunity to promote the bank on a personalized basis, which is often the key decision factor in a banking relationship. In addition, special product pricing announcements will be made to create excitement and encouragement to “buy Ohio Commerce now.”

For 2007, Ohio Commerce Bank is committed to achieving our growth and operating targets.  We are promoting the bank aggressively with the local business community and clients that desire a superior banking experience.

~ Gary A. Vaccaro, President & CEO

24400 Chagrin Blvd., Suite 100 | Beachwood, OH  44122 | 216-910-0550

www.ohiocommercebank.com

Founded: November 2, 2006

BOARD OF DIRECTORS

L. Louis Amoroso

Retired Bank Executive

Commerce Exchange Bank

John P. Andrews

President

Industrial Security Services, Inc.

Dell R. Duncan

EVP/Chief Operating Officer

Ohio Commerce Bank

Brian K. English

General Counsel

Capitol Bancorp Limited

Lawrence D. Katz

Owner

L. Katz Coaching & Consulting

Mark A. Mintz

Director & Founder

SageQuest

Cary M. Root

President

American Logistics Group, Inc.

Christopher J. Smerglia

EVP/Chief Credit Officer

Ohio Commerce Bank

Gary A. Vaccaro

President & CEO

Ohio Commerce Bank

Gregory S. Zenczak

President

Orttech, Inc.

Stephen J. Zenczak

President

David Round, Inc.

ADVISORY DIRECTORS

Stuart F. Kline

President

Chase Properties Ltd.

John C. Smythe

President, Great Lakes Region

Capitol Bancorp Limited

James R. Wymer

President

WXZ Development, Inc.

OFFICERS

L. Louis Amoroso

Chairman

Gary A. Vaccaro

President & CEO

Mark A. Mintz

Secretary

Dell R. Duncan

Executive Vice President & COO

Christopher J. Smerglia

Executive Vice President & CCO

Jamie A. Brotherton

Senior Vice President

Richard J. Miller

Vice President

44

PARAGON BANK AND TRUST

Great Lakes Region

RANDALL R. SMITH

President & CEO

As a community bank, we believe it is a privilege to give back to our community. We do this in many ways throughout the year.

Some of our outreach efforts during 2006 included sending a care package to soldiers in Iraq.  Our community has men and women serving overseas and a package from home means a lot. We are happy to support the troops.

We continued a tradition that was started a few years ago of buying food and preparing a meal for the people that are served by and work at a local women’s shelter and rescue mission.

Another Paragon tradition is baking and delivering cookies to local charities during the holidays. Each year we deliver the sweet treats to as many as 20 charitable organizations in the Holland area. We feel gratified to serve the people who do so much good for the underprivileged in our community.

We have a diverse community and we believe we are called to serve all segments of the population.  During Holland’s annual Tulip Time celebration, we participated in Kunstmarkt, an arts and crafts show, and the Latin American Fiesta.  In addition, we took part in National Night Out, which was an awareness rally against crime and illicit drugs.  Our involvement in these community events is also a chance to generate more name recognition for our bank.

This past fall, a team of employees volunteered to perform a work project with United Way Day of Caring, a community service day that kicks off the local United Way campaign. Our project was to clean up a beach boardwalk and the wooden steps leading to the boardwalk, which runs along the shores of Lake Michigan. Our care for the environment, illustrated by our involvement in this project, ensures that friends, neighbors and visitors to West Michigan can enjoy our “Great Lake” as much as we do.

Lastly, 100 percent of our employees, again, made a financial contribution to the 2006-07 United Way campaign. We take our community commitment seriously and it is returned to us thousands of times each year with the business support our bank receives from the community.

~ Randall R. Smith, President & CEO

240 East 8th Street | Holland, MI  49423 | 616-394-9600

Trust & Investments Division | 616-394-9055

www.paragonbank.com

Founded: September 24, 1990

BOARD OF DIRECTORS

Dr. Robert J. Bates

Physician

Western Michigan Urological Assoc., P.C.

Charles A. Brower

CPA & Partner

DeLong & Brower, P.C.

Scott Diepenhorst

Principal

SD & Associates, Inc.

Paul Elzinga

Chairman Emeritus

Elzinga & Volkers, Inc.

Michael P. Haverdink

President

Ottawa Kent Insurance Agency, Inc.

Jeffery K. Helder

Attorney at Law

Cunningham Dalman, P.C

Lee W. Hendrickson

Chief Financial Officer

Capitol Bancorp Limited

Grant M. Kasten

President

Kasten Insulation Services, Inc.

Lawrence D. Kerkstra

Chairman of the Board

Kerkstra Precast, Inc.

Scott G. Kling

President

Trust & Investments Division

Paragon Bank & Trust

Leonard Maas

President

L & M Maas Investments, LLC

Mitchell W. Padnos

Executive Vice President

Louis Padnos Iron

& Metal Company

Richard H. Ruch

Director Emeritus

Randall R. Smith

President & CEO

Paragon Bank & Trust

Richard G. Swaney

Attorney at Law

Swaney & Thomas, P.C.

Ned B. Timmer

President

T2 Communications

Robert J. Trameri

Director Emeritus

Retired Chairman

Paragon Bank & Trust

Barry L. Werkman

Vice President of Finance

Hope College

OFFICERS

Richard G. Swaney

Chairman

Charles A. Brower

Vice Chairman & Secretary

Randall R. Smith

President & CEO

Scott G. Kling

President, Trust & Investments Division

C. Steven DeLoof

Vice President

M. Jane Riemersma

Vice President

Alan K. Yamaoka

Vice President

45

PEOPLES STATE BANK

Southeast Region

BRUCE D. JONES

Acting President

As the sole provider of banking services in Jeffersonville and Twiggs County since 1971, Peoples State Bank has been proud to help fund community development as well as the needs of individual families. Throughout the years, one of our most important assets has been the loyalty of our customers. We appreciate their friendship and business and are committed to providing sound, progressive banking services to merchants and consumers in our area.

A number of changes have taken place for our employees in the past year as Peoples State Bank has gone through a major core systems implementation, enabling us to integrate more fully with our Capitol affiliates. While change can be challenging, this new system will allow us to offer additional products and services.  We are committed to offering all the “Big Bank” products with the personal touch that our customers expect from their hometown bank.

As our customers support the bank and help it grow, we gladly accept the responsibility to invest in our community with donations of time and money. All of our employees live in or near Jeffersonville and serve the community in a variety of ways. The bank also sponsors a number of local charities, including the Twiggs County Booster Club, the Twiggs County Department of Children’s Services and Twiggs Academy.

In order to grow Peoples State Bank, we are seeking new ways to satisfy the economic needs of our community. Commercial deposit and loan growth has been and will continue to be a primary focus as we work to best serve our business customers and their employees. During the next year, the bank will also focus on improving product development, including expanding customer use of Internet banking, cash management products, home equity lines of credit and mortgage lending.

We welcome our neighbors to stop by for a cup of coffee and meet our professional and energetic staff.  Our employees and board members remain committed to our customers and community.

As our name says, we truly are the “Peoples” bank.

~ Bruce D. Jones, Acting President

207 Main St. | Jeffersonville, GA  31044 | 478-945-3262

www.psbjeffersonville.com

Founded: April 5, 2005

BOARD OF DIRECTORS

Alan D. Curtis

President & CEO

Cochran Air Service, Inc.

Charles R. Greene

President & CEO

Allentown Chip Company, Inc.

Bruce D. Jones

President & CEO

Community Bank of Rowan

Acting President of Peoples State Bank

Patrick T. Reid

Attorney

Reid & Reid

Matthew D. Stanaland

President

Bank of Valdosta

Bobby G. Wetherington

Partner

Wetherington Farms, LP

OFFICERS 

Bruce D. Jones

Acting President

Gary K. Jennings

Vice President

Cynthia A. Newton

Vice President

Mae C. Starling

Vice President

46

POINT LOMA COMMUNITY BANK

California Region

ANTHONY D. CALABRESE SR.

President

After a very successful year of growing our business and expanding our marketing and community outreach programs, Point Loma Community Bank is growing profitably. We have almost doubled in size in 2006 and all indications are that we look forward to further growth opportunities in 2007.

During 2006 we had the distinction of being recognized as a bank leader in the Certificate of Deposits Account Registry (CDARS) program. Of the hundreds of banks nationwide that uses CDARS, our bank was in the top 10 percent. CDARS allows high net worth individuals, nonprofits and companies to enjoy FDIC insurance on deposits of up to $25 million by spreading their money over a large number of  financial institutions in the CDARS network while providing the customer the convenience of having to work with only their primary bank.

We love our Point Loma community, which helps explain why our employees responded with 100 percent participation in the 2006-07 United Way campaign. Our contributions fund local agencies that help our neighbors in need. Last summer, our bank sponsored the Point Loma Concert Series and I had the pleasure of emceeing two of the five concerts in the series. This event gained our bank tremendous exposure as the bank’s name and logo were draped across the front of the stage and we staffed a table to market bank products to the thousands that attended each concert.

Our affiliations and sponsorships are positive additions to our marketing and business development efforts. They include the Point Loma Association, Peninsula Chamber of Commerce, Point Loma Rotary Club, Coastal Tritons Pop Warner Football Team and the Peninsula YMCA. 

As part of our ongoing effort to build awareness of Point Loma Community Bank, we placed a promotional ad campaign in a local publication for the summer. It was great exposure for our community bank.

As we expand our customer base, we have also expanded our staff. We now have 21 employees.  We are proud to be able to supply our community with quality jobs and be a local business that is building to last.

Our goal for the future is simply to provide the best service and banking experience in our community, while rewarding our employees and shareholders with a strong and profitable bank. 

~ Anthony D. Calabrese Sr., President

1350 Rosecrans Street | San Diego, CA  92106 | 619-243-7900

www.pointlomabank.com

Founded: August 2, 2004

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Gregg W. Beaty

D.M.D.

Anthony D. Calabrese Sr.

President

Point Loma Community Bank

Maurice P. Correia

CPA

Correia & Associates

Arthur DeFever

President

DeFever Marine Enterprises

William T. Fiedler

President

Fiedler Construction Company

Harold O. Grafton

President

Cement Cutting, Inc.

Theodore Griffith

President

Pacific Tugboat Service &

Pearson Marine Fuel

Marcia Haas

Owner/Managing Partner

Aristocrat Apartments

John S. Lewis

President, Western Regions

Capitol Bancorp Limited

Julius S. Paeske Jr.

President

Commercial Facilities, Inc.

Richard D. Thorn

Attorney and Owner

Ward & Thorn, PLC

Mark A. Winkler

Broker Associate

Prudential Realty

OFFICERS

John S. Lewis

Chairman

Anthony D. Calabrese Sr.

President

Gary A. Housman

Executive Vice President & Secretary

Donald H. Gruhl

Senior Vice President

Millicent M. McKibbin

Senior Vice President

Jill M. Faucher

Vice President

Rigoberto Herrera

Vice President

Leticia C. Trujillo

Vice President

47

PORTAGE COMMERCE BANK

Great Lakes Region

DENNIS J. KUHN

President & CEO

Portage Commerce Bank was launched in 1988 and became the second member of the Capitol Bancorp family two years later. This has been a long and very successful partnership.

Today, we are proud to have one of the best performing banks in the CBC system. We do that with a level of service that ensures we are satisfying our customers’ financial services needs. We also have a great board of directors, the members of which average 15 years of outstanding service to our bank.

Over the years, we have complemented our lending services with Internet Banking, Cash Management and depository products especially designed for small businesses and entrepreneurs. Additionally, Portage Commerce Bank now offers a wide array of wealth management choices through Capitol Wealth Advisors. 

In 2006, we were proud to provide the largest commitment in our history to a local nonprofit for its building project, which includes the addition of a family health center and early education classrooms.

We completed an expansion within our existing building to accommodate the bank’s current and future needs. The entire first floor was remodeled and the loan operations unit was moved to the second floor to join the rest of the operations department. The employee lunchroom was expanded, three offices were added and one large office was divided for additional storage. The bank is refreshed with new carpeting, wallpaper and paint.

Our commercial lending team is one of the most experienced in the area and we continued to add more depth to our lending staff during the year.  Additionally, we now have a business development officer focused on deposit gathering, which is critical to our future growth. We have always been good at loan generation -- we plan to develop equally talented deposit gatherers.  

Throughout the year, we hosted customer appreciation events to thank our loyal customers for their business. In the same light, employees demonstrated their community commitment by volunteering with local organizations, events and fundraisers. The generosity of our employees is demonstrated by 100 percent participation in the area’s 2006-07 United Way campaign.

A key to our success has always been our interest in the welfare of the citizens of the City of Portage and Kalamazoo County. Our commitment to this community will never change.

~ Dennis J. Kuhn, President & CEO

800 East Milham Road | Portage, MI  49002 | 269-323-2200

www.portagecommerce.com

Founded: May 2, 1988

BOARD OF DIRECTORS

Paul R. Ballard

Retired President & CEO

Portage Commerce Bank

David L. Becker

Retired Founder

Becker Insurance Agency, P.C.

Thomas R. Berglund, M.D.

Portage Physicians

Robert B. Borsos

Attorney at Law & Shareholder

Kreis, Enderle, Callander &

Hudgins, P.C.

John M. Brink

CPA & Partner

Brink, Key & Chludzinski, P.C.

Patricia E. Dolan

Community Volunteer

Alan A. Halpern, M.D.

Michigan Orthopedic Surgery

& Rehabilitation, P.C.

Robert L. Johnson, Retired

Secretary & Treasurer

Medallion Properties, Inc.

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Dennis J. Kuhn

President & CEO

Portage Commerce Bank

Paul M. Lane, Ph.D.

Seidman School of Business

Grand Valley State University

William J. Longjohn

Retired Vice President

Midwest Business Exchange

John W. Martens, CPA

Retired

Russell M. Rathburn

President & Owner

Rathco Safety Supply, Inc.

OFFICERS

Michael L. Kasten

Chairman

William J. Longjohn

Vice Chairman & Secretary

Dennis J. Kuhn

President & CEO

Steven K. Piper

Senior Vice President & CCO

John M. Crandle

Senior Vice President

James V. Lunarde

Senior Vice President

Kenneth R. Blough

First Vice President

Roy L. Dangel, Jr.

First Vice President

Cheryl M. Germain

First Vice President

James E. Higgins

First Vice President

James S. Burkett

Vice President

Carol L. Ludlow

Vice President

Susan M. Wright

Vice President

48

RED ROCK COMMUNITY BANK

Southwest Region

J. RANDALL BOESCH

President

Red Rock Community Bank is located in a city where “21” can be a very successful number. As Capitol Bancorp celebrates its first 50 banks, notably, Red Rock was the 21st Capitol Bancorp affiliate bank when it debuted in 1999 and it is very successful.

Having just celebrated our seventh anniversary, the bank is experiencing solid growth and financial performance. Our success has inspired us to give back to the community which supports our bank.

In 2006, the bank and our employees supported more than 20 events and programs. Listed are a few of the events we participated in:

• Gene Ward Elementary School - Red Rock adopted this pre-K to fourth grade school in 2005. In 2006 we participated in several school events, including reading day. Along with our customers, the bank contributed more than 2,000 items in the back-to-school drive. We also raised money so that the school could buy a maintenance shed for its cactus garden.

• Nevada Fair Housing Center - The goal of this nonprofit is to train, educate and financially support low income families so they can achieve the American Dream of home ownership. The bank provided an educational grant for first-time homebuyer seminars and also offered second mortgages to families prequalified by the Center.

• University of Nevada Las Vegas - Red Rock, along with one of our affiliates, Bank of Las Vegas, was the primary sponsor of the UNLV Hall of Fame dinner. Five scholar athletes were inducted this year as well as a mentor of the business community. We also contributed to the celebrity golf outing, scholarship program and the UNLV Golf Foundation.

• Women’s Development Center - This organization has a 30-year history of helping distressed families. Its focus is placing single parents into transitional housing and providing job training. We supported the Center with a food drive with the Red Rock team and customers donating more than 1,400 food items. Red Rock’s Tom Mangione serves as the Center’s CEO and board member Molly Hamrick is secretary. With our support, the Center now has more than 170 housing units, providing living quarters for more than 400 people.

We are counting our successes in 2006 - 50 banks for CBC and success by bank No. 21, Red Rock Community Bank - in growing safely and soundly and supporting our community!

~ J. Randall Boesch, President

10000 West Charleston, Suite 100 | Las Vegas, NV  89135 | 702-948-7500

www.redrockcommunity.com

Founded: November 29, 1999

BOARD OF DIRECTORS

J. Randall Boesch

President

Red Rock Community Bank

Richard H. Bowler

Principal

Piercy Bowler Taylor & Kern

Eric L. Colvin

President

Apex of Nevada

Michael J. Devine

Attorney at Law

James L. Dunn

Owner & Broker

Dunn Properties, Ltd.

Molly K. Hamrick

Vice President & CFO

Coldwell Banker Premier Realty

Philip G. Hardy Jr.

President

Hardy Companies, Inc.

James A. Harris

Vice President

Brown & Brown Insurance

Richard Hollander

President

Hollander Capital Management, Inc.

Thomas C. Mangione

Executive Vice President &

Bank Development Officer

Red Rock Community Bank

Lori A. Marrs

Owner

Marrs Bergquist, CPAs

Fredrick P. Waid

Attorney at Law of Counsel

Hutchinson & Steffen

J. Bruce Wiggins

President

Strategic Medical Management

OFFICERS

Michael J. Devine

Chairman

Thomas C. Mangione

Vice Chairman, Executive Vice President

& Bank Development Officer

J. Randall Boesch

President

Brian W. Astle

Executive Vice President & CCO

Shahzad B. Ali

Capitol Wealth Advisors

Senior Vice President

Susan E. Daleiden

Senior Vice President

Brent D. Kamerath

Senior Vice President

Armando C. Rodriguez

Senior Vice President

Michael R. Beal

Vice President

Eloise Dominguez

Vice President

Joel C. Everett

Vice President

R. Mitch Taylor

Vice President

49

SOUTHERN ARIZONA COMMUNITY BANK

Southwest Region

JOHN P. LEWIS

President & CEO

A Tucson newspaper recently reported the success story of a local entrepreneur named Daniel Contreras. In 1993, he began selling hot dogs from a cart on the south side of Tucson. His fresh and delicious food items were such a hit with the south-side residents that he is now the proud owner of two restaurants. In the newspaper article, he credited Southern Arizona Community Bank with helping him realize his dream of being a bona fide restaurateur.

This inspiring success story is an example of our bank’s commitment to building relationships and just one of the many past year’s exciting achievements and milestones for which the bank received public recognition. With the right products  and employees with a real passion for what they do, we have become the small bank with a big reputation for personal service and community involvement.

This focus on personal service is the message of a new media campaign the bank developed this past year. The campaign slogan is: “The folks who decide work right inside.” Radio spots, print ads, billboards and bus shelter benches all communicate the message that the bank’s decision-makers are accessible and respond rapidly to business requests.

Our commitment to the community goes well beyond words, with bank officers involved in 18 nonprofit organizations and 100 percent employee participation in the United Way campaign. We also provide free checking and open our doors in the evening and on weekends to nonprofit organizations to use our board room for meetings.

Other achievements of the past year include the following:

Election of two new board members who both have a strong presence in the business community; expansion of our product line to include new investment options through Capitol Wealth Advisors; contribution to the new Brandi Fenton Memorial Park, which opened to the public in December; and, a celebration of our eighth anniversary with a customer appreciation day that included free hot dogs and sodas for everyone.

Southern Arizona Community Bank will continue to grow along with the Tucson area, which recently reached the one million population milestone. Our foundation is first-name banking, personal relationships and a genuine commitment to the community.

~ John P. Lewis, President & CEO

6400 North Oracle Road | Tucson, AZ  85704 | 520-219-5000

www.southernarizonabank.com

Founded: August 17, 1998

BOARD OF DIRECTORS

William R. Assenmacher

President

T. A. Caid Industries, Inc.

Jody A. Comstock, M.D.

Physician & Owner

Skin Spectrum

Dr. Amram Dahukey

Physician/Owner

Premier Foot & Ankle Surgeons

Robert A. Elliott

President & Owner

The Elliott Accounting Group

Michael W. Franks

Principal

Seaver Franks Architects

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Yoram S. Levy

Partner

Triangle Ventures, LLC

John P. Lewis

President & CEO

Southern Arizona Community Bank

Jim Livengood

Director of Athletics

University of Arizona

James A. Mather

Attorney at Law & CPA

Morgan E. North

President & Owner

Borderland Construction Company, Inc.

Susan C. Ong

Broker/Owner

Broadstone, Ltd.

James M. Sakrison

Principal & Attorney at Law

Slutes, Sakrison & Hill, P.C.

Jean M. Tkachyk

CFO

University Physicians Healthcare

Paul A. Zucarelli

Principal

CBIZ, Gordon, Zucarelli &

Handley Insurance, Ltd.

OFFICERS

Paul A. Zucarelli

Chairman

Michael L. Kasten

Vice Chairman

John P. Lewis

President & CEO

Robert A. Elliott

Secretary

Michael J. Trueba

Executive Vice President & CCO

Terri R. Gomez

Senior Vice President

Minette Goldsmith

Vice President

Mindy C. Webb

Vice President

50

SUMMIT BANK OF KANSAS CITY

Midwest Region

RICHARD L. VIAR

President

Overall, 2006 has been an incredible year full of rewards, challenges and achievements.  As we complete our first full fiscal year of operation, I am reminded how fortunate Summit Bank of Kansas City is to be part of this exceptional organization.  In November 2005, we became the 40th Capitol Bancorp affiliate bank.  Less than a year later, Capitol’s 50th was successfully launched.  

Our bank has rapidly established itself as the community bank of choice in the eastern Jackson County market.  By consistently embracing our core values of Customer Focus, Community Leadership and Collegial Integrity, our associates have created a bank environment that is both highly-respected and envied by our banking peers.  We are confident that the bank is appropriately positioned to flourish and grow in 2007 and beyond.   

Significant accomplishments during our first full year include:

• Receiving the prestigious Preferred Lender Program designation from the U.S. Small Business Administration.

• Hosting a community-wide ribbon cutting and Grand Opening Celebration for more than 300 local shareholders, customers and dignitaries.

• Vicki Henderson, chief operations officer, was named one of 2006’s “25 Women Who Mean Business” by the Kansas City Business Journal.

• Active involvement in key organizations, activities and community events further solidifying our position as the area’s community bank of choice.

• Sponsoring and providing critical volunteer leadership for a wide range of Chamber of Commerce activities, economic development initiatives, service clubs and United Way agencies.

• Expanding our professional staff to include a residential mortgage lender and a wealth management investment executive, enabling the bank to offer an even more comprehensive array of competitive services. 

Like many of our sister banks, we benefit greatly from having an engaged, knowledgeable and influential local Board of Directors.  Each member is a well-respected and highly visible member of our community, and has a passion for the success of our organization. Under their guidance and direction, our first year was spent laying the foundation for controlled, brisk, quality growth. 

We are now firmly positioned to capitalize on that growth and increase both our market share and prominence.  We are confident that 2007 is going to be a great year for Summit Bank of Kansas City!

~ Richard L. Viar, President

1650 NE Grand, Suite 100 | Lee’s Summit, MO  64086 | 816-251-9000

www.summitbankofkc.com

Founded: November 18, 2005

BOARD OF DIRECTORS

Jack A. Accurso

Chairman

American Foodservice Company

Carl L. Chinnery

Attorney

Chinnery, Evans & Nail, P.C.

William W. Coates IV

President

Billy Goat Industries

Dr. Roger L. Fender

Owner

Fender Family Dentistry

Robert F. Glaser

General Manager

Residences of Kirkwood

Harlan L. Limpus

Executive Member

Winterstone Golf Course

Kurt D. Pycior

Owner

Froehlich Pycior Companies

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Stanley E. Ricketts

President, Midwest Region

Capitol Bancorp Limited

Carson Ross

President

Carson Ross Consulting

Diane J. Seif

President

DVA Enterprises Inc.

Dr. Steven M. Silverstein

President

Silverstein Eye Centers, P.C.

Richard L. Viar

President

Summit Bank of Kansas City

OFFICERS

Joseph D. Reid

Chairman

Stanley E. Ricketts

Vice Chairman

Richard L. Viar

President

Phillip W. McElhaney

Secretary,

Executive Vice President & CCO

Vicki L. Henderson

Senior Vice President

Patricia E. Case

Vice President

Robert K. Dempski

Capitol Wealth Advisors

Senior Vice President

51

SUNRISE BANK OF ALBUQUERQUE

Southwest Region

STEVEN A. MARCUM

President & CEO

2006 was a year of revitalization for our bank as we strengthened our team by adding new leadership in key strategic areas.  We like to think of this opportunity  as the dawn of a new era of true relationship banking at Sunrise Bank of Albuquerque.

