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, 2007
	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  o        No  x

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  o  No  x

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  x        No  o

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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer  o Accelerated filer  x Non-accelerated filer  o Smaller Reporting Company  o

(Do not check if a smaller reporting company)

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

Yes  o        No  x

As of June 30, 2007, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was:  $377,346,977.  (Such amount was computed based on shares held by non-affiliates as of January 31, 2007 and the common stock closing price reported by the New York Stock Exchange on June 30, 2007.  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 25, 2008
Common Stock, no par value per share	17,319,178 shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Annual Report to Shareholders for the Year Ended      December 31, 2007 (Annual Report)	Parts I, II, and IV
Portions of Proxy Statement for the Annual Meeting of      Shareholders to be held April 23, 2008 (Proxy Statement)	Part III

- 2 - -

CAPITOL BANCORP LTD.

Form 10-K

Fiscal Year Ended: December 31, 2007

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-28, F-39 – F-42 and F-56, Financial Information Section of Annual Report
Item 1A.  Risk Factors	Page F-30, Financial Information Section of Annual Report
Item 2.  Properties	Pages F-39 – F-40 and F-54, 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-56 – F-58 and F-64 – F-65 , 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-7 – F-30, Financial Information Section of Annual Report
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	Pages F-6 and F-25 – F-28, Financial Information Section of Annual Report
Item 8.  Financial Statements and Supplementary Data	Pages F-2 and F-34 – F-68, Financial Information Section of Annual Report
Item 9A. Controls and Procedures	Pages F-31 – F-33, 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-31 – F-68, Financial Information Section of Annual Report

Key:

"Annual Report" means the 2007 Annual Report of Capitol provided to Shareholders and the Commission pursuant to Rule 14a-3(b).  Capitol's 2007 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 23, 2008.

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.

- 3 - -

CAPITOL BANCORP LTD.

2007 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

- 4 - -

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]

- 5 - -

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-39 – F-42, 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-39 – F-42, 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-11, Financial Information Section of Annual Report, under the caption "Summary and Overview," and "Capitol's Bank Development Strategy," Pages F-39 – F-42, 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-24, Financial Information Section of Annual Report, under the caption "Liquidity, Capital Resources and Capital Adequacy" and Pages F-25 – F-28, Financial Information Section of Annual Report, under the caption "Trends Affecting Operations."

At December 31, 2007, Capitol and its subsidiaries employed approximately 1,611 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, Capitol Trust IX was formed in 2004 and Capitol Trust X and Capitol Trust XI were formed in 2007.  Each of these securities has similar terms.  Additional information regarding trust-preferred securities is incorporated by reference from Page F-56, 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

- 6 - -

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 Board of Governors of the Federal Reserve 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 nonbanking 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 60 subsidiary banks (as of December 31, 2007), 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 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, the National Bank Act or national thrift regulations.  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), the Office of the Comptroller of the Currency ("OCC") (in the case of national banks) or the Office of Thrift Supervision (“OTS”) (in the case of federal savings banks) and are subject to the rules and regulations of the OCC, the OTS, the Federal Reserve Board and the Federal Deposit Insurance Corporation ("FDIC").  As of December 31, 2007, 51 of Capitol's banking subsidiaries are state-chartered banks and are therefore subject to supervision, regulation and examination by state banking regulators.  Elkhart Community Bank and Goshen Community Bank were members of the Federal Reserve System until March 2008 so they were subject to supervision and examination by the Federal Reserve Board; as non-member banks they will be regulated similar to other state-chartered banks of Capitol by the FDIC and respective state regulatory agency.  Six of Capitol’s depository institution subsidiaries, as of December 31, 2007, are chartered as federal savings banks and are subject to regulation and examination by the OTS and FDIC.  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.

- 7 - -

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 were member banks of the Federal Reserve System until March 2008, subject to the dividend limits 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.

OTS regulations limit capital distributions by federal savings banks, including the payment of cash dividends.  A federal savings bank must file an application with the OTS for prior approval if a capital distribution in a calendar year will exceed the sum of the institution’s net income for that year to date plus retained net income for the preceding two years or if such distribution would violate prior OTS agreements or OTS-imposed conditions or otherwise raises safety and soundness concerns.

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 fees to a holding company if the institution would thereafter be undercapitalized.  Institutions that are adequately but not well capitalized cannot accept, renew or roll over 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 roll over 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 obtaining distributions from the institution without prior regulatory approval;  

- 8 - -

Item 1. Business – continued.

· 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;  

· 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, 2007 and 2006, 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, 2007 is incorporated herein by reference from Note P to the consolidated financial statements appearing in the Annual Report.

FDIC Insurance Assessments:

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 increased the assessment amount for all insured institutions for payments due June 30, 2007 and thereafter.  The new minimum annual assessment rate is 0.05% for a well capitalized bank, while the maximum annual rate is 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 had paid a deposit insurance assessment prior to that date, or were 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 could 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.  The FDIC retains the ability to increase regular insurance assessments and to levy special additional assessments.  After incurring modest amounts of FDIC insurance premiums of $362,000 in 2006 and $375,000 in 2005, the 2007 assessments increased significantly to $2.0 million; the significant increase in FDIC assessments in 2007 is the result of the new insurance premium rate structure adopted by the FDIC in late 2006.

In 2006, the FDIC 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 December 31, 2007, the annualized FICO assessment was equal to 1.14 basis points for each $100 in domestic deposits maintained at an institution.

- 9 - -

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 Regulation W of the Federal Reserve Act and substantially similar regulations of the FDIC.  The affiliates of the banks include Capitol and any entity controlled by Capitol.  Generally, Regulation W (i) limits 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.

- 10 - -

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

- 11 - -

Item 1. Business – continued.

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, DC20549.  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, 2007, 2006 and 2005.
	2007							2006							2005
				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	$	23,912		$	1,120	4.68	%	$	33,123		$	1,403	4.24	%	$	20,673		$	635	3.07	%
Federal funds sold		205,294			10,687	5.21	%		171,445			8,703	5.08	%		144,536			4,734	3.28	%
Investment securities -- U.S. Treasury, government
agencies, mutual funds and other		39,330			1,699	4.32	%		42,277			1,806	4.27	%		45,948			1,561	3.40	%
Loans held for sale		24,427			2,133	8.73	%		36,306			2,740	7.55	%		33,710			2,627	7.79	%
Portfolio loans (2)		3,840,526			314,800	8.20	%		3,236,538			264,701	8.18	%		2,834,973			214,882	7.58	%
Total interest-earning
assets/interest income		4,133,489			330,439	7.99	%		3,519,689			279,353	7.94	%		3,079,840			224,439	7.29	%
Allowance for loan losses (deduct)		(50,316	)						(44,000	)						(38,628	)
Cash and due from banks		153,042							150,782							141,271
Premises and equipment, net		56,925							50,656							33,063
Other assets		159,855							119,987							97,893
Total assets	$	4,452,995						$	3,797,114						$	3,313,439
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings deposits	$	83,632			2,291	2.74	%	$	59,985			981	1.64	%	$	71,890			844	1.17	%
Time deposits under $100,000		569,773			28,060	4.92	%		429,108			17,983	4.19	%		338,920			10,790	3.18	%
Time deposits $100,000 and over		1,031,011			52,828	5.12	%		889,769			38,115	4.28	%		717,851			21,701	3.02	%
Other interest-bearing deposits		1,227,480			40,981	3.34	%		1,066,109			31,550	2.96	%		998,165			19,878	1.99	%
Notes payable and short-term borrowings		220,996			11,048	5.00	%		173,719			8,169	4.70	%		170,853			6,485	3.80	%
Subordinated debentures		143,390			11,954	8.34	%		100,999			8,788	8.70	%		100,892			7,881	7.81	%
Total interest-bearing
liabilities/interest expense		3,276,282			147,162	4.49	%		2,719,689			105,586	3.88	%		2,398,571			67,579	2.82	%
Noninterest-bearing demand deposits		628,345							614,529							564,823
Accrued interest on deposits and
other liabilities		31,640							25,305							20,912
Minority interests in consolidated subsidiaries		133,170							110,060							59,927
Stockholders' equity		383,558							327,531							269,206
Total liabilities and
stockholders' equity	$	4,452,995						$	3,797,114						$	3,313,439
Net interest income				$	183,277						$	173,767						$	156,860
Interest Rate Spread (3)						3.50	%						4.06	%						4.47	%
Net Yield on Interest-Earning Assets (4)						4.43	%						4.94	%						5.09	%
Ratio of Average Interest-Earning
Assets to Interest-Bearing Liabilities		1.26							1.29							1.28
(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.

[The remainder of this page intentionally left blank]

- 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.
	2007 compared to 2006									2006 compared to 2005
	Volume			Rate			Net Total			Volume			Rate			Net Total
Increase (decrease) in interest income:
Money market and interest-bearing deposits	$	(420	)	$	137		$	(283	)	$	471		$	297		$	768
Federal funds sold		1,757			227			1,984			1,004			2,965			3,969
Investment securities -- U.S. Treasury, government
agencies, mutual funds and other		(127	)		20			(107	)		(132	)		377			245
Loans held for sale		(992	)		385			(607	)		198			(85	)		113
Portfolio loans		49,506			593			50,099			31,981			17,838			49,819
Total		49,724			1,362			51,086			33,522			21,392			54,914
Increase (decrease) in interest expense:
Interest-bearing deposits:
Savings deposits		483			827			1,310			(156	)		293			137
Time deposits under $100,000		6,568			3,509			10,077			3,286			3,907			7,193
Time deposits $100,000 and over		6,581			8,132			14,713			5,988			10,426			16,414
Other interest-bearing deposits		5,107			4,324			9,431			1,434			10,238			11,672
Notes payable and short-term borrowings		2,337			542			2,879			110			1,574			1,684
Subordinated debentures		3,548			(382	)		3,166			8			899			907
Total		24,624			16,952			41,576			10,670			27,337			38,007
Increase (decrease) in net
interest income	$	25,100		$	(15,590	)	$	9,510		$	22,852		$	(5,945	)	$	16,907

[The remainder of this page intentionally left blank]

- 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, 2007, 2006 and 2005 (in $1,000s):
	2007				2006				2005
			Estimated				Estimated				Estimated
	Amortized		Market		Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value		Cost		Value
Available for sale:
United States treasury securities	$	499	$	499
United States government agency securities		8,991		9,025	$	13,403	$	13,285	$	23,276	$	23,022
Mortgage-backed securities		3,402		3,368		4,089		3,991		2,437		2,355
Municipals		1,222		1,227		1,630		1,628		1,640		1,631
		14,114		14,119		19,122		18,904		27,353		27,008
Held for long-term investment:
Federal Reserve Bank stock		563		563		864		864		536		536
Federal Home Loan Bank stock		18,765		18,765		14,148		14,148		12,960		12,960
Corporate		4,204		4,204		4,419		4,419		1,835		1,835
Other		1,946		1,946		2,318		2,318		1,335		1,335
		25,478		25,478		21,749		21,749		16,666		16,666
	$	39,592	$	39,597	$	40,871	$	40,653	$	44,019	$	43,674

The table below shows the amortized cost, estimated market value, relative maturities and weighted average yields of investment securities at

December 31, 2007 (in $1,000s):

			Estimated		Weighted
	Amortized		Market		Average
	Cost		Value		Yield
Maturity:
Due in one year or less	$	2,220	$	2,218		3.96	%
After one year, through five years		6,145		6,175		9.25	%
After five years, through ten years		2,974		2,975		9.48	%
After ten years		2,775		2,751		5.82	%
Securities held for long-term investment,
without stated maturities		25,478		25,478
Total	$	39,592	$	39,597

Investment securities which do not have stated maturities (corporate, 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, 2007:

United States treasury securities	0 years     and     1 month
United States government agency securities	3 years     and     6 months
Mortgage-backed securities	2 years     and      3 months
Municipals	3 years     and     10 months

[The remainder of this page intentionally left blank]

- 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):
	2007				2006				2005				2004				2003
Loans secured by real estate:
Commercial	$	1,917,113	44.43	%	$	1,602,743	45.94	%	$	1,352,338	45.21	%	$	1,187,648	44.10	%	$	999,508	44.47	%
Residential (including multi-family)		698,960	16.20	%		529,357	15.17	%		501,861	16.78	%		487,048	18.09	%		413,068	18.38	%
Construction, land development and
other land		852,595	19.76	%		705,255	20.22	%		579,132	19.36	%		499,166	18.54	%		361,235	16.07	%
Total loans secured by real estate		3,468,668	80.39	%		2,837,355	81.33	%		2,433,331	81.35	%		2,173,862	80.73	%		1,773,811	78.92	%
Commercial and other business-purpose
loans		768,473	17.81	%		602,294	17.26	%		512,018	17.12	%		474,781	17.63	%		432,763	19.26	%
Consumer		48,041	1.11	%		39,957	1.15	%		37,661	1.26	%		32,947	1.22	%		35,117	1.56	%
Other		29,519	0.69	%		9,072	0.26	%		8,179	0.27	%		11,314	0.42	%		5,749	0.26	%
Total portfolio loans	$	4,314,701	100.00	%	$	3,488,678	100.00	%	$	2,991,189	100.00	%	$	2,692,904	100.00	%	$	2,247,440	100.00	%

The table below summarizes (in $1,000s) the remaining maturity of portfolio loans outstanding at December 31, 2007 according to scheduled repayments

of principal:

	Fixed		Variable
	Rate		Rate		Total
Aggregate maturities of portfolio loan balances which are due
in one year or less:	$	524,102	$	1,039,515	$	1,563,617
After one year but within five years		1,288,211		381,535		1,669,746
After five years		221,348		791,905		1,013,253
Nonaccrual loans		21,082		47,003		68,085
Total	$	2,054,743	$	2,259,958	$	4,314,701

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

Loans secured by real estate

          Commercial

          Comprised of a broad mix of business use and nonfarm nonresidential properties, including office, retail, warehouse and light industrial uses.

          A typical loan size is generally less than $1,000,000 and, at December 31, 2007, approximately 27% of such properties were owner-occupied.

          Residential (including multi-family)

          Includes single and multi family residential loans held for permanent portfolio and home equity lines of credit.

          Construction, land development and other land

          Includes loans made to finance land development for new or existing structures, vacant land and agricultural land.

Commercial and other business-purpose loans

          Includes a range of loans for sole proprietorships, partnerships, corporations, and other business enterprises and also to individuals for

          commercial, industrial and professional purposes but not for investment or personal expenditure purposes.

Consumer

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

Other

          Includes loans to finance agricultural production, obligations of states and political subdivisions in the US and nonprofit organizations.

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.

- 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 loans secured by real estate. See Note D of the Notes to Consolidated Financial Statements
for additional information regarding nonperforming loans.
	2007			2006			2005			2004			2003
Nonperforming loans:
Nonaccrual loans:
Loans secured by real estate:
Commercial	$	19,016		$	8,771		$	9,451		$	4,713		$	4,958
Residential (including multi-family)		13,381			6,808			4,826			7,632			5,297
Construction, land development and
other land		29,756			8,583			2,847			2,252			2,805
Total loans secured by real estate		62,153			24,162			17,124			14,597			13,060
Commercial and other business-purpose loans		5,782			5,349			5,279			8,491			7,740
Consumer		66			215			219			121			60
Other		84			--			--			--			--
Total nonaccrual loans		68,085			29,726			22,622			23,209			20,860
Past due loans:
Loans secured by real estate:
Commercial		113			1,380			739			1,609			1,033
Residential (including multi-family)		1,116			526			1,891			2,726			2,730
Construction, land development and
other land		2,531			1,116			864			80			57
Total loans secured by real estate		3,760			3,022			3,494			4,415			3,820
Commercial and other business-purpose loans		714			1,375			339			568			1,985
Consumer		66			151			140			102			110
Other		5			--			137			177			97
Total past due loans		4,545			4,548			4,110			5,262			6,012
Total nonperforming loans	$	72,630		$	34,274		$	26,732		$	28,471		$	26,872
Nonperforming loans as a percentage
of total portfolio loans		1.68	%		0.98	%		0.89	%		1.06	%		1.20	%
Nonperforming loans as a percentage
of total assets		1.48	%		0.84	%		0.77	%		0.92	%		0.98	%
Allowance for loan losses as a
percentage of nonperforming loans		80.03	%		132.50	%		151.72	%		131.97	%		116.87	%

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 grades 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.  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, 2007, potential problem loans (which includes nonperforming loans) approximated $219 million or about 5% 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:

	2007			2006			2005			2004			2003
Other real estate owned at January 1	$	9,464		$	3,733		$	3,855		$	4,248		$	4,605
Properties acquired in restructure
of loans or in lieu of foreclosure		17,216			8,870			5,718			4,233			3,898
Properties sold		(10,021	)		(2,806	)		(4,440	)		(3,833	)		(3,704	)
Payments received from borrowers or
tenants, credited to carrying amount		(162	)		-			-			(552	)		(121	)
Other changes, net		(140	)		(333	)		(1,400	)		(241	)		(430	)
Other real estate owned at December 31	$	16,357		$	9,464		$	3,733		$	3,855		$	4,248

Other real estate owned is valued at estimated 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):
	2007			2006			2005			2004			2003
Allowance for loan losses at January 1	$	45,414		$	40,559		$	37,572		$	31,404		$	28,953
Allowance for loan losses of acquired
bank subsidiary											724
Loans charged off:
Loans secured by real estate:
Commercial		(3,102	)		(2,737	)		(1,182	)		(827	)		(204	)
Residential (including multi-family)		(3,265	)		(1,831	)		(2,348	)		(1,005	)		(1,796	)
Construction, land development and
other land		(1,192	)		(812	)		(346	)		(953	)		(362	)
Total loans secured by real estate		(7,559	)		(5,380	)		(3,876	)		(2,785	)		(2,362	)
Commercial and other business-purpose loans		(6,257	)		(2,943	)		(4,988	)		(5,306	)		(6,032	)
Consumer		(403	)		(255	)		(776	)		(277	)		(377	)
Other		--			(121	)		(3	)		(20	)		(19	)
Total charge-offs		(14,219	)		(8,699	)		(9,643	)		(8,388	)		(8,790	)
Recoveries:
Loans secured by real estate:
Commercial		70			66			20			111			34
Residential (including multi-family)		226			213			601			99			237
Construction, land development and
other land		20			8			4			--			24
Total loans secured by real estate		316			287			625			210			295
Commercial and other business-purpose loans		1,101			896			758			832			970
Consumer		165			215			287			80			115
Other		7			--			--			2			--
Total recoveries		1,589			1,398			1,670			1,124			1,380
Net charge-offs		(12,630	)		(7,301	)		(7,973	)		(7,264	)		(7,410	)
Additions to allowance charged to expense		25,340			12,156			10,960			12,708			9,861
Allowance for loan losses at December 31	$	58,124		$	45,414		$	40,559		$	37,572		$	31,404
Total portfolio loans outstanding at December 31	$	4,314,701		$	3,488,678		$	2,991,189		$	2,692,904		$	2,247,440
Ratio of allowance for loan losses to
portfolio loans outstanding		1.35	%		1.30	%		1.36	%		1.40	%		1.40	%
Average total portfolio loans for the year	$	3,840,526		$	3,236,538		$	2,834,973		$	2,492,379		$	2,101,617
Ratio of net charge-offs to average
portfolio loans outstanding		0.33	%		0.23	%		0.28	%		0.29	%		0.35	%

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.

- 18 - -

SUMMARY OF LOAN LOSS EXPERIENCE (TABLE E - CONTINUED)
CAPITOL BANCORP LIMITED
The amounts 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:
	2007					2006					2005					2004					2003
			Percentage					Percentage					Percentage					Percentage					Percentage
	Amount		of Loans			Amount		of Loans			Amount		of Loans			Amount		of Loans			Amount		of Loans
Loans secured by real estate:
Commercial	$	21,918		0.51	%	$	17,886		0.51	%	$	18,337		0.61	%	$	16,570		0.61	%	$	13,966		0.62	%
Residential (including multi-family)		10,235		0.24	%		7,234		0.21	%		6,805		0.23	%		6,796		0.25	%		5,772		0.26	%
Construction, land development and
other land		11,278		0.26	%		8,471		0.24	%		7,853		0.26	%		6,964		0.26	%		5,048		0.23	%
Total loans secured by real estate		43,431		1.01	%		33,591		0.96	%		32,995		1.10	%		30,330		1.12	%		24,786		1.11	%
Commercial and other business-purpose
loans		13,727		0.32	%		11,112		0.32	%		6,943		0.23	%		6,624		0.25	%		6,047		0.27	%
Consumer		667		0.01	%		558		0.02	%		510		0.02	%		460		0.02	%		491		0.02	%
Other		299		0.01	%		153		0.00	%		111		0.01	%		158		0.01	%		80		0.00	%
Total allowance for loan losses	$	58,124		1.35	%	$	45,414		1.30	%	$	40,559		1.36	%	$	37,572		1.40	%	$	31,404		1.40	%
Total portfolio loans outstanding	$	4,314,701				$	3,488,678				$	2,991,189				$	2,692,904				$	2,247,440

[The remainder of this page intentionally left blank]

- 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, 2007, 2006 and 2005:
	2007					2006					2005
			Average					Average					Average
	Amount		Rate			Amount		Rate			Amount		Rate
Noninterest-bearing demand deposits	$	628,345				$	614,529				$	564,823
Savings deposits		83,632		2.74	%		59,985		1.64	%		71,890		1.17	%
Time deposits under $100,000		569,773		4.92	%		429,108		4.19	%		338,920		3.18	%
Time deposits $100,000 and over		1,031,011		5.12	%		889,769		4.28	%		717,851		3.02	%
Other interest-bearing deposits		1,227,480		3.34	%		1,066,109		2.96	%		998,165		1.99	%
Total deposits	$	3,540,241				$	3,059,500				$	2,691,649

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, 2007 (in $1,000s):

Three months or less	$	407,957
Three months to six months		227,955
Six months to twelve months		250,114
Over 12 months		181,179
Total	$	1,067,205

[The remainder of this page intentionally left blank]

- 20 - -

FINANCIAL RATIOS (TABLE G)
CAPITOL BANCORP LIMITED
	Year Ended December 31
	2007			2006			2005
Net income as a percentage of:
Average stockholders' equity		5.72	%		12.94	%		13.34	%
Average total assets		0.49	%		1.12	%		1.08	%
Capital ratios:
Average stockholders' equity as a
percentage of average total assets		8.61	%		8.63	%		8.12	%
Average total equity (stockholders' equity and
minority interests in consolidated subsidiaries)
as a percentage of average total assets		11.60	%		11.52	%		9.93	%
Average total capital funds (stockholders'
equity, minority interests in consolidated
subsidiaries and subordinated debentures)
as a percentage of average total assets		14.82	%		14.18	%		12.98	%
Dividend payout ratio (cash dividends per share
as a percentage of net income per share):
Basic		77.52	%		35.32	%		29.75	%
Diluted		78.74	%		36.96	%		30.77	%

[The remainder of this page intentionally left blank]

- 21 - -

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 risks currently deemed 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, was engaged in significant new bank development activity in 2007 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.