It takes years of experience and deep roots in the community to form the quality relationships that transcend the many banking changes that occur in a city like Albuquerque.  We continued to build our base of experience by attracting veteran local bankers bringing with them long-standing relationships and strong identities created through involvement in the community and service to customers. 

To enhance our commitment to relationship banking, we brought aboard Bob Valdiviez as chief credit officer, and Michael Sanchez, as senior lender. Together, they have 50 years of lending experience in this market. They provide our bank with the kind of seasoning in key leadership positions unmatched by any community bank in our market. 

We continued to expand the depth of our Board of Directors in 2006 by adding local CPA Brad Steward.  He brings a strong background in finance and accounting and years of Albuquerque business relationships to an already veteran, productive board that includes Turner Branch, Helen Elliott and Todd Sandoval. 

In addition to supporting the economic health of Albuquerque by financing economic development projects, our team members are committed to enhancing the Albuquerque community by making donations and volunteering their time to numerous charitable and civic organizations. Last year, our support was given to the Alameda and Longfellow elementary schools, Big Brothers & Big Sisters of Central New Mexico, Bernalillo County 4-H and 516 Arts Cooperative, to name a few.

I am most proud of our employees for their commitment to United Way of Central New Mexico. For the second consecutive year, we have 100 percent employee participation in personal giving and our total contributions are double what they were in the previous year.

We believe that all relationships are built on the principles of trust and mutual respect. At Sunrise Bank of Albuquerque, we will continue to apply these principles as we build a bank focused on solid relationships with customers and our community.

~ Steven A. Marcum, President & CEO

225 Gold SW | Albuquerque, NM  87102 | 505-244-8000

www.sunrisebankabq.com

Founded: April 6, 2000

BOARD OF DIRECTORS

Annette Arrigoni

Account Executive

Berger Briggs Real Estate and

Insurance, Inc.

Turner W. Branch

President

Branch Law Firm, P.A.

Helen A. Elliott

CPA

Elliott, Pohlman & Co., CPAs, PC

E. Gary Fichtner

President

Esthetic Dental Arts, Inc.

Steven A. Marcum

President & CEO

Sunrise Bank of Albuquerque

Ronald K. Sable

President

Concord Solutions Ltd.

Todd A. Sandoval

President

Sandia Office Supply, Inc.

J. Brad Steward, CPA

Shareholder/Partner

Pulakos & Alongi, Ltd.

Stephen D. Todd

President, Southwest Region

Capitol Bancorp Limited

Robert J. Valdiviez

EVP/Chief Credit Officer

Sunrise Bank of Albuquerque

Janis K. Wainright

EVP/Chief Operating Officer

Sunrise Bank of Albuquerque

OFFICERS

Stephen D. Todd

Chairman

Ronald K. Sable

Vice Chairman

Steven A. Marcum

President & CEO

Robert J. Valdiviez

Executive Vice President & CCO

Janis K. Wainright

Executive Vice President & COO

Michael J. Sanchez

Senior Vice President

Lorraine S. Alires

Vice President

Antoinette E. Creel

Vice President

52

SUNRISE BANK OF ARIZONA

Southwest Region

MICHAEL S. MORANO

President & CEO

The Sunrise Bank of Arizona team took several decisive steps in 2006 to generate new business opportunities, while staying involved in business and community organizations that keep the Scottsdale and Phoenix markets vibrant.

We formed a marketing committee to create more excitement for our bank. Composed of our senior banking officers, this committee meets quarterly to analyze marketing, advertising and business development opportunities. We are marketing and creating awareness of our name by advertising in business magazines and neighborhood papers near our offices. We also look ‘outside the box’ to utilize different venues and sponsorships to publicize the bank.

For instance, several of our employees took turns staffing a booth at the busy 2006 Scottsdale Area Chamber’s Expo. More than 500 visitors stopped by our booth where we distributed product brochures and accepted business cards for a drawing.  Our lenders, specializing in commercial, Small Business Administration (SBA) and real estate financing, were on hand to talk with prospects and we were able to land some solid business leads. In order to expand networking opportunities with small business clients and prospects, we belong to three chambers of commerce covering the Scottsdale Area, Phoenix and the more geographically diverse Hispanic communities.

We are deeply involved in volunteering time and donating to charitable organizations in our community. Our 2006 involvement and donations benefited Junior Achievement, Boys & Girls Clubs, the Arthritis Foundation, Marines Corps’ Toys for Tots and the St. Vincent DePaul Society.

Our successful business development efforts were recognized in November as the bank captured the prized SBA Lender of the Year award from the Business Development Finance Corp., a development corporation that partners with banks to offer SBA section 504 loans. Additionally, our executive vice president, David Tracy, was honored in receiving the organization’s Banker of the Year award.

The Sunrise team is always exploring opportunities to expand our sphere of influence. We have a wide array of products for real estate investors and homebuyers. We offer a complete package for commercial and retail customers. Through our affiliation with Capitol Wealth Advisors we are now positioned to help our high net-worth clients with all of their trust and investment needs.

Sunrise Bank of Arizona is moving forward with high hopes for 2007.

~ Michael S. Morano, President & CEO

4350 East Camelback Road, Suite 100A | Phoenix, AZ  85018 | 602-956-6250

Scottsdale | 6263 N. Scottsdale Road, Suite 100 | Scottsdale, AZ  85250  | 480-624-2600

www.sunrisebankofarizona.com

Founded: December 16, 1998

BOARD OF DIRECTORS

Michael R. Allen

President

Sureway Properties

Thomas W. Beal

Principal & Owner

Beal Insurance Inc.

Patrick M. Devine

Vice President

CB Richard Ellis

Richard E. Garcia

President & Designated Broker

Garcia Realty Advisors, Inc.

George B. Jackson

Financial Consultant

A.G. Edwards & Sons

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

John S. Lewis

President, Western Regions

Capitol Bancorp Limited

Glen M. Lineberry

Principal

Lineberry Associates, LLC

Richard Lustiger

General Counsel

Harkins Theaters

Michael S. Morano

President & CEO

Sunrise Bank of Arizona

Joe W. Panter

Partner

Wildflower Bread Co.

Whitestone Financial

Debbie A. Tracy

President

Tracy’s Auto Body

OFFICERS

John S. Lewis

Chairman

Michael L. Kasten

Vice Chairman

Michael S. Morano

President & CEO

Kathleen M. King

Secretary

David W. Tracy

Executive Vice President & CCO

Tyrone D. Couch

Vice President

Marc R.Weisinger

Senior Vice President

Cynthia J. Heaps

Vice President

Jill J. Lowell

Vice President

Mary S. Madison

Vice President

Richard M. Manning

Vice President

53

SUNRISE BANK OF ATLANTA

Southeast Region

CHARLES H. GREEN

President

After four years as an affiliated loan production office, Sunrise Bank of Atlanta opened as a full-service bank in June 2006.  Located near Atlanta’s famous Peachtree Street between downtown and midtown, our bank was organized amid vigorous construction in the central city. This urban revitalization has included the recent opening of the world’s largest aquarium and Atlantic Station, a 10 million square foot, multi-use development that reclaimed a former steel mill site.

We have aggressively started building our profile and are attracting new clients to the bank.  The bank opened with this promise to our community: “Personalized Service, Custom Solutions, and Bankers Exceeding Your Expectations.”  We call it the ‘Art’ of Banking. To emphasize this concept, we have incorporated different forms of art in our marketing program.

The bank’s entry lobby features a series of three original paintings depicting the sun in its ascension over the horizon, painted by Atlanta artist Victoria Hanlon.  One of the images has been reproduced as the background on our bank’s debit cards. The bank is impressively decorated with more than 15 original contemporary paintings on loan from several Atlanta artists. 

When phoning the bank, callers who are temporarily placed on hold hear a recording by a member of the Atlanta Symphony Youth Orchestra playing the Bach Cello Suite No. 1. 

In August, Atlanta Mayor Shirley Franklin presided over our grand opening celebration and cut our opening “ribbon,” which was composed, in part, of 100 $1 bills.  The $100 “ribbon” was donated to the Metro Atlanta Arts Fund. 

In November, our 7,600 square-foot office was recognized as the “Best Urban Design - Retail” for 2006 by the Central Atlanta Progress organization. 

In competing with the larger money-center banks in Atlanta, we have won many new accounts through simply listening and caring.  We are working to be a capable financial partner to entrepreneurs, small businesses and emerging professionals.

We have implemented this effort with an exceptional staff committed to excellence.  Our goal is to deliver a unique banking concept to our market - banking is an art, not a science. 

~ Charles H. Green, President

600 Peachtree St., NW, Suite 300 | Atlanta, GA  30308 | 404-249-6500

www.sunrisebankofatlanta.com

Founded: June 21, 2006

BOARD OF DIRECTORS

Kim E. Anderson

Director

Boardwalk Consulting LLC

Dr. Lawrence E. Cooper

President & CEO

Bentley Investments, Inc.

Peter G. Davis

President & CEO

Vesdia Corporation

Randal A. Enterkin

President & CEO

Enterkin & Associates, Inc.

Charles H. Green

President

Sunrise Bank of Atlanta

Angela Hsu

Senior Attorney

Duke Realty Corporation

Bari R. Love

Senior Vice President

Jackson Spalding Communications

M. Kasim Reed

Partner

Holland & Knight LLP

Joseph D. Reid III

Director of Bank Development

Capitol Bancorp Limited

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Patrick T. Reid

Attorney

Reid and Reid

R. Kirk Rich

President

Rich Real Estate Services, Inc.

Grace Lopez-Williams

President

Grace Lopez-Williams, CPA, PC

OFFICERS

Joseph D. Reid

Chairman

Patrick T. Reid

Vice Chairman

Charles H. Green

President

Ashley Barsoum

Senior Vice President & CCO

June F. Kossow

Senior Vice President & COO

Mitch D. Belton

Vice President

Richard S. Darlington III

Vice President

Arthur J. Ensley

Vice President

Lori J. Roberts

Vice President

Tareasa P. Sexton

Vice President

54

SUNRISE BANK OF SAN DIEGO

California Region

RANDALL S. CUNDIFF

President & CEO

Sunrise Bank of San Diego was the 27th bank to join the Capitol Bancorp family. More significantly, it was Capitol’s first bank to open in California. The surfboard hanging in the lobby represented the bank’s “New Wave of Banking” to the San Diego market.  We are proud that our bank is recognized as the stepping stone to the West Coast for the Capitol Bancorp (CBC) network of affiliate banks.  

We are also proud to have supported the start-up of the additional bank affiliates in California through loan production, training and introducing the banks to the CBC culture. As CBC continues to build its California network of banks, the power of its network continues to facilitate completion of larger real estate transactions.  In 2006, we utilized the participation network to close a $6 million real estate transaction for a low-income housing development in our community.

The “New Wave of Banking” transitioned to a “Brighter Way of Banking,” as the bank moves into its sixth year of operation.  Our bank’s success is a direct outcome of continued efforts to build relationships with the community and “super-serve” our clients. Our goal for continued success is to turn every client into a “raving fan” and focus on true relationship building.

Last year was a transitional year for Sunrise Bank with regard to our banking professionals, products and purpose.  The bank hired a senior vice president of business development to enhance the bank’s commercial banking efforts on expanding community banking relationships driven with less emphasis on transactional business.  Wealth management and residential lending were two additional areas of focus the bank added to its array of financial tools in 2006.   The bank’s membership in the recently formed San Diego Chapter of Breakfast Club of America, as a marketing platform to develop new business relationships, is an example of this new focus.

Sunrise Bank’s “Brighter Way of Banking” is based on a simple model - add value to the needs of business clients and entrepreneurs.  The value we add through our superior service creates loyal, lifetime clients and ultimately…Raving Fans!

~ Randall S. Cundiff, President & CEO

4570 Executive Drive, Suite 110 | San Diego, CA  92121 | 858-625-9050

www.sunrisebanksd.com

Founded: January 11, 2001

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Craig V. Castanos

Craig V. Castanos, CPA

Randall S. Cundiff

President & CEO

Sunrise Bank of San Diego

Michael R. Labelle

Senior Director

Studley

John S. Lewis

President, Western Regions

Capitol Bancorp Limited

John F. McColl

President

Trinity Capital Group

John M. Rooney

President

Torrey Financial Group

Elizabeth K. Strom

Leasing Director

Equity Office Properties Trust

OFFICERS

John S. Lewis

Chairman

Randall S. Cundiff

President & CEO

Suzanne K. Gregory

Executive Vice President

CCO & Secretary

John L. Brackett

Senior Vice President

Gregory S. Fletcher

Vice President

Mary Jane Gertino

Vice President

Robin Hill

Vice President

Joseph L. Kennedy

Vice President

Miranda E. Klassen

Vice President

Michael H. Markie

Vice President

55

VALLEY FIRST COMMUNITY BANK

Southwest Region

JUDITH R. EGAN

President & CEO

At Valley First Community Bank, we strongly believe in giving back to our community with our time, talents and monetary support. Every team member is encouraged to become involved in a project or an organization to better our community.

Several of our 2006 community projects benefited Scottsdale Public Schools, including providing financial literacy training to sixth graders at Yavapai Elementary School and seventh graders at Cocopah Middle School. We also participated in an Artist in Residence Program at Cocopah Middle School that brought Steve Farley, a graphic designer, into the classroom to teach the students how to design and create marketing materials. During this two-week program, our bank became the “marketing client” of Louise Bunker’s third period Tech Lab class that was divided into five teams to compete for our advertising business. 

The students interviewed our officers twice at the school. They also visited the bank to take pictures and to get a sense of our bank’s culture by interacting with our team members.  They brainstormed their ideas and decided on their designs. The graphic designer then helped them with the technical aspects of creating a web page or a flyer to showcase our Freedom Business Checking program.

On the final day of the program each team had five minutes to present their web page and flyer designs and sell us on the merits of their proposal.  We provided feedback after each presentation.  The high level of creativity, professionalism and hard work exhibited in every one of the marketing pieces was amazing, which made it very difficult to select the winning designs.

Ultimately, every participant in the Artist in Residence Program was a winner. The students gained valuable experiential learning that will assist them throughout life. Our bank gained two flyers and a web page that will be utilized in our 2007 promotional efforts - and all of us had major fun during the process!

We look forward to partnering again with our local schools and the many other organizations that are making a positive difference in the lives of residents of all ages. This is one of the best aspects of community banking!

~ Judith R. Egan, President & CEO

7501 East McCormick Parkway, North Court | Scottsdale, AZ  85258 | 480-596-0883

www.valleyfirstbank.com

Founded: June 30, 1997

BOARD OF DIRECTORS

Sam Kathryn Campana

Vice President & Executive Director

National Audubon Society, Inc.

Marilyn D. Cummings

Realtor

Russ Lyon Realty Company

Judith R. Egan

President & CEO

Valley First Community Bank

William R. Fitzpatrick

CPA

Eide Bailly

Steven M. Goldstein

Attorney at Law

Sacks, Tierney, P.A. Lawyers

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Frederick L. Kidder

Chief Executive Officer

Scottsdale Area Chamber

of Commerce

Stewart Larson

Broker and Managing Partner

Holmes-Larsen Auction Marketing

Gordon D. Murphy

Retired Executive Vice President

Arizona Bankers Association

Eileen S. Rogers

President

Allegra Print & Imaging

Pamela L. Sparks

Historical Researcher & Archivist

Sparks, Tehan, & Ryley,

P.C. Law Firm

OFFICERS

Gordon D. Murphy

Chairman

Michael L. Kasten

Vice Chairman

Judith R. Egan

President & CEO

Marilyn D. Cummings

Secretary

Roni M. Grodnick

Executive Vice President & CCO

Nancy E. Selby

Executive Vice President

Cheryl L. DeGroot

Vice President

Daniel R. Klenske

Vice President

James Miller

Capitol Wealth Advisors,

Vice President

Michele J. Yates

Vice President

56

YUMA COMMUNITY BANK

Southwest Region

KATHERINE M. BRANDON

President & CEO

We have just completed our first full year in our new two-story building. Yuma Community Bank (YCB) leases 9,000 square feet on the first floor. The new building is known in the community as the copper building on 4th Avenue.  A portion of the exterior is copper. Inside, copper artwork is found throughout the bank and includes an eight-foot copper water feature in the lobby.

In January 2006, approximately 200 investors, customers and prospects attended the grand opening celebration for the new building.  Invited guests for the open house were encouraged to bring a food item to donate to the Yuma Community Food Bank.  With the abundance of space now available, YCB has increased its support of nonprofit agencies, such as hosting food and clothing drives for Crossroads Mission. For the holidays, the bank hosted a Salvation Army Angel Tree, with the staff and customers contributing food, clothing and gifts that were distributed to less fortunate people in our community.

During the Yuma County Fair, the bank purchased a 4-H animal at auction and then donated it back to the fair so that it could be auctioned again. The money received by YCB from the new buyer was donated to the Yuma Community Food Bank. 

YCB was also actively involved with local students on National Teach Children to Save Day.  YCB takes very seriously our responsibility to help teach young people about banking.  We had four officers visit local schools to talk about the value of saving for the future and establishing and maintaining good credit.  Additionally, YCB awarded $1,000 scholarships to two deserving high school seniors.  The students earned the scholarships by writing the best original essays about the importance of maintaining a good credit score.

Our primary focus is on our customers - and their banking needs. Building relationships is all about planning, preparing, listening and acting to best serve the customer. We embrace this philosophy.  We believe the best way to expand the size of our bank is to retain our customers and ask for referrals. Word of mouth from happy customers is a powerful advertising tool.

~ Katherine M. Brandon, President & CEO

2285 S. 4th Ave. | Yuma, AZ  85364 | 928-782-7000

www.yumabank.com

Founded: December 15, 2000

BOARD OF DIRECTORS

Katherine M. Brandon

President & CEO

Yuma Community Bank

Clarence B. Cheatham

Vice President

DPE Construction

Raymond R. Corona

Optometrist & President

Corona Optique

Lawrence L. Deason

Attorney at Law

Lawrence L. Deason, Ltd.

Ram R. Krishna, M.D.

President

Ram R. Krishna, M.D., P.C.

John T. Osterman

President

Osterman Financial Group

Ronald K. Sable

President

Concord Solutions Ltd.

David S. Sellers

President

Sellers Petroleum

John R. Sternitzke

President

Sternco Engineers, Inc.

Pamela K. Walsma

Attorney at Law

Westover, Shadle & Walsma, PLC

Ronald S. Watson

Real Estate Broker & Owner

ERA Matt Fischer Realtor

Robert R. Woodman

Owner

Woodman Realty

Leonard C. Zazula

Cashier - Western Regions

Capitol Bancorp Limited

OFFICERS

Ronald S. Watson

Chairman

Ram R. Krishna, M.D.

Vice Chairman

Katherine M. Brandon

President & CEO

Pamela K. Walsma

Secretary

Keith L. Simmonds

Executive Vice President & CCO

Theresa N. Wine

Senior Vice President

Kari M. Reily

Vice President

57

AMERA MORTGAGE CORPORATION

MARK A. JANSSEN

CEO

Amera Mortgage was on the move in 2006 in more ways than one.  First, we moved our headquarters from Farmington Hills to Milford, Michigan. We now have more office space with room to grow.  Additionally in 2006, we opened a new retail location in Livonia, Michigan.

At the same time, we implemented a major system upgrade which provides us with a platform for efficient growth, as well as the ability to make our systems and software available to retail and bank mortgage loan originators 24/7.

Early in the year, we hosted our inaugural Amera Day for mortgage loan officers in Capitol Bancorp’s Eastern and Western Regions. These events brought together the mortgage lenders in each region to share ideas and methods to achieve their annual origination goals. It also provided Amera with the opportunity to introduce technology enhancements. This is now an annual event.

GuideTrac™ and AutoPricer™ were two of Amera’s mortgage technology enhancements that were rolled out during the year. GuideTrac™  provides loan officers the ability to search for lending solutions based on criteria input and the guidelines applicable for a wide array of loan programs. AutoPricer™  works to automatically price loans based on the input criteria. We are currently exploring an upgrade to the AutoPricer™  system that will enable us to provide more of our products and pricing to mortgage loan officers. 

Amera Title began business during the year, providing loan closing and services primarily for Amera’s retail loan originators in Michigan. We plan to roll out Amera Title to Capitol Bancorp’s Michigan banks in 2007.

Late in 2006, we explored delivering loan files to investors with imaging technology.  We are currently piloting the system by delivering closed loans with imaged documents to two investors.

We are currently exploring new front end origination and processing technology,which is an extension of our current mortgage platform. The goal is to invest in this software and implement it during the first half of 2007. It will provide improved reporting for loan originators and management, consistent disclosures and documentation, workflow monitoring and notification, and a seamless interface to Amera’s mortgage software platform and marketing materials. 

Amera Mortgage is on the move to better serve our loan partners at Capitol Bancorp banks and retail locations across America!

~ Mark A. Janssen, CEO

1050 Corporate Office Drive, Suite 200 | Milford, MI  48381-3155 | 248-685-1700

www.ameramortgage.com

Founded: June 9, 1983

BOARD OF DIRECTORS

Susan L. Bowen

Executive Vice President

Amera Mortgage Corporation

Melinda Cain

Executive Vice President

Amera Mortgage Corporation

James F. Crawford

Director of Strategic Products

& Services

Capitol Bancorp Limited

Lee W. Hendrickson

Chief Financial Officer

Capitol Bancorp Limited

Mark A. Janssen

CEO

Amera Mortgage Corporation

Lyle W. Miller

President

L. W. Miller Holding Company

Jerald H. Rock

President

Amera Mortgage Corporation

John C. Smythe

President, Great Lakes Region

Capitol Bancorp Limited

OFFICERS

John C. Smythe

Chairman

Mark A. Janssen

CEO

Jerald H. Rock

President

Lee W. Hendrickson

Secretary & Treasurer

Susan L. Bowen

Executive Vice President

Melinda F. Cain

Executive Vice President

Kathleen M. DeFrances

Executive Vice President

John A. Korch

Senior Vice President

Sharon A. Pastori

Senior Vice President & CFO

James A. Sellick

Senior Vice President

Nancy J. Caruso

Vice President

Susan Good

Vice President

Melodie A. Haverkate

Vice President

Kathleen E. S. Lawrence

Vice President

Paul G. Richer

Vice President

Robert A. Risher

Vice President

James M. Shaffer

Vice President

Susan L. Shaffer

Vice President

58

CAPITOL WEALTH

ROBERT R. HOGAN

President & CEO

The past year has been one of excitement, growth and development for Capitol Wealth.  Some of our key accomplishments included:

• Adding 15 new bank wealth platforms, bringing the total number of Capitol Wealth Advisor platforms to 22.

• Completing the conversion of our full-service brokerage business onto the platform.

• Rolling out myWEALTH, our new online discount brokerage trading application, to all of the banks and customers within the Capitol affiliate network. 

• Enhancing our support infrastructure by establishing new financial and management reporting processes, developing a wealth management website, as well as broadening our compliance, risk and control environment.

Progress will accelerate in 2007.

We continue on a path of establishing wealth programs at each of the Capitol affiliate banks.  As such, our plans consist of adding more than 24 new Capitol Wealth Advisor representatives at these banks. In addition, we will continue the development of a national trust company (Capitol Wealth Trust) that will expand our trust product and service offerings to support all affiliate banks and their clients. 

In meeting our goals for 2007 and beyond, we have assembled a talented, experienced team of professionals.  Specifically, we have created two new roles:

• a strategic acquisition director to acquire local insurance and asset management firms around the communities where our individual banks exist; and,

• a product and business development director to help grow our existing wealth program business as well as better integrate brokerage, trust, insurance, and asset management products and services.

Capitol Wealth is excited about furthering the evolution of Capitol Bancorp’s service-oriented business model.  Through our wealth management activities, customers are provided a complete array of advice, service and products.  Although we provide all the services of a bigger institution, we still build personal relationships with each and every client.  As with Capitol Bancorp’s banks, we are deeply rooted members of communities - which is why we are a perfect complement to all the traditional banking services and relationships our community banks are known for providing.