- 22 - -

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.  Most 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 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 and Federal Government; Changes in Federal and State Banking Laws and Regulations Could 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, the FDIC, the OTS and, in the case of one national bank, the OCC.

Various Federal and 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 broad 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.

- 23 - -

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, including 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 Methods 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.

- 24 - -

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 during 2007 of concerns about the health of the domestic economy have continued into 2008.  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 banks’ loan portfolio are 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 banks’ 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.

- 25 - -

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 having large concentrations in commercial real estate due to the recent downturn in the real estate market in certain areas of the country, 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 upon 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 decreased interest rates several times, including significant reductions in early 2008.  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.

- 26 - -

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 obligation, in the event Capitol utilizes this facility.  In the event of violation of the covenants relating to the credit facility, or the 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 $158.3 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 accumulated 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.

- 27 - -

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The names and locations of Capitol's banks are listed on Pages F-39 – F-40, 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.  Most 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 Internet banking and utilization of ATMs to process some customer-initiated transactions, 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-54, 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.  Rent paid by Brighton Commerce Bank to the leasing entity amounted to $236,148 in 2007.  Capitol's subsidiary bank, Ann Arbor Commerce Bank, leases its primary banking facility from South State Commerce Center L.L.C.  Lyle W. Miller's Trust owns 10% of the membership interest, H. Nicholas Genova's IRA owns 10% of the membership interest of the LLC and Kathleen A. Gaskin owns 5% of the membership interest.  Rent paid by Ann Arbor Commerce Bank amounted to $474,448 in 2007, and maintenance fees amounted to $208,965.  Capitol and its subsidiary bank, Capitol National Bank, paid rent of $791,943 in 2007 for their principal offices at Capitol Bancorp Center, 200 Washington Square North, Lansing, Michigan and the adjacent Phoenix Building to Business & Trade Center Limited, a Michigan limited partnership, of which Joseph D. Reid and Lewis D. Johns are partners.  Additionally, the cost of significant leasehold improvements and routine maintenance made in 2007 was $1,097,359.  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.

- 28 - -

Item 2. Properties – continued.

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, 2007, 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 2007, no matters were submitted to a vote by security holders.

[The remainder of this page intentionally left blank]

- 29 - -

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-56 – F-58 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-64 and F-65, 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, 2007

	(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*	1,951,757	$  29.52	115,417
Equity compensation plans not approved by security holders(1)	44,830	20.95	--
Equity compensation plans resulting from share exchanges	463,495	20.22	--
Total	2,460,082	$  27.85	115,417

(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 2007.

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, 2007, resulting from the satisfaction of certain performance targets.  The shares were not registered under the Securities Act of 1933.

- 30 - -

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, 2007, 2006, 2005, 2004 and 2003."

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

Incorporated by reference from Pages F-7 – F-30, 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-28, 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.

- 31 - -

Item 9A.  Controls and Procedures – continued.

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

Incorporated by reference from Page F-31, Financial Information Section of Annual Report.

Attestation Report of Independent Registered Public Accounting Firm:

Incorporated by reference from Pages F-32 and F-33, 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 15, 2008, the Compensation Committee of Capitol's Board of Directors established base salaries for 2008 and approved bonuses for 2007 for Capitol's named executive officers.  Messrs. Hendrickson, Lewis and Thomas and Ms. Reid elected to forego bonuses for 2007 due to the performance of Capitol.  These named executive officers were given a 2.5% increase in their base salary effective March 15, 2008.

On March 10, 2008, Messrs. Hendrickson and Lewis entered into employment agreements with Capitol.  The material terms of the agreement are identical to Capitol’s existing employment agreements with Mr. Thomas and Ms. Reid (filed as exhibits to Capitol’s Report on Form 10-K for the year ended December 31, 2005) and include an initial five-year term, provide for one year severance pay and a change of control provision equal to 299% of their base salary.

[The remainder of this page intentionally left blank]

- 32 - -

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," "INFORMATION REGARDING CAPITOL’S DIRECTORS NOT CURRENTLY UP FOR ELECTION," "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," "SUMMARY COMPENSATION," "EMPLOYMENT AGREEMENTS," "GRANTS OF PLAN-BASED AWARDS," "2006 AND 2007 EQUITY GRANTS," "OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2007," "OPTION EXERCISES AND STOCK VESTED 2007," "PENSION BENEFITS 2007," "EXECUTIVE SUPPLEMENTAL INCOME PLAN," "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION," "DIRECTOR COMPENSATION," "NON-EMPLOYEE DIRECTOR COMPENSATION IN 2007," "POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL," and "EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION."

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 "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," "CORPORATE GOVERNANCE," "ROLE OF THE BOARD," "INDEPENDENCE OF DIRECTORS," "INDEPENDENT DIRECTORS," "NON-INDEPENDENT DIRECTORS," 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."

- 33 - -

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-31 – F-68 of the Financial Information Section of Annual Report of the Registrant to its stockholders for the year ended December 31, 2007, are incorporated by reference in Item 8:

Reports of Independent Registered Public Accounting Firm.

Consolidated balance sheets--December 31, 2007 and 2006.

Consolidated statements of income--Years ended December 31, 2007, 2006 and 2005.

Consolidated statements of changes in stockholders' equity--Years ended December 31, 2007, 2006 and 2005.

Consolidated statements of cash flows--Years ended December 31, 2007, 2006 and 2005.

Notes to consolidated financial statements.

All financial statements have been incorporated by reference from the Annual Report.  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 36-38) which immediately precedes such exhibits and is incorporated herein by reference.

[The remainder of this page intentionally left blank]

- 34 - -

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 10, 2008, in the capacities indicated below.

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

- 35 - -

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*	(25)
	(b9)	Forty-Third, Forty-Fourth, Forty-Fifth, Forty-Sixth, Forty-Seventh, Forty-Eighth, Forty-Ninth, Fiftieth, Fifty-First, Fifty-Second, Fifty-Third, Fifty-Fourth and Fifty-Fifth Amendments to Profit Sharing/401(k) Plan*

- 36 - -

Exhibit No.		Description	Page Number or Incorporated by Reference from:
10		Material Contracts—continued:
	(c)	Lease Agreement with Business & Trade Center, Ltd.	(9)
	(d)	Capitol Bancorp Ltd Employee Stock Ownership Plan (as amended and restated January 1, 2008) and Amendment No. 1 thereto*
	(e)	Employment Agreements with John C. Smythe and Charles J. McDonald*	(2)
	(f)	Executive Supplemental Income Agreements with 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 K. Reid and Bruce Thomas (and, effective March 2008, Lee W. Hendrickson and John S. Lewis)*	(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 2007 Annual Report B.       Financial Information Section of 2007 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.

- 37 - -

Exhibit No.	Description	Page Number or Incorporated by Reference from:
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 906of the Sarbanes-Oxley Act of 2002.

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)	Form 10-K for the year ended December 31, 2006, filed March 16, 2007.
*	A management contract or compensatory plan required to be filed with this report.

- 38 - -

EX-10.B9

EXHIBIT 10 (b9-1)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 43

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective January 10, 2007 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 Tacoma	Bank	Washington	1/10/2007

      Dated:  January 10, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin Reid English                                                                         Cristin Reid English Corporate President

      Dated:  January 10, 2007 BANK OF TACOMA     By:    /s/ Michael Hansch                                                                                Michael Hansch President

EXHIBIT 10 (b9-2)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 44

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective February 27, 2007 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 Community Bank	Bank	California	2/27/2007

      Dated:  February 27, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin Reid English                                                                           Cristin Reid English Corporate President

      Dated:  February 27, 2007 SUNRISE COMMUNITY BANK     By:    /s/ Stuart Bailey                                                                                      Stuart Bailey President

EXHIBIT 10 (b9-3)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 45

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective May 4, 2007 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Larimer Bank of Commerce	Bank	Colorado	5/4/2007

      Dated:  May 4, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  May 4, 2007 LARIMER BANK OF COMMERCE     By:    /s/ Mark Kross                                                                                        Mark Kross President

EXHIBIT 10 (b9-4)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 46

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective October 1, 2007 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 Bean Counter, LLC	Limited Liability Company	Michigan	10/1/2007

      Dated:  October 1, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                                                                                   Cristin K. Reid Corporate President

EXHIBIT 10 (b9-5)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 47

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective July 31, 2007 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
USNY Bank	Bank	New York	7/31/2007

      Dated:  July 31, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  July 31, 2007 USNY BANK     By:    /s/ Michael Briggs                         Michael Briggs President

EXHIBIT 10 (b9-6)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 48

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective July 16, 2007 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Issaquah Community Bank	Bank	Washington	7/16/2007

      Dated:  July 16, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  July 16, 2007 ISSAQUAH COMMUNITY BANK     By:    /s/ Robert Ittes                                                                                  Robert Ittes President

  EXHIBIT 10 (b9-7)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 49

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective August 1, 2007 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
BAIA Acquisition Company, LLC	Limited Liability Company	Michigan	8/1/2007

      Dated:  August 1, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  August 1, 2007 BAIA ACQUISITION COMPANY     By:    /s/ Susan Rossi                              Susan Rossi Vice President

      Dated:  August 1, 2007 BAIA ACQUISITION COMPANY     By:    /s/ John Henry                                John Henry Vice President

EXHIBIT 10 (b9-8)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 50

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective September 26, 2007 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
High Desert Bank	Bank	Oregon	9/26/2007

      Dated:  September 26, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  September 26, 2007 HIGH DESERT BANK     By:    /s/ Larry Snyder                             Larry Snyder President

EXHIBIT 10 (b9-9)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 51

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective October 5, 2007 adding the following participating employer at the end of the list contained:

Name of Employer	Type of Entity	State of Organization	Date of Participation
Loveland Bank of Commerce	Bank	Colorado	10/5/2007

      Dated:  October 5, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  October 5, 2007 LOVELAND BANK OF COMMERCE     By:    /s/ John Busby                               John Busby President

 EXHIBIT 10 (b9-10)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 52

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective November 6, 2007 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 Feather River	Bank	California	11/6/2007

      Dated:  November 6, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  November 6, 2007 BANK OF FEATHER RIVER     By:    /s/ Richard Veale                            Richard Veale President

EXHIBIT 10 (b9-11)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 53

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective December 3, 2007 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 Lincoln	Bank	Nebraska	12/3/2007

      Dated:  December 3, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  December 3, 2007 COMMUNITY BANK OF LINCOLN     By:    /s/ Mary Gerdes                             Mary Gerdes President

EXHIBIT 10 (b9-12)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 54

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective December 10, 2007 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 Fort Bend	Bank	Texas	12/10/2007

      Dated:  December 10, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  December 10, 2007 BANK OF FORT BEND     By:    /s/ Bruce Mercer                            Bruce Mercer President

EXHIBIT 10 (b9-13)

AMENDMENT TO THE

CAPITOL BANCORP, LTD.

EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

AMENDMENT NUMBER 55

The Capitol Bancorp, Ltd. Employee Savings and Stock Ownership Plan is hereby amended effective December 13, 2007 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 Las Colinas	Bank	Texas	12/13/2007

      Dated:  December 13, 2007 CAPITOL BANCORP LIMITED     By:    /s/ Cristin K. Reid                           Cristin K. Reid Corporate President

      Dated:  December 13, 2007 BANK OF LAS COLINAS     By:    /s/ Gerold Hooker                           Gerold Hooker President

EX-10.D

EXHIBIT 10 (d) 

Amended and Restated

Capitol Bancorp Ltd.

Employee Stock Ownership Plan

Effective january 1, 2008

Table of Contents

Article 1 [- 1 -]

Definitions [- 1 -]

1.1           Administrator [- 1 -]

1.2           Adopting Employer [- 1 -]

1.3           Affiliated Employer [- 1 -]

1.4           Age [- 1 -]

1.5           Allocation Period [- 1 -]

1.6           Anniversary Date [- 1 -]

1.7           Annual Additions [- 1 -]

1.8           Annuity Starting Date [- 2 -]

1.9           Beneficiary [- 2 -]

1.10         Benefiting Participant [- 2 -]

1.11         Break in Service [- 2 -]

1.12         Code [- 2 -]

1.13         Code §401(a)(17) Compensation Limit [- 2 - -]

1.14         Code §414(s) Compensation [- 3 - -]

1.15         Code §415(c)(3) Compensation [- 3 - -]

1.16         Code §3401 Compensation [- 3 -]

1.17         Committee [- 3 -]

1.18         Company Stock [- 3 -]

1.19         Company Stock Account [- 4 -]

1.20         Compensation [- 4 -]

1.21         Compensation Determination Period [- 4 - -]

1.22         Current Obligations [- 4 -]

1.23         Deemed Code §125 Compensation [- 4 - -]

1.24         Determination Date [- 4 -]

1.25         Disability [- 4 -]

1.26         Distribution Calendar Year [- 5 -]

1.27         Early Retirement Age [- 5 -]

1.28         Eligible Employee [- 5 -]

1.29         Employee [- 5 -]

1.30         Employer [- 5 -]

1.31         Exempt Loan [- 5 -]

1.32         Fiscal Year [- 5 -]

1.33         Forfeiture [- 5 -]

1.34         Form W-2 Compensation [- 6 -]

1.35         HCE [- 6 -]

1.36         Highly Compensated Employee [- 6 - -]

1.37         Hour of Service [- 6 -]

1.38         Immediately Distributable [- 7 -]

1.39         Key Employee [- 7 -]

1.40         Leased Employee [- 7 -]

1.41         Life Expectancy [- 7 -]

1.42         Limitation Year [- 7 -]

1.43         Maternity or Paternity Leave [- 8 - -]

1.44         Named Fiduciary [- 8 -]

1.45         NHCE [- 8 -]

1.46         Non-Highly Compensated Employee [- 8 - -]

1.47         Non-Key Employee [- 8 -]

1.48         Normal Retirement Age [- 8 -]

1.49         Normal Retirement Date [- 8 - -]

1.50         Other Investments Account [- 8 - -]

1.51         Otherwise Excludible Participant [- 8 - -]

1.52         Participant [- 8 -]

1.53         Participant's Account [- 8 -]

1.54         Participant's Account Balance [- 8 - -]

1.55         Permissive Aggregation Group [- 9 - -]

1.56         Plan [- 9 -]

1.57         Plan Year [- 9 -]

1.58         Policy [- 9 -]

1.59         Qualified Domestic Relations Orders [- 9 - -]

1.60         Required Aggregation Group [- 9 - -]

1.61         Required Beginning Date [- 9 -]

1.62         Regulation [- 9 -]

1.63         Rollover Account [- 9 -]

1.64         Rollover Contribution (or Rollover) [- 9 - -]

1.65         Safe Harbor Code §415 Compensation [- 9 - -]

1.66         Sponsoring Employer [- 10 -]

1.67         Spouse [- 10 -]

1.68         Statutory Code §415 Compensation [- 10 - -]

1.69         Terminated Participant [- 11 -]

1.70         Top Heavy [- 11 -]

1.71         Top Heavy Minimum Allocation [- 11 - -]

1.72         Top Heavy Ratio [- 11 -]

1.73         Transfer Contribution [- 13 -]

1.74         Transfer Contribution Account [- 13 - -]

1.75         Trustee [- 13 -]

1.76         Trust (or Trust Fund) [- 13 -]

1.77         Unallocated Company Stock Account [- 13 - -]

1.78         Valuation Calendar Year [- 13 -]

1.79         Valuation Date [- 13 -]

1.80         Vested Aggregate Account [- 13 - -]

1.81         Vested, Vested Interest or Vesting [- 13 - -]

1.82         Voluntary Employee Contribution [- 13 - -]

1.83         Voluntary Employee Contribution Account [- 13 - -]

1.84         Year of Service [- 14 -]

Article 2 [- 17 -]

Plan Participation [- 17 -]

2.1           Eligibility and Entry Date Requirements [- 17 - -]

2.2           Waiver of Participation [- 17 -]

2.3           Reemployment After Termination [- 18 - -]

Article 3 [- 19 -]

Contributions and Allocations [- 19 -]

3.1           Employer Contributions [- 19 -]

3.2           Company Stock Account [- 20 -]

3.3           Earnings and Losses [- 22 -]

3.4           Forfeitures and Their Usage [- 22 - -]

3.5           Top Heavy Minimum Allocation [- 22 - -]

3.6           Failsafe Allocation [- 23 -]

3.7           Rollover Contributions [- 24 -]

3.8           Voluntary Employee Contributions [- 24 - -]

Article 4 [- 25 -]

Plan Benefits [- 25 -]

4.1           Benefit Upon Normal (or Early) Retirement [- 25 - -]

4.2           Benefit Upon Late Retirement [- 25 - -]

4.3           Benefit Upon Death [- 25 -]

4.4           Benefit Upon Disability [- 25 - -]

4.5           Benefit Upon Termination of Employment [- 25 - -]

4.6           Determination of Vested Interest [- 25 - -]

Article 5 [- 27 -]

Distribution of Benefits [- 27 -]

5.1           Distribution of Benefit Upon Retirement [- 27 - -]

5.2           Distribution of Benefit Upon Death [- 27 - -]

5.3           Distribution of Benefit Upon Disability [- 28 - -]

5.4           Distribution of Benefit Upon Termination of Employment [- 29 -]

5.5           Mandatory Cash-Out of Benefits [- 29 - -]

5.6           Restrictions on Immediate Distributions [- 30 - -]

5.7           Accounts of Rehired Participants [- 31 - -]

5.8           Spousal Consent Requirements [- 33 - -]

5.9           Required Minimum Distributions [- 33 - -]

5.10         Statutory Commencement of Benefits [- 36 - -]

5.11         Post-Termination Earnings [- 36 -]

5.12         Distribution in the Event of Legal Incapacity [- 36 - -]

5.13         Missing Payees and Unclaimed Benefits [- 36 - -]

5.14         Direct Rollovers [- 37 -]

5.15         Distributions of Stock [- 38 -]

5.16         Cash Dividends on Company Stock [- 38 - -]

5.17         Non-Terminable Rights and Protections [- 38 - -]

5.18         Required Cash Distribution for Certain Banks [- 38 -]

5.19         Financial Hardship Distributions [- 38 - -]

5.20         Pre-Retirement Distributions [- 39 -]

5.21         Distribution of Rollover Contributions [- 39 - -]

5.22         Distribution of Voluntary Employee Contributions [- 40 -]

5.23         Distribution of Transfer Contributions [- 40 - -]

Article 6 [- 41 -]

Code § 415 Limitations [ - 41 -]

6.1           Maximum Annual Additions [- 41 - -]

6.2           Adjustments to Maximum Annual Addition [- 41 - -]

6.3           Multiple Plans and Multiple Employers [- 42 - -]

6.4           Adjustment for Excessive Annual Additions [- 42 - -]

Article 7 [- 43 -]

Loans, Insurance and Directed Investments [- 43 - -]

7.1           Loans to Participants [- 43 -]

7.2           Insurance on Participants [- 43 - -]

7.3           Key Man Insurance [- 43 -]

Article 8 [- 44 -]

Duties of the Administrator [- 44 -]

8.1           Appointment, Resignation, Removal and Succession [- 44 -]

8.2           General Powers and Duties [- 44 - -]

8.3           Functions of Committee [- 44 -]

8.4           Multiple Administrators [- 44 - -]

8.5           Correcting Administrative Errors [- 44 - -]

8.6           Promulgating Notices and Procedures [- 44 - -]

8.7           Employment of Agents and Counsel [- 45 - -]

8.8           Compensation and Expenses [- 45 -]

8.9           Claims Procedures [- 45 -]

8.10         Qualified Domestic Relations Orders [- 45 - -]

8.11         Appointment of Investment Manager [- 45 - -]

Article 9 [- 46 -]

Trustee Provisions [- 46 -]

9.1           Appointment, Resignation, Removal and Succession [- 46 -]

9.2           Investment Alternatives of the Trustee [- 46 - -]

9.3           Valuation of the Trust [- 48 -]

9.4           Compensation and Expenses [- 48 -]

9.5           Payments From the Trust Fund [- 48 - -]

9.6           Payment of Taxes [- 48 -]

9.7           Accounts, Records and Reports [- 48 - -]

9.8           Employment of Agents and Counsel [- 48 - -]

9.9           Division of Duties and Indemnification [- 49 - -]

9.10         Investment Manager [- 50 -]

9.11         Exclusive Benefit Rule [- 50 -]

9.12         Voting Company Stock [- 50 -]

9.13         Application of Cash [- 50 -]

9.14         Restrictions on Company Stock Transactions [- 50 - -]

9.15         Exempt Loans [- 50 -]

9.16         Diversification Rights of Qualified Participants [- 51 - -]

9.17         Superseding Trust or Custodial Agreement [- 52 - -]

Article 10 [- 53 -]

Adopting Employer Provisions [- 53 -]

10.1         Plan Contributions [- 53 -]

10.2         Plan Amendments [- 53 -]

10.3         Plan Expenses [- 53 -]

10.4         Employee Transfers [- 53 -]

10.5         Multiple Employer Provisions Under Code §413(c) [- 53 -]

10.6         Termination of Adoption [- 53 -]

10.7         Payment of Benefits Upon Termination of Adoption [- 54 -]

Article 11 [- 55 -]

Amendment, Termination, Merger and Transfers [- 55 - -]

11.1         Plan Amendment [- 55 -]

11.2         Termination By Sponsoring Employer [- 56 - -]

11.3         Merger or Consolidation [- 56 -]

Article 12 [- 57 -]

Miscellaneous Provisions [- 57 -]

12.1         No Contract of Employment [- 57 -]

12.2         Title to Assets [- 57 -]

12.3         Qualified Military Service [- 57 - -]

12.4         Fiduciaries and Bonding [- 57 -]

12.5         Severability of Provisions [- 57 -]

12.6         Interpretation of the Plan [- 57 -]

12.7         Legal Action [- 58 -]

12.8         Qualified Plan Status [- 58 -]

12.9         Mailing of Notices to Administrator, Employer or Trustee [- 58 -]

12.10       Participant Notices and Waivers of Notices [- 58 - -]

12.11       No Duplication of Benefits [- 58 - -]

12.12       Evidence Furnished Conclusive [- 58 - -]

12.13       Release of Claims [- 58 -]

12.14       Multiple Copies of Plan And/or Trust [- 58 - -]

12.15       Limitation of Liability and Indemnification [- 58 - -]

12.16       Written Elections and Forms [- 59 - -]

12.17       Assignment and Alienation of Benefits [- 59 - -]

12.18       Exclusive Benefit Rule [- 59 -]

12.19       Dual and Multiple Trusts [- 59 - -]

Capitol Bancorp Ltd.

Employee Stock Ownership Plan

This Agreement is made and entered into as of the 1st day of January, 2008, between Capitol Bancorp Ltd. (hereafter the "Sponsoring Employer") and Cristin K. Reid, David O'Leary and Bruce A. Thomas (hereafter collectively  the "Trustee").

Introduction

The Sponsoring Employer previously established an employee stock ownership plan (hereafter the "Plan") designed to invest primarily in employer securities as provided in Code §4975(e)(7), effective January 1, 1988, which the Sponsoring Employer wishes to amend. Therefore, effective January 1, 2008 (except for those specific provisions that have an earlier effective date), the Sponsoring Employer hereby amends and restates the Plan to comply with the requirements of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986, as amended by subsequent legislation, including the Economic Growth and Tax Relief Act of 2001 and the Job Creation and Workers Assistance Act of 2002, and certain law changes under the Pension Protection Act of 2006, and to comply with all applicable rulings and Regulations thereunder.

  Article 1                      

Definitions

1.1   Administrator.

The term "Administrator" means the Sponsoring Employer unless another Administrator is appointed under Section 8.1.

1.2   Adopting Employer.

The term "Adopting Employer" means any entity which adopts this Plan with the consent of the Sponsoring Employer. In addition to all the other terms and conditions set forth in the Plan, an Adopting Employer will also be subject to the terms and conditions set forth in Article 10. An Affiliated Employer is not considered an Adopting Employer unless it has specifically adopted the Plan. The method of crediting Years of Service for purposes of eligibility and vesting of employees of Adopting Employers shall be determined by resolution of the Board of Directors of Capitol Bancorp Ltd. at the time of approval of the Adopting Employer’s adoption of the Plan.  Such method of crediting Years of Service shall be recorded in the administrative procedures of the Plan. A list of the Adopting Employers is attached hereto as Appendix A.

1.3   Affiliated Employer.

The term "Affiliated Employer" means any of the following: (1) a controlled group of corporations as defined in Code §414(b); (2) a trade or business (whether or not incorporated) under common control as described in Code §414(c); (3) any organization (whether or not incorporated) which is a member of an affiliated service group as described in Code §414(m); and (4) any other entity required to be aggregated as described in Code §414(o). Any Periods of Service or Years of Service with an Affiliated Employer will only be taken into account as otherwise provided under the Plan.

1.4   Age.

    The term "Age" means a Participant's actual attained age unless other specified under the terms of the Plan.

1.5   Allocation Period.

The term "Allocation Period" means a period of 12 consecutive months or less for which (a) an Employer contribution is made and allocated under the terms of the Plan; (b) Forfeitures are allocated under the terms of the Plan; or (c) earnings and losses are allocated under the terms of the Plan.

1.6   Anniversary Date.

    The term "Anniversary Date" means December 31st of each Plan Year.

1.7   Annual Additions.

The term "Annual Additions" means the sum of the following amounts credited to a on a Participant's behalf for any Limitation Year: (a) Employer contributions; (b) Forfeitures; (c) amounts allocated to an individual medical account, as defined in Code §415(l)(2), which is part of a pension or annuity plan maintained by the Employer; and (d) amounts derived from contributions paid or accrued that are attributable to post-retirement medical benefits, allocated to the separate account of a Key Employee, as defined in Code §419A(d)(3), under a welfare fund, as defined in Code §419(e), maintained by the Employer. A Participant's Annual Additions do not include a Participant's Rollover Contributions, loan repayments,

- 1 - -

repayments of prior Plan distributions, direct transfers of contributions from another plan to this Plan, deductible contributions to a simplified employee pension plan, or voluntary deductible contributions.

1.8   Annuity Starting Date.

The term "Annuity Starting Date" means the first day of the first period for which a benefit is paid as an annuity, or in the case of a benefit not payable as an annuity, the first day all events have occurred which entitle the Participant to the benefit. The first day of the first period for which a benefit is payable because of Disability will be treated as the Annuity Starting Date only if it is not an auxiliary benefit.

1.9   Beneficiary.

The term "Beneficiary" means the recipient designated by a Participant to receive the benefit payable upon the Participant's death, or the recipient designated by a Beneficiary to receive any benefit payable in the event of the Beneficiary's death prior to receiving the entire death benefit to which the Beneficiary is entitled. All Beneficiary designations will be made subject to the following provisions:

(a)   Beneficiary Designations By a Participant. Subject to the provisions of Section 5.8 regarding the rights of a Participant's Spouse, each Participant may designate a Beneficiary in writing with the Administrator. If a Participant designates his or her Spouse and the Participant and his or her Spouse are legally divorced subsequent to the date of the designation, then the designation of such Spouse as a Beneficiary hereunder will be deemed null and void unless the Participant, subsequent to the legal divorce, reaffirms the designation in writing. In the absence of any other designation, the Participant will be deemed to have designated the following Beneficiaries in the following order, provided however, that with respect to clauses (1) and (2) following, such Beneficiaries are then living: (1) the Participant's Spouse, (2) the Participant's issue per stirpes; and (3) the Participant's estate.

(b)   Beneficiary Designations By a Beneficiary. In the absence of a Beneficiary designation or other directive from a Participant to the contrary, any Beneficiary may name his or her own Beneficiary in accordance with Section 5.2(d) to receive any benefits payable in the event of the Beneficiary's death prior to the receipt of all the Participant's death benefits to which the Beneficiary was entitled.

(c)   Beneficiaries Considered Contingent Until the Death of the Participant. Notwithstanding any provision in this Section to the contrary, any Beneficiary named hereunder will be considered a contingent Beneficiary until the death of the Participant (or Beneficiary, as the case may be), and until such time will have no rights granted to Beneficiaries under the Plan.

1.10   Benefiting Participant.

The term "Benefiting Participant" means a Participant who is eligible to receive an allocation of Employer contributions or Forfeitures as of the last day of an Allocation Period. The requirements to be a Benefiting Participant are set forth in Section 3.1(c).

1.11   Break in Service.

The term "Break in Service" means a 12-month eligibility or Vesting computation period as set forth in Section 1.84 in which an Employee does not complete more than 500 Hours of Service. If any computation period is less than 12 months, the Hours of Service requirement set forth in the preceding sentence will be proportionately reduced if it is greater than one.

1.12   Code.

The term "Code" means the Internal Revenue Code of 1986, as amended, and the Regulations and rulings promulgated thereunder by the Internal Revenue Service. All citations to sections of the Code and Regulations are to such sections as they may from time to time be amended or renumbered.

1.13   Code §401(a)(17) Compensation Limit.

The term "Code §401(a)(17) Compensation Limit" means, for any Plan Year and/or Limitation Year which begins on or after January 1, 2002, the statutory limit that applies to each Participant's annual Compensation for a specific Compensation Determination Period which is taken into account under the Plan; such annual Compensation will not exceed $200,000. However, the $200,000 statutory limit on annual Compensation will be adjusted for cost-of-living increases in accordance with Code §401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to annual Compensation for the Compensation Determination Period that begins with or within such calendar year. If a Compensation Determination Period is less than 12 consecutive months, then the Code §401(a)(17) Compensation Limit will be multiplied by a fraction, the numerator of which is the number of months in the Compensation Determination Period, and the denominator of which is 12. If Compensation for any prior Compensation

- 2 - -

Determination Period is used in determining a Participant's Plan benefits for the current Plan Year, then the annual Compensation for such prior Compensation Determination Period is subject to the applicable Code §401(a)(17) Compensation Limit as in effect for that prior Compensation Determination Period.

1.14   Code §414(s) Compensation.

The term "Code §414(s) Compensation" means for testing purposes any compensation that qualifies as a nondiscriminatory definition of compensation under Code §414(s) and the Regulations thereunder. The Administrator is not bound by any other definition of compensation in the Plan in determining Code §414(s) Compensation. The Administrator may determine on an annual basis (and within its discretion) Code §414(s) Compensation, which will be applied consistently to all Participants for a Plan Year; to all applicable tests that are administered for such Plan Year; and to all plans (including this Plan) of the Sponsoring Employer and Adopting Employers for such Plan Year. Code §414(s) Compensation may be determined over the Plan Year for which the applicable test is being performed or the calendar year ending within such Plan Year. In determining Code §414(s) Compensation, the Administrator within its discretion may take into consideration only the Compensation received while the Employee is a Participant under the component of the Plan being tested.

1.15   Code §415(c)(3) Compensation.

The term "Code §415(c)(3) Compensation" means the following:

(a)   Top Heavy and Key Employee Determinations. In determining Top Heavy Minimum Allocations and if a Employee is a Key Employee, the term "Code §415(c)(3) Compensation means Form W-2 Compensation during the entire Compensation Determination Period that statutorily applies.

(b)   Code §415 Limitations. In determining a Participant's Code §415 limitation for any Limitation Year, Code §415(c)(3) Compensation means Form W-2 Compensation during the entire Compensation Determination Period that statutorily applies.

(c)   Highly Compensated Employee Determinations. In determining if a Participant is a Highly Compensated Employee (or for any other statutory determination not described in paragraphs (a) and (b) above), Code §415(c)(c) Compensation means Form W-2 Compensation during the entire Compensation Determination Period that statutorily applies.

(d)   Exclusions to Compensation Do Not Apply. Code §415(c)(3) Compensation includes any amounts that are excluded from Compensation under Section 1.20 of the Plan.

(e)   Inclusion of Certain Amounts. Code §415(c)(3) Compensation includes (a) elective deferrals as defined in Code §402(g)(3) and amounts contributed or deferred by the Employer at the election of the Employee which are not includible in gross income under Code §125 (including Deemed Code §125 Compensation), Code §132(f)(4), or Code §457; and (b) effective January 1, 2005, Post-Severance Compensation.

1.16   Code §3401 Compensation.

The term "Code §3401 Compensation" means wages within the meaning of Code §3401(a) that are actually paid or made available in gross income for the purposes of income tax withholding at the source but determined without regard to any rules under Code §3401 that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code §3401(a)(2)).

1.17   Committee.

The term "Committee" means the administrative/advisory group that the Sponsoring Employer may establish, to which the Sponsoring Employer may delegate certain of the Sponsoring Employer's responsibilities as Administrator. The Sponsoring Employer is permitted to select another name for such administrative/advisory group. The Sponsoring Employer may appoint one or more members to the Committee. Members of the Committee need not be Participants or Beneficiaries, and officers and directors of the Sponsoring Employer are not precluded from serving as members of the Committee.

1.18   Company Stock.

The term "Company Stock" means common stock issued by the Employer which is voting common stock (or preferred stock convertible into voting common stock) and which qualifies under Code §409(l) as an Employer security.

- 3 - -

1.19   Company Stock Account.

The term "Company Stock Account" means the account to which is credited a Participant's share of Company Stock contributed to or acquired by the Plan.

1.20   Compensation.

The term Compensation means amounts received by an Employee from the Employer during a Compensation Determination Period, determined in accordance with the following provisions:

(a)   Compensation Used to Determine Employer Contributions. In determining Employer contributions, the term Compensation means a Participant's Form W-2 Compensation received during the Compensation Determination Period. For purposes of this paragraph, (1) the Compensation Determination Period is the Plan Year; and (2) elective deferrals as defined in Code §402(g)(3) and amounts contributed or deferred by the Employer at the election of the Employee which are not includible in gross income under Code §125 (including Deemed Code §125 Compensation), Code §132(f)(4), or Code §457 will be included as Compensation.

(b)   Code §401(a)(17) Compensation Limit. Notwithstanding any provision of this Section to the contrary, Compensation for any Compensation Determination Period (or Plan Year) will not exceed the limitation set forth in Code §401(a)(17) as in effect for that Compensation Determination Period (or Plan Year). The Code §401(a)(17) limit for Plan Years which begin on or after January 1, 2002 will not exceed $200,000, as adjusted for cost-of-living increases in accordance with Code §401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to annual Compensation for the Compensation Determination Period that begins with or within such calendar year. If a Compensation Determination Period is less than 12 consecutive months, then the applicable Code §401(a)(17) limit will be multiplied by a fraction, the numerator of which is the number of months in the Compensation Determination Period and the denominator of which is 12. If Compensation for any prior Compensation Determination Period is used in determining a Participant's Plan benefits for the current Plan Year, then the annual Compensation for such prior Compensation Determination Period is subject to the applicable Code §401(a)(17) limit in effect for that prior Compensation Determination Period.

1.21   Compensation Determination Period

The term "Compensation Determination Period" means either the Plan Year, the Fiscal Year ending with or within the Plan Year, or the calendar year ending with or within the Plan Year, as specifically set forth in the Plan with respect to a particular component or type of contribution. However, for purposes of a specific statutory determination (e.g. whether an Employee is a Highly Compensated Employee), the term "Compensation Determination Period" means the period stated in the Plan.

1.22   Current Obligations.

The term "Current Obligations" means obligations of the Trust Find arising from the extension of credit to the Trust Fund and which are payable in cash within one year from the date an Employer contribution is made to the Plan.

1.23   Deemed Code §125 Compensation.

The term "Deemed §125 Compensation" means an excludable amount that is not available to an Employee in cash in lieu of group health coverage under a Code §125 arrangement because that Employee is not able to certify that he or she has other health coverage. An amount is permitted to be treated as Deemed Code §125 Compensation only if the Employer does not request or collect information about the Employee's other health coverage as part of the enrollment process for the health plan.

1.24   Determination Date.

The term "Determination Date" means, for any Plan Year subsequent to the first Plan Year of the Plan, the last day of the preceding Plan Year. For the first Plan Year of the Plan, the term "Determination Date" means the last day of that first Plan Year.

1.25   Disability.

The term "Disability" means a physical or mental condition arising after an Employee has become a Participant which totally and permanently prevents the Participant from engaging in any occupation for remuneration or profit. The determination as to whether a Participant has suffered a Disability will be made by a physician acceptable to the Administrator. If a difference of opinion arises between the Participant and the Administrator as to whether the Participant has suffered a Disability, it will be settled by a majority decision of three physicians, one to be appointed by the Administrator, one to be appointed by the Participant, and the third to be appointed by the two physicians first appointed herein.

- 4 - -

1.26   Distribution Calendar Year.

The term "Distribution Calendar Year" means, for purposes of required minimum distributions under Section 5.9, a calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year that contains the Participant's Required Beginning Date. For distributions beginning after the Participant's death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under Section 5.9(b)(2)(B). The required minimum distribution for the Participant's first Distribution Calendar Year will be made on or before the Participant's Required Beginning Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant's Required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year.

1.27   Early Retirement Age.

The term "Early Retirement Age" means any date after a Participant reaches 55 and completes at least 10 Years of Service.

1.28   Eligible Employee.

The term "Eligible Employee" means any Employee who is a member of an eligible class of Employees and who is not excluded from participating in the Plan. If the Plan utilizes the failsafe allocation provisions of Section 3.6, then the term "Eligible Employee" means any Employee who receives a failsafe allocation, even if such Employee was previously excluded from participating in the Plan. Furthermore, the Sponsoring Employer may elect at any time to reclassify any Employee who had been excluded from participating in the Plan (or a component of the Plan) to be an Eligible Employee through a Plan amendment that is retroactively applied for one or more prior Plan Years because the Plan (or a component of the Plan) failed to satisfy for such Plan Year one of the tests set forth in Code §410(b)(1)(A), (B) or (C), or for any other reason required to maintain the tax exempt status of the Plan.

1.29   Employee.

The term "Employee" means (a) any person that is reported on the payroll records of the Sponsoring Employer as an employee who is deemed by the Sponsoring Employer to be a common law employee; (b) any person that is reported on the payroll records of an Affiliated Employer as an employee who is deemed by the Affiliated Employer to be a common law employee (even if the Affiliated Employer is not an Adopting Employer), except for purposes of determining eligibility to participate in the Plan; (c) any Self-Employed Individual who derives Earned Income from the Employer; and (d) any person who is considered a Leased Employee but who (1) is not covered by a plan described in Code §414(n)(5), or (2) is covered by a plan described in Code §414(n)(5) but Leased Employees constitute more than 20% of the Employer's non-highly compensated workforce. However, the term "Employee" will not include an Independent Contractor. If an Independent Contractor is later determined by the Sponsoring Employer, a court, or governmental agency to be an Employee or to have been an Employee, and so long as such individual is an Eligible Employee, then such individual will only be eligible for Plan participation prospectively and will participate in the Plan as of the later of (a) the date that such determination is made, or (b) the entry date set forth in Section 2.1(c) that coincides with or next follows such determination and after such individual has satisfied any eligibility requirements set forth in Section 2.1.

1.30   Employer.

The term "Employer" means the Sponsoring Employer and any Adopting Employer.

1.31   Exempt Loan.

The term "Exempt Loan" means a loan made to the Plan by a disqualified person or that is guaranteed by a disqualified person and which satisfies the requirements of Regulation §54.4975-7(b) and Department of Labor regulation §2550.408b-3.

1.32   Fiscal Year.

The term "Fiscal Year" means the Sponsoring Employer's 12 consecutive month accounting year beginning January 1st and ending the following the following December 31st. If the Fiscal Year is changed, a short Fiscal Year is established beginning the day after the last day of the Fiscal Year in effect before this change and ending on the last day of the new Fiscal Year.

1.33   Forfeiture.

The term "Forfeiture" means generally the amount by which a Participant's Account balance attributable to Employer contributions exceeds his or her Vested Interest in the Participant's Account balance attributable to Employer contributions as determined at the time set forth in Section ‎3.4. The term "Forfeiture" means any amount that is removed from a Participant's Account pursuant to any Employee Plans

- 5 - -

Compliance Resolution System (EPCRS) program or any other correction guidance that is issued by the Internal Revenue Service. However, no Forfeitures will occur solely because a Participant transfers employment from the Sponsoring Employer to an Affiliated Employer or Adopting Employer (or vice versa).

1.34   Form W-2 Compensation.

The term "Form W-2 Compensation" means wages within the meaning of Code §3401(a) and all other payments of compensation actually paid or made available in gross income to an Employee by the Employer in the course of the Employer's trade or business for which the Employer is required to furnish the Employee a Form W-2 under Code §6041(d), §6051(a)(3) and §6052. Compensation must be determined without regard to rules limiting remuneration included in wages based on the nature or location of employment or services performed (like the exception for agricultural labor in Code §3401(a)(2)).

1.35   HCE.

The term "HCE" means a Highly Compensated Employee.

1.36   Highly Compensated Employee.

The term "Highly Compensated Employee" means any Employee who during the Plan Year or the look-back year was a 5% owner as defined in Code §416(i)(1), or who for the look-back year had Code §415 Compensation in excess of $80,000 as adjusted in accordance with Code §415(d) (except that the base year will be the calendar quarter ending September 30, 1996). In determining who is a former Highly Compensated Employee, the rules for determining which Employees are Highly Compensated Employees for the Plan Year or look-back year for which the determination is being made (in accordance with temporary Regulation §1.414(q)-1T, A-4, Notice 97-45, and any subsequent guidance) will be applied. A former Highly Compensated Employee for the determination year is any former Employee who, with respect to the Employer, had a separation year (as defined in temporary Regulation §1.414(q)-1T, A-5) prior to the determination year and was an active Highly Compensated Employee for either such Employee's separation year or any determination year ending on or after the Employee's 55th birthday. For purposes of determining status as a former Highly Compensated Employee, whether an employee was an active Highly Compensated Employee for a determination year that ended on or after the Employee's 55th birthday, or that was a separation year, is based on the rules applicable to determining HCE status as in effect for that determination year. If the Employer maintains more than one qualified retirement plan, the definition of Highly Compensated Employee must be consistently applied to all such plans. In determining if an Employee is a Highly Compensated Employee based on his or her Compensation, the top paid group election in Code §414(q)(3) will not be applied by this Plan.