~ Robert R. Hogan, President & CEO

9300 Harris Corners Pkwy. Suite 210 | Charlotte, NC  28269 | 704-599-1055

www.capitolwealth.com

BOARD OF DIRECTORS

Jay J. Butler

Retired Bank Executive

James F. Crawford

Director of Strategic Products

& Services

Capitol Bancorp Limited

Robert R. Hogan

Vice Chairman, President & CEO

Capitol Wealth, Inc.

Michael M. Moran

Chief of Capital Markets

Capitol Bancorp Limited

Enrico S. Piraino

Business Entrepreneur

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Patrick T. Reid

Attorney at Law

Pamela E. West

Retired Bank Executive

Ben E. Yeakley

Retired Trust Executive

Real Estate Developer

OFFICERS

Joseph D. Reid

Chairman

Robert R. Hogan

Vice Chairman, President & CEO

David M. Paventi

Secretary, Treasurer & COO

59

C A P I T O L  B A N C O R P  L I M I T E D

OFFICERS

Joseph D. Reid

Chairman & CEO

Art R. Aguirre

Vice President

Corporate Loan Review Officer

Scott R. Andrews

President

California Region

Gregory R. Bixby

Chief Information Officer

Missy P. Bowden

Vice President

Bank Performance, Western Regions

Brent R. Branch

Assistant Vice President

Manager of Network Services

Jeremy J. Burchman

Corporate Counsel

Robert C. Carr

Vice Chairman

Margarete L. Chalker

Director of Tax

James F. Crawford

Director of Strategic Products

Clinton D. Dunn

President

Texas Region

David J. Dutton

Chief Information Officer

Ann L. Dziuba

Corporate Counsel

Brian K. English

General Counsel

Carl C. Farrar

Senior Vice President

Credit Administration

David D. Fortune

Chief Credit Officer

Thomas S. Giovanelli

President

Northwest Region

David S. Groenewoud

Corporate Finance Manager

John T. Haarala

Corporate Counsel

Reginald A. Hansom, Jr.

Assistant Vice President

Computer Operations Manager

Janet L. Hardin

Vice President

Business Support Services

Lee W. Hendrickson

Chief Financial Officer

Rebecca M. Hills

Assistant Director of Accounting

Richard C. Houseworth

Director of Government Relations

Jocelyn S. Hunt

Assistant Vice President

Senior Compliance Risk Analyst

Rick H. James

Vice President

Bank Performance, Eastern Regions

Jason W. Johnson

Corporate Counsel

Bruce D. Jones

President

Southeast Region

Marsha L. Jones

Vice President

Item Processing

Angela M. Kimber

Corporate Counsel

Joseph A. King

Corporate Counsel

Sondra K. Koskela

Loan Quality Control Specialist

John S. Lewis

President

Western Regions

Tina M. Luha

Director of Bank Accounting

Stephanie A. Maat

Director of Training

Charles J. McDonald

Cashier

Eastern Regions

David J. Meninga

Corporate Counsel

Kelly D. Miller

Vice President

Bank Performance, Eastern Regions

Annetta Mirabella

Cashier

 Northwest Region

George F. Mochmar

Vice President

Bank Performance, Eastern Regions

Michael M. Moran

Chief of Capital Markets

John R. Myers

Vice President

Senior Loan Review Officer

Kenneth I. Myers

Director of Risk Management

Phillip Kyle Oesterle

Vice President

Operating Services

Gregory E. Patten

Vice President

Technology Services

Linda D. Pavona

Director of Corporate Relations

David K. Powers

Director of Credit Administration

Great Lakes Region

Amy L. Pramov

Director of Human Resources Services

Steven J. Pricco

Director of Government Guaranteed Lending

Joal R. Redmond

Director of Communications

Cristin K. Reid

Corporate President

Joseph D. Reid III

Director of Bank Development

William E. Rheaume

Senior Counsel

Stanley E. Ricketts

President

Midwest Region

James R. Rose Jr.

Senior Vice President

Credit Administration

Kenneth G. Schafer

Corporate Tax Officer

Nancy A. Schoolman

Vice President

Corporate Compliance Officer

John C. Smythe

President

Great Lakes Region

Patricia L. Stone

Senior Vice President

Credit Administration

Stephanie M. Swan

Director of Shareholder Services

Darryl S. Tenenbaum

Vice President

Corporate Auditor

Bruce A. Thomas

President

Eastern Regions

Stephen D. Todd

President

Southwest Region

Marie D. Walker

Director of Accounting

Gerald L. Weitner

Senior Vice President

Credit Administration

Thomas C. Wisehart

Corporate Counsel

Leonard C. Zazula

Cashier

Western Regions

F I N A N C I A L   I N F O R M A T I O N

Table of Contents

Selected Consolidated Financial Data	F-2
Information Regarding Capitol's Common Stock	F-3
Chief Executive Officer and Chief Financial Officer Certifications	F-4
Availability of Form 10-K and Certain Other Reports	F-4
Other Corporate and Shareholder Information	F-5
Cautions Regarding Forward-Looking Statements	F-6
Management's Discussion and Analysis of Capitol's Business, Financial Condition and Results of Operations:
Summary and Overview	F-7
Capitol's Bank Development Strategy	F-8
Bank Development as a Defined Focus	F-8
"Incubation" of Young Community Banks	F-8
Monitoring and Managing Capitol's Investments in Community Banks	F-9
Capitol's Results of Operations	F-12
Capitol's Financial Position	F-15
Liquidity, Capital Resources and Capital Adequacy	F-21
Trends Affecting Operations	F-25
Critical Accounting Policies Affecting Capitol's Financial Statements	F-29
Use of Estimates in Determining the Allowance for Loan Losses	F-29
Accounting for Goodwill and Other Intangibles	F-30
Accounting for Stock Options	F-30
Consolidation Policy	F-31
New Accounting Standards	F-31
Risk Factors Affecting Capitol and its Banks	F-31
Report on Management's Assessment of Internal Control Over Financial Reporting	F-33
Report of Independent Registered Public Accounting Firm on Management's Assessment of Internal Control Over Financial Reporting	F-34
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	F-36
Consolidated Balance Sheets	F-37
Consolidated Statements of Income	F-38
Consolidated Statements of Changes in Stockholders' Equity	F-39
Consolidated Statements of Cash Flows	F-40
Notes to Consolidated Financial Statements	F-41

F-1

Selected Consolidated Financial Data

(in $1,000s, except per share data)

	As of and for the Year Ended December 31
	2006(1)		2005(2)		2004(3)		2003(4)		2002(5)
For the year:
Interest income	$	279,353	$	224,439	$	179,089	$	164,416	$	156,454
Interest expense		105,586		67,579		47,496		49,490		55,860
Net interest income		173,767		156,860		131,593		114,926		100,594
Provision for loan losses		12,156		10,960		12,708		9,861		12,676
Noninterest income		21,532		21,048		19,252		20,087		14,982
Noninterest expense		137,804		117,289		97,787		86,952		76,538
Net income		42,391		35,925		26,716		23,380		16,653
Net income per share:
Basic		2.69		2.42		1.88		1.86		1.64
Diluted		2.57		2.34		1.79		1.77		1.57
Cash dividends paid per share		.95		.72		.65		.51		.44
At end of year:
Total assets	$	4,065,816	$	3,475,721	$	3,091,418	$	2,737,062	$	2,409,288
Total earning assets		3,743,041		3,204,646		2,885,545		2,521,375		2,226,969
Portfolio loans		3,488,678		2,991,189		2,692,904		2,247,440		1,991,372
Deposits		3,258,485		2,785,259		2,510,072		2,288,664		2,062,072
Notes payable and short-term borrowings		191,154		175,729		172,534		92,774		93,398
Subordinated debentures		101,035		100,940		100,845		90,816		51,583
Minority interests in consolidated subsidiaries		126,512		83,838		39,520		30,946		28,016
Stockholders' equity		361,879		301,866		252,159		218,897		160,037

			Quarterly Results of Operations (unaudited)
	Total for the Year		Fourth Quarter			Third Quarter		Second Quarter		First Quarter
Year ended December 31, 2006:(1)
Interest income	$	279,353	$	74,978		$	73,082	$	68,196	$	63,097
Interest expense		105,586		30,896			28,387		24,559		21,744
Net interest income		173,767		44,082			44,695		43,637		41,353
Provision for loan losses		12,156		3,444			3,441		2,815		2,456
Net income		42,391		11,382	(6)		10,789		10,267		9,953
Net income per share:
Basic		2.69		.71			.68		.65		.64
Diluted		2.57		.68	(6)		.66		.63		.61
Cash dividends paid per share		.95		.25			.25		.25		.20
Year ended December 31, 2005:(2)
Interest income	$	224,439	$	61,372		$	58,655	$	54,491	$	49,921
Interest expense		67,579		19,748			17,814		15,899		14,118
Net interest income		156,860		41,624			40,841		38,592		35,803
Provision for loan losses		10,960		3,791			2,107		3,039		2,023
Net income		35,925		10,019			9,594		8,297		8,015
Net income per share:
Basic		2.42		.66			.64		.56		.55
Diluted		2.34		.64			.61		.54		.52
Cash dividends paid per share		.72		.19			.18		.18		.17

(1)	Includes Community Bank of Rowan, effective February 2006 (located in Salisbury, North Carolina), Asian Bank of Arizona, effective April 2006 (located in Phoenix, Arizona), Evansville Commerce Bank, effective May 2006 (located in Evansville, Indiana), Bank of Valdosta (located in Valdosta, Georgia), Sunrise Bank of Atlanta (located in Atlanta, Georgia) and Bank of Everett (located in Everett, Washington), all effective June 2006, Bank of Maumee (located in Maumee, Ohio) and 1st Commerce Bank (located in North Las Vegas, Nevada), both effective October 2006, and Ohio Commerce Bank (located in Beachwood, Ohio), effective November 2006.
(2)	Includes Bank of Michigan, effective January 2005 (located in Farmington Hills, Michigan), Peoples State Bank, acquired April 7, 2005 (located in Jeffersonville, Georgia), Bank of Bellevue (located in Bellevue, Washington) and Fort Collins Commerce Bank (located in Fort Collins, Colorado), both effective June 2005, Bank of Auburn Hills, effective July 2005 (located in Auburn Hills, Michigan), Bank of San Francisco, effective August 2005 (located in San Francisco, California), Bank of Belleville (located in Belleville, Illinois) and Summit Bank of Kansas City (located in Lee's Summit, Missouri), both effective November 2005, and Bank of Santa Barbara, effective December 2005 (located in Santa Barbara, California).
(3)	Includes First Carolina State Bank (located in Rocky Mount, North Carolina), acquired April 1, 2004 and Point Loma Community Bank (located in San Diego, California), effective August 2004.
(4)	Includes Bank of Escondido (located in Escondido, California), effective October 2003.
(5)	Includes Bank of Las Vegas (located in Las Vegas, Nevada), effective February 2002 and Napa Community Bank (located in Napa, California), effective March 2002.
(6)	Fourth quarter 2006 net income was favorably impacted by year-end adjustments, primarily driven by loan fees, approximating $1.3 million ($0.07 per diluted share) net of income taxes.

F-2

INFORMATION REGARDING CAPITOL'S COMMON STOCK

Capitol's common stock is traded on the New York Stock Exchange (NYSE) under the symbol "CBC." Market quotations regarding the range of high and low sales prices of Capitol's common stock, as reported by the NYSE, were as follows:

	2006				2005
	Low		High		Low		High
Quarter Ended:
March 31	$	36.74	$	47.22	$	29.30	$	35.82
June 30		37.84		47.16		28.75		34.00
September 30		36.89		46.00		31.25		36.96
December 31		44.12		47.49		29.10		38.93

Below is a graph which summarizes the cumulative return earned by Capitol's shareholders over the last five years compared with the SNL (SNL Financial LC) $1B-$5B Asset-Size Index (SNL) and the cumulative total return on the Russell 2000 Index (R-2000). This presentation assumes the value of an investment in Capitol's common stock and each index was $100 on December 31, 2001 and that subsequent cash dividends were reinvested.

 

	Period Ended
Index	12/31/01	12/31/02	12/31/03	12/31/04	12/31/05	12/31/06
CBC	100.00	178.66	223.47	283.73	308.27	388.96
R-2000	100.00	79.52	117.09	138.55	144.86	171.47
SNL	100.00	115.44	156.98	193.74	190.43	220.36

F-3

INFORMATION REGARDING CAPITOL'S COMMON STOCK--Continued

During 2006, Capitol paid cash dividends of $0.20 per share in the first quarter and $0.25 per share in the second, third and fourth quarters. In 2005, Capitol paid cash dividends of $0.17 per share in the first quarter, $0.18 per share in the second and third quarters and $0.19 per share in the fourth quarter. Future payment of dividends is subject to approval by Capitol's board of directors, future operating performance and management's assessment of the consolidated organization's capital adequacy.

As of January 31, 2007, there were 10,216 beneficial holders of Capitol's common stock, based on information supplied to Capitol from its stock transfer agent and other sources.

At February 26, 2007, 17,046,721 shares of common stock were outstanding. Capitol's stock transfer agent is UMB Bank, n.a., 928 Grand Ave., P.O. Box 410064, Kansas City, Missouri 64141-0064 (telephone 800/884-4225). The web site for UMB Bank, n.a. is http://www.umb.com.

Capitol has a direct purchase and dividend reinvestment plan, the Capitol Bancorp Limited Direct Purchase and Dividend Reinvestment Plan ("Capitol Bancorp Direct"), which offers a variety of convenient features including dividend reinvestment, certain fee-free transactions, certificate safekeeping and other benefits. For a copy of the Plan prospectus, informational brochure and enrollment materials, contact UMB Bank, n.a. at 800/884-4225 or Capitol at 517/487-6555.

In addition to Capitol's common stock, trust-preferred securities of Capitol Trust I (a subsidiary of Capitol) are listed on NYSE under the symbol "CBCPrA." Those trust-preferred securities consist of 2,530,000, 8.5% cumulative preferred securities, with a liquidation amount of $10 per preferred security. The trust-preferred securities are guaranteed by Capitol and mature in 2027, are currently callable and may be extended to 2036 if certain conditions are met.

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER CERTIFICATIONS

Capitol has filed with the U.S. Securities and Exchange Commission all required certifications of its Chief Executive Officer (CEO) and Chief Financial Officer regarding the quality of Capitol’s public disclosures. In addition, Capitol’s CEO submitted to the NYSE an annual CEO certification stating that he is not aware of any violation by Capitol of the NYSE’s corporate governance listing standards.

AVAILABILITY OF FORM 10-K AND CERTAIN OTHER REPORTS

A copy of Capitol's 2006 report on Form 10-K, without exhibits, is available to holders of its common stock or trust-preferred securities without charge, upon written request. Form 10-K includes certain statistical and other information regarding Capitol and its business. Requests to obtain Form 10-K should be addressed to Investor Relations, Capitol Bancorp Limited, Capitol Bancorp Center, 200 Washington Square North, Lansing, Michigan 48933.

F-4

AVAILABILITY OF FORM 10-K AND CERTAIN OTHER REPORTS--Continued

Form 10-K and certain other periodic reports are filed with the Securities and Exchange Commission ("SEC"). The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding companies which file electronically (which includes Capitol). The SEC's web site address is http://www.sec.gov. Capitol's filings with the SEC are also available at Capitol's web site, http://www.capitolbancorp.com.

OTHER CORPORATE INFORMATION

EXECUTIVE OFFICES

Capitol Bancorp Center	2777 East Camelback Road
200 Washington Square North	Suite 375
Lansing, Michigan 48933	Phoenix, Arizona 85016
517/487-6555	602/955-6100
www.capitolbancorp.com

INDEPENDENT AUDITORS

BDO Seidman, LLP

Grand Rapids, Michigan

SHAREHOLDER INFORMATION

ANNUAL MEETING

Capitol's Annual Meeting will be held on Wednesday, April 25, 2007 at 4:00 p.m. at the Lansing Center, located at 333 E. Michigan Avenue, Lansing, Michigan.

COMMON STOCK TRADING INFORMATION

Capitol's common stock trades on the New York Stock Exchange (NYSE) under the trading symbol "CBC."

COMMON STOCK TRANSFER AGENT

UMB Bank, n.a.

928 Grand Avenue

P.O. Box 410064

Kansas City, Missouri 64141-0064

800/884-4225

DIRECT PURCHASE AND DIVIDEND REINVESTMENT PLAN

Capitol offers an easy and affordable way to invest in Capitol's common stock through its direct purchase and dividend reinvestment plan, Capitol Bancorp Direct. The Plan's benefits include the ability to make an initial investment in common stock with as little as $50, reinvestment of dividends in additional common stock, direct deposit of dividends, ability to purchase common stock as frequently as once a month, and the option to make transfers or gifts of Capitol's common stock to another person. Participation in the Plan is voluntary and shareholders and prospective investors are eligible. Purchases under the Plan are not currently subject to any brokerage fees or commissions. For further information regarding Capitol Bancorp Direct or a copy of the Plan's prospectus, informational brochure and enrollment materials, contact UMB Bank, n.a. at 800/884-4225 or Capitol at 517/487-6555.

F-5

TRUST-PREFERRED SECURITIES TRADING INFORMATION

Preferred securities of Capitol Trust I (a subsidiary of Capitol) trade on NYSE under the trading symbol "CBCPrA."

TRUST-PREFERRED SECURITIES TRUSTEE

JP Morgan Institutional Trust Services - Tempe, Arizona

CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS

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

F-6

Management's Discussion and Analysis of Capitol's Business,

Financial Condition and Results of Operations

Summary and Overview

This section of the Annual Report is intended to discuss, from management's perspective, matters of importance and relevance to readers regarding Capitol's operations, financial position and other things which have a significant effect on Capitol, its business and its banks. This narrative includes some comments about future events and other forward-looking statements and readers are advised to carefully read the cautionary statement about forward-looking statements which is on page F-6 of this Annual Report.

Capitol is unique in the community bankingindustry. As a bank-development company, Capitol forms new community banks in a wide variety of markets during an era of industry consolidation. Capitol operates in one business segment, community banking. Capitol's banks are staffed with banking professionals, serving customers who desire professional banking services delivered personally.

No other bank holding company in the U.S. is believed to hold as many bank 'charters' (i.e., individually capitalized, licensed and managed, community banks) as distinct operating subsidiaries. Capitol had 50 banks operating in 11 states as of December 31, 2006. Capitol announced plans in 2006 to expand to 100 banks within the next five years.

Capitol's de novo bank management model is fine-tuned to create a scalable, low overhead structure which is focused on delivering return-on-equity results, while enabling the individual banks operating autonomy in all areas which impact the customer relationship. Capitol's 'back-office' functions, which support the banks, are capable of expanding coverage in concert with growth in both the number and size of affiliate banks.

2006 was another significant year in Capitol's history:

· Record earnings of $42 million for the year ($2.57 per diluted share), an increase of 18% over 2005 earnings of $36 million ($2.34 per diluted share).  

· Total assets surpassing $4 billion at year end.  

· Substantial growth in the number of banks within Capitol's affiliation network, from 41 at the beginning of the year to 50 at year-end.

In addition to the achievements summarized above, Capitol's management added resources in 2006 in the areas of bank development, risk management, credit administration, technology, and other centralized back-office functions to meet the needs of its growing banks while also preparing to meet its development objectives.

F-7

Near the close of 2005, a wealth management unit was formed, Capitol Wealth, Inc., which commenced operations in 2006 with an initiative to expand Capitol's banks' scope of services in meeting the needs of their clients beyond loans and deposits. Full time Capitol Wealth advisors will be located at Capitol's banks to work in tandem with their traditional banking colleagues. This new initiative is intended to expand the availability of financial services to the banks' clientele while increasing noninterest revenues. This activity commenced at selected banks beginning in early 2006 and will expand in coming years.

Capitol's Bank Development Strategy

Bank Development as a Defined Focus

Each new bank typically starts as a single-location office. Each is led by a bank president and a team of banking professionals with significant local experience, overseen by an independent board of directors composed of business leaders drawn from that local community. Each bank has complete on-site authority to make all decisions which directly affect the customer, such as credit approval and the pricing and structure of both loans and deposits. The notion of banking as a profession is key to Capitol's model where its banks' customers seek a relationship with banking professionals to meet their needs as opposed to transaction-oriented financial institutions pushing financial products at customers and emphasizing market share.

With Capitol's focused banking model, bank development on a national scale is a natural extension of this business philosophy. Capitol's bank development philosophy is based on just a few key ingredients necessary to start a new bank:

· A bank president candidate with a significant background in the future bank's business community, capable of attracting customer relationships and other banking professionals

· An office address from which to operate a bank, optimally located in that business community

· A strong group of potential board members, drawn from the local business community, to oversee the future bank's activities and assist in business development

· Availability of capital from community investors seeking to invest up to 49% in the required start-up equity of the future bank

Notably, 'market size' is not a big factor in Capitol's approach to bank-development. Rather, the key is people. Capitol's banks are small in market stature, emphasizing personalized banking relationships.

"Incubation" of Young Community Banks

New banks, just like most start-up businesses, are not profitable from the outset. Each new bank is started with sufficient capital to absorb early period losses and to support balance-sheet growth. During these early periods of operation, Capitol's management works closely with the de novo bank's president in providing guidance and assistance to help achieve the

F-8

bank's goals and objectives as it navigates toward future profitability. Near a de novo bank's 3^rd anniversary of operation, Capitol typically offers the bank's community investors (up to 49% of the bank's start-up capital) an opportunity to exchange their bank investment for shares of Capitol's common stock, generally at 150% of the bank's shares' then current book value. The exchange offer (which is not a contractual obligation of Capitol) is generally subject to approval by the bank's shareholders. When the offer is made, the bank is often 'turning the corner' on cumulative profitability and the share-exchange enables the bank's shareholders to achieve both a return on their original investment in the bank and liquidity in the form of marketable shares of Capitol's common stock, if the shareholders elect to enter into the share-exchange transaction. In 2006, Capitol completed two share-exchange transactions; three share-exchange transactions were completed in 2005.

Monitoring and Managing Capitol's Investments in Community Banks

Capitol monitors and manages its investments in community banks through the bank performance group of its management team. Lead by regional presidents, Capitol's bank performance group assists the banks in the development of detailed budgets, monitors progress on the banks' business plans and reviews monthly operating results for each bank. Capitol's bank performance group executives also assist in the identification of bank development opportunities within their respective regions. In addition to the monitoring of operating results, Capitol assists the banks in managing capital, including funding supplemental capital when needed to support bank growth, and implementing asset/liability management strategies.

Capitol's unique relationship with its banks is multidimensional, as an investor, mentor and service provider. As investor, Capitol closely monitors the financial performance of its bank subsidiaries. Capitol's mentoring role of providing assistance and guidance when and where necessary to help enhance bank performance is most important for its youngest affiliates where guidance is needed during their early formative stages. Capitol provides efficient back-office support services which can be done centrally for all of its banks and which do not involve a direct interface with the bank customer, such as:

· Accounting

· Capital management

· Credit administration

· Data processing

· Human resources administration

· Internal audit

· Legal support

· Risk management

Some of these functions are performed nationally from a single location, while others are performed regionally, where it is more efficient to have personnel located geographically based on their respective responsibilities in relation to the physical location of the banks.

F-9

Total assets and revenues of each bank within Capitol's eastern regions are summarized below as of and for the years ended December 31, 2006 and 2005 (in $1,000s):

	Total Assets				Total Revenues(3)
	2006		2005		2006		2005
Eastern Regions:
Great Lakes Region:
Ann Arbor Commerce Bank	$	310,407	$	320,075	$	23,598	$	24,035
Bank of Auburn Hills(2)		31,559		10,848		1,849		348
Bank of Belleville(2)		24,948		14,641		1,188		70
Bank of Maumee(1)		9,915				133
Bank of Michigan(2)		51,287		31,119		3,073		773
Brighton Commerce Bank		103,909		105,694		7,889		7,268
Capitol National Bank		256,741		246,132		17,531		16,118
Detroit Commerce Bank		106,233		84,979		8,634		6,466
Elkhart Community Bank		86,883		75,648		6,476		5,329
Evansville Commerce Bank(1)		20,772				591
Goshen Community Bank		80,137		74,545		5,216		4,076
Grand Haven Bank		129,033		122,757		9,702		8,629
Kent Commerce Bank		86,916		78,939		6,800		6,304
Macomb Community Bank		101,353		93,497		7,713		6,498
Muskegon Commerce Bank		95,551		96,649		7,494		7,236
Oakland Commerce Bank		134,437		115,720		9,660		8,711
Ohio Commerce Bank(1)		14,466				199
Paragon Bank & Trust		98,804		106,535		7,816		8,499
Portage Commerce Bank		179,413		183,018		14,813		14,122
Great Lakes Region Total		1,922,764		1,760,796		140,375		124,482
Southeast Region:
Bank of Valdosta(1)		21,626				561
Community Bank of Rowan(1)		45,503				1,870
First Carolina State Bank		93,819		83,345		6,341		4,669
Peoples State Bank(2)		32,714		31,620		2,629		1,415
Sunrise Bank of Atlanta(1)		16,990				912
Southeast Region Total		210,652		114,965		12,313		6,084
Midwest Region-Summit Bank of Kansas City(2)		19,529		9,152		841		40
Eastern Regions Total	$	2,152,945	$	1,884,913	$	153,529	$	130,606

Total assets and revenues for Capitol's western regions and footnotes relating to this table appear on the following page.