1.37   Hour of Service.

The term "Hour of Service" means, with respect to any provision of the Plan in which service is determined by the elapsed time method, each hour for which an Employee is paid, or is entitled to payment, by the Employer or an Affiliated Employer for the performance of duties. With respect to any provision of the Plan in which service is determined by counting an Employee's Hours of Service, the meaning of the term "Hour of Service" will be determined in accordance with the following provisions:

(a)   Determination of Hours. The term Hour of Service means (1) each hour an Employee is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliated Employer, which will be credited to the Employee for the computation period in which the duties are performed; (2) each hour for which an Employee is paid, or entitled to payment, by the Employer or an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, except that no more than 501 Hours of Service will be credited under this clause (2) for any single continuous period (whether or not such period occurs in a single computation period); and (3) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer or an Affiliated Employer, except that the same hours will not be credited both under clause (1) or clause (2) and under this clause (3), and these hours will be credited for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. Hours of Service will be calculated and credited pursuant to DOL Regulation §2530.200b-2(b) and (c), which are incorporated in this Plan by reference. Hours of Service shall be determined on the basis of actual hours for which the Employee is paid or entitled to payment as reflected on the Employee's W-2 form.

- 6 - -

(b)   Maternity or Paternity Leave. In determining if a Break in Service for participation and Vesting has occurred in a computation period, an individual on Maternity or Paternity Leave will receive credit for up to 501 Hours of Service which would otherwise have been credited but for such absence, or in any case in which such Hours of Service cannot be determined, 8 hours per day of such absence. Hours  of Service credited for Maternity of Paternity Leave will be credited in the computation period in which the absence begins if the crediting is necessary to prevent a Break in Service in that period, or in all other cases, in the following computation period.

(c)   Use of Equivalencies. Notwithstanding paragraph (a), the Administrator may elect for all Employees or for one or more different classifications of Employees (provided such classifications are reasonable and are consistently applied) to apply one or more of the following equivalency methods in determining the Hours of Service of an Employee. Under such equivalency methods, an Employee will be credited with (1) 190 Hours of Service for each month he or she is paid or entitled to payment for at least one Hour of Service; or (2) 95 Hours of Service for each semi-monthly period in which he or she is paid or entitled to payment for at least one Hour of Service; or (3) 45 Hours of Service for each week he or she is paid or entitled to payment for at least one Hour of Service; or (4) 10 Hours of Service for each day he or she is paid or entitled to payment for at least one Hour of Service.

1.38   Immediately Distributable.

The term "Immediately Distributable" means any part of the Participant's benefit that could be distributed to the Participant (or the Participant's surviving Spouse) before the Participant reaches (or would have reached if not deceased) the later of his or her Normal Retirement Age or Age 62.

1.39   Key Employee.

The term "Key Employee" means, for Plan Years beginning on or after January 1, 2002, any Employee, former Employee or deceased Employee who at any time during the Plan Year that includes the Determination Date was (a) an officer of the Employer having annual Compensation greater than the dollar amount set forth in Code §416(i)(1), as adjusted for Plan Years beginning after December 31, 2002; (b) a 5% owner as defined in Code §416(i)(1)(B)(I); or (c) a 1% owner as defined in Code §416(i)(1)(B)(ii) whose annual Compensation is more than $150,000. The determination of who is a Key Employee will be made in accordance with Code §416(i)(1) and the Regulations and other guidance issued thereunder.

1.40   Leased Employee.

The term "Leased Employee" means, for Plan Years beginning on or after January 1, 1997, any person within the meaning of Code §414(n)(2) and §414(o) who is not reported on the payroll records of the Employer as a common law employee and who provides services to the Employer if (a) the services are provided under an agreement between the Employer and a leasing organization; (b) the person has performed services for the Employer or for the Employer and related persons as determined under Code §414(n)(6) on a substantially full time basis for a period of at least one year; and (c) the services are performed under the primary direction or control of the Employer. Contributions or benefits provided to a Leased Employee by the leasing organization which are attributable to services performed for the Employer will be treated as provided by the Employer. A Leased Employee will not be considered an Employee of the recipient if he or she is covered by a money purchase plan providing (a) a non-integrated Employer contribution rate of at least 10% of Code §415 Compensation, including amounts contributed by the Employer pursuant to a salary deferral agreement which are excludible from the Leased Employee's gross income under a cafeteria plan covered by Code §125 (including Deemed Code §125 Compensation), a cash or deferred plan under Code §401(k), a SEP under Code §408(k) or a tax-deferred annuity under Code §403(b), and also including, for Plan Years beginning on or after January 1, 2001, any elective amounts that are not includible in the gross income of the Leased Employee because of Code §132(f)(4); (b) immediate participation; and (c) full and immediate vesting. This exclusion is only available if Leased Employees do not constitute more than 20% of the recipient's non-highly compensated work force.

1.41   Life Expectancy.

The term "Life Expectancy" means, for purposes of required minimum distributions under Section 5.9, life expectancy as computed by use of the Single Life Table in Regulation §1.401(a)(9)-9.

1.42   Limitation Year.

The term "Limitation Year" means the Plan Year.

- 7 - -

1.43   Maternity or Paternity Leave.

The term "Maternity or Paternity Leave" means that an Employee is absent from work because of the Employee's pregnancy; the birth of the Employee's child; the placement of a child with the Employee in connection with the adoption of such child by the Employee; or the need to care for such child for a period beginning immediately following the child's birth or placement as set forth above.

1.44   Named Fiduciary.

The term "Named Fiduciary" means the Plan Administrator or other fiduciary named by the Plan Administrator to control and manage the operation and administration of the Plan. To the extent authorized by the Plan Administrator, a Named Fiduciary may delegate its responsibilities to a third party or parties. The Employer will also be a Named Fiduciary.

1.45   NHCE.

The term "NHCE" means a Non-Highly Compensated Employee.

1.46   Non-Highly Compensated Employee.

The term "Non-Highly Compensated Employee" means any Employee who is not a Highly Compensated Employee.

1.47   Non-Key Employee.

The term "Non-Key Employee" means any Employee who is not a Key Employee, including former Key Employees. In making the allocation in Section 3.5, Non-Key Employee means a Non-Key Employee who either is a Participant or would be a Participant but for the reasons in Section 3.5(a).

1.48   Normal Retirement Age.

The term "Normal Retirement Age" means the date a Participant reaches Age 65. There is no mandatory retirement Age.

1.49   Normal Retirement Date.

The term "Normal Retirement Date" means the same date a Participant reaches Normal Retirement Age.

1.50   Other Investments Account.

The term "Other Investments Account", if any, means the aggregate value of all of a Participant's accounts (other than the Company Stock Account) to which are credited a Participant's share of Employer contributions, Forfeitures which are not used to pay administrative expenses or to reduce Employer contributions, earnings and losses, and the proceeds of any Policies, if any, purchased on the Participant's life under Section 7.2. Any purchase of Company Stock will be debited from one or more of these accounts which together constitute a Participant's Other Investments Account.

1.51   Otherwise Excludible Participant.

The term "Otherwise Excludible Participant" means a Participant who has not satisfied the statutory age and service requirements set forth in Code §410(b).

1.52   Participant.

The term "Participant" means any Employee who has met the eligibility and participation requirements of the Plan. However, an individual who is no longer an Employee will cease to be a Participant if his or her entire Plan benefit (1) is fully guaranteed by an insurance company and legally enforceable at the sole choice of such individual against such insurance company, provided that a contract, Policy, or certificate describing the individual's Plan benefits has been issued to such individual; (2) is paid in a lump sum distribution which represents such individual's entire interest in the Plan; or (3) is paid in some other form of distribution and the final payment thereunder has been made.

1.53   Participant's Account.

The term "Participant's Account" means the aggregate balance in a Participant's Company Stock Account and Other Investments Account and any other accounts that the Administrator may determine necessary from time.

1.54   Participant's Account Balance.

The term "Participant's Account Balance" means, for required minimum distributions purposes under Section 5.9, the balance of the Participant's Account as of the last Valuation Date in the Valuation Calendar Year, increased by contributions made and allocated or forfeitures allocated to the Account as of dates in the Valuation Calendar Year after the Valuation Date and decreased by distributions made in the Valuation Calendar Year after the Valuation Date. The Participant's Account Balance for the Valuation Calendar Year includes any amounts rolled over or transferred to the Plan in the Valuation Calendar Year or the Distribution Calendar Year if distributed or transferred in the Valuation Calendar Year.

- 8 - -

1.55   Permissive Aggregation Group.

The term "Permissive Aggregation Group" means a Required Aggregation Group plus any Employer plan or plans which when considered as a group with the Required Aggregation Group would continue to satisfy the requirements of Code §401(a)(4) and §410.

1.56   Plan.

The term "Plan" means the Capitol Bancorp Ltd. Employee Stock Ownership Plan, established by the Sponsoring Employer as amended from time to time.

1.57   Plan Year.

The term Plan Year means the Plan's twelve month accounting year beginning January 1st and ending the following the following December 31st. If the Plan Year is changed, a short Plan Year will be established beginning the day after the last day of the Plan Year in effect before the change and ending on the last day of the new Plan Year.

1.58   Policy.

The term "Policy" means an insurance policy or annuity contract purchased pursuant to Section 7.2.

1.59   Qualified Domestic Relations Orders.

The term "Qualified Domestic Relations Order" is a signed domestic relations order issued by a State Court which creates, recognizes or assigns to an alternate payee(s) right to receive all or part of a Participant's Plan benefit. An alternate payee is a Spouse, former Spouse, child, or other dependent of a Participant who is treated as a Beneficiary under the Plan as a result of the QDRO. Effective as of April 6, 2007,  the term "Qualified Domestic Relations Order" also includes (a) an order that is issued with respect to another DRO or QDRO, including an order that revises or amends a prior order; (b) an order issued after the participant’s annuity starting date or death; or (c) an order that names as the alternate payee a person deemed financially dependent upon the participant, provided that the other requirements for a QDRO as set forth in the Plan’s QDRO procedure and/or as defined in Code §414(p) are satisfied.

1.60   Required Aggregation Group.

The term "Required Aggregation Group" means (1) each Employer qualified deferred compensation plan in which at least one Key Employee participates or participated at any time during the Plan Year containing the Determination Date or any of the four preceding Plan Years (regardless of whether the plan has terminated); and (2) any other Employer qualified deferred compensation plan that enables a plan described in (1) to satisfy Code §401(a)(4) or §410.

1.61   Required Beginning Date.

The term "Required Beginning Date" means the later of April 1 of the calendar year following the calendar year age in which a Participant reaches age 70½ or actual retirement. However, for a Participant who is a 5% owner, the term Required Beginning Date means April 1st of the calendar year following the later of the calendar year in which the Participant reaches Age 70½. Notwithstanding the foregoing to the contrary, if a Participant made a distribution election prior to January 1, 1984 pursuant to §242(b) of the Tax Equity and Fiscal Responsibility Act (TEFRA), such Participant's benefit will be distributed at the time and in the manner set forth in the election provided it has not been revoked, and further provided that the election provides a method of distribution of benefits which satisfies the provisions of Code §401(a)(9) as in effect prior to the enactment of TEFRA.

1.62   Regulation.

The term "Regulation" means regulations as promulgated by the Secretary of the Treasury, the Secretary of the Department of Labor, or their delegates, as amended and/or renumbered from time to time.

1.63   Rollover Account.

The term "Rollover Account" means account to which a Participant's Rollover Contributions, if any, are credited.

1.64   Rollover Contribution (or Rollover).

The terms "Rollover Contribution" and "Rollover" mean an amount eligible for tax free rollover treatment which is transferred to this Plan from a qualified retirement plan under Code §401(a); from a qualified annuity plan under Code §403(a); from a qualified annuity under Code §403(b); from an individual retirement account under Code §408(a) (without regard to whether the individual retirement account is a "conduit individual retirement account"); from an individual retirement annuity under Code §408(b) (without regard to whether the individual retirement account is a "conduit individual retirement account"); and from a governmental plan under Code §457(b).

1.65   Safe Harbor Code §415 Compensation.

The "Safe Harbor Code §415 Compensation" means an Employee's compensation as determined under Regulation §1.415-2(d)(10), to wit: Earned Income, wages, salaries, fees

- 9 - -

for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Sponsoring Employer maintaining the Plan to the extent that the amounts are includable in gross income (including, but not limited to, commissions paid salespersons, compensation for services based on a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or other expense allowances under a non-accountable plan as described in Regulation §1.62-2(c)). Safe Harbor Code §415 Compensation includes amounts paid or made available to the Employee. An Employee's Safe Harbor Code §415 Compensation will be determined in accordance with the following provisions:

(a)   Excluded Amounts. Safe Harbor Code §415 Compensation does not include the following: (1) Employer contributions made by the Employer to a plan of deferred compensation to the extent that, before the application of the Code §415 limitations to that plan, the contributions are not includible in the Employee's gross income for the taxable year in which contributed; Employer contributions made on behalf of an Employee to a simplified employee pension described in Code §408(k) for the taxable year in which contributed;  and any distributions from a plan of deferred compensation for Code §415 purposes, regardless of whether such amounts are includible in the Employee's gross income when distributed; (2) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which receive special tax benefits, such as premiums for group-term life insurance (but only to the extent that the premiums are not includible in the gross income of the employee), or contributions made by an Employer (whether or not under a salary deferral agreement) towards the purchase of an annuity described in Code §403(b) (regardless of whether such the contributions are excludible from an Employee's gross income).

(b)   Inclusion of Certain Amounts. Code §415(c)(3) Compensation includes (a) elective deferrals as defined in Code §402(g)(3) and amounts contributed or deferred by the Employer at the election of the Employee which are not includible in gross income under Code §125 (including Deemed Code §125 Compensation), Code §132(f)(4), or Code §457; and (b) effective January 1, 2005, Post-Severance Compensation.

1.66   Sponsoring Employer.

The term "Sponsoring Employer" means Capitol Bancorp Ltd. (and any successor thereto that elects to assume sponsorship of this Plan).

1.67   Spouse.

The term "Spouse" means the person to whom a Participant is legally married. Furthermore, a former Spouse will be treated as the Participant's Spouse or surviving Spouse to the extent provided under a Qualified Domestic Relations Order.

1.68   Statutory Code §415 Compensation.

The term "Statutory Code §415 Compensation" means, in applying the Code §415 limits, an Employee's compensation determined as follows under Regulation §1.415-2(d)(2):

(a)   Amounts Includable as Statutory Code §415 Compensation. Statutory Code §415 Compensation  includes the following: (1) wages, salaries, fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Sponsoring Employer maintaining the Plan to the extent that the amounts are includable in gross income (including, but not limited to, commissions paid salespersons, compensation for services based on a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or other expense allowances under a non-accountable plan as described in Regulation §1.62-2(c)); (2) in the case of a Self-Employed Individual, Earned Income; (3) amounts described in Code §104(a)(3), §105(a) and 105(h), but only to the extent these amounts are includible in the gross income of the Employee; (4) amounts paid or reimbursed by the Employer for moving expenses incurred by the Employee, but only to the extent that at the time of the payment it is reasonable to believe that these amounts are not deductible by the Employee under Code §217; (5) the value of a non-qualified stock option granted to an Employee by the Employer, but only to the extent that the value of the option is includible in the gross income of the Employee for the taxable year in which granted; and (6) the amount includible in the gross income of an Employee upon

- 10 - -

making the election described in Code §83(b). Clauses (1) and (2) above include foreign earned income (as defined in Code §911(b)), regardless of whether excludible from gross income under Code §911. Compensation determined under clause (1) above is to be determined without regard to the exclusions from gross income in Code §931 and §933. Similar principles are to be applied with respect to income subject to Code §931 and §933 in determining compensation described in clause (2). Statutory Code §415 Compensation includes amounts paid or made available to the Employee.

(b)   Exclusion of Certain Amounts. Statutory Code §415 Compensation does not include (1) Employer contributions made by the Employer to a plan of deferred compensation to the extent that, before the application of the Code §415 limitations to that plan, the contributions are not includible in the Employee's gross income for the taxable year in which contributed; Employer contributions made on behalf of an Employee to a simplified employee pension described in Code §408(k) for the taxable year in which contributed;  and any distributions from a plan of deferred compensation for Code §415 purposes, regardless of whether such amounts are includible in the Employee's gross income when distributed; (2) amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (4) other amounts which receive special tax benefits, such as premiums for group-term life insurance (but only to the extent that the premiums are not includible in the gross income of the employee), or contributions made by an Employer (whether or not under a salary deferral agreement) towards the purchase of an annuity described in Code §403(b) (regardless of whether such the contributions are excludible from an Employee's gross income).

(c)   Inclusion of Certain Amounts. Code §415(c)(3) Compensation includes (a) elective deferrals as defined in Code §402(g)(3) and amounts contributed or deferred by the Employer at the election of the Employee which are not includible in gross income under Code §125 (including Deemed Code §125 Compensation), Code §132(f)(4), or Code §457; and (b) effective January 1, 2005, Post-Severance Compensation.

1.69   Terminated Participant.

The term "Terminated Participant" means a Participant who has ceased to be an Employee for reasons other than retirement, death or Disability.

1.70   Top Heavy.

The term "Top Heavy" means for any Plan Year beginning after December 31, 1983 that (1) the Top Heavy Ratio exceeds 60% and the Plan is not part of a Required Aggregation Group or Permissive Aggregation Group; or (2) the Plan is a part of a Required Aggregation Group but not a Permissive Aggregation Group and the Top Heavy Ratio for the group exceeds 60%; or (3) the Plan is a part of a Required Aggregation Group and a Permissive Aggregation Group and the Top Heavy Ratio for the Permissive Aggregation Group exceeds 60%.

1.71   Top Heavy Minimum Allocation.

The term "Top Heavy Minimum Allocation" means an amount of Employer contributions and Forfeitures that is subject to the following rules: (a) if a defined benefit plan is not part of a Required Aggregation Group or a Permissive Aggregation Group with this Plan, then the Top Heavy Minimum Allocation equals an Employee's Code §415(c)(3) Compensation multiplied by the lesser of (1) 3% or (2) the largest percentage of Employer contributions (including any Elective Deferrals made on behalf of a Key Employee to a 401(k) Plan maintained by the Employer) and Forfeitures that are allocated to the Participant's Account of a Key Employee for that Plan Year, expressed as a percentage of such Key Employee's Code §415(c)(3) Compensation; (b) elective deferrals that are made on behalf of a Participant to a 401(k) Plan (and, for Plan Years beginning before 2002, matching contributions) cannot be used to satisfy the Top Heavy Minimum Allocation; (c) Social Security contributions are disregarded; and (d) to the extent required to be nonforfeitable under Code §416(b)), the Top Heavy Minimum Allocation may not be forfeited under Code §411(a)(3)(B) or §411(a)(3)(D).

1.72   Top Heavy Ratio.

For Plan Years beginning on or after January 1, 2002, in determining if this Plan is Top Heavy, the "Top Heavy Ratio" will be determined in accordance with the following provisions:

- 11 - -

(a)   Employer Only Maintains DC Plans. If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer has not maintained any defined benefit plan which during the 5-year period ending on the Determination Date(s) has or has had accrued benefits, then the Top Heavy Ratio for this Plan alone, for the Required Aggregation Group, or for the Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the Participant's Account balances of all Key Employees as of the Determination Date(s) (including any part of any Participant's Account balance distributed during the 1-year period ending on the Determination Date(s); however, including any part of any Participant's Account balance distributed during the 5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death, or Disability), and the denominator of which is the sum of all Participant's Account balances (including any part of any Participant's Account balance distributed in the 1-year period ending on the Determination Date(s); however, including any part of any Participant's Account balance distributed during the 5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death, or Disability), both computed in accordance with Code §416 and the Regulations thereunder. Both the numerator and denominator of the Top Heavy Ratio are increased to reflect any contribution that is not actually made as of the Determination Date, but which is required to be taken into account on that Determination Date under Code §416 and the Regulations thereunder.

(b)   Employer Maintains Both DC and DB Plans. If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the Determination Date(s) has or has had any accrued benefits, then the Top Heavy Ratio for any Required Aggregation Group or for any Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the Participant's Account balances under the aggregated defined contribution plan or plans for all Key Employees, determined in accordance with paragraph (a) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the Participant's Account balances under the aggregated defined contribution plan or plans for all Participants, determined in accordance with paragraph (a) above, and the present value of accrued benefits under the defined benefit plan or plans for all Participants as of the Determination Date(s), all determined in accordance with Code §416 and the Regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top Heavy Ratio are increased for any distribution of an accrued benefit made in the 1-year period ending on the Determination Date (or the 5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death, or Disability).

(c)   Value of Participant's Account Balances and the Present Value of Accrued Benefits. For purposes of paragraphs (a) and (b), the value of the Participant's Account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Code §416 and the Regulations for the first and second Plan Years of a defined benefit plan. The Participant's Account balances and accrued benefits will be disregarded for a Participant (1) who is not a Key Employee during the 12-month period ending on the Determination Date but was a Key Employee in a prior year, or (2) who has not been credited with at least one Hour of Service with any Employer maintaining the Plan at any time during the 1-year period ending on the Determination Date. The calculation of the Top Heavy Ratio and the extent to which distributions, Rollover Contributions, and Transfer Contributions are taken into account will be made in accordance with Code §416 and the Regulations thereunder. When aggregating plans, the value of the Participant's Account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. The accrued benefit of a Participant other than a Key Employee will be determined under (1) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (2) if there is no such method, then as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code §411(b)(1)(C).

- 12 - -

(d)   Computing Present Values. In establishing the present value of accrued benefits to compute the Top Heavy Ratio, benefits not in pay status are handled on the basis that retirement occurs on the automatic vesting date or, if later, the date of reference. Benefits are discounted only for interest and mortality.

1.73   Transfer Contribution.

The term "Transfer Contribution" means a non-taxable transfer of a Participant's benefit directly or indirectly from another qualified plan to this Plan. Transfer Contributions include assets transferred to this Plan from another plan as a result of a merger or similar transaction involving this Plan and the other plan. Any direct or indirect transfer as defined in Code §401(a)(11) of assets from a defined benefit plan, a money purchase plan, a target benefit plan, a stock bonus plan, or a profit sharing plan that provided for a life annuity form of payment to the Participant will be considered a Transfer Contribution. Elective deferrals (including qualified matching contributions, qualified matching contributions, and 401(k) safe harbor contributions) which are transferred to this Plan in a direct or indirect trustee-to-trustee transfer from another qualified plan and which remain subject to the limitations in Regulation §1.401(k)-1(d) will be considered a Transfer Contribution. Assets that are transferred from another qualified plan in a plan-to-plan elective transfer will also be considered a Transfer Contribution.

1.74   Transfer Contribution Account.

The term "Transfer Contribution Account" means the account to which a Participant's Transfer Contributions, if any, are allocated.

1.75   Trustee.

The term "Trustee" means the persons or entity named as trustee or trustees of the Trust. The term Trustee will also mean custodian if a custodian is appointed by the Sponsoring Employer.

1.76   Trust (or Trust Fund).

The term "Trust" or "Trust Fund" means the assets of the Plan. The term Trust or Trust Fund will also mean any custodial agreement entered into by the Sponsoring Employer.

1.77   Unallocated Company Stock Account.

The term "Unallocated Company Stock Account" means an account containing Company Stock acquired with the proceeds of an Exempt Loan and which has not been allocated to the Participants' Company Stock Accounts.

1.78   Valuation Calendar Year.

The term "Valuation Calendar Year" means, for purposes of required minimum distributions under Section 5.9, the calendar year immediately preceding a Distribution Calendar Year.

1.79   Valuation Date.

The term "Valuation Date" means the date when the Trustee determines the value of the Trust Fund. A Valuation Date of the Trust Fund must occur as of the last day of each Plan Year. However, the Administrator can value all or any portion of the assets of the Trust Fund more frequently, including, but not limited to, semi-annually, quarterly, monthly, or daily; the Administrator may implement any additional Valuation Dates for any reason. For purposes of calculating the Top Heavy Ratio, the term "Valuation Date" means the date when the Participant's Account balances or accrued benefits are valued.

1.80   Vested Aggregate Account.

The term Vested Aggregate Account means a Participant's Vested Interest in the aggregate value of his or her Participant's Account and any accounts attributable to the Participant's own Plan contributions (including rollovers).

1.81  Vested, Vested Interest or Vesting.

The term "Vested," "Vested Interest" or "Vesting" means a Participant's nonforfeitable percentage in an account maintained on his or her behalf under the Plan. A Participant's Vested Interest in his or her Participant's Account will be determined in accordance with Section 4.6.

1.82   Voluntary Employee Contribution.

The term Voluntary Employee Contribution means a non-deductible contribution made to the Plan by a Participant.

1.83   Voluntary Employee Contribution Account.

The term Voluntary Employee Contribution Account means the sub-account to which a Participant's Voluntary Employee Contributions, if any, are allocated.

- 13 - -

1.84   Year of Service.

With respect to any provision of the Plan in which service is determined by counting an Employee's Hours of Service, the term "Year of Service" means a 12-consecutive month computation period during which an Employee (or Participant) is credited with a specified number of Hours of Service for the Employer, determined in accordance with the following provisions:

(a)   Employment Commencement Date. The Employment Commencement Date is the first day an Employee performs an Hour of Service for an Employer, Affiliated Employer or Adopting Employer. The Reemployment Commencement Date is the first day following a Break In Service on which an Employee performs an Hour of Service for an Employer, Adopting Employer or Affiliated Employer.

(b)   Year of Service for Eligibility. For any Plan Year in which the eligibility requirements under Section 2.1 are based on an Employee's Years of Service, a Year of Service is a 12-consecutive month computation period in which an Employee is credited with at least 1,000 Hours of Service. An Employee's initial eligibility computation period will begin on his or her Employment Commencement Date. The second eligibility computation period will begin on the first day of the Plan Year which begins prior to the first anniversary of the Employee's Employment Commencement Date regardless of whether the Employee is credited with 1,000 Hours of Service during the initial computation period. If the Employee is credited with 1,000 Hours of Service in both the initial eligibility computation period and in the second eligibility computation period, the Employee will be credited with two Years of Service for eligibility purposes. If a Plan Year is less than 12 months, the Hours of Service requirement set forth herein will be proportionately reduced. In determining eligibility and the applicable entry date under Section 2.1, an Employee will be deemed to have completed a Year of Service on the last day of the computation period during which the Employee completes the applicable Hours of Service requirement.

(c)   Year of Service for Vesting. For any Plan Year in which a Participant's Vested Interest under Section 4.6 is based on Years of Service, a Year of Service is a 12-consecutive month computation period in which an Employee is credited with at least 1,000 Hours of Service. The Vesting computation period is the Plan Year, and if any Plan Year is less than 12 consecutive months and the Hours of Service requirement in this paragraph is greater than one, such requirement will be proportionately reduced.

(d)   Prior Service Credit. An Employee will receive credit for all Years of Service with the Employer.

(e)   Re-employment of an Employee Before a Break In Service and Before Eligibility Requirements Are Satisfied.If an Employee terminates employment with the Employer prior to satisfying the eligibility requirements set forth in Section 2.1 and the Employee is subsequently re-employed by the Employer before incurring a Break in Service, then the Employee's pre-termination Years of Service (and Hours of Service during the eligibility computation period) will not be counted in determining the satisfaction of such eligibility requirements, and for all other purposes other than vesting computation, as applicable, and the eligibility computation period and the vesting computation period, as applicable, will remain unchanged.

(f)   Re-employment of an Employee Before a Break In Service and After Eligibility Requirements Are Satisfied. If an Employee terminates employment with the Employer prior to the Employee's entry date under Section 2.1, the Employee had satisfied the eligibility requirements under Section 2.1 as of the date of such termination, and the Employee is subsequently re-employed by the Employer before incurring a Break in Service, then (1) the Employee will become a Participant in the Plan as of the later of (A) the date the Employee would have entered the Plan had the Employee not terminated employment with the Employer, or (B) the Employee's Re-employment Commencement Date; (2) the Employee's pre-termination Years of Service (and Hours of Service during a computation period) will be counted for all purposes; and (3) the Vesting computation period will remain unchanged.

(g)   Re-employment of a Participant Before a Break In Service.If an Employee terminates employment  with the Employer after becoming a Participant in the Plan and is subsequently re-employed by the Employer before incurring a Break in Service, then (1) the Employee's Years of Service and employment will be deemed not to have been interrupted; (2) the Employee will recommence Plan

- 14 - -

participation immediately upon re-employment; (3) the Employee's pre-termination Years of Service (and Hours of Service during a computation period) will be counted for all purposes; and (4) the vesting computation period will remain unchanged.

(h)   Re-employment of an Employee After a Break In Service and Before Eligibility Requirements Are Satisfied.If an Employee terminates employment with the Employer prior to satisfying the eligibility requirements under Section 2.1 and the Employee is subsequently re-employed by the Employer after incurring a Break in Service, then the Employee's Year(s) of Service that were completed prior to the Break in Service will be counted, subject to the following provisions:

(1)   Determination of Years of Service for Eligibility Using the Rule of Parity. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, Years of Service completed prior to an Employee's Break(s) in Service will not be counted if the total number of consecutive Breaks in Service incurred by the Employee equals or exceeds the greater of five or the aggregate number of Year of Service credited to the Employee prior to incurring the Breaks in Service; this rule hereafter is referred to as the "rule of parity." For purposes of the preceding sentence, the aggregate number of Years of Service will not include Years of Service previously disregarded under prior applications of the rule of parity. If such former Employee's Years of Service are disregarded under the rule of parity, then (A) the rehired Employee will be treated as a new Employee for purposes of Section 2.1 and (B) the Employee's eligibility computation period will commence on the Employee's Re-employment Commencement Date. If such former Employee's Years of Service are not disregarded under the rule of parity, then the eligibility computation periods will remain unchanged. However, if this Plan provides that an Employee must complete more than one Year of Service for eligibility purposes under Section 2.1, and provides that an Employee will have a 100% Vested Interest in his or her Participant's Account upon becoming a Participant in the Plan, then (A) the Year of Service (and Hours of Service) of an Employee who incurs a Break in Service before satisfying such eligibility requirement will not be counted for eligibility purposes and (B) the Employee's eligibility computation period will commence on the Employee's Re-employment Commencement Date.

(2)   Determination of Years of Service for Vesting. For any Plan Year in which a Vested Interest under Section 4.6 is based on Years of Service, then in determining an Employee's Vested Interest in his or her Participant's Account, any Years of Service that were completed prior to an Employee's Break(s) in Service will not be counted (A) if the Employee is not Vested in any portion of his or her Participant's Account and (B) if the total number of consecutive Breaks in Service incurred by the Employee equals or exceeds the greater of five or the aggregate number of Years of Service credited to the Employee prior to incurring the Break(s) in Service. For purposes of the preceding sentence, the aggregate number of Years of Service will not include any Years of Service previously disregarded under prior applications of the rule of parity.

(i)   Re-employment of an Employee After a Break In Service, After Eligibility Requirements Are Satisfied, But Before the Employee's Entry Date. If an Employee terminates employment with the Employer after satisfying the eligibility requirements under Section 2.1 (but before the Employee's entry date under Section 2.1) and the Employee is subsequently re-employed by the Employer after incurring a Break in Service, then the Employee's Years of Service completed prior to the Break in Service will be counted , subject to the following:

(1)   Determination of Years of Service for Eligibility Using the Rule of Parity. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, Years of Service completed prior to an Employee's Break(s) in Service will not be counted if the total number of consecutive Breaks in Service incurred by the Employee equals or exceeds the greater of five or the aggregate number of Years of Service credited to the Employee prior to incurring the Break(s) in Service; this rule hereafter is referred to as the "rule of parity." For purposes of the preceding sentence, the aggregate number of Years of Service will not include Years of Service previously disregarded under prior applications of the rule of parity. If such

- 15 - -

former Employee's Years of Service are disregarded under the rule of parity, then (A) the rehired Employee will be treated as a new Employee for purposes of Section 2.1 and (B) the Employee's eligibility computation period will commence on the Employee's Re-employment Commencement Date. If such former Employee's Years of Service are not disregarded under the rule of parity, then the rehired Employee will enter the Plan under Section 2.1 on the Employee's Re-employment Commencement Date.

(2)   Determination of Years of Service for Vesting. For any Plan Year in which a Vested Interest under Section 4.6 is based on Years of Service, then in determining an Employee's Vested Interest in his or her Participant's Account, any Years of Service that were completed prior to an Employee's Break(s) in Service will not be counted (A) if the Employee is not Vested in any portion of his or her Participant's Account and (B) if the total number of consecutive Breaks in Service incurred by the Employee equals or exceeds the greater of five or the aggregate number of Years of Service credited to the Employee prior to incurring the Break(s) in Service. For purposes of the preceding sentence, the aggregate number of Years of Service will not include any Years of Service previously disregarded under prior applications of the rule of parity.

(j)   Re-employment of a Participant After a Break In Service.If an Employee (1) was a Participant in the Plan, (2) terminates employment with the Employer, and (3) is subsequently re-employed by the Employer after incurring a Break in Service, then the Employee's Years of Service that were completed prior to the Break in Service will be counted, subject to the following:

(1)   Determination of Years of Service for Eligibility Using the Rule of Parity.For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, Years of Service completed prior to an Employee's Break(s) in Service will not be counted if the total number of consecutive Breaks in Service incurred by the Employee equals or exceeds the greater of five or the aggregate number of Years of Service credited to the Employee prior to incurring the Break(s) in Service; this rule hereafter is referred to as the "rule of parity." For purposes of the preceding sentence, the aggregate number of Years of Service will not include Years of Service previously disregarded under prior applications of the rule of parity. If such former Employee's Years of Service are disregarded under the rule of parity, then (A) the rehired Employee will be treated as a new Employee for purposes of Section 2.1 and (B) the Employee's eligibility computation period will commence on the Employee's Re-employment Commencement Date. If such former Employee's Years of Service are not disregarded under the rule of parity, then the rehired Employee will reenter the Plan as of the Employee's Re-employment Commencement Date.

(2)   Determination of Years of Service for Vesting.For any Plan Year in which a Vested Interest under Section 4.6 is based on Years of Service, then in determining an Employee's Vesting Interest in his or her Participant's Account, any Years of Service that were completed prior to an Employee's Break(s) in Service will not be counted (A) if the Employee is not Vested in any portion of his or her Participant's Account and (B) if the total number of consecutive Break(s) in Service incurred by the Employee equals or exceeds the greater of five or the aggregate number of Years of Service credited to the Employee prior to incurring the Break(s) in Service. For purposes of the preceding sentence, the aggregate number of Years of Service will not include any Years of Service previously disregarded under prior applications of the rule of parity.

(k)   Ignoring Service for Eligibility If Service Requirement for Eligibility Is More Than 1 Year of Service. Notwithstanding anything in the Plan to the contrary, if this Plan provides that an Employee must complete more than one Year of Service for eligibility purposes under Section 2.1, and provides that an Employee will have a 100% Vested Interest in his or her Participant's Account upon becoming a Participant in the Plan, then (A) the Years of Service (and Hours of Service) of an Employee who incurs a Break in Service before satisfying such eligibility requirement will not be counted for eligibility purposes and (B) the Employee's eligibility computation period will commence on the Employee's Re-employment Commencement Date.

- 16 - -

                       Article 2                      

Plan Participation

2.1   Eligibility and Entry Date Requirements.

An Eligible Employee who was a Participant on December 31, 2007 will continue to participate in the Plan. Otherwise, an Eligible Employee will become eligible to enter the Plan as a Participant in accordance with the following provisions:

(a)   Eligible Employees. All Employees are Eligible Employees except for the following ineligible classes of Employees: (1) Employees whose employment is governed by a collective bargaining agreement between Employee representatives and the Employer in which retirement benefits were the subject of good faith bargaining unless such agreement expressly provides for; and (2) Employees who are non-resident aliens who do not receive earned income from the Employer which constitutes income from sources within the United States.

(b)   Age and Service Requirements. An Eligible Employee described in Section 2.1(a) will be eligible to enter the Plan as a Participant on the applicable entry date set forth in Section 2.1(c) upon reaching Age 21 and being credited with 1 Year of Service.

(c)   Entry Date. An Eligible Employee described in Section 2.1(a) will enter the Plan as a Participant on the January 1st or the July 1st that coincides with or next follows the date on which the Eligible Employee first satisfies the eligibility requirements set forth in Section 2.1(b).

(d)   Participation By Employees Whose Status Changes. If an Employee who is not an Eligible Employee becomes an Eligible Employee, the Employee will participate in the Plan immediately if he or she has satisfied the minimum age and service requirements and would have previously become a Participant had he or she been an Eligible Employee. The participation of a Participant who ceases to be an Eligible Employee will be suspended. Upon once again becoming an Eligible Employee, a suspended Participant will resume eligibility. The Vested Interest of a Participant who ceases to be an Eligible Employee will continue to increase in accordance with Section 4.6.

(e)   Participation By Former Participants. A Participant who terminates employment with the Employer for any reason but is subsequently reemployed as an Eligible Employee will again become a Participant in the Plan as provided in the definition of Year of Service.

2.2   Waiver of Participation.

An Employee who is otherwise eligible to participate in the Plan may elect to waive such participation in accordance with the following provisions:

(a)   Irrevocable Election. An Eligible Employee may make a one-time irrevocable election to waive participation in the Plan. However, the Administrator may in its sole discretion elect not to make this option available to one or more Eligible Employees if the Eligible Employee is not an HCE and is not likely to become an HCE and if the Administrator determines that such waiver may cause the Plan for any Plan Year to fail to satisfy one of the tests in Code §410(b)(1)(A) or Code §410(b)(1)(B) and (C). The Employee's election to waive participation in the Plan must be in writing and must be delivered to the Administrator. Notwithstanding the foregoing however, once an Employee has become a Participant in the Plan, no waiver can be made, except as provided in paragraph (b) below.

(b)   Election to Waive Allocation. Notwithstanding paragraph (a), and subject to the Top-Heavy Minimum Allocation requirements set forth in Section 3.5, a Participant may agree to forego an allocation of Employer contributions to his or her Participant's Account for all or any Allocation Periods if the Participant is an HCE for the Allocation Period and such waiver does not have a direct or indirect impact on the overall remuneration paid to such Participant.

(c)   Administrative Requirements. An Employee's election to waive participation or forego an allocation must be in writing and must be delivered to the Administrator on or before the date the Employee first becomes eligible to participate in the Plan in the case of a waiver under paragraph (a), and before the Participant is entitled to an allocation to his or her Participant's Account in the case of foregoing an

- 17 - -

allocation under paragraph (b). The Administrator will furnish any form required to make an election under this Section, which may include the requirement for consent by the Employee's Spouse.

2.3   Reemployment After Termination.

If an Employee terminates employment and is subsequently reemployed by the Employer or an Affiliated Employer, such Employee's Years of Service for purposes of eligibility (as well as the time such Employee enters or reenters the Plan as a Participant) will be determined in accordance with the rules described in the definition of Year of Service.

- 18 - -

                                       Article 3                      

Contributions and Allocations

3.1   Employer Contributions.

The Employer intends to make contributions to the Plan. The Employer does not guarantee either the making of the contributions or the payment of the benefits under the Plan. The Employer reserves the right to reduce, suspend or discontinue contributions for any reason at any time, but if the Plan is deemed to be terminated as a result of such reduction, suspension or discontinuance, the provisions of Article 9 will become effective. All contributions will be determined in accordance with the following provisions:

(a)   Amount of Contribution. The Employer in its sole discretion may make a contribution to the Plan. The amount will be determined by the Employer, and the Employer's determination will be binding on the Trustee, the Administrator and all Participants, and cannot be reviewed in any manner.

(b)   Allocation of Contribution. Each Benefiting Participant's share of Employer contributions will be allocated to his or her Participant's Account in accordance with the following provisions:

(1)   Company Stock. Subject to the requirements of Section 3.2, Company Stock contributed to the Plan will be allocated to each Benefiting Participant's Company Stock Account in the ratio that each Benefiting Participant's Compensation for the Allocation Period bears to the total Compensation of all Benefiting Participants for the Allocation Period. However, Company Stock acquired by the Plan with the proceeds of an Exempt Loan will only be allocated to each Participant's Company Stock Account upon release from the Unallocated Company Stock Suspense Account as provided in Section 3.2(b). Company Stock acquired with the proceeds of an Exempt Loan will be an asset of the Trust Fund and maintained in the Unallocated Company Stock Suspense Account. Company Stock which has been released from the Unallocated Company Stock Account during the Plan Year will be allocated on the annual Valuation Date to each Benefiting Participant's Company Stock Account in the same ratio as described above.

(2)   Other Contributions. Each Benefiting Participant's share of cash or property, other than Company Stock and dividends attributable thereto, will be allocated to his or her Other Investments Account in the ratio that the Compensation of each Benefiting Participant for the Allocation Period bears to the total Compensation of all Benefiting Participants for the Allocation Period.

(3)   Cash Dividends.  Cash dividends received by the Plan that are attributable to Company Stock allocated to a Participant's Company Stock Account and that are not currently distributed under Section 5.16 will be reinvested in Company Stock.

(c)   Benefiting Participants. A Participant will be a Benefiting Participant for any Allocation Period in accordance with the following provisions:

(1)   Participants Employed on the Last Day of the Allocation Period. Any Participant who is an Employee on the last day of the Allocation Period and who at any time during the Allocation Period was in an eligible class of Employees as set forth in Section 2.1(a) will be a Benefiting Participant for that Allocation Period only if he or she is credited with at least 1,000 Hours of Service during the Allocation Period (or is credited with the proportionate equivalent if the Allocation Period is less than 12 consecutive months).

(2)   Participants Who Terminate Before the Last Day of the Allocation Period. Any Participant who terminates employment with the Employer before the last day of the Allocation Period: (A) a Participant who terminates because of his or her retirement on or after Normal Retirement Age will be a Benefiting Participant regardless of the number of Hours of Service with which he or she is credited during the Allocation Period; (B) a Participant who terminates because of his or her death will be a Benefiting Participant regardless of the number of Hours of Service with which he or she is credited during the Allocation Period; (C) a Participant who terminates because of his or her Disability will be a Benefiting Participant regardless of the number of

- 19 - -

Hours of Service with which he or she is credited during the Allocation Period; and (D) a Participant who terminates for reasons other than retirement on or after Normal Retirement Age, death or Disability will not be a Benefiting Participant.

(d)   Limitations on Contributions. Notwithstanding any provision of this Article, no Employer contribution will be made for any Participant who is not a Benefiting Participant for an Allocation Period unless otherwise required by the Top Heavy Minimum Allocation provisions in Section 3.5.

(e)   Allocation Period. Any contribution made under the terms of the Plan may, at the election of the Employer, be contributed (1) each payroll period; (2) each month; (3) each Plan quarter; (4) on an annual basis; or (5) on any other less than annual Allocation Period basis as determined by the Employer, provided such Allocation Period does not discriminate in favor of HCEs. The Employer may elect a different Allocation Period for each type of contribution. Contributions will be allocated to Benefiting Participants as of the last day of an applicable contribution period.

(f)   Form of Contribution. To the extent the Employer's contribution is not used to reduce an obligation or liability of an Employer to the Plan, and the contribution is unencumbered and discretionary, then the contribution may consist of (1) Company Stock; (2) cash; (3) cash equivalencies; (4) qualifying employer real property and/or qualifying employer securities as defined in ERISA §407(d)(4) and ERISA §407(d)(5), provided the acquisition of such qualifying employer real property and/or qualifying employer securities satisfies the requirements of ERISA §408(e); or (5) any other property that is not prohibited under Code §4975 and is acceptable to the Trustee.