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F-10

Summary of total assets and revenues - continued (western regions' banks and consolidated totals):

	Total Assets					Total Revenues(3)
	2006		2005			2006		2005
Eastern Regions Total (from preceding page)	$	2,152,945	$	1,884,913		$	153,529	$	130,606
Western Regions:
Southwest Region:
1st Commerce Bank(1)		14,829					202
Arrowhead Community Bank		79,152		83,639			8,076		7,043
Asian Bank of Arizona(1)		20,248					781
Bank of Las Vegas		67,478		58,315			5,331		4,130
Bank of Tucson		187,683		167,638			15,358		12,758
Black Mountain Community Bank		138,961		128,958			10,984		8,746
Camelback Community Bank		83,003		82,309			6,355		5,937
Desert Community Bank		93,914		78,907			7,464		5,749
East Valley Community Bank		35,954		43,352			3,202		3,606
Fort Collins Commerce Bank(2)		54,410		27,427			3,641		943
Mesa Bank		165,822		132,775			15,798		10,890
Red Rock Community Bank		108,362		102,618			8,515		7,410
Southern Arizona Community Bank		85,912		98,849			6,629		6,032
Sunrise Bank of Albuquerque		59,798		61,812			4,796		5,169
Sunrise Bank of Arizona		119,785		111,204			10,347		10,630
Valley First Community Bank		72,333		72,759			5,629		4,694
Yuma Community Bank		74,477		61,523			6,049		4,629
Southwest Region Total		1,462,121		1,312,085			119,157		98,366
California Region:
Bank of Escondido		82,412		70,807			5,115		3,790
Bank of San Francisco(2)		28,122		13,685			1,649		286
Bank of Santa Barbara(2)		42,559		14,386			2,138		16
Napa Community Bank		99,009		84,512			7,212		5,788
Point Loma Community Bank		43,715		34,213			3,185		2,061
Sunrise Bank of San Diego		71,170		66,809			5,800		5,616
California Region Total		366,987		284,412			25,099		17,557
Northwest Region:
Bank of Bellevue(2)		33,155		19,726			2,061		408
Bank of Everett(1)		20,061					489
Northwest Region Total		53,216		19,726			2,550		408
Western Regions Total		1,882,324		1,616,223			146,806		116,331
Other, net		30,547		(25,415	)		550		(1,450	)
Consolidated totals	$	4,065,816	$	3,475,721		$	300,885	$	245,487

(1)	Became a Capitol affiliate in 2006 and is included for periods after addition to the Capitol banking network.
(2)	Became a Capitol affiliate in 2005 and is included for periods after addition to the Capitol banking network.
(3)	Total revenues is the sum of interest income and noninterest income.

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F-11

Capitol's Results of Operations

Net income for 2006 approximated $42 million, an 18% increase over the $36 million earned in 2005. Net income for 2004 was $26.7 million. Diluted earnings per share for 2006 amounted to $2.57 compared to $2.34 in 2005 and $1.79 in 2004.

The table below summarizes for each of Capitol's eastern regions' banks, net income and the related rates of return on average equity and assets, where applicable (in $1,000s):

	Net Income									Return on Average Equity									Return on Average Assets
	2006			2005			2004			2006			2005			2004			2006			2005			2004
Eastern Regions:
Great Lakes Region:
Ann Arbor Commerce Bank	$	3,739		$	4,007		$	4,234			14.19	%		14.80	%		16.24	%		1.21	%		1.22	%		1.30	%
Bank of Auburn Hills(2)		(332	)		(437	)
Bank of Belleville(2)		(548	)		(405	)
Bank of Maumee(1)		(619	)
Bank of Michigan(2)		(343	)		(1,017	)
Brighton Commerce Bank		845			1,097			1,091			8.93	%		11.86	%		13.09	%		0.80	%		1.02	%		1.11	%
Capitol National Bank		2,879			3,510			3,602			14.97	%		18.62	%		20.77	%		1.20	%		1.46	%		1.59	%
Detroit Commerce Bank		942			633			163			11.23	%		9.15	%		2.91	%		0.99	%		0.80	%		0.27	%
Elkhart Community Bank		948			726			703			11.18	%		9.21	%		9.76	%		1.16	%		0.97	%		1.17	%
Evansville Commerce Bank(1)		(851	)
Goshen Community Bank		383			47			405			5.58	%		0.71	%		6.34	%		0.55	%		0.08	%		0.83	%
Grand Haven Bank		1,284			999			(412	)		11.75	%		9.75	%					1.01	%		0.82	%
Kent Commerce Bank		365			678			578			4.72	%		8.14	%		7.01	%		0.44	%		0.79	%		0.70	%
Macomb Community Bank		58			442			867			0.66	%		5.03	%		9.83	%		0.06	%		0.47	%		0.93	%
Muskegon Commerce Bank		158			1,184			1,516			1.87	%		12.52	%		16.25	%		0.16	%		1.23	%		1.70	%
Oakland Commerce Bank		1,143			1,835			1,014			11.50	%		17.75	%		10.14	%		0.94	%		1.46	%		0.77	%
Ohio Commerce Bank(1)		(383	)
Paragon Bank & Trust		858			819			1,073			7.71	%		7.18	%		9.53	%		0.85	%		0.74	%		1.00	%
Portage Commerce Bank		2,706			2,940			2,862			16.72	%		18.31	%		20.54	%		1.51	%		1.56	%		1.66	%
Great Lakes Region Total		13,232			17,058			17,696
Southeast Region:
Bank of Valdosta(1)		(822	)
Community Bank of Rowan(1)		(1,095	)
First Carolina State Bank(3)		637			478			445			5.59	%		4.42	%		4.31	%		0.75	%		0.64	%		0.66	%
Peoples State Bank(2)		282			77						6.57	%		2.90	%					0.55	%		0.36	%
Sunrise Bank of Atlanta(1)		(820	)
Southeast Region Total		(1,818	)		555			445
Midwest Region—Summit Bank of Kansas City(2)		(593	)		(319	)
Eastern Regions Total	$	10,821		$	17,294		$	18,141

Net income and the related rates of return on average equity and assets for Capitol's western regions and footnotes relating to this table appear on the following page.

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F-12

Net income and the related rates of return on average equity and assets - continued (western regions' banks and consolidated totals):

	Net Income									Return on Average Equity									Return on Average Assets
	2006			2005			2004			2006			2005			2004			2006			2005			2004
Eastern Regions Total (from preceding page)	$	10,821		$	17,294		$	18,141
Western Regions:
Southwest Region:
1st Commerce Bank(1)		(432	)
Arrowhead Community Bank		1,293			1,255			758			15.68	%		17.47	%		12.53	%		1.49	%		1.56	%		1.14	%
Asian Bank of Arizona(1)		(567	)
Bank of Las Vegas		707			670			224			7.24	%		9.70	%		3.65	%		1.09	%		1.16	%		0.41	%
Bank of Tucson		4,656			3,732			2,962			29.93	%		27.61	%		24.69	%		2.62	%		2.12	%		1.86	%
Black Mountain Community Bank		2,556			2,204			1,428			20.40	%		20.95	%		16.20	%		1.96	%		1.84	%		1.50	%
Camelback Community Bank		1,119			1,167			554			13.64	%		13.90	%		6.24	%		1.36	%		1.42	%		0.68	%
Desert Community Bank		1,302			1,061			634			15.29	%		13.65	%		8.18	%		1.51	%		1.42	%		1.05	%
East Valley Community Bank		514			313			219			9.51	%		6.38	%		5.12	%		1.27	%		0.67	%		0.49	%
Fort Collins Commerce Bank(2)		170			(396	)					2.10	%								0.42	%
Mesa Bank		3,995			2,808			1,659			32.56	%		31.37	%		22.83	%		2.59	%		2.45	%		1.91	%
Red Rock Community Bank		2,162			1,856			806			17.38	%		15.32	%		6.47	%		2.09	%		1.73	%		0.75	%
Southern Arizona Community Bank		1,189			1,290			1,291			13.51	%		14.74	%		15.47	%		1.39	%		1.46	%		1.54	%
Sunrise Bank of Albuquerque		494			929			770			7.50	%		13.58	%		12.53	%		0.86	%		1.36	%		1.09	%
Sunrise Bank of Arizona		1,372			2,215			2,674			10.82	%		18.12	%		23.27	%		1.17	%		1.82	%		2.03	%
Valley First Community Bank		716			604			310			9.67	%		9.06	%		5.11	%		0.97	%		0.86	%		0.60	%
Yuma Community Bank		1,199			992			915			16.95	%		14.88	%		15.59	%		1.70	%		1.66	%		1.74	%
Southwest Region Total		22,445			20,700			15,204
California Region:
Bank of Escondido		787			452			(186	)		7.70	%		4.78	%					1.04	%		0.72	%
Bank of San Francisco(2)		(484	)		(726	)
Bank of Santa Barbara(2)		(630	)		(514	)
Napa Community Bank		1,572			965			579			13.65	%		9.47	%		6.80	%		1.86	%		1.27	%		0.87	%
Point Loma Community Bank(3)		196			(467	)		(703	)		2.84	%								0.48	%
Sunrise Bank of San Diego		885			1,095			1,104			8.18	%		10.18	%		11.26	%		1.27	%		1.69	%		1.58	%
California Region Total		2,326			805			794
Northwest Region:
Bank of Bellevue(2)		(384	)		(551	)
Bank of Everett(1)		(733	)
Northwest Region Total		(1,117	)		(551	)
Western Regions Total		23,654			20,954			15,998
Other, net		7,916			(2,323	)		(7,423	)
Consolidated totals	$	42,391		$	35,925		$	26,716			12.94	%		13.34	%		11.25	%		1.12	%		1.08	%		0.91	%

(1)	Became a Capitol affiliate in 2006 and is included for periods after addition to the Capitol banking network.
(2)	Became a Capitol affiliate in 2005 and is included for periods after addition to the Capitol banking network.
(3)	Became a Capitol affiliate in 2004 and is included for periods after addition to the Capitol banking network.

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F-13

The principal revenue source for Capitol's banks is interest income from loans. Net interest income is the total of all interest income minus all interest expense. This is an important measure that is used to help determine the amount of net operating revenues for financial institutions. Net operating revenue is the sum of net interest income and noninterest income.

Net interest income totaled $173.8 million in 2006, an 11% increase over the $156.9 million reported in 2005. This increase is due to a combination of several factors. In total, net interest income increased $16.9 million which was comprised of an increase in interest income of about $55 million, partially offset by an increase in interest expense of about $38 million. These variances can be analyzed further in terms of their association with changes in interest rates versus changes in volume of the interest-bearing asset or liability. For example, the increase in interest income includes approximately $33 million resulting from higher levels of loans outstanding in 2006 (i.e., volume), plus an increase of $22 million due to higher rates as loans repriced or were refinanced at rising rates in 2006. Similarly, the $38 million increase in interest expense is comprised of two components: $10 million from larger balances and $28 million from higher interest rates.

Net interest income increased about $25.3 million in 2005. Most of that net increase resulted from an increase in interest income of $45 million (of which about half resulted from loan growth in 2005) and from an increase in interest expense of $20 million primarily associated with larger liability balances and higher interest rates.

Combined with noninterest income, total consolidated net operating revenue approximated $195.3 million in 2006, $177.9 million in 2005 and $150.8 million in 2004. Noninterest income for these periods was $21.5 million, $21 million and $19.3 million, respectively.

Noninterest income, in total, has been relatively consistent, but with several important changes in its components. In 2006, 2005 and 2004, revenue from mortgage loans originated for sale amounted to $5.4 million, $6.1 million and $5.6 million, respectively. Loan origination volume decreased in 2006 and 2005, compared to 2004 levels, due to higher interest rates. Increased rates have substantially reduced origination volume from refinancings. Further, reduction in home sales volume in some communities (particularly within the state of Michigan) has also negatively impacted origination volume. Other noninterest income remained relatively steady in 2006, but increased significantly in 2005, primarily from fees from origination of non-portfolio commercial loans. Due to the nature of these revenues, as well as gains on the sale of government-guaranteed loans, the amount of the revenue can vary significantly from year to year depending on interest rates and business opportunities. Revenue from trust and wealth management activities increased more than 50% in 2006, rebounding from a large decrease in 2005.

The provision for loan losses approximated $12.2 million, $11 million and $12.7 million in 2006, 2005 and 2004, respectively. The amount of the provision for loan losses is determined based on management's analysis of amounts necessary for the allowance for loan losses; this is discussed in greater detail later in the Financial Position section of this narrative.

F-14

Noninterest expense totaled $137.8 million, $117.3 million and $97.8 million in 2006, 2005 and 2004, respectively. In total, these expenses increased 17.5% in 2006, 19.9% in 2005 and 12.5% in 2004. Increases in the components of noninterest expense in 2006 were primarily associated with added staffing and other costs associated with growing young banks and adding new banks (nine in each of 2006 and 2005). The lower rate of increase in 2004 was the result of a slower pace of adding new banks (two added in 2004). The more significant elements of other noninterest expense consisted of the following (in $1,000s):

	2006		2005		2004
Preopening and start-up costs of de novo banks and bank- development subsidiaries	$	4,462	$	2,971	$	448
Advertising		2,921		2,266		1,981
Professional fees		2,547		2,124		2,046
Paper, printing and supplies		2,409		2,135		1,697
Directors' fees		2,196		1,577		914
Taxes other than income taxes		1,372		1,401		1,010
Bank services (ATMs, telephone banking and Internet banking)		1,564		1,229		1,123
Communications		1,380		1,229		996
Other		13,252		13,866		10,006
Total	$	32,103	$	28,798	$	20,221

Capitol's effective tax rate was 34.1% in 2006, 38.7% in 2005 and 36.4% in 2004. The statutory federal income tax rate applicable to Capitol is currently 35%. The effective tax rate includes state income taxes, but excludes taxes incurred in states which are based on measures other than income (which are shown in the table above). The lower effective tax rate in 2006 resulted primarily from state income tax benefits.

Capitol's Financial Position

Capitol completed 2006 with a milestone in consolidated total assets. Total assets grew to $4.1 billion from $3.5 billion at the end of 2005 and $3.1 billion at the beginning of 2005.

Key to the balance-sheet strength of Capitol is its total capital position (subordinated debentures, minority interests in consolidated subsidiaries and stockholders' equity totaling approximately $589.4 million or 14.5% of total assets) and liquidity (cash and cash equivalents of $348.9 million or 8.6% of total assets) at December 31, 2006. Both of those key elements are discussed in the next section, Liquidity, Capital Resources and Capital Adequacy.

When looking at Capitol's financial position, as shown in its consolidated balance sheet, it is clear that the single largest asset category is portfolio loans. Accordingly, the narrative in this section is devoted primarily to loans.

F-15

Net portfolio loans (total portfolio loans after subtracting the allowance for loan losses) approximated $3.4 billion at December 31, 2006 and $3 billion at December 31, 2005. These amounts approximated 85% of total consolidated assets at December 31, 2006 and 2005. 2006 loan growth approximated $497.5 million. On a consolidated basis, portfolio loan growth at banks less than three years of age as of year-end 2006 approximated 61% of all banks' portfolio loan growth, which is the expected result of Capitol's growing number of banks.

Capitol's banks emphasize commercial loans, consistent with their focus on lending to local entrepreneurs, professional service firms and other businesses. All of Capitol's banks use a common credit policy; however, as emphasized earlier, all credit decisions are made at the local level at each community bank. The utilization of an enterprise-wide credit policy has several key benefits to Capitol and its banks, such as procedural guidance for:

· Loan underwriting and documentation

· Credit granting authorities within the bank

· Acceptable collateral and loan structuring

· Loan participations amongst other affiliates or other funding sources, when proposals exceed an individual bank's limitations

· Collections and workouts

· Documenting and evaluating the adequacy of the allowance for loan losses

· Establishing corporate credit administration resources to aid the banks when needed

As part of the banks' emphasis on commercial lending, commercial real estate is sought as the primary source of collateral for commercial loans when possible. This emphasis on use of commercial real estate as collateral has been a consistent practice of Capitol and its banks from their earliest days of operation, based on the use of appropriate loan-to-value ratios, avoidance of large real estate development projects and the belief that, even in soft economies, commercial real estate tends to have substantially less loss potential than other types of business-asset collateral, such as receivables, inventory and equipment.

A potentially negative aspect of real estate as a primary source of collateral for commercial loans is that when some commercial loans develop performance difficulties and reach nonperforming status (i.e., becoming 90 days past due or being placed on nonaccrual status), the resolution period can be long due to the foreclosure process and further extended if the real estate sales environment is weak in particular markets. In contrast, a commercial loan secured by receivables, inventory or equipment which becomes nonperforming tends to have a higher loss potential due to the probable dissipation of collateral value.

F-16

At December 31, 2006, the consolidated allowance for loan losses approximated $45.4 million or 1.30% of total portfolio loans outstanding, compared with $40.6 million or 1.36% at December 31, 2005 and $37.6 million or 1.40% at the beginning of 2005. As stated earlier, the allowance is based on management's analysis of inherent losses in the portfolio at the balance sheet date.

Nonperforming loans approximated $34.3 million and $26.7 million at December 31, 2006 and 2005, and approximated 0.98% and 0.89% of portfolio loans and 0.84% and 0.77% of total assets, respectively. Of the nonperforming loans at December 31, 2006, about 79% were real-estate secured. At December 31, 2006, the coverage ratio of the allowance for loan losses to nonperforming loans (i.e., the allowance as a percentage of nonperforming loans) was 132.5%, compared to 151.7% at the beginning of the year.

At December 31, 2006, about 85% of Capitol's total nonperforming loans were carried at Michigan-based banks where nonperforming loans increased $5.7 million or 24% in 2006. In concert with elevated levels of nonperforming loans at Michigan banks, their combined allowance ratio of about 1.50% of portfolio loans at year-end 2006 and 2005 has been maintained at a higher level than the consolidated ratio. Due to a combination of commercial real estate collateral and a weak economic climate (which has Michigan largely viewed as a one-state recession), resolution of nonperforming loans and other nonperforming assets may take extended periods, levels of nonperforming loans could increase further and general economic conditions may not improve in the near term. Management believes that nonperforming loans have been properly considered in its evaluation of the adequacy of the allowance for loan losses as of December 31, 2006.

In addition to the identification of nonperforming loans involving borrowers with payment performance difficulties (i.e., nonaccrual loans and loans past-due 90 days or more), management utilizes an internal loan review process to identify other potential problem loans which may warrant additional monitoring or other attention. This loan review process is a continuous activity which periodically updates internal loan classifications. At inception, all loans are individually assigned a classification which grade the credits on a risk basis, assessing the financial strength of the borrower and guarantors and other factors such as the borrowers' historical and projected financial performance, local economic conditions and other subjective factors. The loan classification process is fluid and subjective.

Potential problem loans include loans which are generally performing as agreed; however, because of loan review's and/or lending staff's risk assessment, increased monitoring is deemed appropriate. In addition, some loans are identified for monitoring because of specific performance issues or other risk factors requiring closer management attention and the development of specific remedial action plans.

At December 31, 2006, potential problem loans (which includes nonperforming loans) approximated $146 million or about 4.2% of total consolidated portfolio loans. Such totals typically approximate 4% to 5% of loans outstanding and are an important part of management's ongoing and proactive loan review activities which are designed to early-identify loans which warrant close monitoring at the bank and corporate credit-administration

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levels. It is important to note that these potential problem loans do not necessarily have significant loss exposure (nor are they necessarily deemed 'impaired'), but rather are identified by management in this manner to aid in loan administration and risk management. These loans are considered in management's evaluation of the adequacy of the allowance for loan losses.

As noted in the Critical Accounting Policies section which appears later in this narrative, the use of estimates in determining the allowance for loan losses is very important for an understanding of Capitol's consolidated financial statements. Simply stated, the allowance for loan losses is management's estimate of loan losses inherent in the loan portfolio at the balance-sheet date. The allowance for loan losses is increased by provisions for loan losses, which are charged against operations, and reduced by net loan write-offs which are charged against the allowance. There are many ways to estimate losses or 'loss reserves' and, arguably, there is no one 'right' way. Management's experience is that its estimation techniques have accurately determined historical losses.

Capitol had 50 separately chartered banks at year-end 2006. Each bank separately documents the adequacy of its respective allowance for loan losses. As mentioned previously, Capitol has a uniform, enterprise-wide credit policy which, among other things, provides the banks guidance on evaluating and documenting the adequacy of the allowance for loan losses. Essentially, a standardized computational template is used consistently for all of Capitol's banks. The template includes elements for all portfolio loan categories for performing loans, nonperforming loans, watch credits and environmental factors. While a standardized template is utilized, management is required to apply subjective judgment in determining risk factors specific to their banks and other matters in determining the allowance needed at the bank level. Further, the combined results of the banks' separate analyses are evaluated at the Capitol, or parent, level on a judgmental basis. The process to evaluate and determine the adequacy of the allowance for loan losses at each individual bank and on a consolidated basis is labor intensive and requires a high degree of judgment. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions.

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F-18

The following table summarizes portfolio loans, the allowance for loan losses and nonperforming loans for each of the banks, regionally, and on a consolidated basis (in $1,000s):

	Total Portfolio Loans				Allowance for Loan Losses				Nonperforming Loans				Allowance as a % of Total Portfolio Loans
	2006		2005		2006		2005		2006		2005		2006			2005
Eastern Regions:
Great Lakes Region:
Ann Arbor Commerce Bank	$	288,408	$	286,146	$	4,393	$	4,712	$	4,441	$	3,103		1.52	%		1.65	%
Bank of Auburn Hills(2)		26,432		6,058		410		90		629				1.55	%		1.49	%
Bank of Belleville(2)		17,410		1,534		260		23						1.49	%		1.50	%
Bank of Maumee(1)		3,327				50								1.50	%
Bank of Michigan(2)		44,630		28,062		669		421						1.50	%		1.50	%
Brighton Commerce Bank		94,987		93,553		995		978		522		1,412		1.05	%		1.05	%
Capitol National Bank		196,074		197,062		2,833		3,233		3,365		4,938		1.44	%		1.64	%
Detroit Commerce Bank		103,153		81,533		1,335		1,104		1,328		110		1.29	%		1.35	%
Elkhart Community Bank		77,515		70,671		1,010		919		676		908		1.30	%		1.30	%
Evansville Commerce Bank(1)		14,711				232								1.58	%
Goshen Community Bank		63,653		53,497		862		648		233		443		1.35	%		1.21	%
Grand Haven Bank		120,025		117,241		2,643		2,575		2,682		3,342		2.20	%		2.20	%
Kent Commerce Bank		83,065		74,385		1,237		1,277		2,256		1,751		1.49	%		1.72	%
Macomb Community Bank		87,737		90,448		1,670		1,422		3,738		2,142		1.90	%		1.57	%
Muskegon Commerce Bank		81,799		88,007		1,231		1,021		3,906		1,430		1.50	%		1.16	%
Oakland Commerce Bank		114,876		101,859		1,636		1,424		2,862		948		1.42	%		1.40	%
Ohio Commerce Bank(1)		739				11								1.49	%
Paragon Bank & Trust		82,259		92,427		1,298		1,375		2,132		2,216		1.58	%		1.49	%
Portage Commerce Bank		167,005		171,679		1,729		2,057		1,380		2,119		1.04	%		1.20	%
Great Lakes Region Total		1,667,805		1,554,162		24,504		23,279		30,150		24,862		1.47	%		1.50	%
Southeast Region:
Bank of Valdosta(1)		18,870				283								1.50	%
Community Bank of Rowan(1)		36,534				534								1.46	%
First Carolina State Bank		73,884		68,235		800		690		150		173		1.08	%		1.01	%
Peoples State Bank(2)		15,154		19,909		263		140				16		1.74	%		0.70	%
Sunrise Bank of Atlanta(1)		14,553				215								1.48	%
Southeast Region Total		158,995		88,144		2,095		830		150		189		1.32	%		0.94	%
Midwest Region—Summit Bank of Kansas City(2)		15,645		644		235		10						1.50	%		1.55	%
Eastern Regions Total	$	1,842,445	$	1,642,950	$	26,834	$	24,119	$	30,300	$	25,051		1.46	%		1.47	%

Loan information for Capitol's western regions, consolidated totals and footnotes relating to this table appear on the following page.