(g)   Refund of Contributions for All Plans. Contributions made to the Plan by the Employer can only be returned to the Employer in accordance with the following provisions:

(1)   Failure of Plan to Initially Qualify. If the Plan fails to initially satisfy the requirements of Code §401(a) and the Employer declines to amend the Plan to satisfy such requirements, contributions made prior to the date such qualification is denied must be returned to the Employer within 1 year of the date of such denial, but only if the application for the qualification is made by the time prescribed by law for filing the Employer's tax return for the taxable year in which the Plan is adopted, or by such later date as the Secretary of the Treasury may prescribe.

(2)   Contributions Made Under a Mistake of Fact. If a contribution is attributable in whole or in part to a good faith mistake of fact, including a good faith mistake in determining the deductibility of the contribution under Code §404, an amount may be returned to the Employer equal to the excess of the amount contributed over the amount that would have been contributed had the mistake not occurred. Earnings attributable to an excess contribution will not be returned, but losses attributable to the excess contribution will reduce the amount so returned. Such amount will be returned within one year of the date the contribution was made or the deduction disallowed, as the case may be.

(3)   Nondeductible Contributions. Except to the extent an Employer may intentionally make a nondeductible contribution, for example in order to correct an administrative error or restore a Forfeiture, any contribution by the Employer is conditioned on its deductibility and will otherwise be returned to the Employer.

3.2   Company Stock Account.

Company Stock allocable to a Benefiting Participant's Company Stock Account, or Company Stock released from the Unallocated Company Stock Account during an Allocation Period, will be allocated to a Benefiting Participant's Company Stock Account in accordance with the following:

(a)   Company Stock. A Benefiting Participant's Company Stock Account will be credited with his or her allocable share of Company Stock (including fractional shares) purchased and paid for by the Plan or contributed in kind by the Employer, except that Company Stock acquired with the proceeds of an Exempt Loan must be added to and maintained in the Unallocated Company Stock Suspense Account. Such Company Stock will be released and withdrawn from that account as if all Company Stock in that

- 20 - -

account were encumbered. In the case of an Employer that is an electing small business corporation, the Plan may not use dividends on any allocated Company Stock to pay an Exempt Loan that was used to purchase Company Stock. Cash dividends paid on Company Stock in a Participant's Company Stock Account will, in the sole discretion of the Administrator, either be credited to the Participant's Account or will be used to repay an Exempt Loan. However, (1) when cash dividends are used to repay an Exempt Loan, Company Stock will be released from the Unallocated Company Stock Suspense Account and will be allocated to each Benefiting Participant's Company Stock Account in the ratio that each Benefiting Participant's Compensation for the Allocation Period bears to the total Compensation of all Benefiting Participants for the Allocation Period; and (2) Company Stock allocated to a Participant's Company Stock Account will have a fair market value not less than the amount of cash dividends which would have been allocated to such Participant's Account for the Allocation Period.

(b)   Unallocated Company Stock Account. Any Company Stock which is acquired with an Exempt Loan and is in the Unallocated Company Stock Account will only be withdrawn and allocated to Participants' Accounts in accordance with the following provisions:

(1)   Method of Withdrawing Stock. For each Allocation Period during the duration of an Exempt Loan, the number of shares of Company Stock released from the Unallocated Company Stock Account will equal the number of shares held therein immediately before release for the current Allocation Period multiplied by a fraction, the numerator of which is the amount of principal and interest paid for the Allocation Period and the denominator of which is the sum of the numerator plus the principal and interest to be paid for all future Allocation Periods. The number of future Allocation Periods must be definitely ascertainable and must be determined without taking into account any possible extensions or renewal periods. If the interest rate under the Exempt Loan is variable, the interest to be paid in future Allocation Periods must be computed by using the interest rate applicable as of the end of the Allocation Period.

(2)   Alternative Method of Withdrawing Stock. Notwithstanding subparagraph (1), the number of shares of Company Stock released from the Unallocated Company Stock Account may be determined in the same manner described in subparagraph (1) except that the number will be based solely on the amount of principal paid for the Allocation Period in relation to the sum of such amount plus the principal to be paid for all future Allocation Periods, provided that (1) the Exempt Loan must provide for annual payments of principal and interest at a cumulative rate that is not less rapid at any time than level annual payments of such amounts for 10 years; (2) interest in any payment is disregarded only to the extent it would be determined to be interest under standard loan amortization tables; and (3) the alternative described in this subparagraph is not applicable from the time that, by reason of a renewal, extension or refinancing, the sum of the expired duration of the Exempt Loan, the renewal period, the extension period, and the duration of a new Exempt Loan exceeds 10 years.

(3)   Method of Allocating Withdrawn Stock to Participants. The Plan must consistently allocate to each Participant's Account, in the same manner as Employer contributions under Section 3.1 are allocated, non-monetary units (shares and fractional shares of Company Stock) representing each Participant's interest in Company Stock withdrawn from the Unallocated Company Stock Suspense Account. However, Company Stock released from the Unallocated Company Stock Account with cash dividends under paragraph (a) will be allocated to each Benefiting Participant's Company Stock Account in the same proportion that each such Participant's number of shares of Company Stock sharing in such cash dividends bears to the total number of shares of all Benefiting Participants' Company Stock sharing in such cash dividends.

- 21 - -

(4)   Allocation of Income. Income earned on Company Stock in the Unallocated Company Stock Account will be used, at the discretion of the Administrator, to repay the Exempt Loan used to purchase such Company Stock. Company Stock released from the Unallocated Company Stock Account with such income, and any income which is not so used, will be allocated on the annual Valuation Date in the same proportion that each Benefiting Participant's Compensation for the Plan Year bears to the total Compensation of all Benefiting Participants for the Plan Year.

3.3   Earnings and Losses.

As of each Valuation Date, amounts in Participants' accounts/sub-accounts which have not been segregated from the general Trust Fund for investment purposes and which have not been distributed since the prior Valuation Date will have the net income of the Trust Fund that has been earned since the prior Valuation Date allocated in accordance with such rules and procedures that are established by the Administrator and that are applied in a uniform and nondiscriminatory manner based upon the investments of the Trust Fund and the Participants' accounts/sub-accounts to which the net income is allocated. Participants' accounts which have been segregated from the general Trust Fund for investment purposes will only have the net income earned thereon allocated thereto. Policy dividends or credits will be allocated to the Participant's Account for whose benefit the Policy is held. For purposes of this Section, the term "net income" means the net of any interest, dividends, unrealized appreciation and depreciation (other than the unrealized appreciation or depreciation of the Company Stock allocated to the Participants' Company Stock Accounts), capital gains and losses, and investment expenses of the Trust Fund as determined on each Valuation Date. Net income does not include (1) the interest paid under any installment contract for the purchase of Company Stock by the Plan or the interest paid on any loan used by the Plan to purchase Company Stock; or (2) income received by the Trust Fund with respect to Company Stock acquired with an Exempt Loan to the extent such income is used to repay the loan. All income received by the Trust Fund from Company Stock acquired with the proceeds of an Exempt Loan may, at the discretion of the Administrator, be used to repay such loan.

3.4   Forfeitures and Their Usage.

Forfeitures will be determined and applied in accordance with the following:

(a)   When Forfeitures Occur. A Forfeiture will occur upon the earlier to occur of (1) the date the Participant receives a distribution of his or her Vested Interest under Article 5; or (2) the date the Participant incurs five consecutive Breaks in Service after termination of employment.

(b)   Usage and Allocation of Forfeitures. On each annual Valuation Date, the Administrator may elect to use all or any portion of the Forfeiture Account to pay administrative expenses incurred by the Plan. The portion of the Forfeiture Account that is not used to pay administrative expenses will be used first to restore previous Forfeitures of Participants' Accounts pursuant to Section 5.7 and/or to restore missing Participants' Accounts pursuant to Section 5.13. The portion of the Forfeiture Account that is not used to pay administrative expenses and is not used to satisfy the provisions of the previous sentence will then be used to reduce the Employer’s contribution for the current Plan Year or a future Plan Year.

3.5   Top Heavy Minimum Allocation.

In any Top Heavy Plan Year in which a Key Employee receives an allocation of Employer contributions or Forfeitures, each Employee who is described in paragraph (a) below will receive the Top Heavy Minimum Allocation, determined in accordance with the following provisions:

(a)   Participants Who Must Receive the Top Heavy Minimum Allocation. The Top Heavy Minimum Allocation, or such lesser amount as may be permitted under paragraph (b), will be made for each Participant who is a Non-Key Employee and who is employed by an Employer on the last day of the Plan Year, even if such Participant (1) fails to complete any minimum Hours of Service/Period of Service required to receive an allocation of Employer contributions or Forfeitures for the Plan Year; (2) fails to make Elective Deferrals to the Plan in the case of a 401(k) plan; or (3) receives Compensation that is less than a stated amount.

(b)   Participation in Multiple Defined Contribution Plans. If (1) this Plan is not part of a Required Aggregation Group or a Permissive Aggregation Group with a defined benefit plan, (2) this Plan is part of a Required Aggregation Group or a Permissive Aggregation Group with one or more defined

- 22 - -

contribution plans, (3) a Participant who is described in paragraph (a) participates in this Plan and in one or more defined contribution plans that are part of the Required Aggregation Group or the Permissive Aggregation Group, and (4) the allocation of Employer contributions and Forfeitures of each plan that is part of the Required Aggregation Group or the Permissive Aggregation Group (when each plan is considered separately) is insufficient to satisfy the Top Heavy Minimum Allocation requirement with respect to such Participant, the Top Heavy Minimum Allocation requirement will nevertheless be satisfied if the aggregate allocation of Employer contributions and Forfeitures that are made on behalf of such Participant under this Plan and all other defined contribution plans that are part of the Required Aggregation Group or the Permissive Aggregation Group (and any other defined contribution plan that is sponsored by the Employer) is sufficient to satisfy the Top Heavy Minimum Allocation requirement. However, if the aggregate allocation of Employer contributions and Forfeitures that are made on behalf of a Participant under this Plan and all other defined contribution plans that are part of the Required Aggregation Group or the Permissive Aggregation Group (and any other defined contribution plan that is sponsored by the Employer) is not sufficient to satisfy the Top Heavy Minimum Allocation requirement, then the Employer will make an additional contribution on behalf of such Participant to this Plan and/or to one or more defined contribution plans that are part of the Required Aggregation Group or the Permissive Aggregation Group (or any other defined contribution plan that is sponsored by the Employer) in order that the aggregate allocation of Employer contributions and Forfeitures that are made on behalf of such Participant under this Plan and all defined contribution plans that are part of the Required Aggregation Group or the Permissive Aggregation Group (and any other defined contribution plan that is sponsored by the Employer) satisfies the Top Heavy Minimum Allocation requirement.

(c)   Contributions That Can Be Used to Satisfy Top Heavy Minimum. All Employer contributions to this Plan will used in determining if the Employer has satisfied the Top Heavy minimum benefit and/or Top Heavy Minimum Allocation requirements of this Section. Employer contributions that are made on behalf of a Participant to a 401(k) plan by the Employer may also be used.

3.6   Failsafe Allocation.

For any Plan Year in which the Plan fails to satisfy the average benefit percentage test under Code §410(b)(2) or the average benefits test under Regulation §1.401(a)(4) (or if the Administrator is unable to or elects not to perform such tests), the Administrator may make allocations under this paragraph to the extent necessary to insure that the Plan for any such Plan Year satisfies one of the tests under either Code §410(b)(1)(A) (in which the Plan initially fails to benefit at least 70% of NHCEs), or in Code §410(b)(1)(B) (in which the Plan initially fails to benefit a percentage of NHCEs that is at least 70% of the percentage of HCEs who benefit under the Plan). In such event in order to satisfy such test(s) for any Plan Year affected, an additional Employer contribution may be made and allocated for certain Employees who did not receive an allocation for the Plan Year, subject to the following provisions:

(a)   Group Order of Allocation. Anyallocation made under this section will be made in the following order: (1) first, an allocation may be made to that group of Employees who were Participants for the Plan Year but did not receive an allocation for the Plan Year with respect to the contribution source that is not in compliance with Code §410(b); (2) next, an allocation may be made to that group of Employees who have not yet satisfied the eligibility requirements under Section 2.1 and are not members of an ineligible class of Employee as described in Section 2.1; (3) next, an allocation may be made to that group of Employees who have satisfied the eligibility requirements under Section 2.1 except that they are members of an ineligible class of Employees as described in Section 2.1 with respect to that contribution source; and (4) finally, an allocation may be made to that group of Employees who have not yet satisfied the eligibility requirements under Section 2.1 and are members of an ineligible class of Employees as described in Section 2.1.

(b)   Priority of Allocation Within Each Group. Only those Employees who are required to benefit under the Plan for the Plan Year to satisfy the above tests will be entitled to an allocation. To determine each Employee's priority within each group for this purpose, individuals will first be ranked by Hours of Service during the Plan Year with the highest number first. Then, before making an allocation under this Section, Employees will be further ranked beginning with those Employees who are employed on the last day of the Plan Year.

- 23 - -

3.7   Rollover Contributions.

Subject to any procedures adopted by the Administrator pursuant to Section 8.6, any Employee who was a former Employee, experienced a termination of employment with the Employer and received a distribution of his or her benefit hereunder is permitted to make Rollover Contributions to the Plan. Rollover Contributions will be allocated to an Employee's Rollover Contribution Account in which the Employee will have a 100% Vested Interest. The Administrator may choose for investment purposes either to segregate Rollover Contribution Accounts into separate interest bearing accounts or to invest Rollover Contribution Accounts as part of the general Trust Fund.

3.8   Voluntary Employee Contributions.

Voluntary Employee Contributions are not permitted.

- 24 - -

                      Article 4                      

Plan Benefits

4.1   Benefit Upon Normal (or Early) Retirement.

Every Participant who has reached Normal (or Early) Retirement Age will be entitled upon subsequent termination of employment to receive his or her Vested Aggregate Account balance determined as of the most recent Valuation Date coinciding with or immediately preceding the date of distribution. Distribution will be made in accordance with Section 5.1.

4.2   Benefit Upon Late Retirement.

A Participant who has reached Normal Retirement Age may elect to remain employed and retire at a later date. Such Participant will continue to participate in the Plan and his or her Participant's Account will continue to receive allocations under Article 3. Upon actual retirement, the Participant will be entitled to his or her Vested Aggregate Account balance determined as of the most recent Valuation Date coinciding with or immediately preceding the date of distribution. Distribution will be made in accordance with Section 5.1.

4.3   Benefit Upon Death.

Upon the death of a Participant prior to termination of employment, or upon the death of a Terminated Participant prior to distribution of his or her Vested Aggregate Account, his or her Beneficiary will be entitled to the Participant's Vested Aggregate Account balance determined as of the most recent Valuation Date coinciding with or immediately preceding the date of distribution. If any Beneficiary who is living on the date of the Participant's death dies prior to receiving his or her entire death benefit, the portion of such death benefit will be paid in a lump sum to the estate of such deceased Beneficiary. The Administrator's determination that a Participant has died and that a particular person has a right to receive a death benefit will be final. Distribution will be made in accordance with Section 5.2.

4.4   Benefit Upon Disability.

If a Participant suffers a Disability prior to termination of employment, or if a Terminated Participant suffers a Disability prior to distribution of his or her Vested Aggregate Account balance, he or she will be entitled to his or her Vested Aggregate Account balance determined as of the most recent Valuation Date coinciding with or immediately preceding the date of distribution. Distribution will be made in accordance with Section 5.3.

4.5   Benefit Upon Termination of Employment.

A Terminated Participant will be entitled to his or her Vested Aggregate Account balance as of the most recent Valuation Date coinciding with or immediately preceding the date of distribution. Distribution to a Terminated Participant who does not die prior to distribution or who does not suffer a Disability prior to distribution will be made under Section 5.4.

4.6   Determination of Vested Interest.

A Participant's Vested Interest in his or her Participant's Account will be determined in accordance with the following provisions:

(a)   Vesting Upon Retirement, Death or Disability. A Participant will have a 100% Vested Interest in his or her Participant's Account upon reaching Normal Retirement Age prior to termination of employment. A Participant will also have a 100% Vested Interest therein upon his or her retirement at Early Retirement; upon his or her Disability prior to termination of employment; and upon his or her death prior to termination of employment.

(b)   Vesting of Employer Contributions. A Participant's Vested Interest in his or her Participant's Account will be determined by the vesting schedule following this paragraph based on the Participant's credited Years of Service on the date the determination is made. All Years of Service will be counted in determining a Participant's Vested Interest under this paragraph.

   1 Year of Service.............0% Vested

   2 Years of Service.........20% Vested

   3 Years of Service.........40% Vested

   4 Years of Service.........60% Vested

   5 Years of Service.........80% Vested

   6 Years of Service.......100% Vested

- 25 - -

Notwithstanding the foregoing vesting schedule, if a Participant is discharged for “just cause” before he or she has three Years of Service for vesting purposes, the entire amount of the Participant’s Account shall be forfeited.  No such forfeiture shall occur, however, on or after the date a Participant reaches Normal Retirement Age.  For purposes of this paragraph, “just cause” shall mean theft, fraud, embezzlement or willful misconduct causing significant property damage to the Employer or personal injury to any other Employee or other acts that the Employer deems to be “just cause.”

(c)   Amendments to the Vesting Schedule. No amendment to the Plan may directly or indirectly reduce a Participant's Vested Interest in his or her Participant's Account. If the Plan is amended in any way that directly or indirectly affects the computation of a Participant's Vested Interest in his or her Participant's Account, or the Plan is deemed amended by an automatic change to or from a Top Heavy Vesting schedule, then the following provisions will apply:

(1)   Participant Election. Any Participant with at least three Years of Service may, by filing a written request with the Administrator, elect to have the Vested Interest in his or her Participant's Account computed by the Vesting schedule in effect prior to the amendment. A Participant who fails to make an election will have the Vested Interest computed under the new schedule. The period in which the election may be made will begin on the date the amendment is adopted or is deemed to be made and will end on the latest of (1) 60 days after the amendment is adopted; (2) 60 days after the amendment becomes effective; or (3) 60 days after the Participant is issued written notice of the amendment by the Employer or Administrator.

(2)   Preservation of Vested Interest. Notwithstanding the foregoing to the contrary, if the vesting schedule is amended, then in the case of an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective, the Vested Interest in his or her Participant's Account determined as of such date will not be less than his or her Vested Interest computed under the Plan without regard to such amendment.

- 26 - -

                                        Article 5                      

Distribution of Benefits

5.1   Distribution of Benefit Upon Retirement.

Unless a cash-out occurs under Section 5.5, the retirement benefit a Participant is entitled to receive under Section 4.1 or 4.2 will be distributed in the following manner:

(a)   Form of Distribution. A Participant may elect to have his or her benefit distributed by one of the following methods: (1) in one lump-sum; or (2) in substantially equal monthly, quarterly, semi-annual, or annual installments over a 5-year period (unless the Participant elects a longer period). If the Participant's Account balance exceeds $935,000, the 5-year period will be extended 1 additional year (but not more than 5 additional years) for each $935,000 or fraction thereof by which the Participant's Account balance exceeds $935,000. These dollar limits will be adjusted at the same time and in the same manner as provided in Code §415(d).

(b)   Partial Distributions. If a Participant receives a distribution of less than 100% of his or her Vested Aggregate Account balance, the Administrator will determine the portion (including zero) of the distribution that will be made from each of the Participant's sub-accounts, provided that any such determination is made in a uniform nondiscriminatory manner.

(c)   Time of Distribution. Distribution will be made within a reasonable time after the Participant terminates employment on or after his or her Normal (or Early) Retirement Date, but distribution must begin no later than the Required Beginning Date. Notwithstanding the foregoing, distribution of a Participant's Company Stock Account will begin no later than one year after the close of the Plan Year in which the Participant terminates employment on or after his or her Normal (or Early) Retirement Date unless the Participant otherwise elects. However, to the extent permitted by law, Company Stock acquired with an Exempt Loan will be excluded from any such distribution until the close of the Plan Year in which the Exempt Loan is repaid in full.

5.2   Distribution of Benefit Upon Death.

Unless a cash-out occurs under Section 5.5, the benefit a deceased Participant's Beneficiary is entitled to receive under Section 4.3 will be distributed in the following manner:

(a)   Surviving Spouse. If a Participant is married on the date of his or her death, the Participant's surviving Spouse will be entitled to receive a death benefit determined in accordance with the following:

(1)   Form of Distribution.Notwithstanding any other Beneficiary designation by a Participant, if a Participant is married on the date of death, the surviving Spouse will be entitled to receive 100% of the Participant's death benefit unless the surviving Spouse has waived that right under Section 5.8. The benefit will be distributed at the surviving Spouse's election by one of the following methods: (1) in one lump-sum; or (2) in substantially equal monthly, quarterly, semiannual, or annual installments over a 5-year period (unless the surviving Spouse elects a longer period). If the Participant's Account balance exceeds $935,000, the 5-year period will be extended 1 additional year (but not more than 5 additional years) for each $185,000 or fraction thereof by which the Participant's Account balance exceeds $935,000. These dollar limits will be adjusted at the same time and in the same manner as provided in Code §415(d).

(2)   Time of Distribution. The surviving Spouse may elect to (1) have any death benefit to which he or she is entitled distributed within a reasonable time after the death of the Participant; or (2) defer distribution of the death benefit, but distribution may not be deferred beyond December 31st of the calendar year in which the deceased Participant would have attained Age 70½. Notwithstanding the foregoing, distribution of a Participant's Company Stock Account will begin no later than one year after the close of the Plan Year in which the Participant dies unless the Spouse otherwise elects. However, to the extent permitted by law, Company Stock acquired with an Exempt Loan will be excluded from any such distribution until the close of the Plan Year in which the Exempt Loan is repaid in full. If the surviving Spouse dies before distribution begins, then distribution will be made as if the surviving Spouse were the Participant.