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Summary of loan information - continued:

	Total Portfolio Loans				Allowance for Loan Losses				Nonperforming Loans				Allowance as a % of Total Portfolio Loans
	2006		2005		2006		2005		2006		2005		2006			2005
Eastern Regions Total (from preceding page)	$	1,842,445	$	1,642,950	$	26,834	$	24,119	$	30,300	$	25,051		1.46	%		1.47	%
Western Regions:
Southwest Region:
1st Commerce Bank(1)		9,588				125								1.30	%
Arrowhead Community Bank		71,252		73,800		720		654		855		140		1.01	%		0.89	%
Asian Bank of Arizona(1)		14,499				200								1.38	%
Bank of Las Vegas		62,818		50,899		705		495						1.12	%		0.97	%
Bank of Tucson		160,009		143,900		1,472		1,405		199		200		0.92	%		0.98	%
Black Mountain Community Bank		127,844		103,627		1,529		1,277				131		1.20	%		1.23	%
Camelback Community Bank		78,922		73,813		733		852		46		41		0.93	%		1.15	%
Desert Community Bank		83,284		71,050		830		830		137		273		1.00	%		1.17	%
East Valley Community Bank		31,884		38,716		321		497						1.01	%		1.28	%
Fort Collins Commerce Bank(2)		52,147		22,619		695		306						1.33	%		1.35	%
Mesa Bank		157,979		125,513		1,473		1,215						0.93	%		0.97	%
Red Rock Community Bank		100,010		83,259		1,084		1,300		151		198		1.08	%		1.56	%
Southern Arizona Community Bank		77,845		76,953		775		720		16		59		1.00	%		0.94	%
Sunrise Bank of Albuquerque		53,027		53,669		778		693				300		1.47	%		1.29	%
Sunrise Bank of Arizona		112,720		101,846		1,126		1,253		246		70		1.00	%		1.23	%
Valley First Community Bank		66,256		57,794		611		526						0.92	%		0.91	%
Yuma Community Bank		58,577		50,474		500		485				27		0.85	%		0.96	%
Southwest Region Total		1,318,661		1,127,932		13,677		12,508		1,650		1,439		1.04	%		1.11	%
California Region:
Bank of Escondido		37,398		38,228		370		460		19		23		0.99	%		1.20	%
Bank of San Francisco(2)		26,415		7,291		375		102						1.42	%		1.40	%
Bank of Santa Barbara(2)		40,198		3,546		533		54						1.33	%		1.52	%
Napa Community Bank		78,467		70,359		1,020		1,237				19		1.30	%		1.76	%
Point Loma Community Bank		38,018		29,759		510		423						1.34	%		1.42	%
Sunrise Bank of San Diego		65,250		58,983		540		588				200		0.83	%		1.00	%
California Region Total		285,746		208,166		3,348		2,864		19		242		1.17	%		1.38	%
Northwest Region:
Bank of Bellevue(2)		28,037		8,327		370		120						1.32	%		1.44	%
Bank of Everett(1)		8,269				122								1.48	%
Northwest Region Total		36,306		8,327		492		120						1.36	%		1.15	%
Western Regions Total		1,640,713		1,344,425		17,517		15,492		1,669		1,681		1.07	%		1.15	%
Other, net		5,520		3,814		1,063		948		2,305
Consolidated totals	$	3,488,678	$	2,991,189	$	45,414	$	40,559	$	34,274	$	26,732		1.30	%		1.36	%

(1)	Became a Capitol affiliate in 2006 and is included for periods after addition to the Capitol banking network.
(2)	Became a Capitol affiliate in 2005 and is included for periods after addition to the Capitol banking network.

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F-20

There are several other asset categories. Loans held for sale ($34.6 million and $21.6 million at December 31, 2006 and 2005, respectively) are home mortgages which are presold to the secondary market that generally are collected in 30-60 days (discussed in more detail in the following section of this narrative). There is also a modest amount of investment securities on the balance sheet ($40.7 million and $43.7 million at December 31, 2006 and 2005, respectively). Goodwill and other intangibles increased to $62.2 million at year-end 2006, an increase of $11.8 million primarily resulting from share-exchange transactions; accounting for goodwill is described in the Critical Accounting Policies section of this narrative. All other asset categories are individually less than $65 million at December 31, 2006 and 2005.

The primary source of funding of loans is deposits, which is discussed in the next section of this narrative.

Liquidity, Capital Resources and Capital Adequacy

Asset liquidity for financial institutions typically consists of cash and cash equivalents, loans held for sale and investment securities available for sale. These categories totaled $402.4 million at year-end 2006, or about 9.9% of total assets. This compares to $353.7 million or about 10.2% of total assets at year-end 2005. Liquidity is important for financial institutions because of their need to meet loan funding commitments, depositor withdrawal requests and various other commitments discussed in the accompanying notes to consolidated financial statements. Liquidity can vary significantly on a daily basis, based on customer activity.

About half of the investment securities portfolio is classified as available for sale, although the banks generally have not sold investments to meet liquidity needs. During 2006, there were no sales of investment securities available for sale, compared with $1.8 million in 2005 and $59.6 million in 2004. Sales of investment securities available for sale in 2005 and 2004 were primarily related to changes in risk-management strategies.

Loans held for sale, as previously mentioned, approximated $34.6 million at December 31, 2006, compared to $21.6 million at year-end 2005. These loans are residential real estate mortgages originated by the banks, primarily through Capitol's mortgage affiliate, Amera Mortgage Corporation. These loans are subsequently sold into the secondary market, rather than being held in the banks' portfolios, to reduce interest rate risk. Mortgage loan origination volume in 2006 decreased 24%, to approximately $483.9 million compared to $634.4 million in 2005 and $715.2 million in 2004. The decrease in volume was primarily due to higher interest rates in 2005 and 2006 after record low interest rates, refinancing volume and home sale activity as discussed previously. Future volume will depend in large part on interest rates and the relative strength of residential real estate market conditions. Also, to the extent warranted, the banks may sell other loans from time to time.

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The primary source of funds for the banks is deposits. The banks rely upon interest-bearing time deposits as part of their funding strategy. The banks also emphasize noninterest-bearing deposits, or checking accounts, which reduce the banks' cost of funds. Noninterest-bearing deposits were about 20% of total deposits at year-end 2006 (about 21% at year-end 2005) and increased $60 million, or 10%, during the year.

In recent periods, many banks within the industry have experienced some competitive challenges in obtaining additional deposits to fuel growth. Capitol's banks have had similar experiences in their individual markets. As depositors have wider access to the Internet and other real-time interest rate monitoring resources, deposit sourcing and pricing has become more competitive. Deposit growth is achievable, but at a competitive price, with tight net interest margins, especially during periods of relatively low interest rates. As interest rates increase, customers are more attracted to competitively-priced time deposits, and growth in non-interest bearing balances is more difficult to achieve. The banks do not generally rely on brokered deposits as a key funding source (approximately $354 million at year-end 2006 or 13.6% of interest-bearing deposits compared to 10.8% in 2005); however, brokered deposits are a ready resource to help meet funding needs, such as loan commitments (which are discussed in greater detail in Note O of the consolidated financial statements), and manage interest rate risk.

To supplement their funding sources, some of the banks have lines of credit from the Federal Home Loan Bank system. At year-end 2006, a total of approximately $184 million ($173 million at year-end 2005) was borrowed under those facilities and additional borrowing availability approximated $379 million. Some of the banks also have smaller lines of credit with their correspondent banks. Borrowings under these facilities are generally at short-term market rates of interest and, although the repayment dates can be extended, are generally outstanding for brief periods of time.

Capitol has a credit facility aggregating $25 million from an unaffiliated bank. At year-end 2006 and 2005, no amounts were borrowed under this facility.

Capitol's longer-term contractual obligations are disclosed in the notes to the consolidated financial statements. Such obligations consist principally of time deposits of the banks, debt and lease obligations and trust-preferred securities, the principal amounts of which are summarized as follows (in $1,000s):

			Payments Due by Period
	Total(1)		Within 1 Year		Within 1-3 Years		Within 3-5 Years		After 5 Years
Deposits without a stated maturity	$	1,838,252	$	1,838,252
Time deposits		1,420,233		1,153,331	$	204,984	$	59,282	$	2,636
Debt obligations		191,154		125,314		33,128		32,594		118
Rent commitments under noncancelable leases		41,898		7,167		11,973		9,478		13,280
Trust-preferred securities		103,300								103,300
Total	$	3,594,837	$	3,124,064	$	250,085	$	101,354	$	119,334

   (1) Excludes interest.

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Loan commitments of Capitol's banks (stand-by letters of credit and unfunded loans) generally expire within one year. Deposit balances other than time accounts and interest payable on deposits are excluded from the table set forth on the preceding page; please refer to the later interest-rate sensitivity table regarding all deposit maturities. Other than the items set forth on the preceding page, there are no individually material contractual obligations, such as purchase obligations.

A significant source of capital has been investments made by community investors, or minority shareholders, in the subsidiaries which are consolidated for financial reporting purposes. Total minority interests in consolidated subsidiaries amounted to $126.5 million at year-end 2006, a net increase of $42.7 million from the $83.8 million level at year-end 2005. The net increase in minority interests in 2006 resulted mainly from Capitol's formation of new banks and bank-development subsidiaries.

Capitol has formed several bank-development subsidiaries, each capitalized with two classes of common stock, voting and nonvoting. All of the voting common stock (an investment of $1 million for each entity) is owned by Capitol. All of the nonvoting common stock, ranging from $9.9 million to $15.8 million for each of the bank-development companies, was sold in private offerings to accredited investors, some of whom are related parties of Capitol. These entities are engaged in bank development activities, through Capitol, either on a de novo basis or through acquisition opportunities. Each of these entities bear a similar name, Capitol Development Bancorp Limited ("CDBL"), numbered in their sequential formation, CDBL-I through CDBL-VI. CDBL-I became wholly-owned via a share-exchange with Capitol effective November 30, 2006. At December 31, 2006, Capitol had presented an exchange offer to the holders of CDBL-II's nonvoting common stock, which was approved by those shareholders and became effective February 2007; Capitol completed that share-exchange through the issuance of approximately 371,000 shares of previously unissued common stock.

Two subsidiaries became wholly-owned from share-exchange transactions completed in 2006 which resulted in the issuance of about 555,000 shares of Capitol's common stock. In these transactions, the shares acquired from the minority shareholders were exchanged for Capitol's common stock according to fixed, but differing, exchange ratios. In 2005, Capitol similarly completed three separate share-exchange transactions which resulted in the issuance of approximately 610,000 shares of Capitol's common stock.

While it is likely that similar share exchange transactions, as a strategy to gain full ownership of some majority-owned affiliates, may occur in the future, any such transactions depend upon whether Capitol offers such an exchange and whether minority shareholders vote in favor of it on a transaction-by-transaction basis.

Capitol generally adds banks on a de novo or start-up basis. Capitol does, however, consider bank acquisition opportunities, particularly when such opportunities facilitate entry into a state where Capitol did not previously have a presence. In April 2005, Capitol acquired a majority interest in Peoples State Bank located in Jeffersonville, Georgia. In April 2004, Capitol acquired First Carolina State Bank, which is located in Rocky Mount, North Carolina. The pro forma effects of these acquisitions were not significant.

F-23

Capitol's capital structure consists of these primary elements:

· Stockholders' equity

· Minority interests in consolidated subsidiaries

· Trust-preferred securities and related subordinated debentures

Total stockholders' equity approximated $361.9 million at year-end 2006, an increase of $60 million for the year. The 2006 increase in stockholders' equity includes earnings (less dividends paid), the previously-mentioned share-exchange transactions and proceeds from the issuance of common stock from the exercise of stock options. The book value per share of common stock (i.e., stockholders' equity divided by the number of common shares outstanding) was $21.73 at year-end 2006, compared with $19.13 at year-end 2005. Cash dividends per share of $0.95 were paid in 2006, compared to $0.72 in 2005 and $0.65 in 2004. In early 2007, Capitol's board of directors approved a first-quarter cash dividend of $0.25 per share. Future payment of dividends is subject to approval by Capitol's board of directors, future operating performance and management's assessment of the consolidated organization's capital adequacy.

Minority interests in consolidated subsidiaries represent the underlying noncontrolling interests in the equity of banks and bank-development subsidiaries owned by others. Those shareholders include some shareholders of Capitol; however, these equity interests are separate from their ownership of Capitol's common stock. These minority interests increase as new banks are added with investors other than Capitol, decrease when minority interests are exchanged for Capitol's common stock (and those interests then "migrate" to Capitol's stockholders' equity) and increase or decrease for the minority interests' share of their entity's income or losses.

Capitol has previously raised a total of $103.3 million of capital through issuance of trust-preferred securities. Most of these funds have been obtained through private placements of pooled trust-preferred securities. Trust-preferred securities are long-term debt obligations which are treated as elements of capital for regulatory purposes. As noted in the accompanying financial statements, the trusts relating to Capitol's trust-preferred securities are classified as debt obligations on the consolidated balance sheet.

Total capitalization at year-end 2006 amounted to $589.4 million, or 14.5% of total assets. This compares to $486.6 million, or 14% at year-end 2005.

At December 31, 2006, Capitol and its bank-development subsidiaries had $34.9 million of funds available for deployment into formation of new banks and/or other corporate purposes.

Capitol and each of its banks and bank-development subsidiaries are subject to a complex series of regulatory rules and requirements which require specific levels of capital adequacy at both the bank level and on a consolidated basis. Under those rules and regulations, banks are categorized as well capitalized, adequately capitalized or inadequately capitalized using several ratio measurements, including a risk-weighting approach to assets and financial commitments. Banks falling into the inadequately capitalized category are subject to the prompt corrective action provisions of the FDIC Improvement Act, which can result in

F-24

significant regulatory agency intervention and other adverse action. Although it is permissible to maintain capital adequacy at the adequately capitalized level, Capitol operates with the objective of its banks meeting the well capitalized standard. The well capitalized banks benefit from lower FDIC deposit insurance costs and less restrictive limitations on some banking activities.

New banks, as a condition of regulatory charter approval, are required to maintain higher ratios of capital adequacy. Generally, they are required to keep a specific ratio of capital-to-average-total-assets of not less than 8% during their first three years of operation.

In the opinion of management, Capitol and its banks met the criteria to be classified as well capitalized at year-end 2006.

Trends Affecting Operations

The most significant trends which can impact the financial condition and results of operations of financial institutions are changes in market rates of interest and changes in general economic conditions.

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F-25

Changes in interest rates, either up or down, have an impact on net interest income (plus or minus), depending upon the direction and timing of such changes. At any point in time, there is an imbalance between interest rate-sensitive assets and interest rate-sensitive liabilities. This means that when interest rates change, the timing and magnitude of the effect of such interest rate changes can alter the relationship between asset yields and the cost of funds. This timing difference between interest rate-sensitive assets and interest rate-sensitive liabilities is characterized as a "gap" which is quantified by the distribution of rate-sensitive amounts within various time periods in which they reprice or mature. The following table summarizes the consolidated financial position in relation to "gap" at December 31, 2006 (in $1,000s):

	Interest Rate Sensitivity
	0 to 3 Months			4 to 12 Months			1 to 5 Years			Over 5 Years			Total
ASSETS
Money market and interest-bearing deposits	$	17,707		$	19,101		$	396					$	37,204
Federal funds sold		141,913												141,913
Loans held for sale		34,593												34,593
Investment securities		17,937			2,068			6,926		$	13,722			40,653
Portfolio loans:
Commercial		1,280,104			251,326			1,449,943			121,752			3,103,125
Real estate mortgage		201,354			20,851			30,654			6,745			259,604
Installment		32,161			24,506			60,415			8,867			125,949
Nonearning assets														322,775
Total assets	$	1,725,769		$	317,852		$	1,548,334		$	151,086		$	4,065,816
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Time deposits under $100,000	$	123,976		$	230,873		$	103,750		$	1,605		$	460,204
Time deposits $100,000 and over		363,192			435,290			160,516			1,031			960,029
All other interest-bearing deposits		813,859			204,211			82,601			86,327			1,186,998
Total interest-bearing deposits		1,301,027			870,374			346,867			88,963			2,607,231
Notes payable and short-term borrowings		57,380			67,934			65,722			118			191,154
Trust preferred securities		48,000									55,300			103,300
Noninterest-bearing liabilities														675,740
Minority interests in consolidated subsidiaries														126,512
Stockholders' equity														361,879
Total liabilities and stockholders' equity	$	1,406,407		$	938,308		$	412,589		$	144,381		$	4,065,816
Interest rate sensitive period gap	$	319,362		$	(620,456	)	$	1,135,745		$	6,705
Interest rate sensitive cumulative gap	$	319,362		$	(301,094	)	$	834,651		$	841,356
Period rate sensitive assets/period rate sensitive liabilities		1.23			0.34			3.75			1.05
Cumulative rate sensitive assets/cumulative rate sensitive liabilities		1.23			0.87			1.30			1.29
Cumulative gap to total assets		7.85	%		(7.41	)%		20.53	%		20.69	%

F-26

The "gap" changes daily based upon changes in the underlying assets and liabilities at the banks. Analyzing exposure to interest rate risk is prone to imprecision because the "gap" is constantly changing, the "gap" differs at each of the banks and it is difficult to predict the timing, amount and direction of future changes in market interest rates and the potential corresponding effect on customers' balances and transactions.

The banks endeavor to manage and monitor interest rate risk in concert with market conditions and risk parameters. Management strives to maintain a reasonably balanced position of interest rate-sensitive assets and liabilities. Capitol and its banks have not engaged in speculative positions, for example through the use of derivatives, in anticipation of interest rate movements. In periods of relatively lower interest rates, the banks emphasize variable rate loans and time deposits to the extent possible in a competitive environment; however, competitive influences often result in making fixed rate loans, although the banks seek to limit the duration of such loans. Similarly, low interest rates generally make competition more intense for deposits, since loan demand will typically increase during periods of lower rates and, accordingly, result in higher interest costs on deposits as competitors bid-up rates, adversely impacting interest margins. Future interest rates and the impact on earnings are difficult to predict. In addition to interest rate risk relating to interest-bearing assets and liabilities, changes in interest rates also can impact future transaction volume of loans and deposits at the banks. For activities which are influenced by levels of interest rates for transaction volume (for example, origination of residential mortgage loans), pricing margins and demand can become impacted significantly by changes in interest rates.

As a means of monitoring and managing exposure to interest rate risk, management uses a computerized simulation model which is intended to estimate pro forma effects of changes in interest rates. Using the simulation model, the following table illustrates, on a consolidated basis, changes which would occur in annual levels of interest income, interest expense and net interest income (in $1,000s) assuming both one hundred and two hundred basis point ("bp") parallel increases and decreases in interest rates:

	Pro Forma Assuming No Change in Interest Rates		Pro Forma Effect of Interest Rate Increases				Pro Forma Effect of Interest Rate Decreases
			+100 bp		+200 bp		-100 bp		-200 bp
Interest income	$	308,683	$	328,927	$	349,237	$	288,704	$	268,648
Interest expense		142,855		162,108		181,260		122,872		102,888
Net interest income	$	165,828	$	166,819	$	167,977	$	165,832	$	165,760

The pro forma analysis above is intended to quantify theoretical changes in interest income based on stated assumptions. The pro forma analysis excludes the effect of numerous other variables such as borrowers' ability to repay loans, the ability of banks to obtain deposits in a radically changed interest-rate environment and how management would revise its asset and liability management priorities in concert with rate changes.

F-27

While the pro forma analysis above is intended to estimate the impact of an immediate 100 and 200 basis point change in rates, actual results will be different. Those results will differ (and may be materially different) because a sudden rate change in market rates does not result in an instantaneous parallel shift in rates on loans and deposits at banks. Further, any financial model intended to estimate the impact of interest rate changes will not necessarily incorporate other variables, including management's efforts to manage its asset and liability interest rate sensitivity, or customer behavior.

General economic conditions also have a significant impact on both the results of operations and the financial condition of financial institutions. Local economic conditions, and to some extent national economic conditions, have a significant impact on levels of loan demand as well as the ability of borrowers to repay loans timely and the availability of funds for customers to make deposits. As discussed earlier, Michigan's economic climate has been weak and is somewhat uncertain. Capitol's Michigan-based banks have minimal amounts of loans made directly to auto industry-related businesses; however, the stress of the U.S. auto industry and weaknesses in other commerce in Michigan is likely to have some adverse impact on the communities in which the banks are located. At the time this narrative was written, uncertainties of domestic economic health and global stability preclude prediction of near-term trends and their potential effects.

Bank regulatory agencies have recently issued commentary regarding asset concentrations, with particular emphasis on commercial real estate when used as collateral for loans. As discussed elsewhere, Capitol's banks intentionally seek commercial real estate as collateral when making loans because its experience suggests lower loss potential on those loans than ones merely secured by accounts receivable, inventory or equipment. Further, many of these loans at Capitol's banks are made to borrowers with owner-occupied businesses, where the real estate collateral is obtained as part of a broader collateral package for business loans, with less emphasis on loans solely dependent on speculative real estate development projects.

Continuing consolidation of the banking industry on a national basis, and in the markets of Capitol's banks, has presented opportunities for growth. As a result of consolidation of the banking industry and the handling of customer relationships as perceived 'commodities' by the larger banks, many customer relationships have been displaced, generating opportunities for cultivation by Capitol's banks, as well as opportunities for development of new banks where Capitol has not previously had banks. For many customers, banking services have become a commodity in an environment that is dominated by larger mega-bank or mass-merchandising institutions. For the professional, entrepreneur and other customers seeking a more service-oriented, customized and professional banking relationship, Capitol's banks fill that need through their focus on single-location banks with full, local decision-making authority. As Capitol's banks focus on service delivery and keeping their relative operational size at a manageable level, only a modest market share of deposits and loan activity is necessary to achieve profitability and investor-oriented earnings performance.

F-28

Start-up banks generally incur operating losses during their early periods of operation. Recently-formed start-up banks will detract from consolidated earnings performance and additional start-up banks formed in 2007 and beyond will similarly negatively impact short-term consolidated profitability. On a consolidated basis, such operating losses reduce net income by the pro rata share of Capitol's ownership percentage in those banks. Capitol reduces the net income impact of early-period losses of start-up banks through its unique ownership structure of substantially less than 100% of those banks either directly or indirectly through bank-development subsidiaries. When those banks become profitable, their operating results will contribute to consolidated earnings to the extent of Capitol's ownership percentage.

Commercial banks continue to be subject to significant regulatory requirements which impact current and future operations. In addition to the extent of regulatory interaction with financial institutions, extensive rules and regulations governing lending activities, deposit gathering and capital adequacy (to name a few), translate into a significant cost burden of financial institution regulation. Such costs include the significant amount of management time and expense which is incurred in maintaining compliance and developing systems for compliance with those rules and regulations as well as the cost of examinations, audits and other compliance activities. The future of financial institution regulation, and its costs, is uncertain and difficult to predict.

Premiums for FDIC insurance have historically been a significant cost of doing business as financial institutions, but in the last several years, deposit insurance premiums have been maintained at a stable and modest level. FDIC deposit insurance premium levels will become a more significant expense in 2007 and beyond as the FDIC imposes a risk-based matrix approach for assessment of premiums for deposit insurance.

International bank regulatory agencies are currently contemplating revisions to the existing risk-based capital adequacy framework through the Basel l-A and other proposals. As currently proposed, management does not expect those proposals to have a material impact on Capitol and its banks.