- 27 - -

Distribution will be considered as having commenced when the deceased Participant would have reached Age 70½ even if payments have been made to the surviving Spouse before that date.

(b)   Non-Spouse Beneficiary. Any death benefit a non-Spouse Beneficiary is entitled to receive will be distributed at the surviving Spouse's election by one of the following methods: (1) in one lump-sum; or (2) in substantially equal monthly, quarterly, semiannual, or annual installments over a 5-year period (unless the surviving Spouse elects a longer period). If the Participant's Account balance exceeds $935,000, the 5-year period will be extended 1 additional year (but not more than 5 additional years) for each $185,000 or fraction thereof by which the Participant's Account balance exceeds $935,000. These dollar limits will be adjusted at the same time and in the same manner as provided in Code §415(d). Distribution to a non-Spouse Beneficiary will be made within a reasonable time after the death of the Participant, but distribution of a lump sum must be made by December 31st of the calendar year which contains the 5th anniversary of the date of the Participant's death, or installments must begin no later than December 31st of the calendar year immediately following the calendar year the Participant died. Notwithstanding the foregoing, distribution of a Participant's Company Stock Account will begin no later than one year after the close of the Plan Year in which the Participant dies unless the Beneficiary otherwise elects. However, to the extent permitted by law, Company Stock acquired with an Exempt Loan will be excluded from any such distribution until the close of the Plan Year in which the Exempt Loan is repaid in full.

(c)   Distribution If the Participant or Other Payee Is In Pay Status. If a Participant or Beneficiary who has begun receiving distribution of a benefit dies before the entire benefit is distributed, the balance will be distributed to the Participant's Beneficiary (or Beneficiary's beneficiary) at least as rapidly as under the method of distribution being used on the date of the Participant's or Beneficiary's death.

(d)   Payments to a Beneficiary. In the absence of a Beneficiary designation or other directive from the deceased Participant to the contrary, any Beneficiary may name his or her own Beneficiary to receive any benefits payable in the event of the Beneficiary's death prior to receiving the entire death benefit to which the Beneficiary is entitled; and if a Beneficiary has not named his or her own Beneficiary, the Beneficiary's estate will be the Beneficiary. If any benefit is payable under this paragraph to a Beneficiary of the deceased Participant's Beneficiary or to the estate of the deceased Participant's Beneficiary, or to any other Beneficiary or the estate thereof, subject to the limitations regarding the latest dates for benefit payment in paragraphs (a) and (c) above, the Administrator may (1) continue to pay the remaining value of such benefits in the amount and form already commenced, or pay such benefits in any other manner permitted under the Plan for a Participant or Beneficiary, and (2) if payments have not already commenced, pay such benefits in any other manner permitted under the Plan. Distribution to the Beneficiary of a Beneficiary must begin no later than the date distribution would have been made to the Participant's Beneficiary. The Administrator's determination under this paragraph will be final and will be applied in a non-discriminatory manner that does not discriminate in favor of Highly Compensated Employees.

(e)   Partial Distributions. If a Participant's Beneficiary receives a distribution of less than 100% of the Participant's Vested Aggregate Account balance, the Administrator will determine the portion (including zero) of the distribution that will be made from each of the Participant's sub-accounts, provided that any such determination is made in a uniform nondiscriminatory manner.

5.3   Distribution of Benefit Upon Disability.

Unless a cash-out occurs under Section 5.5, the Disability benefit a Participant is entitled to receive under Section 4.4 will be distributed in the following manner:

(a)   Form of Distribution. A Participant may elect to have his or her benefit distributed by one of the following methods: (1) in one lump-sum; or (2) in substantially equal monthly, quarterly, semi-annual, or annual installments over a 5-year period (unless the Participant elects a longer period). If the Participant's Account balance exceeds $935,000, the 5-year period will be extended 1 additional year (but not more than 5 additional years) for each $185,000 or fraction thereof by which the Participant's

- 28 - -

Account balance exceeds $935,000. These dollar limits will be adjusted at the same time and in the same manner as provided in Code §415(d).

(b)   Partial Distributions. If a Participant receives a distribution of less than 100% of his or her Vested Aggregate Account balance, the Administrator will determine the portion (including zero) of the distribution that will be made from each of the Participant's sub-accounts, provided that any such determination is made in a uniform nondiscriminatory manner.

(c)   Time of Distribution. Distribution will be made within an administratively reasonable time after the date on which a Participant who suffers a Disability terminates employment, but not later than the Participant's Required Beginning Date. Notwithstanding the foregoing, distribution of a Participant's Company Stock Account will begin no later than one year after the close of the Plan Year in which the Participant terminates employment because of the Disability unless the Participant otherwise elects. However, to the extent permitted by law, Company Stock acquired with an Exempt Loan will be excluded from any such distribution until the close of the Plan Year in which the Exempt Loan is repaid in full.

5.4   Distribution of Benefit Upon Termination of Employment.

Unless a cash-out occurs under Section 5.5 or a prior distribution has been made under Section 5.2 or 5.3, the benefit a Terminated Participant is entitled to receive under Section 4.5 will be distributed in the following manner:

(a)   Form of Distribution. A Participant may elect to have his or her benefit distributed by one of the following methods: (1) in one lump-sum; or (2) in substantially equal monthly, quarterly, semi-annual, or annual installments over a 5-year period (unless the Participant elects a longer period). If the Participant's Account balance exceeds $935,000, the 5-year period will be extended 1 additional year (but not more than 5 additional years) for each $185,000 or fraction thereof by which the Participant's Account balance exceeds $935,000. These dollar limits will be adjusted at the same time and in the same manner as provided in Code §415(d).

(b)   Partial Distributions. If a Participant receives a distribution of less than 100% of his or her Vested Aggregate Account balance, the Administrator will determine the portion (including zero) of the distribution that will be made from each of the Participant's sub-accounts, provided that any such determination is made in a uniform nondiscriminatory manner.

(c)   Time of Distribution. Distribution will be made within an administratively reasonable time after a Terminated Participant requests payment, but in no event later than the Required Beginning Date. Notwithstanding the foregoing, if a Terminated Participant is not reemployed by the Employer at the end of the fifth Plan Year following the Plan Year of his or her termination of employment, distribution of his or her Company Stock Account must begin not later than one year after the close of the fifth Plan Year following the Plan Year in which the Participant incurs such termination; but if a Terminated Participant is reemployed by the Employer as of the last day of the fifth Plan Year following the Plan Year of such termination of employment, distribution of his or her Company Stock Account will be postponed until the Participant is otherwise entitled to a distribution under the Plan. However, to the extent permitted by law, Company Stock acquired with an Exempt Loan will be excluded from such distribution until the close of the Plan Year in which the Exempt Loan is repaid in full.

5.5   Mandatory Cash-Out of Benefits.

Effective March 28, 2005, the Vested Aggregate Account of a terminated Participant who satisfies the requirements of this Section will be mandatorily distributed (a "cash-out") without the Participant's consent in accordance with the provisions  set forth below. Cash-outs prior to March 28, 2005 are governed by the terms of the Plan (including amendments) as in effect prior to such date.

(a)   Cashout Threshold. The Administrator can only make a distribution under this Section if a Participant's Vested Aggregate Account on the date of distribution does not exceed $5,000 (excluding the Participant's Rollover Account) (such amount hereafter referred to as the "Cashout Threshold"). If a Participant would have received a distribution under the preceding sentence but for the fact that the

- 29 - -

Participant's Vested Aggregate Account exceeded the Cashout Threshold when the Participant terminated employment, and if at a later time the Participant's Vested Aggregate Account is reduced to an amount not greater than the Cash-out Threshold in effect at that later time, then the Administrator will distribute such amount or remaining amount in a lump sum without the Participant’s consent. Any portion of the Participant's Account which is not Vested will be treated as a Forfeiture.

(b)   Time and Form of Distribution. Any distribution under this Section will be made as soon as administratively feasible after the Participant terminates employment (or, if applicable, as soon as administratively feasible after a terminated Participant's Vested Aggregate Account no longer exceeds the Cash-out Threshold). Distribution will, at the election of the Participant, be made in the form of a lump sum cash payment or as a direct rollover under Section 5.14. However, if the Participant fails to make a timely election and the amount of the distribution is $1,000 or less (including the Participant's Rollover Account), distribution will made in the form of a lump sum cash payment not less than 30 days and not more than 90 days (or such other time as permitted by law) after the Code §402(f) notice is provided to the Participant. If the Participant fails to make a timely election and the amount of the distribution exceeds $1,000 (including the Participant's Rollover Account), the Administrator will pay the distribution in an automatic direct rollover to an individual retirement plan designated by the Administrator. Such individual retirement plan, as defined in Code §7701(a)(37), may be either an individual retirement account within the meaning of Code §408(a) or an individual retirement annuity within the meaning of Code §408(b) (either of which is hereafter referred to as an IRA). The Administrator will establish the IRA at a qualified financial institution by selecting an IRA trustee, custodian or issuer that is unrelated to the Employer or the Administrator, and will make the initial investment choices for the IRA. Any automatic direct rollover will occur not less than 30 days and not more than 90 days (or such other time as permitted by law) after the Code §402(f) notice with the explanation of the automatic direct rollover is provided to the Participant.

5.6   Restrictions on Immediate Distributions.

If a Participant's Vested Aggregate Account balance exceeds the amount set forth in paragraph (a) of this Section and is Immediately Distributable, such account can only be distributed in accordance with the following provisions:

(a)   General Rule. If (1) the Vested Aggregate Account balance (effective January 1, 2002, determined before taking into account the Participant's Rollover Contribution Account) of a terminated Participant exceeds $5,000, or if there are remaining payments to be made with respect to a particular distribution option that previously commenced, and (2) such amount is Immediately Distributable, then the Participant must consent to any distribution of such amount. If (1) the Vested Aggregate Account balance (effective January 1, 2002, determined before taking into account the Participant's Rollover Contribution Account) of a terminated Participant does not exceed $5,000, but (if applicable) exceeds the cash-out threshold set forth in Section 5.5(a), and (2) such amount is Immediately Distributable, then only the Participant (or where the Participant has died, the Participant's Spouse or Beneficiary) must consent to any distribution of such amount.

(b)   Definition of Immediately Distributable. A Participant's benefit is immediately distributable if any part could be distributed to the Participant (or the Participant's surviving Spouse) before the Participant reaches (or would have reached if not deceased) the later of Normal Retirement Age or Age 62.

(c)   Consent Requirement. The consent of the Participant to any benefit that is immediately distributable must be obtained in writing within the 180-day period ending on the Annuity Starting Date. The Participant is not required to consent to a distribution that is required by Code §401(a)(9) or §415.

(d)   Notification Requirement. The Administrator must notify the Participant of the right to defer any distribution until it is no longer immediately distributable. Notification will include a general explanation of the material features and relative values of the optional forms of benefit, if any, available in a manner that would satisfy the notice requirements of Code §417(a)(3); and will be provided no less than 30 days or more than 180 days prior to the Annuity Starting Date. However, distribution of a Participant's benefit may begin less than 30 days after the such notice is given if (1) the Administrator clearly informs the Participant that the Participant has a right to a period of at least

- 30 - -

30 days after receiving notice to consider the decision of whether or not to elect a distribution; (2) the Participant, after receiving the notice, affirmatively elects a distribution or a particular distribution option.

(e)   Consent Not Needed on Plan Termination. If upon Plan termination neither the Employer nor an Affiliated Employer maintains another defined contribution plan other than (1) an employee stock ownership plan (ESOP) as defined in Code §4975(e)(7) or §409(a), (2) a simplified employee pension (SEP) as defined in Code §408(k), (3) a SIMPLE IRA plan as defined in Code §408(p), (4) a plan or contract that satisfies the requirements of Code§ 403(b), or (5) a plan that is described in Code §457(b) or Code §457(f), then the Participant's benefit will, without the Participant's consent, be distributed to the Participant. If the Employer or an Affiliated Employer maintains another defined contribution plan other than an ESOP, a SEP, a SIMPLE IRA, a 403(b) plan/contract, or a 457(b) or 457(f) plan, then the Participant's benefit will, without the Participant's consent, be transferred to the other plan if the Participant does not consent to an immediate distribution under this Section.

5.7   Accounts of Rehired Participants.

If a Participant who is not 100% Vested in his or her Participant's Account terminates employment with the Employer, a Forfeiture of all or a portion of the Participant's Account of the terminated Participant may have occurred, and the Participant is subsequently reemployed by the Employer, then his or her Participant's Account will be administered in accordance with the following:

(a)   Reemployment of a Participant After 5 Consecutive Breaks in Service. If the Participant is reemployed by the Employer after incurring five consecutive Breaks in Service, then any previous Forfeiture of the Participant's Account will not be restored under the terms of this Plan.

(b)   Reemployment of a Non-Vested Participant Before 5 Consecutive Breaks in Service. If a Participant's Vested Interest in the entire Participant's Account balance attributable to Employer contributions is 0% on the date that the Participant terminates employment, the Participant is deemed to have received a distribution of such Vested Interest on the date of such termination of employment pursuant to the Section 3.4(a)(1), a Forfeiture of the Participant's Account balance attributable to Employer contributions occurs on the date of such termination of employment pursuant to Section 3.4(a)(1), and the Participant is subsequently reemployed by the Employer before incurring five consecutive Breaks in Service, then the previous Forfeiture of such Participant's Account balance attributable to Employer contributions will be restored, calculated as of the date that the Forfeiture occurred (unadjusted by subsequent gains and losses). Such restoration of the previous Forfeiture of such Participant's Account balance attributable to Employer contributions will occur in the Plan Year that such Participant is reemployed by the Employer.

(c)   Reemployment of a Vested Participant Before 5 Consecutive Breaks in Service. If a Participant's Vested Interest in the Participant's Account balance attributable to Employer contributions is less than 100% (but greater than 0%) on the date that the Participant terminates employment, a Forfeiture of the non-Vested portion of the Participant's Account balance attributable to Employer contributions of the terminated Participant may have occurred, and the Participant is subsequently reemployed by the Employer before incurring five consecutive Breaks in Service, then the following provisions apply:

(1)   Distribution Has Occurred But No Forfeiture Has Occurred. If a Forfeiture of the non-Vested portion of the Participant's Account balance attributable to Employer contributions has not occurred but a distribution of all or a portion of the Participant's Account of the terminated Participant has occurred, then a separate bookkeeping account will be established for the Participant's Account at the time of distribution; the Participant's Vested Interest in the separate bookkeeping account at any relevant time will be an amount ("X") determined according to the following formula: X = P(AB + (R x D) - (R x D)). In applying the formula, "P" is the Vested Interest at the relevant time, "AB" is the respective account balance at the relevant time, "D" is the amount of the distribution, and "R" is the ratio of the respective account balance at the relevant time to the respective account balance after the distribution.

- 31 - -

(2)   No Distribution Has Occurred But Forfeiture Has Occurred. If a Forfeiture of the non-Vested portion of the Participant's Account balance attributable to Employer contributions has occurred and the terminated Participant is reemployed by the Sponsoring Employer or an Affiliated Employer before incurring five consecutive Breaks in Service and before receiving a distribution of the Vested Interest in his or her Participant's Account balance attributable to Employer contributions, then the previous Forfeiture of such Participant's Account balance attributable to Employer contributions will be restored, calculated as of the date that the Forfeiture occurred (unadjusted by subsequent gains and losses). Such restoration of the previous Forfeiture of such Participant's Account balance attributable to Employer contributions will occur in the Plan Year that such Participant is reemployed by the Employer.

(3)   Both Distribution and Forfeiture Have Occurred. If a distribution of all or a portion of the Vested Interest in the Participant's Account of a terminated Participant has occurred and a Forfeiture of the non-Vested portion of the Participant's Account attributable to Employer contributions has occurred (which may not necessarily occur at the same time that the distribution occurs), then the previous Forfeiture of such Participant's Account balance attributable to Employer contributions will be restored, calculated as of the date the Forfeiture occurred (unadjusted by subsequent gains and losses) and based upon the Sponsoring Employer's decision whether the Participant is required to repay the full amount of all distributions attributable to Employer contributions. With respect to such decision of the Sponsoring Employer whether the Participant is required to repay to the Plan the full amount of all distributions attributable to Employer contributions, in order to have the previous Forfeiture of such Participant's Account balance attributable to Employer contributions be restored, the following provisions will apply:

(A)   Precedent Established. Once such a decision by the Sponsoring Employer is made, it will establish precedence for the Plan and cannot be changed, altered or modified.

(B)   Time of Restoration If Repayment Is Not Required. If, based upon the Sponsoring Employer's decision, the Participant is not required to repay to the Plan the full amount of all distributions which were attributable to Employer contributions in order to have the previous Forfeiture of such Participant's Account balance attributable to Employer contributions be restored, then such restoration will occur in the Plan Year in which the Participant is reemployed by the Employer.

(C)   Time of Restoration If Repayment Is Required. If, based upon the Sponsoring Employer's decision, the Participant is required to repay to the Plan the full amount of all distributions which were attributable to Employer contributions in order to have the previous Forfeiture of such Participant's Account attributable to Employer contributions be restored, then such repayment by the Participant must be made before the earlier of (i) five years after the Participant's Reemployment Commencement Date, or (ii) the date on which the Participant incurs five consecutive Breaks in Service following the date of distribution of either the entire or the remaining Vested Interest in the Participant's Account. Such restoration of the previous Forfeiture of such Participant's Account balance attributable to Employer contributions will occur in the Plan Year that the Participant repays to the Plan the full (or any remaining) amount of the distribution which was attributable to Employer contributions.

(d)   Sources for Restoration. The sources to restore a previous Forfeiture of the non-Vested portion of the Participant's Account balance attributable to Employer contributions pursuant to this Section will be made first by using available Forfeitures to restore the previous Forfeiture and, if such available Forfeitures are insufficient to restore the previous Forfeiture, by the Employer making a special Employer contribution to the Plan to the extent necessary to restore the previous Forfeiture.

- 32 - -

5.8   Spousal Consent Requirements.

A surviving Spouse's election not to receive a death benefit under Section 5.2 will not be effective unless (1) the election is in writing; (2) the election designates a specific Beneficiary or form of benefit that cannot be changed without spousal consent (or the Spouse's consent expressly permits designations by the Participant without any requirement of further spousal consent); and (3) the Spouse's consent acknowledges the effect of the election and is witnessed by the Administrator or a notary public.

5.9   Required Minimum Distributions.

All distributions will be determined and made in accordance with the final and temporary Regulations issued by the Internal Revenue Service under Code §401(a)(9) on April 17, 2002. Pursuant to those Regulations, all distributions will be determined in accordance with the following:

(a)   General Rules. All distributions hereunder will be made in accordance with these general rules: (1) the provisions of this Section will apply in determining required minimum distributions for calendar years beginning with the 2003 calendar year; (2) the requirements of this Section will take precedence over any inconsistent Plan provisions and prior Plan amendments; (3) all distributions required under this Section will be determined and made in accordance with the Regulations under Code §401(a)(9); and (4) notwithstanding the other provisions of this Section, distributions may be made under a designation made before January 1, 1984, in accordance with Tax Equity and Fiscal Responsibility Act (TEFRA) §242(b)(2) and the provisions of the Plan that relate to TEFRA §242(b)(2).

(b)   Time and Manner of Distribution. All required minimum distributions will be made from the Plan in the following time and in the following manner:

(1)   Required Beginning Date. The Participant's entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant's Required Beginning Date.

(2)   Death of Participant Before Distributions Begin. If the Participant dies before distribution begins, the Participant's entire interest will be distributed (or begin to be distributed) not later than set forth in the following provisions:

(A)   5-Year Rule Applies to All Distributions to Designated Beneficiaries. If the Participant dies before distributions begin and there is a Designated Beneficiary, the Participant's entire interest will be distributed to the Designated Beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant's death. If the Participant's surviving Spouse is the Participant's sole Designated Beneficiary and the surviving Spouse dies after the Participant but before distributions to either the Participant or the surviving Spouse begin, this subparagraph will apply as if the surviving Spouse were the Participant. This subparagraph also applies to all distributions.

(B)   Life Expectancy Rule. Notwithstanding subparagraph (b)(2)(A), a Participant (or, if no election has been made by the Participant prior to the Participant's death, then the Participant's Designated Beneficiary) may elect on an individual basis whether the Life Expectancy rule applies to distributions after the death of a Participant who has a Designated Beneficiary. The election must be made no later than September 30th of the calendar year in which distribution would be required to begin under this subparagraph (b)(2)(B). If neither the Participant nor the Beneficiary makes an election under this subparagraph (or the election is received later than September 30th of the calendar year in which distribution would be required to begin under this subparagraph (b)(2)(B)), then distributions will be made in accordance with the 5-Year rule of subparagraph (b)(2)(A) above. The following relate to the Life Expectancy rule under this subparagraph:

(i) Surviving Spouse Is Sole Designated Beneficiary. If the Participant's surviving Spouse is the sole Designated Beneficiary, distributions to the surviving Spouse will begin by the later of [a] December 31 of the calendar year immediately following the calendar year in which the Participant died, or [b] December 31 of the calendar year in which the Participant would have attained age 70½.

- 33 - -

(ii) Surviving Spouse Is Not Sole Designated Beneficiary. If the Participant's surviving Spouse is not the sole Designated Beneficiary, then distributions to the Designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(iii) No Beneficiary Is Designated. If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant's death, then the Participant's entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant's death.

(iv) Surviving Spouse Dies Before Distributions Begin. If the Participant's surviving Spouse is the Participant's sole Designated Beneficiary and the surviving Spouse dies after the Participant but before distributions to the surviving Spouse begin, then this subparagraph (b)(2)(B), other than subparagraph (b)(2)(B)(i), will apply as if the surviving Spouse were the Participant.