Critical Accounting Policies Affecting Capitol's Financial Statements

Note B of the notes to the consolidated financial statements is captioned Significant Accounting Policies. That disclosure spans numerous pages, all of which are deemed "significant" and are required disclosures under generally accepted accounting principles (GAAP). For purposes of this narrative, current SEC guidance requires the selection of a few of those, for discussion, as "critical accounting policies." The selection of which few will differ from company to company, even within a common industry, such as within the business of banking. Capitol considers its critical accounting policies to include the following:

Use of Estimates in Determining the Allowance for Loan Losses. Bank regulatory agencies, accounting standard setters and the SEC have all issued commentary, guidance and a variety of

F-29

rule-making releases on how financial institutions are to determine the amount of their allowance for loan losses. Some of this guidance is very recent. Determining the allowance is really a

process and methodology which is inherently subjective in how and when to recognize and record a loss allowance or 'reserve' for loans. It is not a process or methodology which can be merely reduced to a strict absolute computation, like a mathematical formula to compute taxes. The process and methodology will differ from one company to another and there is no 'one size fits all' format or approach to loss reserving. All of Capitol's banks use a consistent computational template, combined with judgmental factors unique to the loan portfolio at each bank, to determine their respective allowances for loan losses. Management believes its process and methodology for determining the allowance for loan losses is appropriate and adequate to properly estimate losses inherent in the loan portfolio at the balance-sheet date; however, actual future losses will differ from amounts considered in the allowance methodology. Further, bank regulatory agencies may have differing perspectives on the process, methodology and adequacy of the allowance for loan losses when examining the banks. The process of determining the level of the allowance for loan losses at each individual bank and on a consolidated basis requires a high degree of subjective judgment. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions. At December 31, 2006, Capitol's allowance for loan losses approximated 1.30% of portfolio loans outstanding. Based on portfolio loans outstanding at that date, any 1 basis-point (.01%) change in the allowance would have an approximate $350,000 impact on both the allowance for loan losses and income before income taxes.

Accounting for Goodwill and Other Intangibles. At December 31, 2006, Capitol had $62.2 million of intangibles on its balance sheet, which consisted principally of goodwill. Goodwill arises in acquisition accounting. In Capitol's transactions, most of this goodwill is the premium which relates to the share-exchange transactions when Capitol has issued its shares of common stock at a modest premium (usually around 50%) over the book value of the minority interest of a subsidiary bank's shares. Current accounting rules require an annual review of goodwill for potential impairment. Goodwill is reviewed for impairment by management by comparing estimated entity fair value (using bank sale transaction multiples) to net assets of the entity. If any amount of the goodwill is deemed to be impaired, such amount is to be written off in the period the determination is made. This is an area involving significant judgment. Based on management's review, no amount of goodwill was deemed to be impaired at December 31, 2006.

Accounting for Stock Options. A new accounting standard became effective for Capitol January 1, 2006, which changed its method of accounting for stock options, requiring expense recognition for share-based payments.

Like many companies, Capitol has granted stock options to its officers and directors and, as permitted under accounting rules in effect through December 31, 2005, did not require treating stock options as an element of compensation expense. This is because Capitol used the so-called intrinsic-value method for accounting for stock options, which ascribed zero value and expense to stock options at the date granted or over the life of the stock option, because Capitol's stock options have been granted with an exercise price equal to the fair

F-30

value of Capitol's common stock at the grant date. When using that method, Capitol had been required to disclose what the fair value of the stock options would be, using a valuation

model and a pro forma presentation of what compensation expense would have been recognized if Capitol used that fair value method and expensing alternative.

It is difficult to estimate what future impact the accounting rule change may have on future incentive awards, but it may result in extended vesting periods for future stock option grants, use of restricted stock awards or stock appreciation rights as a replacement of stock options in future periods or a combination of these or other long-term incentives.

While the new rules apply prospectively to stock options granted after the 2006 effective date mentioned previously, it also applies to any previously granted but unvested stock options at that effective date. No stock options were granted in 2006. Capitol accelerated the vesting of any previously unvested stock options prior to January 1, 2006, for the purpose of avoiding expense recognition, as permitted with the rule changes, relating to those stock options.

Consolidation Policy. Current accounting rules require consolidation of entities which are majority-owned or controlled by Capitol. This means that partially-owned banks and bank-development subsidiaries are combined with Capitol for financial reporting purposes along with banks and other subsidiaries which are wholly-owned. The consolidated balance sheet includes all assets and liabilities of those entities. Capitol's net income, however, only includes the entities' net income or loss to the extent of Capitol's ownership. Reported results would be materially different if Capitol had 100% ownership of those entities. Capitol has typically gained full ownership at a later date through share-exchange transactions.

New Accounting Standards

There were several new accounting standards which were issued or became effective in 2006, in addition to some which have later effective dates. They are listed and discussed in Note B of the consolidated financial statements, beginning on page F-48.

Risk Factors Affecting Capitol and its Banks

Current SEC reporting guidance suggests this narrative identify risk factors of the reporting entity in summary form. The summary below is not a complete list of all risk factors identified by management and readers are encouraged to review Capitol's other SEC filings, particularly registration statements, for a more comprehensive review of risk factors, which include the following:

· The favorable environment for formation of new banks could change adversely

· New banks, which include Capitol's younger affiliates, incur operating losses and may not contribute to consolidated earnings for a period of time

F-31

· The favorable environment which has made both capital and management talent readily available for formation of new banks could change adversely

· Changes in regulations, or regulatory action regarding Capitol or its banks could limit future expansion plans

· The consolidated allowance for loan losses is based on estimates

· Concentrations in loans secured by commercial real estate could limit or delay future expansion plans and loss estimates could change significantly if real estate market conditions deteriorate

· The complexity of Capitol's structure (a mixture of partially-owned and wholly-owned banks and related entities) complicates financial analysis

In addition to the items listed above, of course, changes in interest rates can have a pervasive impact on Capitol and its banks.

Capitol has a risk management program in place which endeavors to manage these and other risks.

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F-32

Report on Management's Assessment of

Internal Control Over Financial Reporting

Capitol Bancorp Ltd. is responsible for the preparation, integrity and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements and notes included in this annual report have been prepared in conformity with United States generally accepted accounting principles and necessarily include some amounts that are based on management's best estimates and judgments.

We, as management of Capitol Bancorp Ltd., are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Capitol's Audit Committee, consisting entirely of independent directors, meets regularly with management, internal auditors and the independent registered public accounting firm, and reviews audit plans and results, as well as management's actions taken in discharging responsibilities for accounting, financial reporting, and internal control. BDO Seidman, LLP, independent registered public accounting firm, and the internal auditors have direct and confidential access to Capitol's Audit Committee at all times to discuss the results of their examinations.

Management assessed Capitol's system of internal control over financial reporting as of December 31, 2006, in relation to criteria for effective internal control over financial reporting as described in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2006, its system of internal control over financial reporting was effective and met the criteria of the Internal Control - Integrated Framework. BDO Seidman, LLP, independent registered public accounting firm, has issued an attestation report on management's assessment of Capitol's internal control over financial reporting.

  Joseph D. Reid Chairman and CEO   Lansing, Michigan March 14, 2007 Lee W. Hendrickson Chief Financial Officer

F-33

       BDO Seidman, LLP Accountants and Consultants 99 Monroe Avenue N.W., Suite 800 Grand Rapids, Michigan 49503-2654 Telephone: (616) 774-7000 Fax: (616) 776-3680

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Capitol Bancorp Ltd.

We have audited management's assessment, included in the accompanying Report on Management's Assessment of Internal Control Over Financial Reporting, that Capitol Bancorp Ltd. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Capitol Bancorp Ltd.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Corporation's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

F-34

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that Capitol Bancorp Ltd. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also in our opinion, Capitol Bancorp Ltd. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2006, of Capitol Bancorp Ltd. and subsidiaries and our report dated March 14, 2007 expressed an unqualified opinion thereon.

Grand Rapids, Michigan

March 14, 2007

F-35

  BDO Seidman, LLP Accountants and Consultants 99 Monroe Avenue N.W., Suite 800 Grand Rapids, Michigan 49503-2654 Telephone: (616) 774-7000 Fax: (616) 776-3680

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Capitol Bancorp Ltd.

We have audited the accompanying consolidated balance sheets of Capitol Bancorp Ltd. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capitol Bancorp Ltd. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Capitol Bancorp Ltd. and subsidiaries' internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 14, 2007 expressed an unqualified opinion thereon.

Grand Rapids, Michigan

March 14, 2007

F-36

Consolidated Balance Sheets

	-December 31-
	2006			2005
	(in $1,000s)
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 sale	34,593			21,638
Investment securities—Note C:
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, less allowance for loan losses of $45,414 in 2006 and $40,559 in 2005—Note D		3,443,264			2,950,630
Premises and equipment—Note F		54,295			41,629
Accrued interest income		17,524			13,719
Goodwill and other intangibles—Notes B and R		62,215			50,378
Other assets		64,402			47,945
TOTAL ASSETS	$	4,065,816		$	3,475,721
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing	$	651,253		$	591,229
Interest-bearing—Note G		2,607,232			2,194,030
Total deposits		3,258,485			2,785,259
Debt obligations:
Notes payable and short-term borrowings—Note H		191,154			175,729
Subordinated debentures—Note I		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—Note A		126,512			83,838
STOCKHOLDERS' EQUITY—Notes B, J and P
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/loss)		(144	)		(226	)
Total stockholders' equity		361,879			301,866
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,065,816		$	3,475,721

See notes to consolidated financial statements.

F-37

Consolidated Statements of Income

		-Year Ended December 31-
	2006		2005		2004
		(in $1,000s except per share data)
Interest income:
Portfolio loans (including fees)	$	264,701	$	214,882	$	173,376
Loans held for sale		2,740		2,627		2,150
Taxable investment securities		956		1,008		1,331
Federal funds sold		8,703		4,734		1,620
Other		2,253		1,188		612
Total interest income		279,353		224,439		179,089
Interest expense:
Deposits		88,629		53,213		36,695
Debt obligations and other		16,957		14,366		10,801
Total interest expense		105,586		67,579		47,496
Net interest income		173,767		156,860		131,593
Provision for loan losses—Note D		12,156		10,960		12,708
Net interest income after provision for loan losses		161,611		145,900		118,885
Noninterest income:
Service charges on deposit accounts		4,318		4,120		4,381
Trust and wealth-management revenue		3,336		2,069		3,456
Fees from origination of non-portfolio residential mortgage loans		5,439		6,146		5,581
Gains on sale of government-guaranteed loans		2,434		2,980		3,778
Realized gains (losses) on sales of investment securities available for sale				8		(603	)
Other		6,005		5,725		2,659
Total noninterest income		21,532		21,048		19,252
Noninterest expense:
Salaries and employee benefits		85,196		72,387		63,281
Occupancy		12,116		9,735		8,791
Equipment rent, depreciation and maintenance		8,389		6,369		5,494
Other		32,103		28,798		20,221
Total noninterest expense		137,804		117,289		97,787
Income before income taxes and minority interest		45,339		49,659		40,350
Income taxes—Note L		15,463		19,232		14,699
Income before minority interest		29,876		30,427		25,651
Minority interest in net losses of consolidated subsidiaries		12,515		5,498		1,065
NET INCOME	$	42,391	$	35,925	$	26,716
NET INCOME PER SHARE—Note M:
Basic	$	2.69	$	2.42	$	1.88
Diluted	$	2.57	$	2.34	$	1.79

 See notes to consolidated financial statements.

F-38

Consolidated Statements of Changes in Stockholders' Equity (in $1,000s, except share and per-share data)

	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances at January 1, 2004	$	175,962	$	43,135		$	(200	)	$	218,897
Issuance of 183,349 shares of common stock in conjunction with acquisition of First Carolina State Bank		4,970								4,970
Issuance of 346,947 shares of common stock to acquire minority interests in subsidiaries		8,665								8,665
Issuance of 257,409 shares of common stock upon exercise of stock options, net of common stock surrendered to facilitate exercise		1,302								1,302
Issuance of 13,063 unvested shares of restricted common stock, net of related unearned employee compensation		--								--
Recognition of compensation expense relating to restricted common stock of $1,168 and other		820								820
Cash dividends paid ($0.65 per share)				(9,375	)					(9,375	)
Components of comprehensive income:
Net income for 2004				26,716						26,716
Market value adjustment for investment securities available for sale (net of income tax effect)							164			164
Comprehensive income for 2004										26,880
BALANCES AT DECEMBER 31, 2004		191,719		60,476			(36	)		252,159
Issuance of 610,383 shares of common stock to acquire minority interests in subsidiaries		20,136								20,136
Issuance of 337,059 shares of common stock upon exercise of stock options, net of common stock surrendered to facilitate exercise		2,510								2,510
Recognition of compensation expense relating to restricted common stock of $1,242 and other		1,590								1,590
Issuance of shares to ESOP		584								584
Cash dividends paid ($0.72 per share)				(10,848	)					(10,848	)
Components of comprehensive income:
Net income for 2005				35,925						35,925
Market value adjustment for investment securities available for sale (net of income tax effect)							(190	)		(190	)
Comprehensive income for 2005										35,735
BALANCES AT DECEMBER 31, 2005		216,539		85,553			(226	)		301,866
Issuance of 555,280 shares of common stock to acquire minority interest in subsidiaries		24,962								24,962
Issuance of 244,259 shares of common stock upon exercise of stock options, net of common stock surrendered to facilitate exercise		3,573								3,573
Issuance of 80,750 unvested shares of restricted common stock, net of related unearned employee compensation		--								--
Recognition of compensation expense relating to restricted common stock		1,689								1,689
Tax benefit from share-based payments		2,481								2,481
Cash dividends paid ($0.95 per share)				(15,165	)					(15,165	)
Components of comprehensive income:
Net income for 2006				42,391						42,391
Market value adjustment for investment securities available for sale (net of income tax effect)							82			82
Comprehensive income for 2006										42,473
BALANCES AT DECEMBER 31, 2006	$	249,244	$	112,779		$	(144	)	$	361,879

See notes to consolidated financial statements.

F-39

Consolidated Statements of Cash Flows

	-Year Ended December 31-
	2006			2005			2004
	(in $1,000s)
OPERATING ACTIVITIES
Net income	$	42,391		$	35,925		$	26,716
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		12,156			10,960			12,708
Depreciation of premises and equipment		7,219			5,661			4,881
Amortization of intangibles		585			577			549
Net amortization (accretion) of investment security premiums (discounts)		(8	)		63			87
Loss on sales of premises and equipment		18			157			111
Minority interest in net losses of consolidated subsidiaries		(12,515	)		(5,498	)		(1,065	)
Compensation expense relating to restricted common stock		1,689			1,242			1,168
Deferred federal income tax credit		(5,493	)		(5,263	)		(2,282	)
Originations and purchases of loans held for sale		(483,850	)		(634,362	)		(715,238	)
Proceeds from sales of loans held for sale		470,895			655,867			715,096
Increase in accrued interest income and other assets		(17,504	)		(15,815	)		(5,475	)
Increase (decrease) in accrued interest expense on deposits and other liabilities		(1,338	)		11,801			347
NET CASH PROVIDED BY OPERATING ACTIVITES		14,245			61,315			37,603
INVESTING ACTIVITIES
Cash and cash equivalents of acquired subsidiary					3,557			4,202
Proceeds from sales of investment securities available for sale					1,756			59,574
Proceeds from calls, prepayments and maturities of investment securities		14,266			11,249			18,254
Purchases of investment securities		(9,347	)		(14,667	)		(19,736	)
Net increase in portfolio loans		(504,790	)		(306,258	)		(403,358	)
Proceeds from sales of premises and equipment		708			93			23
Purchases of premises and equipment		(20,611	)		(14,879	)		(11,139	)
NET CASH USED BY INVESTING ACTIVITIES		(519,774	)		(319,149	)		(352,180	)
FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings accounts		134,250			85,385			151,512
Net increase in certificates of deposit		338,976			189,802			16,354
Net borrowings from debt obligations		15,425			3,195			77,900
Net proceeds from issuance of subordinated debentures								9,935
Resources provided by minority interests		68,751			62,794			14,778
Net proceeds from issuance of common stock		3,573			2,510			954
Tax benefit from share-based payments		2,481
Cash dividends paid		(15,165	)		(10,848	)		(9,375	)
NET INCREASE PROVIDED BY FINANCING ACTIVITIES		548,291			332,838			262,058
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		42,762			75,004			(52,519	)
Cash and cash equivalents at beginning of year		306,108			231,104			283,623
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	348,870		$	306,108		$	231,104
See notes to consolidated financial statements.

F-40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND

PRINCIPLES OF CONSOLIDATION

Capitol Bancorp Limited ("Capitol" or the "Corporation") is a multibank holding company. Consolidated bank subsidiaries located in the Eastern Regions consist of the following:

Affiliate	Location	Percentage Owned at December 31, 2006	Year Formed or Acquired
Eastern Regions
Great Lakes Region:
Ann Arbor Commerce Bank	Ann Arbor, Michigan	100%	1990
Bank of Auburn Hills	Auburn Hills, Michigan	(1)	2005
Bank of Belleville	Belleville, Illinois	(1)	2005
Bank of Maumee	Maumee, Ohio	(1)	2006
Bank of Michigan	Farmington Hills, Michigan	(1)	2005
Brighton Commerce Bank	Brighton, Michigan	100%	1997
Capitol National Bank	Lansing, Michigan	100%	1982
Detroit Commerce Bank	Detroit, Michigan	100%	1998
Elkhart Community Bank	Elkhart, Indiana	100%	1999
Evansville Commerce Bank	Evansville, Indiana	(1)	2006
Goshen Community Bank	Goshen, Indiana	100%	2000
Grand Haven Bank	Grand Haven, Michigan	100%	1995
Kent Commerce Bank	Grand Rapids, Michigan	100%	1998
Macomb Community Bank	Clinton Township, Michigan	100%	1996
Muskegon Commerce Bank	Muskegon, Michigan	100%	1997
Oakland Commerce Bank	Farmington Hills, Michigan	100%	1992
Ohio Commerce Bank	Beachwood, Ohio	(1)	2006
Paragon Bank & Trust	Holland, Michigan	100%	1994
Portage Commerce Bank	Portage, Michigan	100%	1988
Midwest Region - Summit Bank of Kansas City	Lee's Summit, Missouri	(1)	2005
Southeast Region:
Bank of Valdosta	Valdosta, Georgia	(1)	2006
Community Bank of Rowan	Salisbury, North Carolina	(1)	2006
First Carolina State Bank	Rocky Mount, North Carolina	100%	2004
Peoples State Bank	Jeffersonville, Georgia	100%	2005
Sunrise Bank of Atlanta	Atlanta, Georgia	(1)	2006

(1) Majority-owned by a bank development subsidiary in which Capitol has a controlling interest.

Consolidated bank subsidiaries located in the Western Regions appear on the following page.

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F-41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND

PRINCIPLES OF CONSOLIDATION—Continued

Consolidated bank subsidiaries - continued:

Affiliate	Location	Percentage Owned at December 31, 2006	Year Formed or Acquired
Western Regions
Southwest Region:
1st Commerce Bank	North Las Vegas, Nevada	(1)	2006
Arrowhead Community Bank	Glendale, Arizona	100%	2000
Asian Bank of Arizona	Phoenix, Arizona	(1)	2006
Bank of Las Vegas	Las Vegas, Nevada	100%	2002
Bank of Tucson	Tucson, Arizona	100%	1996
Black Mountain Community Bank	Henderson, Nevada	100%	2000
Camelback Community Bank	Phoenix, Arizona	100%	1998
Desert Community Bank	Las Vegas, Nevada	100%	1999
East Valley Community Bank	Chandler, Arizona	100%	1999
Fort Collins Commerce Bank	Fort Collins, Colorado	51%	2005
Mesa Bank	Mesa, Arizona	100%	1998
Red Rock Community Bank	Las Vegas, Nevada	100%	1999
Southern Arizona Community Bank	Tucson, Arizona	100%	1998
Sunrise Bank of Albuquerque	Albuquerque, New Mexico	100%	2000
Sunrise Bank of Arizona	Phoenix, Arizona	100%	1998
Valley First Community Bank	Scottsdale, Arizona	100%	1997
Yuma Community Bank	Yuma, Arizona	100%	2000
California Region:
Bank of Escondido	Escondido, California	100%	2003
Bank of San Francisco	San Francisco, California	51%	2005
Bank of Santa Barbara	Santa Barbara, California	(1)	2005
Napa Community Bank	Napa, California	87%	2002
Point Loma Community Bank	Point Loma, California	51%	2004
Sunrise Bank of San Diego	San Diego, California	100%	2001
Northwest Region:
Bank of Bellevue	Bellevue, Washington	(1)	2005
Bank of Everett	Everett, Washington	(1)	2006

(1) Majority-owned by a bank development subsidiary in which Capitol has a controlling interest.

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F-42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND

PRINCIPLES OF CONSOLIDATION—Continued

Capitol has formed several bank-development subsidiaries, each capitalized with two classes of common stock, voting and nonvoting. All of the voting common stock (an aggregate investment of $1 million for each entity) is owned by Capitol. All of the nonvoting common stock, ranging from $9.9 million to $15.8 million for each of the bank-development companies, was sold in private offerings to accredited investors, some of whom are related parties of Capitol. These entities are engaged in bank development activities, through Capitol, either on a de novo basis or through acquisition opportunities. Each of these entities bear a similar name, Capitol Development Bancorp Limited ("CDBL"), numbered in their sequential formation, CDBL-I through CDBL-VI. CDBL-I became wholly-owned by Capitol effective November 30, 2006 (see Note R).

Capitol views itself as a bank-development company. It is engaged in the formation of de novo banks through majority ownership made directly by Capitol, or through a subsidiary bank-development company, with the remainder of a bank's start-up capital provided by local investors in the community of that bank. When a de novo bank reaches a point of development near its third year of operation, Capitol has typically offered the bank's minority shareholders an opportunity to exchange their bank shares for shares of Capitol's common stock. Capitol has made similar exchange proposals regarding the minority interests of some of its prior bank-development company subsidiaries which, after the share exchange, were merged with and into Capitol. In each instance, however, Capitol is under no obligation to offer such a share exchange and such share exchange proposals are generally subject to approval by the minority shareholders in each proposed transaction. Capitol also pursues bank-development activities through exploring acquisition opportunities.

Capitol and its subsidiaries are engaged in a single business activity--banking. Capitol's bank affiliates provide a full range of banking services to individuals, businesses and other customers located in the respective communities of the bank. Many of the banks operate from a single location and all are commercially-focused (as contrasted to retail or transaction-oriented banks) on meeting the various credit and other financial needs of entrepreneurs, professionals and other businesses and individuals. A variety of deposit products are offered, including checking, savings, money market, certificates of deposit and individual retirement accounts. In addition, trust and investment services are offered through Paragon Bank & Trust. In late 2005, a wealth management subsidiary was established to pursue and deliver wealth management services to Capitol's banks. The principal markets for the banks' financial services are the communities in which the banks are located and the areas immediately surrounding those communities. In addition to commercial banking units, mortgage banking activities are offered through Amera Mortgage Corporation, a less than 50%-owned affiliate, which is accounted for under the equity method.

F-43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND

PRINCIPLES OF CONSOLIDATION—Continued

Each bank is viewed by management as being a separately identifiable business or segment from the perspective of monitoring performance and allocation of financial resources. Although the banks operate independently and are managed and monitored separately, each bank is substantially similar in terms of business focus, type of customers, products, services and economic characteristics. Further, each of the banks and the Corporation are subject to substantially similar laws and regulations unique to the banking industry. Accordingly, the Corporation's consolidated financial statements reflect the presentation of segment information on an aggregated basis.

The consolidated financial statements include the accounts of the Corporation and its majority-owned and/or controlled subsidiaries, after elimination of intercompany accounts and transactions, and after giving effect to applicable minority interests. Banks formed or acquired during 2004, 2005 and 2006 are included in the consolidated financial statements for periods after joining the consolidated group. Certain 2005 and 2004 amounts have been reclassified to conform to the 2006 presentation.

NOTE B—SIGNIFICANT ACCOUNTING POLICIES

Estimates: The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results will differ from those estimates because of the inherent subjectivity and inaccuracy of any estimation.

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, amounts due from banks (interest-bearing and noninterest-bearing), money-market funds and federal funds sold. Generally, federal funds transactions are entered into for a one-day period.

Loans Held For Sale: Loans held for sale represent residential real estate mortgage loans held for sale into the secondary market. Loans held for sale are stated at the aggregate lower of cost or market. Fees from the origination of loans held for sale are recognized in the period the loans are originated.

F-44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

Investment Securities: Investment securities available for sale (generally most debt investment securities of Capitol's banks) are carried at market value with unrealized gains and losses reported as a separate component of stockholders' equity, net of tax effect (accumulated other comprehensive income). All other investment securities are classified as held for long-term investment and are carried at amortized cost which approximates market value (see Note C).

Investments are classified at the date of purchase based on management's analysis of liquidity and other factors. The adjusted cost of the specific securities sold is used to compute realized gains or losses. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.

Loans, Credit Risk and Allowance for Loan Losses: Portfolio loans are carried at their principal balance based on management's intent and ability to hold such loans for the foreseeable future until maturity or repayment.

Credit risk arises from making loans and loan commitments in the ordinary course of business. Substantially all portfolio loans are made to borrowers in the banks' geographic areas. Consistent with the banks' emphasis on business lending, there are concentrations of credit in loans secured by commercial real estate and less significant concentrations exist in loans secured by equipment and other business assets. The maximum potential credit risk to Capitol, without regard to underlying collateral and guarantees, is the total of loans and loan commitments outstanding. Management reduces Capitol's exposure to losses from credit risk by requiring collateral and/or guarantees for loans granted and by monitoring concentrations of credit, in addition to recording provisions for loan losses and maintaining an allowance for loan losses.

The allowance for loan losses is maintained at a level believed adequate by management to absorb estimated losses inherent in the portfolio at the balance sheet date. Management's determination of the adequacy of the allowance is an estimate based on evaluation of the portfolio (including potential impairment of individual loans and concentrations of credit), past loss experience, current economic conditions, volume, amount and composition of the loan portfolio, loan commitments outstanding and other factors. The allowance is increased by provisions charged to operations and reduced by net charge-offs.

Capitol has stand-by letters of credit outstanding that, when issued, commit the banks to make payments on behalf of customers if certain specified future events occur, generally being non-payment by the customer. These obligations generally expire within one year and require collateral and/or personal guarantees based on management's credit assessment. The

F-45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

maximum credit risk associated with these instruments equals their contractual amounts, assuming that the counterparty defaults and the collateral proves to be worthless. The total contractual amounts do not necessarily represent future cash requirements since many of these guarantees may expire without being drawn upon. Capitol records a liability, generally equal to the fees received, for these stand-by letters of credit.

Credit risk also arises from amounts of funds on deposit at other financial institutions (i.e., due from banks) to the extent balances exceed the limits of federal deposit insurance. Capitol monitors the financial position of such financial institutions to evaluate credit risk periodically.

Interest and Fees on Loans: Interest income on loans is recognized based upon the principal balance of loans outstanding. Direct costs of successful origination of portfolio loans generally exceed fees from loan originations (approximately $8.1 million of net deferred costs as of December 31, 2006). The fourth quarter of 2006 was favorably impacted by year-end adjustments, primarily driven by loan fees, approximating $1.3 million net of income taxes.

The accrual of interest is generally discontinued when a loan becomes 90 days past due as to interest. When interest accruals are discontinued, interest previously accrued (but unpaid) is reversed. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal balance and accrued interest and the loan is in process of collection.

Premises and Equipment: Premises and equipment are stated on the basis of cost. Depreciation, which relates primarily to equipment, furniture and software with estimated useful lives of approximately three to seven years, is computed principally by the straight-line method. Buildings are generally depreciated on a straight-line basis with estimated useful lives of approximately 40 years. Leasehold improvements are generally depreciated over the shorter of the respective lease term or estimated useful life.

Goodwill and Other Intangibles: Goodwill is reviewed annually by management for impairment by comparing estimated entity fair value to net assets of the entity. This review is performed at the applicable subsidiary reporting-unit level which has recorded goodwill resulting from specific share-exchange transactions (see Note R) or acquisitions. Impairment adjustments of goodwill (none through December 31, 2006) are charged against earnings, when determined. Other intangibles, which generally consist of core deposit intangibles, are amortized over varying periods of 5 years or less and are not material.

Other Real Estate: Other real estate (included as a component of other assets and which, at December 31, 2006 and 2005, approximated $9.5 million and $3.7 million, respectively) comprises properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. These properties held for sale are carried at the lower of cost or estimated

F-46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

fair value (net of estimated selling cost) at the date acquired and are periodically reviewed for subsequent changes in fair value.

Stock-Based Compensation: No stock-based compensation expense has been recorded upon granting of options to acquire common stock through December 31, 2006, because such stock options were accounted for under the provisions of Accounting Principles Board (APB) Opinion 25 (and related interpretations), when applicable, and were granted at an exercise price equal to the market price of common stock at grant date (such stock options were granted prior to 2006 and became fully vested at December 31, 2005 in advance of a new accounting standard applicable to stock options). Stock options state a specific exercise price and expiration date and may be exercised by the optionee upon payment of the exercise price and related taxes due from the optionee; the Corporation, in its discretion, may permit cashless exercises of stock options. Generally, previously unissued shares of common stock are issued upon exercise of stock options. Compensation expense for awards of restricted stock is recognized ratably over the vesting periods of such awards (generally ranging from four years to fifteen years), based on the fair value of the common stock on the date of grant.

Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, requires the fair value method of accounting for stock options whereby compensation expense will be recognized based on the computed fair value of the options on the grant date for stock options granted on or after the effective date of the standard, January 1, 2006. Certain pro forma disclosures of the expense recognition provisions of Statement No. 123(R) are required for periods prior to implementation of the standard for companies, such as Capitol, which used the intrinsic-value method for accounting for stock options, and are as follows for the years ended December 31, 2005 and 2004:

	2005		2004
Fair value assumptions:
Risk-free interest rate		4.2%		3.9%
Dividend yield		2.0%		2.3%
Stock price volatility		.30		.25
Expected option life		6.8 years		6.7 years
Aggregate estimated fair value of options granted (in thousands)	$	9,373	$	6,581
Net income (in thousands):
As reported		35,925		26,716
Pro forma		29,833		21,450
Net income per share:
Basic:
As reported		2.42		1.88
Pro forma		2.01		1.51
Diluted:
As reported		2.34		1.79
Pro forma	$	1.94	$	1.44

F-47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

Stock price volatility used in the valuation model was based on historical volatility. The risk-free interest rate was based on the yield of U.S. government securities with a maturity date that coincides with the expected option life. The expected option life was estimated based on past exercise behavior of optionees and the related option term.

Trust Assets and Related Income: Customer property, other than funds on deposit, held in a fiduciary or agency capacity by Capitol's banks is not included in the consolidated balance sheet because it is not an asset of the banks or Capitol. Trust and wealth management revenue are recorded on the accrual method.

Federal Income Taxes: Capitol and subsidiaries owned 80% or more by Capitol file a consolidated federal income tax return. Deferred federal income taxes are recognized for the tax consequences of temporary differences by applying enacted tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred income taxes of a change in tax laws or rates is recognized in income in the period that includes the enactment date.

Comprehensive Income: Comprehensive income is the sum of net income and certain other items which are charged or credited to stockholders' equity. For the periods presented, Capitol's only element of comprehensive income other than net income was the net change in the market value adjustment for investment securities available for sale. Accordingly, the elements and total of comprehensive income are shown within the statement of changes in stockholders' equity presented herein.

New Accounting Standards: On January 1, 2006, Financial Accounting Standards Board (FASB) Statement No. 123(R), Share-Based Payment, became effective for Capitol. It makes significant changes to accounting for "payments" involving employee compensation and "shares" or securities, in the form of stock options, restricted stock or other arrangements settled in the reporting entity's securities. Most significant in the standard is the requirement that all stock options subject to Statement No. 123(R) be measured at estimated fair value at the grant date and recorded as compensation expense over the requisite service period associated with the option, usually the vesting period. The standard has been applied at Capitol using the modified-prospective method to stock options granted or modified after December 31, 2005 and any unvested stock options at that date. Capitol had no unvested stock options outstanding at December 31, 2005.

The primary effect of the revised standard's implementation on Capitol was recognition of compensation expense associated with stock options granted after December 31, 2005 (none were granted in 2006). Previously, Capitol used the intrinsic-value method which did not result in expense recognition but, instead, required pro forma presentation of what compensation expense would have been recorded if the fair-value measurement and expense recognition provisions had been applied. An additional change in accounting resulting from the implementation of Statement No. 123(R) is the reclassification of unvested restricted

F-48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

stock to the common stock account on Capitol's balance sheet at January 1, 2006; such reclassification has also been reflected in the accompanying consolidated balance sheet as of December 31, 2005.

In late 2005, the FASB's staff issued Staff Position (FSP) 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. This FSP provides additional guidance on when an investment in a debt or equity security should be considered impaired and when that impairment should be considered other-than-temporary and recognized as a loss. Additionally, the FSP requires certain disclosures about unrealized losses which have not been recognized as other-than-temporary. The effect of this guidance did not have a material effect on Capitol's consolidated financial statements upon implementation on January 1, 2006.

In March 2006, the FASB issued Statement No. 156, Accounting for Servicing of Financial Assets, which is an amendment of Statement No. 140, intended to simplify the accounting for servicing assets and liabilities, such as those common with mortgage securitization activities. Statement No. 156 is effective for years beginning after September 15, 2006, although earlier adoption is permitted. The effect of the standard's adoption is not expected to be material upon implementation on January 1, 2007.

In July 2006, the FASB issued Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with Statement No. 109, "Accounting for Income Taxes." FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present and disclose in their financial statements uncertain tax positions taken or expected to be taken in a tax return. Under FIN 48, tax positions are recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions will be measured initially and thereafter as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement, presuming the tax authority has full knowledge of the position and all relevant facts. FIN 48 also revises disclosure requirements to include disclosure of unrecognized tax benefits. The provisions of this interpretation are required to be adopted for fiscal periods beginning after December 15, 2006. Companies are required to apply the provisions of FIN 48 to all tax positions upon initial adoption with any amounts relating to prior periods recorded as an adjustment to retained earnings. Capitol's management has, based on its preliminary review of the new guidance, estimated that the effect of adoption of FIN 48 will not be material to Capitol's consolidated financial statements.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements, which provides a definition of fair value for accounting purposes, establishes a framework for measuring fair value, expands related financial statement disclosures and will be effective for Capitol in 2008. Capitol's management has not completed its review of this new standard.

F-49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (SAB No. 108) on quantifying financial statement misstatements. In summary, SAB No. 108 was issued to address the diversity in practice of evaluating and quantifying financial statement misstatements and the related accumulation of such misstatements. SAB No. 108 states that both a balance sheet approach and an income statement approach should be used when quantifying and evaluating the materiality of a potential misstatement and contains guidance for correcting errors under this dual perspective. SAB No. 108 became effective for Capitol's financial statements for the year ended December 31, 2006. The adoption of SAB No. 108 did not have a significant impact on Capitol's consolidated financial statements.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected are required to be reported in earnings at each reporting date. Statement No. 159 will be applied prospectively and implemented by Capitol effective January 1, 2008. Management has not completed its analysis of this new standard.

Also recently, the FASB has issued several proposals to amend, supersede or interpret existing accounting standards which may impact Capitol's financial statements at a later date:

· 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.

Other proposals, interpretations of existing pronouncements or FASB staff positions have recently been issued which include the following:

· FASB FSP to require recalculation of leveraged leases if the timing of tax benefits affects cash flows;  

· EITF Issue No. 06-4 which addresses accounting for deferred compensation and post retirement benefits of endorsement split-dollar life insurance; and

F-50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

· EITF Issue No. 06-5 which encompasses accounting for purchases of life insurance and the ramifications of determining the amount that could be realized in accordance with FASB Technical Bulletin 84-4.

Capitol's management has not completed its analysis of this new guidance (as proposed, where applicable) although it anticipates the potential impact (if finalized, where applicable) would not be material to Capitol's consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to Capitol's consolidated financial statements.

NOTE C—INVESTMENT SECURITIES

Investment securities consisted of the following at December 31 (in $1,000s):

	2006				2005
	Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
Available for sale:
United States government agency securities	$	13,403	$	13,285	$	23,276	$	23,022
Mortgage backed securities		4,089		3,991		2,430		2,348
Municipals		1,630		1,628		568		559
		19,122		18,904		26,274		25,929
Held for long-term investment:
Federal Reserve Bank stock		864		864		536		536
Federal Home Loan Bank stock		14,148		14,148		12,960		12,960
Mortgage backed securities		--		--		7		7
Municipals		--		--		1,072		1,072
Corporate stock		4,419		4,419		1,835		1,835
Other		2,318		2,318		1,335		1,335
		21,749		21,749		17,745		17,745
	$	40,871	$	40,653	$	44,019	$	43,674

At December 31, 2006, securities with a market value approximating $10 million were pledged to secure public and trust deposits and for other purposes as required by law. Investments in Federal Reserve Bank stock and Federal Home Loan Bank stock are restricted and may only be resold to, or redeemed by, the issuer.

F-51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE C—INVESTMENT SECURITIES—Continued

Gross unrealized gains and losses on investment securities available for sale were as follows at December 31 (in $1,000s):

	2006				2005
	Gains		Losses		Gains		Losses
United States government agency securities	$	--	$	118	$	35	$	289
Mortgage backed securities		13		111		--		82
Municipals		11		13		4		13
	$	24	$	242	$	39	$	384

The age of gross unrealized losses and carrying value (at estimated market value) of securities available for sale are summarized below (in $1,000s):

	2006				2005
	Unrealized Loss		Carrying Value		Unrealized Loss		Carrying Value
One year or less:
United States government agency securities	$	7	$	3,488	$	129	$	8,744
Mortgage backed securities		--		--		82		2,340
Municipals		--		--		13		242
	$	7	$	3,488	$	224	$	11,326
In excess of one year:
United States government agency securities	$	111	$	9,297	$	160	$	12,595
Mortgage backed securities		111		3,444		--		--
Municipals		13		231		--		--
		235		12,972		160		12,595
	$	242	$	16,460	$	384	$	23,921

Management does not believe any individual unrealized loss as of December 31, 2006 represents other-than-temporary losses (primarily due to such amounts being attributable to changes in interest rates) and has both the intent and ability to hold these securities for a time period necessary to recover the amortized cost.

Gross realized gains and losses from sales and maturities of investment securities were insignificant for each of the periods presented.

F-52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE C—INVESTMENT SECURITIES—Continued

Scheduled maturities of investment securities held as of December 31, 2006 were as follows (in $1,000s):

	Amortized Cost		Estimated Market Value
Due in one year or less	$	5,243	$	5,222
After one year, through five years		6,677		6,612
After five years, through ten years		3,961		3,900
After ten years		3,241		3,170
Securities held for long-term investment, without standard maturities		21,749		21,749
	$	40,871	$	40,653

NOTE D—LOANS

Portfolio loans consisted of the following at December 31 (in $1,000s):

	2006			2005
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

Loans serviced for the benefit of others, which are not recorded on the consolidated balance sheet, approximated $92 million and $77 million at December 31, 2006 and 2005, respectively.

Transactions in the allowance for loan losses are summarized below (in $1,000s):

	2006			2005			2004
Balance at January 1	$	40,559		$	37,572		$	31,404
Allowance for loan losses of acquired bank subsidiary		--			--			724
Provision charged to operations		12,156			10,960			12,708
Loans charged off (deduction)		(8,699	)		(9,643	)		(8,388	)
Recoveries		1,398			1,670			1,124
Net charge-offs		(7,301	)		(7,973	)		(7,264	)
Balance at December 31	$	45,414		$	40,559		$	37,572

Impaired loans (i.e., loans for which there is a reasonable probability that borrowers would be unable to repay all principal and interest due under the contractual terms of the loan documents), which are a subset of nonperforming loans, were not material.

F-53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE D—LOANS—Continued

Nonperforming loans (i.e., loans which are 90 days or more past due and loans on nonaccrual status) are summarized below (in $1,000s):

	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

If nonperforming loans had performed in accordance with their contractual terms during the year, additional interest income of $2.3 million, $1.9 million and $1.6 million would have been recorded in 2006, 2005 and 2004, respectively. Interest income recognized on loans in nonaccrual status in 2006, 2005 and 2004 operations approximated $888,000, $845,000 and $714,000, respectively. At December 31, 2006, there were no material amounts of loans which were restructured or otherwise renegotiated as a concession to troubled borrowers.

The amounts of the allowance for loan losses allocated in the following table (in $1,000s) are based on management's estimate of losses inherent in the portfolio at the balance sheet date, and should not be interpreted as an indication of future charge-offs:

	December 31, 2006					December 31, 2005
	Amount		Percentage of Total Portfolio Loans			Amount		Percentage of Total Portfolio Loans
Commercial	$	41,178		1.18	%	$	37,498		1.26	%
Real estate mortgage		2,675		0.08			1,866		0.06
Installment		1,561		0.04			1,195		0.04
Total allowance for loan losses	$	45,414		1.30	%	$	40,559		1.36	%

F-54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE E—RELATED PARTIES TRANSACTIONS

In the ordinary course of business, Capitol's banking subsidiaries make loans to officers and directors of Capitol and its subsidiaries including their immediate families and companies in which they are principal owners. At December 31, 2006 and 2005, total loans to these persons were $131 million and $123 million, respectively. During 2006, $127 million of new loans were made to these persons and repayments totaled $119 million. Such loans are made at the banking subsidiaries' normal credit terms.

Officers and directors of Capitol (and their associates, family and/or affiliates) are also depositors of the banking subsidiaries. Such deposits, which approximated $171 million at December 31, 2006, are accepted based upon the banks' normal terms as to interest rate, term and deposit insurance.

NOTE F—PREMISES AND EQUIPMENT

Major classes of premises and equipment consisted of the following at December 31 (in $1,000s):

	2006			2005
Land, buildings and improvements	$	19,891		$	16,551
Leasehold improvements		19,483			14,631
Equipment, furniture and software		45,734			35,875
		85,108			67,057
Less accumulated depreciation		(30,813	)		(25,428	)
	$	54,295		$	41,629

Capitol and certain subsidiaries rent office space under operating leases. Rent expense (net of sublease income) under these lease agreements approximated $7.6 million, $6.2 million and $5.9 million, respectively (including rent expense approximating $1.5 million in 2006 and $1.7 million in 2005 and 2004 under leases with related parties).

At December 31, 2006, future minimum rental payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year were as follows (in $1,000s):

2007	$	7,167
2008		6,406
2009		5,567
2010		4,895
2011		4,583
2012 and thereafter		13,280
	$	41,898

F-55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE G—DEPOSITS

The aggregate amount of time deposits of $100,000 or more approximated $960 million and $702.9 million as of December 31, 2006 and 2005, respectively.

At December 31, 2006, the scheduled maturities of time deposits were as follows (in $1,000s):

2007	$	1,153,331
2008		154,753
2009		50,231
2010		28,417
2011		30,865
2012 and thereafter		2,636
	$	1,420,233

Interest paid approximates amounts charged to operations on an accrual basis for the periods presented.

NOTE H—NOTES PAYABLE AND SHORT-TERM BORROWINGS

Notes payable and short-term borrowings consisted of the following at December 31 (in $1,000s):

	2006		2005
Borrowings from Federal Home Loan Banks	$	183,598	$	172,736
Repurchase agreements		559		1,133
Federal funds purchased		6,997		1,860
	$	191,154	$	175,729

Borrowings from Federal Home Loan Banks (FHLB) represent advances secured by certain portfolio residential real estate mortgage loans and other eligible collateral. Such advances become due at varying dates and bear interest at market short-term rates (approximately 5% at December 31, 2006). At December 31, 2006, unused lines of credit under these facilities approximated $379 million. Assets pledged to secure these credit facilities approximated $423 million at December 31, 2006.

Capitol has a credit facility with an unaffiliated bank. Up to $25 million can be borrowed pursuant to a one-year revolving credit agreement which bears interest at a variable rate (8% at December 31, 2006), payable monthly, and a quarterly facility fee on the unused portion. There were no amounts drawn on the line of credit at December 31, 2006 or 2005. The credit facility is reviewed annually for continuance and requires Capitol, among other things, to maintain certain minimum levels of capital, rates of return on assets and other ratios or requirements, and is secured by the common stock of certain bank subsidiaries.

F-56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE H—NOTES PAYABLE AND SHORT-TERM BORROWINGS—Continued

For the periods presented, interest paid on debt obligations approximated amounts charged to expense.

At December 31, 2006, scheduled debt maturities of notes payable and short-term borrowings were as follows (in $1,000s):

2007	$	125,314
2008		24,628
2009		8,500
2010		27,000
2011		5,594
2012 and thereafter		118
	$	191,154

In addition to the foregoing, Capitol has guaranteed some obligations of its subsidiaries (see Note O).

NOTE I—SUBORDINATED DEBT

Subordinated debt relates to trust-preferred securities issued by Capitol which are summarized as follows:

	Interest Rate at December 31		Scheduled		Aggregate Liquidation Amount		Net Carrying Amount           at December 31               (in $1,000s)
	2006		Maturity		(in $1,000s)		2006		2005
Capitol Trust I		8.50% fixed		2027	$	25,300	$	24,543	$	24,507
Capitol Trust II		10.25% fixed		2031		10,000		9,753		9,743
Capitol Statutory Trust III		8.96% variable		2031		15,000		14,630		14,615
Capitol Trust IV		9.02% variable		2032		3,000		2,914		2,911
Capitol Trust VI		8.67% variable		2033		10,000		9,738		9,727
Capitol Trust VII		7.78% fixed		2033		10,000		9,866		9,861
Capitol Statutory Trust VIII		8.31% variable		2033		20,000		19,650		19,637
Capitol Trust IX		7.69% fixed		2034		10,000		9,941		9,939
					$	103,300	$	101,035	$	100,940

Securities of Capitol Trust I were issued in a 1997 public offering. All other Capitol Trust securities were subsequently formed in conjunction with private placements of trust-preferred securities. Each of these securities have similar terms and, subject to certain provisions, may be called by the issuer five years after issuance. The liquidation amount of these securities is guaranteed by Capitol.

F-57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE I—SUBORDINATED DEBT—Continued

Interest paid to the Trusts by Capitol (which is recorded as interest expense in its consolidated financial statements) is distributed by the Trusts to the holders of the trust-preferred securities. Under certain conditions, Capitol may defer payment of interest on the subordinated debentures for periods of up to five years. Under current regulatory guidelines,

such trust-preferred securities are included as capital for purposes of meeting certain ratio requirements.

NOTE J—RESTRICTED COMMON STOCK AND STOCK OPTIONS

Shares of restricted common stock have been granted to certain officers. Compensation expense related to restricted stock approximated $1.7 million in 2006 and $1.2 million in 2005 and 2004. Tax benefits associated with such compensation expense approximated $351,000 in 2006 and $229,000 in 2005 and 2004. Future compensation expense related to unvested restricted common stock as of December 31, 2006 approximates $4.4 million (based on grants through December 31, 2006), to be recorded ratably over a period of approximately 3.2 years, based on the weighted-average remaining vesting period at that date.

Restricted share activity is summarized below:

	2006				2005				2004
	Shares		Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Unvested at January 1		200,631	$	21.76		258,978	$	21.91		259,017	$	21.76
Granted		80,750		38.69		--		--		13,063		28.86
Vested		56,965		22.27		58,347		22.43		13,102		25.92
Forfeited		--		--		--		--		--		--
Unvested at December 31		224,416	$	27.72		200,631	$	21.76		258,978	$	21.91

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F-58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE J—RESTRICTED COMMON STOCK AND STOCK OPTIONS—Continued

Stock options have been granted to certain officers and directors which provide for the purchase of shares of common stock. Generally, stock options are granted at an exercise price equal to the fair value of common stock on the grant date. All such stock options expire at varying periods up to seven years after the date granted. Stock option activity is summarized as follows:

	Number of Stock Options Outstanding			Exercise Price Range					Weighted Average Exercise Price
Outstanding at January 1, 2004		2,298,067		$	9.88	to	$	27.23	$	16.95
Granted in 2004		834,647			22.43	to		33.01		27.77
Exercised in 2004		(515,836	)		9.88	to		25.92		15.93
Cancelled or expired in 2004		(32,739	)
Outstanding at December 31, 2004		2,584,139			10.81	to		33.01		21.06
Granted in 2005		929,425			30.21	to		37.48		33.96
Exercised in 2005		(589,943	)		11.00	to		30.21		15.94
Cancelled or expired in 2005		(41,338	)
Outstanding at December 31, 2005		2,882,283			10.81	to		37.48		26.07
Granted in 2006		--
Exercised in 2006		(312,192	)		10.81	to		37.48		19.59
Cancelled or expired in 2006		--
Outstanding at December 31, 2006		2,570,091		$	10.81	to	$	37.48	$	26.86

The aggregate intrinsic value of exercised options approximated $8.3 million, $12.7 million and $10 million in 2006, 2005 and 2004, respectively.

As of December 31, 2006, all outstanding stock options were vested, currently exercisable and had a weighted average remaining contractual life of 3.94 years. The following table summarizes stock options outstanding segregated by exercise price range:

			Weighted Average
Exercise Price Range	Number Outstanding		Exercise Price		Remaining Contractual Life		Aggregate Intrinsic Value
$10.00 to 14.99		142,033	$	11.28		0.61 years	$	4,959,792
$15.00 to 19.99		279,493		16.62		2.83 years		8,267,403
$20.00 to 24.99		458,868		21.68		3.81 years		11,251,443
$25.00 to 29.99		643,267		27.00		3.39 years		12,350,726
$30.00 to 34.99		697,643		32.11		4.69 years		9,829,790
$35.00 or more		348,787		37.48		5.86 years		3,041,423
		2,570,091					$	49,700,577

Cash received upon exercise of stock options approximated $5.1 million, $4.2 million and $2.4 million and tax benefits realized approximated $2.1 million, $1.8 million and $908,000 in 2006, 2005 and 2004, respectively.

F-59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE K—EMPLOYEE RETIREMENT PLANS

Capitol has a contributory employee retirement savings 401(k) plan which covers substantially all full-time employees of Capitol and certain subsidiaries over age 21. The Plan provides for employer contributions in amounts determined annually by Capitol's board of directors. Eligible employees make voluntary contributions to the Plan. Employer contributions to the Plan, a partial match based on employee contributions (50%, subject to certain limitations), charged to expense for the years ended December 31, 2006, 2005 and 2004 were $1.5 million, $1.1 million and $1.0 million, respectively.

Capitol also has a defined contribution employee stock ownership plan (ESOP) which covers substantially all employees of Capitol and certain subsidiaries. ESOP contributions charged to expense in 2006, 2005 and 2004 approximated $1,134,000, $949,000 and $961,000, respectively. As of December 31, 2006, the ESOP held approximately 292,000 shares of Capitol's common stock which have been allocated to participants' accounts; there were no unallocated shares as of that date.

NOTE L—INCOME TAXES

Income taxes include the following components (in $1,000s):

	2006			2005			2004
Federal:
Currently payable	$	21,367		$	22,326		$	15,401
Deferred (credit)		(5,493	)		(5,263	)		(2,282	)
		15,874			17,063			13,119
State income taxes (credit)		(411	)		2,169			1,580
	$	15,463		$	19,232		$	14,699

In addition to state income taxes, certain states in which the banks operate impose taxes based on measures other than income. Tax expense incurred associated with those jurisdictions approximated $1 million in 2006, 2005 and 2004, and is excluded from income tax expense (included as a component of other noninterest expense).

Federal income taxes paid in 2006, 2005 and 2004 approximated $20.9 million, $19.3 million and $17.1 million, respectively. State income taxes approximating $1.8 million were paid in 2006 ($1.9 million in 2005 and $1.6 million in 2004). Federal income taxes payable at December 31, 2006 and 2005 were reduced by tax benefits approximating $2.1 million and $1.8 million, respectively, arising from the exercise of stock options.

F-60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE L—INCOME TAXES—Continued

Differences between income tax expense recorded and amounts computed using the statutory tax rate are reconciled below (in $1,000s):

	2006			2005			2004
Federal income tax computed at statutory rate of 35%	$	15,869		$	17,381		$	14,122
State income taxes (credit)		(411	)		2,169			1,580
Federal tax effect of:
Amortization of intangibles		205			202			192
State income taxes		144			(759	)		(553	)
Other		(344	)		239			(642	)
	$	15,463		$	19,232		$	14,699

Net deferred income tax assets, which are a component of other assets, consisted of the following at December 31 (in $1,000s):

	2006			2005
Allowance for loan losses	$	15,099		$	13,186
Net operating losses of subsidiaries		8,202			3,774
Deferred compensation		2,635			2,395
Depreciation		(2,136	)		(1,944	)
Start-up costs for de novo banks		2,730			1,301
Market value adjustment for investment securities available for sale		74			117
Other, net		(1,629	)		696
	$	24,975		$	19,525

Certain subsidiaries have net operating loss carryforwards which may reduce income taxes payable in future periods, which have been recognized for financial reporting purposes and, as of December 31, 2006, expire at the following dates and amounts (in $1,000s):

2024	$	2,545
2025		7,344
2026		13,545
	$	23,434

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F-61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE M—NET INCOME PER SHARE

The computations of basic and diluted net income per share were as follows (in 1,000s):

	2006		2005		2004
Numerator—net income	$	42,391	$	35,925	$	26,716
Denominator:
Weighted average number of shares outstanding, excluding unvested restricted shares (denominator for basic earnings per share)		15,772		14,867		14,183
Effect of dilutive securities:
Unvested restricted shares		86		86		263
Stock options		623		412		445
Potential dilution		709		498		708
Denominator for diluted earnings per share—weighted average number of shares and potential dilution		16,481		15,365		14,891
Number of antidilutive stock options excluded from diluted earnings per share computation		--		1,085		160

Additional disclosures regarding restricted shares and stock options are set forth in Note J.

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F-62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE N—ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying values and estimated fair values of financial instruments were as follows at December 31 (in $1,000s):

	2006						2005
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	348,870		$	348,870		$	306,108		$	306,108
Loans held for sale		34,593			34,593			21,638			21,638
Investment securities:
Available for sale		18,904			18,904			25,929			25,929
Held for long-term investment		21,749			21,749			17,745			17,745
		40,653			40,653			43,674			43,674
Portfolio loans:
Commercial		3,103,125			3,093,134			2,688,361			2,680,149
Real estate mortgage		259,604			259,948			212,142			213,324
Installment		125,949			121,775			90,686			90,091
Total portfolio loans		3,488,678			3,474,857			2,991,189			2,983,564
Less allowance for loan losses		(45,414	)		(45,414	)		(40,559	)		(40,559	)
Net portfolio loans		3,443,264			3,429,443			2,950,630			2,943,005
Financial Liabilities:
Deposits:
Noninterest-bearing		651,253			651,253			591,229			591,229
Interest-bearing:
Demand accounts		1,186,999			1,187,320			1,112,773			1,111,669
Time certificates of less than $100,000		460,203			461,145			378,364			378,002
Time certificates of $100,000 or more		960,030			961,649			702,893			702,085
Total interest-bearing		2,607,232			2,610,114			2,194,030			2,191,756
Total deposits		3,258,485			3,261,367			2,785,259			2,782,985
Notes payable and short-term borrowings		191,154			191,713			175,729			175,059
Subordinated debentures		101,035			103,300			100,940			103,300

Estimated fair values of financial assets and liabilities are based upon a comparison of current interest rates on financial instruments and the timing of related scheduled cash flows to the estimated present value of such cash flows using current estimated market rates of interest (unless quoted market values or other fair value information is more readily available). Such estimates of fair value are not intended to represent market value or portfolio liquidation value, and only represent an estimate of fair values based on current financial reporting requirements.

F-63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE O—COMMITMENTS, GUARANTEES AND OTHER CONTINGENCIES

In the ordinary course of business, loan commitments are made to accommodate the financial needs of bank customers. Loan commitments include stand-by letters of credit, lines of credit, and other commitments for commercial, installment and mortgage loans. Stand-by letters of credit, when issued, commit the bank to make payments on behalf of customers if certain specified future events occur and are used infrequently by the banks ($32.3 million and $20.6 million outstanding at December 31, 2006 and 2005, respectively). Other loan commitments outstanding consist of unused lines of credit and approved, but unfunded, specific loan commitments ($794 million and $714.8 million at December 31, 2006 and 2005, respectively). These loan commitments (stand-by letters of credit and unfunded loans) generally expire within one year and are reviewed periodically for continuance or renewal.

All loan commitments have credit risk essentially the same as that involved in routinely making loans to customers and are made subject to the banks' normal credit policies. In making these loan commitments, collateral and/or personal guarantees of the borrowers are generally obtained based on management's credit assessment.

The banking subsidiaries are required to maintain average reserve balances in the form of cash on hand and balances due from the Federal Reserve Bank and correspondent banks. The amount of reserve balances required as of December 31, 2006 and 2005 was $6.7 million.

Deposits at each of the banks are insured up to the maximum amount covered by FDIC insurance. Some of the banks have municipal government deposits which are guaranteed by Capitol ($19.8 million at December 31, 2006).

Capitol has guaranteed up to $7.5 million of secured borrowings by Amera Mortgage Corporation, a less than 50%-owned affiliate.

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F-64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE P—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL

REQUIREMENTS

Current banking regulations restrict the ability to transfer funds from subsidiaries to their parent in the form of cash dividends, loans or advances. Subject to various regulatory capital requirements, bank subsidiaries' current and retained earnings are available for distribution as dividends to Capitol (and other bank shareholders, as applicable) without prior approval from regulatory authorities. Substantially all of the remaining net assets of the subsidiaries are restricted as to payments to Capitol.

Each bank and Capitol are subject to certain other capital requirements. Federal financial institution regulatory agencies have established certain risk-based capital guidelines for banks and bank holding companies. Those guidelines require all banks and bank holding companies to maintain certain minimum ratios and related amounts based on 'Tier 1' and 'Tier 2' capital and 'risk-weighted assets' as defined and periodically prescribed by the respective regulatory agencies. Failure to meet these capital requirements can result in severe regulatory enforcement action or other adverse consequences for a depository institution and, accordingly, could have a material impact on Capitol's consolidated financial statements.

Under the regulatory capital adequacy guidelines and related framework for prompt corrective action, the specific capital requirements involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by regulatory agencies with regard to components, risk weighting and other factors.

As a condition of their charter approval, de novo banks are generally required to maintain a core capital (Tier 1) to average assets ratio of not less than 8% (4% for other banks) and an allowance for loan losses of not less than 1% for the first three years of operations.

As of December 31, 2006, the most recent notifications received by the banks from regulatory agencies have advised that the banks are classified as 'well capitalized' as defined by the applicable agencies. There are no conditions or events since those notifications that management believes would change the regulatory classification of the banks.

Management believes, as of December 31, 2006, that Capitol and the banks meet all capital adequacy requirements to which the entities are subject.

F-65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE P—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL

REQUIREMENTS—Continued

The following table summarizes the amounts (in $1,000s) and related ratios of Capitol's consolidated regulatory capital position:

	December 31
	2006			2005
Tier 1 capital to average adjusted total assets:
Minimum required amount		³$155,110			³$135,864
Actual amount		$527,355			$438,458
Ratio		13.60	%		12.91	%
Tier 1 capital to risk-weighted assets:
Minimum required amount(1)		³$145,475			³$123,072
Actual amount		$527,355			$438,458
Ratio		14.50	%		14.25	%
Combined Tier 1 and Tier 2 capital to risk- weighted assets:
Minimum required amount(2)		³$290,949			³$246,144
Amount required to meet 'Well-Capitalized' category(3)		³$363,687			³$307,680
Actual amount		$572,816			$476,944
Ratio		15.75	%		15.50	%

(1)	The minimum required ratio of Tier 1 capital to risk-weighted assets is 4%.
(2)	The minimum required ratio of Tier 1 and Tier 2 capital to risk-weighted assets is 8%.
(3)	In order to be classified as a 'well-capitalized' institution, the ratio of Tier 1 and Tier 2 capital to risk-weighted assets must be 10% or more.

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F-66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE Q—PARENT COMPANY FINANCIAL INFORMATION

Condensed Balance Sheets

	-December 31-
	2006		2005
	(in $1,000s)
Assets
Cash on deposit principally with subsidiary banks	$	3,314	$	5,129
Money market funds on deposit principally with subsidiary banks		4,113		6,554
Time deposits principally with subsidiary banks		10,406		14,747
Cash and cash equivalents		17,833		26,430
Investment securities		4,048		673
Loans, net		11,314		2,865
Investments in and advances to subsidiaries		418,239		362,843
Investment in and advances to Amera Mortgage Corporation		482		482
Equipment, software and furniture, net		9,332		5,164
Other assets		13,206		19,103
Total assets	$	474,454	$	417,560
Liabilities and Stockholders' Equity
Accounts payable, accrued expenses and other liabilities	$	8,342	$	11,556
Subordinated debentures		104,233		104,138
Total liabilities		112,575		115,694
Stockholders' equity		361,879		301,866
Total liabilities and stockholders' equity	$	474,454	$	417,560

Condensed Statements of Income

	-Year Ended December 31-
	2006			2005			2004
	(in $1,000s)
Income:
Dividends from subsidiaries	$	30,475		$	34,350		$	16,075
Intercompany fees		23,039			19,458			16,561
Interest		199			816			468
Other		943			1,413			99
Total income		54,656			56,037			33,203
Expenses:
Interest		8,896			7,976			6,931
Salaries and employee benefits		10,482			13,325			13,370
Occupancy		1,584			1,249			1,138
Amortization, equipment rent and depreciation		2,146			1,839			1,757
Other		1,606			3,153			4,720
Total expenses		24,714			27,542			27,916
Income before equity in undistributed net earnings of consolidated subsidiaries and income tax credit		29,942			28,495			5,287
Equity in undistributed net earnings of consolidated subsidiaries		11,773			6,171			17,665
Income before income tax credit		41,715			34,666			22,952
Income tax credit		(676	)		(1,259	)		(3,764	)
Net income	$	42,391		$	35,925		$	26,716

F-67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE Q—PARENT COMPANY FINANCIAL INFORMATION—Continued

Condensed Statements of Cash Flows

	-Year Ended December 31-
	2006			2005			2004
	(in $1,000s)
OPERATING ACTIVITIES
Net income	$	42,391		$	35,925		$	26,716
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net earnings of subsidiaries		(11,773	)		(6,171	)		(17,665	)
Depreciation and amortization of intangibles		1,459			1,245			1,197
Loss on sale of equipment and furniture		3			3
Decrease in amounts due from subsidiaries and other assets		23,388			7,938			10,597
Increase (decrease) in accounts payable, accrued expenses and other liabilities		(3,214	)		1,772			718
NET CASH PROVIDED BY OPERATING ACTIVITIES		52,254			40,712			21,563
INVESTING ACTIVITIES
Net cash investments in subsidiaries		(36,193	)		(31,723	)		(27,887	)
Net payments from Amera Mortgage Corporation					315			62
Purchases of investment securities		(2,000	)		(673	)
Net increase in loans		(8,449	)		(1,635	)		(326	)
Proceeds from sales of equipment and furniture					4
Purchases of equipment and furniture		(5,098	)		(4,034	)		(662	)
NET CASH USED BY INVESTING ACTIVITIES		(51,740	)		(37,746	)		(28,813	)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock		3,573			2,510			954
Net proceeds from issuance of subordinated debentures								9,935
Tax benefit from share-based payments		2,481
Cash dividends paid		(15,165	)		(10,848	)		(9,375	)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES		(9,111	)		(8,338	)		1,514
DECREASE IN CASH AND CASH EQUIVALENTS		(8,597	)		(5,372	)		(5,736	)
Cash and cash equivalents at beginning of year		26,430			31,802			37,538
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	17,833		$	26,430		$	31,802

F-68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE R—ACQUISITION OF MINORITY INTERESTS AND ACQUISITION OF

BANK

During 2006, two share-exchange transactions were completed which involved the issuance of previously unissued shares of Capitol's common stock in exchange for the minority interests of the following subsidiaries:

Entity	Effective Date	Number of Common Shares Issued
Bank of Escondido	December 31, 2006	189,000
Capitol Development Bancorp Limited I	November 30, 2006	366,000

Had these acquisitions occurred at the beginning of 2005, unaudited pro forma consolidated net income would have approximated $42.3 million in 2006 and $34.3 million in 2005 and diluted earnings per share would have been $2.49 in 2006 and $2.16 in 2005. Each of these acquisitions has been accounted for under the purchase method of accounting. The carrying value of assets and liabilities of the entities closely approximated fair value at the date of the share exchanges. Total consideration for these transactions approximated $25 million which resulted in the recording of goodwill of approximately $11 million and acquisition of minority interests approximating $14 million.

In April 2005, Capitol acquired a majority interest in Peoples State Bank ("Peoples") located in Jeffersonville, Georgia, in a purchase transaction with total consideration approximating $2.2 million. Peoples' total assets approximated $22.9 million at the acquisition date, including $1.2 million of goodwill relating to the purchase of the controlling interest in the bank by Capitol. Capitol's acquisition of Peoples was accounted for under the purchase method of accounting and its results of operations are included in Capitol's consolidated financial statements for periods after the effective date of the acquisition. The pro forma effect of this acquisition was not significant.

During 2005, three share-exchange transactions were also completed, whereby certain previously majority-owned consolidated subsidiaries became wholly-owned:

Entity	Effective Date	Number of Common Shares Issued
Napa Community Bank	August 31, 2005	202,000
Bank of Las Vegas	November 30, 2005	179,000
First California Southern Bancorp	December 31, 2005	229,000

Had these acquisitions occurred at the beginning of 2004, unaudited pro forma consolidated net income would have approximated $36.2 million in 2005 and $26.7 million in 2004, and diluted earnings per share would have been $2.28 in 2005 and $1.72 in 2004.

F-69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE S—PENDING SHARE EXCHANGE TRANSACTIONS

A share exchange proposal was pending at December 31, 2006 regarding Capitol Development Bancorp Limited II, which was subsequently approved by its shareholders. Capitol issued approximately 371,000 shares of previously unissued common stock upon completion of the share exchange in February 2007.

[The remainder of this page intentionally left blank]

F-70

EX-21

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT

Capitol Bancorp Ltd.

December 31, 2006

Page 1 of 3

Name of Subsidiary	State or Other Jurisdiction of Incorporation
Consolidated Subsidiaries:
Ann Arbor Commerce Bank	Michigan
Brighton Commerce Bank	Michigan
Capitol National Bank	United States (national bank)
Detroit Commerce Bank	Michigan
Elkhart Community Bank	Indiana
First Carolina State Bank	North Carolina
Goshen Community Bank	Indiana
Grand Haven Bank	Michigan
Kent Commerce Bank	Michigan
Macomb Community Bank	Michigan
Muskegon Commerce Bank	Michigan
Oakland Commerce Bank	Michigan
Paragon Bank & Trust	Michigan
Peoples State Bank	Georgia
Portage Commerce Bank	Michigan
Arrowhead Community Bank	Arizona
Bank of Escondido	California
Bank of Las Vegas	Nevada
Bank of San Francisco (51% owned)	California
Bank of Tucson	Arizona
Black Mountain Community Bank	Nevada
Camelback Community Bank	Arizona
Desert Community Bank	Nevada
East Valley Community Bank	Arizona
Mesa Bank	Arizona
Napa Community Bank (87% owned)	California
Point Loma Community Bank (51% owned)	California
Red Rock Community Bank	Nevada
Southern Arizona Community Bank	Arizona
Sunrise Bank of Albuquerque	New Mexico
Sunrise Bank of Arizona	Arizona
Sunrise Bank of San Diego	California
Valley First Community Bank	Arizona
Yuma Community Bank	Arizona
Capitol Trust I	Delaware
Capitol Trust II	Delaware
Capitol Statutory Trust III	Connecticut
Capitol Trust IV	Delaware
Capitol Trust VI	Delaware
Capitol Trust VII	Delaware
Capitol Statutory Trust VIII	Connecticut
Capitol Trust IX	Delaware

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT

Capitol Bancorp Ltd.

December 31, 2006

Page 2 of 3

Name of Subsidiary	State or Other Jurisdiction of Incorporation
Consolidated Subsidiaries—continued:
Capitol Bancorp Colorado Ltd. (100% owned)	Lansing
Fort Collins Commerce Bank (51% owned)	Colorado
Capitol Development Bancorp Limited I (100% owned)	Michigan
Bank of Belleville (51% owned by CDBL-I)	Illinois
Bank of Michigan (51% owned by CDBL-I)	Michigan
Capitol Development Bancorp Limited II (9% owned)	Michigan
Bank of Auburn Hills (51% owned by CDBL-II)	Michigan
Bank of Bellevue (51% owned by CDBL-II)	Washington
Capitol Development Bancorp Limited III (6% owned)	Michigan
Bank of Santa Barbara (51% owned by CDBL-III)	California
Community Bank of Rowan (51% owned by CDBL-III)	North Carolina
Summit Bank of Kansas City (55% owned by CDBL-III)	Missouri
Capitol Development Bancorp Limited IV (7% owned)	Michigan
Capitol Wealth, Inc. (100% owned by CDBL-IV)	Michigan
Asian Bank of Arizona (51% owned by CDBL-IV)	Arizona
Bank of Valdosta (56% owned by CDBL-IV)	Georgia
Evansville Commerce Bank (51% owned by CDBL-IV)	Indiana
Sunrise Bank of Atlanta (51% owned by CDBL-IV)	Georgia
Capitol Development Bancorp Limited V (6% owned)	Michigan
1st Commerce Bank (51% owned by CDBL-V)	Nevada
Bank of Everett (51% owned by CDBL-V)	Washington
Bank of Maumee (51% owned by CDBL-V)	Ohio
Ohio Commerce Bank (51% owned by CDBL-V)	Ohio
Capitol Development Bancorp Limited VI (6% owned)	Michigan
Capitol Capital, LLC	Michigan
Capitol Bancorp Leasing, Inc.	Michigan
Unconsolidated Subsidiary:
Amera Mortgage Corporation, Inc. (less than 50% owned by equity method investee)	Michigan

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT

Capitol Bancorp Ltd.

December 31, 2006

Page 3 of 3

Name of Subsidiary	State or Other Jurisdiction of Incorporation
Inactive Subsidiries:
MOI, Inc. (wholly-owned subsidiary of Oakland Commerce Bank)	Michigan
Financial Center Corporation	Michigan

EX-23

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

Capitol Bancorp Ltd.

Lansing, Michigan

We hereby consent to the incorporation by reference in Registration Statements Nos. 333-122278, 333-104665, 333-84009, and 333-41215 on Form S-3, Registration Statements Nos.

333-139235, 333-137910, 333-137367, 333-129778, 333-128850, 333-124417, 333-116571, 333-113931, and 333-115110 on Form S-4 and Registration Statements Nos. 333-137092, 333-126206, 333-105339, 333-105314, 333-99175, 333-97189, and 333-30521 on Form S-8 of Capitol Bancorp Ltd. of our reports dated March 14, 2007, relating to the consolidated financial statements and the effectiveness of Capitol Bancorp Ltd.'s internal control over financial reporting, which appear on pages F-34 - F-36 in the Annual Report to shareholders (Financial Information Section), which is incorporated in this Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

/s/ BDO Seidman, LLP

March 14, 2007

Grand Rapids, Michigan

EX-31.1

EXHIBIT 31.1

Chief Executive Officer Certification

Pursuant to Rule 13a-14(a) and 15d-14(a)

of the Securities and Exchange Act of 1934, as amended.

I, Joseph D. Reid, certify that:

1.	I have reviewed this annual report on Form 10-K of Capitol Bancorp Ltd.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

    Date: March 14, 2007     /s/ Joseph D. Reid Joseph D. Reid Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Chief Financial Officer Certification

Pursuant to Rule 13a-14(a) and 15d-14(a)

of the Securities and Exchange Act of 1934, as amended.

I, Lee W. Hendrickson, certify that:

1.	I have reviewed this annual report on Form 10-K of Capitol Bancorp Ltd.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

    Date: March 14, 2007     /s/ Lee W. Hendrickson Lee W. Hendrickson Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Chief Executive Officer Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

In connection with the annual report of Capitol Bancorp Ltd. (the "Company") on Form 10-K (the "Form 10-K") for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof, I, Joseph D. Reid, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.	The Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2.	The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

    Date: March 14, 2007     /s/ Joseph D. Reid Joseph D. Reid Chief Executive Officer

The foregoing certification (i) accompanies the filing and is being furnished solely pursuant to 18 U.S.C. § 1350, (ii) will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and (iii) will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Capitol Bancorp Ltd. and will be retained by Capitol Bancorp Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

Chief Financial Officer Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

In connection with the annual report of Capitol Bancorp Ltd. (the "Company") on Form 10-K (the "Form 10-K") for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof, I, Lee W. Hendrickson, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.	The Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2.	The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

    Date: March 14, 2007     /s/ Lee W. Hendrickson Lee W. Hendrickson Chief Financial Officer

The foregoing certification (i) accompanies the filing and is being furnished solely pursuant to 18 U.S.C. § 1350, (ii) will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and (iii) will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Capitol Bancorp Ltd. and will be retained by Capitol Bancorp Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.