(v) Election to Allow Designated Beneficiary Receiving Distributions Under 5-Year Rule to Elect Life Expectancy Distributions. A Designated Beneficiary who is receiving payments under the 5-Year rule may make a new election to receive payments under the Life Expectancy rule until December 31, 2003, provided that all amounts that would have been required to be distributed under the Life Expectancy rule for all Distribution Calendar Years before 2004 are distributed by the earlier of December 31, 2003 or the end of the 5-Year period.

(C)   Date Distributions Are Deemed To Begin. For purposes of this subparagraph (b)(2) and paragraph (d), unless subparagraph (b)(2)(B)(iv) above applies, distributions are considered to begin on the Participant's Required Beginning Date. If subparagraph (b)(2)(B)(iv) above applies, distributions are considered to begin on the date distributions are required to begin to the surviving Spouse under subparagraph (b)(2)(B)(i) above. If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant's Required Beginning Date (or to the Participant's surviving Spouse before the date distributions are required to begin to the surviving Spouse under subparagraph (b)(2)(B)(i)), then the date distributions are considered to begin is the date distributions actually commence.

(3)   Forms of Distribution. Unless the Participant's interest is distributed as an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first Distribution Calendar Year distributions will be made in accordance with paragraphs (c) and (d). If the Participant's interest is distributed as an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code §401(a)(9) and the Regulations.

(c)   Required Minimum Distributions During the Participant's Lifetime. The amount of required minimum distributions during a Participant's lifetime will be determined as follows:

(1)   Amount of Required Distribution Each Distribution Calendar Year. During the Participant's lifetime, the minimum amount that will be distributed each Distribution Calendar Year is the lesser of (A) the quotient obtained by dividing the Participant's Account Balance by the distribution period in the Uniform Lifetime Table set forth in Regulation §1.401(a)(9)-9, using the Participant's age as of the Participant's birthday in the Distribution Calendar Year; or (B) if the Participant's sole Designated Beneficiary for the Distribution Calendar Year is the Participant's Spouse, then the quotient obtained by dividing the Participant's Account Balance by the number in the Joint and Last Survivor Table set forth in Regulation §1.401(a)(9)-9, using the Participant's and Spouse's attained ages as of the Participant's and Spouse's birthdays in the Distribution Calendar Year.

- 34 - -

(2)   Required Minimum Distributions Continue Through Year of Participant's Death. Required minimum distributions will be determined under this paragraph (c) beginning with the first Distribution Calendar Year and up to and including the Distribution Calendar Year that includes the Participant's date of death.

(d)   Required Minimum Distributions After the Participant's Death. Required minimum distributions will be made after a Participant's death in accordance with the following provisions:

(1)   Death On or After Distributions Begins. If a Participant dies on or after the date distribution begins, then the amount of a required minimum distribution will be determined as follows:

(A)   Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a Designated Beneficiary, then the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Designated Beneficiary, determined in accordance with the following:

(i) Calculation of Participant's Remaining Life Expectancy. The Participant's remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(ii) Surviving Spouse Is Sole Designated Beneficiary. If the Participant's surviving Spouse is the Participant's sole Designated Beneficiary, then the remaining Life Expectancy of the surviving Spouse is calculated for each Distribution Calendar Year after the year of the Participant's death using the surviving Spouse's age as of the Spouse's birthday in that Distribution Calendar Year. For Distribution Calendar Years after the year of the surviving Spouse's death, the remaining Life Expectancy of the surviving Spouse is calculated using the age of the surviving Spouse as of the Spouse's birthday in the calendar year of the Spouse's death, reduced by one for each subsequent calendar year.

(iii) Surviving Spouse Is Not Sole Designated Beneficiary. If the Participant's surviving Spouse is not the Participant's sole Designated Beneficiary, then the Designated Beneficiary's remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant's death, reduced by one for each subsequent calendar year.

(B)   No Beneficiary Is Designated. If the Participant dies on or after the date distributions begin and there is no Designated Beneficiary as of September 30 of the year after the year of the Participant's death, then the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account Balance by the Participant's remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one each subsequent year.

(2)   Death Before the Date Distribution Begins. If a Participant dies before the date distribution begins, then the amount of a required minimum distribution will be determined as follows:

(A)   Participant Survived by Designated Beneficiary. If (i) a Participant (or, if no election is made by the Participant prior to the Participant's death, then the Participant's Designated Beneficiary) is permitted to elect the Life Expectancy rule of subparagraph (b)(2)(B); (ii) the Participant dies before the date distributions begin; and (iii) there is a Designated Beneficiary, then the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing

- 35 - -

the Participant's Account Balance by the remaining Life Expectancy of the Participant's Designated Beneficiary, determined as provided in subparagraph (d)(1).

(B)   No Beneficiary Is Designated. If the Participant dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant's death, then distribution of the Participant's entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death.

(C)   Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If (i) a Participant (or, if no election has been made by the Participant prior to the Participant's death, then the Participant's Designated Beneficiary) is permitted to elect the Life Expectancy rule of subparagraph (b)(2)(B); (ii) the Participant dies before the date distributions begin; (iii) the Participant's surviving Spouse is the Participant's sole Designated Beneficiary; and (iv) the surviving Spouse dies before distributions are required to begin to the surviving Spouse under subparagraph (b)(2)(B)(i), then this subparagraph (d)(2) will apply as if the surviving Spouse were the Participant.

5.10   Statutory Commencement of Benefits.

Unless the Participant otherwise elects, distribution of a Participant's benefit must begin no later than the 60th day after the latest of the close of the Plan Year in which the Participant (1) reaches the earlier of Age 65 or Normal Retirement Age; (2) reaches the 10th anniversary of the year he or she began Plan participation; or (3) terminates service with the Employer. However, the failure of a Participant to consent to a distribution while a benefit is immediately distributable within the meaning of Section 5.6(b) will be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section. In addition, if this Plan provides for early retirement, a Participant who satisfied the service requirement (if any) set forth in the definition of Early Retirement Age in Section 1.27 prior to termination of employment will be entitled to receive his or her Vested Aggregate Account balance (if any) upon satisfaction of the age requirement (if any) set forth in the definition of Early Retirement Age.

5.11   Post-Termination Earnings.

As of the Valuation Date coinciding with or next following the date a Participant terminates employment with the Employer for any reason, the Administrator will, until a distribution is made to the Participant or the Participant's Beneficiary in accordance with Sections 5.1, 5.2, 5.3, 5.4, or 5.5, direct the Trustee in a uniform nondiscriminatory manner to either (a) invest the Participant's Vested Aggregate Account balance determined as of such Valuation Date in a separate interest bearing account; or (b) leave the Participant's Vested Aggregate Account balance as part of the general Trust Fund. If the Participant's Vested Aggregate Account balance remains as part of the general Trust Fund, then such account will either (a) share in the allocation of net earnings and losses under Section 3.3 as a non-segregated account, or (b) be granted interest at a rate consistent with the interest bearing investments of the Trust Fund.

5.12   Distribution in the Event of Legal Incapacity.

If any person entitled to benefits (the "Payee") is under any legal incapacity by virtue of age or mental condition, payments may be made in one or more of the following ways as directed by the Administrator: (a) to the Payee directly; (b) to a court-appointed guardian of the Payee; (c) to the person or entity holding a valid power of attorney of the Payee or the Payee's estate; (d) any other person or entity authorized under State (or Commonwealth) law to receive benefits on behalf of the Payee; or (e) if the Payee is a minor, to the authorized person or entity of the Payee (e.g., custodian or guardian) under any Uniform Transfers to Minors Act or Uniform Gifts to Minors Act.

5.13   Missing Payees and Unclaimed Benefits.

With respect to a Participant or Beneficiary who has not claimed any benefit (the "missing payee") to which such missing payee is entitled, and with respect to any Participant or Beneficiary who has not satisfied the administrative requirements for benefit payment, the Administrator may elect to either (1) to segregate the benefit into an interest bearing account, in which event an annual maintenance fee as may be set from time to time in a written administrative policy established by the Sponsoring Employer may be assessed against the segregated account; (2) subject to a written administrative policy established by the Administrator, distribute the benefit at any time in any manner which is sanctioned by the Internal Revenue Service and/or the Department of Labor; or (3) treat the entire benefit as a Forfeiture. If a missing payee whose benefit has been forfeited is located, or if a payee whose benefit has been forfeited

- 36 - -

for failure to satisfy the administrative requirements for benefit payment subsequently satisfies such administrative requirements and claims his or her benefit, and if the Plan has not terminated (or if the Plan has terminated, all benefits have not yet been paid), then the benefit will be restored. The Administrator, on a case by case basis, may elect to restore the benefit by the use of earnings from non-segregated assets of the Fund, by Employer contributions, or by any combination thereof. However, if any such payee has not been located (or satisfied the administrative requirements for benefit payment) by the time the Plan terminates and all benefits have been distributed from the Plan, the Forfeiture of such unpaid benefit will be irrevocable.

5.14   Direct Rollovers.

This Section applies to distributions made after December 31, 2001. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election, a distributee may elect, at the time and in the manner prescribed by the Plan, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(a)   Eligible Rollover Distribution. The term "eligible rollover distribution" means any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include (1) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; (2) any distribution to the extent such distribution is required under Code §401(a)(9); (3) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities); (4) the portion of any distribution which is attributable to a financial hardship distribution; and (5) any other distribution that is reasonably expected to total less than $200 during a year.

(b)   Eligible Retirement Plan. For distributions made after December 31, 2001, the term "eligible retirement plan" means an individual retirement account described in Code §408(a); an individual retirement annuity described in Code §408(b); an annuity plan described in Code §403(a); an annuity contract described in Code §403(b); a qualified trust described in Code §401(a); or an eligible deferred compensation plan under Code §457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. This definition of eligible retirement plan will also apply in the case of a distribution to a surviving Spouse, or to a Spouse or former Spouse who is the alternate payee under a qualified domestic relation order, as defined in Code §414(p); such distribution will be made in the same manner as if the Spouse was the Employee. If any portion of an eligible rollover distribution is attributable to payments or distributions from an individual's Roth elective deferral account (or the segregated portion of an individual's Rollover Contribution Account that is attributable to Roth elective deferrals), then an eligible retirement plan with respect to such portion will only be either another plan's designated Roth account of the individual from whose account the payments or distributions were made, or such individual's Roth IRA.

(c)   Definition of Distributee. For purposes of this Section, the term "distributee" means an Employee or former Employee. In addition, an Employee's or former Employee's surviving Spouse and an Employee's or former Employee's Spouse or former Spouse who is the alternate payee under a qualified domestic relations order as defined in Code §414(p), are distributees with regard to the interest of the Spouse or former Spouse. With respect to any portion of a distribution that is made after December 31, 2006 from an eligible retirement plan of a deceased Employee, a distributee for purposes of a direct trustee-to trustee transfer will include an individual who is the Designated Beneficiary of the Employee and who is not the surviving Spouse of the Employee.

(d)   Definition of Direct Rollover. The term "Direct Rollover" means a payment by the Plan to the eligible retirement plan that is specified by the distributee.

(e)   Non-Spouse Beneficiary Rollover Right. Effective January 1, 2008, a Beneficiary (other than the Participant’s Spouse) who is considered to be a "designated beneficiary" under Code §401(a)(9)(E) may establish an IRA into which all or a portion of a death benefit distribution from this Plan to which such non-spouse designated beneficiary is entitled can be transferred directly. Notwithstanding the

- 37 - -

above, any amount payable to a non-Spouse designated beneficiary that is deemed to be a required minimum distribution may not be transferred into such IRA. If a Participant dies before his or her Required Beginning Date, the non-Spouse designated beneficiary may deposit into such IRA all or any portion of the distribution that is deemed to be an eligible rollover distribution. In determining the portion of such distribution that is considered to be a required minimum distribution that must be made from the IRA, the beneficiary may elect to use either the 5-year rule or the life expectancy rule, pursuant to Regulation §1.401(a)(9)-3, Q&A-4(c). Any distribution made pursuant to this Section 7.4 is not subject to the direct rollover requirements of Code §401(a)(31), the notice requirements of Code §402(f), or the mandatory withholding requirements of Code §3405(c). If a non-Spouse designated beneficiary receives a distribution from the Plan, then the distribution is not eligible for the "60-day" rollover rule, which is available to a Spousal Beneficiary. If the Participant's Beneficiary is a trust, then the Plan may make a direct rollover to an IRA on behalf of the trust if the trust satisfies the requirements to be a designated beneficiary within the meaning of Code §401(a)(9)(E).

5.15   Distributions of Stock.

All distributions made under the other provisions of this Article 5 will be in the form of Company Stock, subject to the following provisions:

(a)   Distribution in the Form of Company Stock. Benefits will be distributed solely in Company Stock. The Participant's Vested Aggregate Account will be distributed in the form of Company Stock to the extent it is allocated to the Participant's Company Stock Account, and the balance, if any, of the Vested Aggregate Account will be distributed in cash.

(b)   Stock Must Be Distributed In Whole Shares. Distribution will be made entirely in whole shares of Company Stock. Any balance in a Participant's Account, if any, not attributable to Company Stock will be applied by the Trustee to acquire for distribution the maximum number of whole shares of Company Stock at the then fair market value. Any unexpended balance in the Participant's Account will be distributed in cash. If the Trustee is unable to purchase the Company Stock required for the distribution, the Trustee will make distribution in cash within one year after the date the distribution was to have been made, except in the case of a retirement distribution which must be made within 60 days after the close of the Plan Year in which retirement occurs.

(c)   Multiple Classes of Company Stock Acquired With Exempt Loan. If Company Stock which was acquired with an Exempt Loan and which is available for distribution consists of more than one class of stock, a Participant's or Beneficiary's distribution must receive substantially the same proportion of each such class of such stock.

5.16   Dividends on Company Stock.

Cash dividends received on Company Stock allocated to Participants' Company Stock Accounts will be reinvested in Company Stock.

5.17   Non-Terminable Rights and Protections.

No Company Stock acquired with an Exempt Loan may be subject to a put, call, or other option, or buy-sell or similar arrangement when held by and distributed from the Plan, whether or not the Plan is then an Employee Stock Ownership Plan (ESOP). The rights and protections granted in this Section are non-terminable and will continue to exist under the terms of the Plan as long as any Company Stock acquired with an Exempt Loan is held by the Plan or by any Participant or any other person for whose benefit such protections and rights have been created, and neither the repayment of such loan nor the failure of the Plan to be an ESOP, nor any amendment of the Plan, will cause a termination of the protections and rights.

5.18   Required Cash Distribution for Certain Banks.

If the Employer is a bank as defined in Code §581 which is prohibited by law from redeeming or purchasing its own securities, the Employer may distribute a Participant's Plan benefit solely in the form of cash notwithstanding a Participant's right as otherwise set forth in the Plan to receive a distribution of Company Stock.

5.19   Financial Hardship Distributions.

Subject to rules and procedures established by the Administrator in an administrative policy regarding hardship distributions, a Participant may request in writing to the Administrator that up to 50% (or such other percentage as specified in the aforementioned administrative

- 38 - -

policy) of the Vested Interest of one or more of the Participant's accounts (calculated as of the date of the hardship request) as permitted in the administrative policy be distributed to the Participant because of his or her immediate and heavy financial hardship. However, notwithstanding any rules and procedures set forth in the administrative policy, no hardship distribution can be made with respect to Transfer Contributions (including post-transfer earnings thereon) and liabilities from a money purchase plan or target benefit plan qualified under Code §401(a) (other than any portion of those assets and liabilities attributable to Voluntary Employee Contributions).

An application for withdrawal shall be made in writing on a form approved by the Administrator.  Withdrawals shall be approved only on account of an immediate and heavy financial need and shall be approved only up to the amount that is necessary to satisfy such financial need.  Hardship withdrawals may only be made from a Participant’s Vested Interest which has been held by the Plan for at least two years.  The determination of the existence of an immediate and heavy financial need and of the amount necessary to meet such need is to be made in a nondiscriminatory and objective manner on the basis of all relevant facts and circumstances.  The determination of the Administrator as to justification of the withdrawal and the amount thereof shall be final.

For purposes of this section, the term “financial hardship” shall mean the financial inability of the Participant to provide the necessary funds for:  (a) deductible medical expenses incurred or necessary (within the meaning of Code §213(d) of the Participant, the Participant’s spouse, children or dependents; (b) the purchase (excluding mortgage payments) of a principal residence for the Participant; (c) payment of tuition for the next 12 months of post secondary education for the Participant, the Participant’s spouse, children or dependents; (d) the need to prevent the eviction of the Participant from, or a foreclosure on the mortgage of, the Participant’s principal residence; (e) payments for burial or funeral expenses for the Participant’s deceased parent, spouse, children or dependents (as defined Code §152 and, for taxable years beginning on or after January 1, 2005, without regard to Code §153(d)(1)(B); and (f) expenses for the repair of damage to the Participant’s principal residence that would qualify for the casualty deduction under Code §165 (determined without regard to whether the loss exceeds 10% of adjusted gross income).

5.20   Pre-Retirement Distributions.

Except as may otherwise be permitted under Section 4.2 or Section 5.19, no distributions are permitted before a Participant terminates employment with the Employer.

5.21   Distribution of Rollover Contributions.

 An Employee's Rollover Contribution Account will be distributed from the Plan in accordance with the following provisions:

(a)   Time of Distribution. An Employee may request in writing a withdrawal of all or any portion of his or her Rollover Contribution Account at any time prior to becoming a Participant, and thereafter upon the earlier of (1) the date the Employee is entitled to a distribution of his or her Participant's benefits under the provisions of Article 5, or (2) the soonest possible administratively practical date after the Participant's termination of employment. The Administrator may require advance notice of a reasonable period not to exceed 60 days prior to the requested date of withdrawal. Any amount withdrawn  can only be redeposited to the Employee's Rollover Contribution Account if the withdrawn amount continues to be deemed a Rollover despite the fact that the amount originated from this Plan. A withdrawal of all or any portion of an Employee's Rollover Contribution Account will not prevent an Employee from accruing any future benefit attributable to Employer contributions. The Administrator may establish additional rules or procedures regarding withdrawals from an Employee's Rollover Contribution Account.

(b)   Spousal Consent Requirements Upon Withdrawal. All or any portion of an Employee's Rollover Contribution Account can be withdrawn from the Plan without the consent of the Employee's Spouse.

- 39 - -

(c)   Form of Distribution. Distribution of all or any portion of an Employee's Rollover Contribution Account prior to the time that the Employee is entitled to a distribution of his or her Participant Account will only be in the form of a single payment. Any amount remaining in an Employee's Rollover Contribution Account at the time the Employee is entitled to a distribution of his or her Participant Account will be distributed, at the election of the Participant, in a lump-sum or in the same manner as the Participant Account under the other provisions of this Article 5.

5.22   Distribution of Voluntary Employee Contributions.

Voluntary Employee Contributions are not permitted.

5.23   Distribution of Transfer Contributions.

A Participant's Transfer Contribution Account will be distributed from the Plan at the same time and in the same manner as the Participant's Account is distributed under Section 5.1, 5.2, 5.3, or 5.4, subject to the following rules:

(a)   Spousal Consent Requirements Upon Withdrawal. If a Transfer Contribution was a direct or indirect transfer as defined in Code §401(a)(11) from a defined benefit plan, a money purchase plan, a target benefit plan, a stock bonus plan, or a profit sharing plan that provided for a life annuity form of payment to the Participant, then a withdrawal of all or any portion of a Participant's Transfer Contribution Account will be subject to the Spousal consent requirements set forth in Section 5.8. However, if a Transfer Contribution was not a direct or indirect transfer as defined in Code §401(a)(11) from a defined benefit plan; a money purchase plan; a target benefit plan; or a stock bonus plan or a profit sharing plan that provided for a joint and survivor annuity or a life annuity form of payment to the Participant, then all or any portion of an a Participant's Transfer Contribution Account can be withdrawn without the consent of the Participant's Spouse.

(b)   Form of Distribution. Notwithstanding anything in this Section to the contrary, if the Transfer Contribution was a direct or indirect transfer as defined in Code §401(a)(11) from a defined benefit plan; a money purchase plan; a target benefit plan; or a stock bonus plan or a profit sharing plan that provided for a joint and survivor annuity or a life annuity form of payment to the Participant, then regardless of the Normal Form of Distribution, a withdrawal of all or any portion of a Participant's Transfer Contribution Account will be subject to the Qualified Joint and Survivor Annuity (QJSA) and Qualified Preretirement Survivor Annuity (QPSA) requirements set forth in Code §401(a)(11). A withdrawal of all or any portion of a Participant's Transfer Contribution Account may also be made in the same manner as the Participant's Account under the other provisions of this Article 5, subject to the Spousal consent requirements set forth in paragraph (a)(1).

(c)   Special Rule for Withdrawal of Elective Deferral Transfers. Notwithstanding anything in this Section to the contrary, if the Transfer Contributions are elective contributions as defined in Regulation 1.401(k)-1(g)(3) (including any qualified non-elective contributions, qualified matching contributions, and ADP safe harbor contributions) which are transferred to this Plan in a direct or indirect trustee-to-trustee transfer from another qualified plan and which are subject to the limitations in Regulation §1.401(k)-1(d), then the distribution of such Transfer Contributions (including post-transfer earnings thereon) will be subject to the limitations in Regulation §1.401(k)-1(d).

- 40 - -

                                    Article 6                      

Code § 415 Limitations

6.1   Maximum Annual Additions.

The maximum Annual Addition made to a Participant's various accounts maintained under the Plan for any Limitation Year will not exceed the lesser of the Dollar Limitation in Section 6.1(a) or the Compensation Limitation Section 6.1(b) below, as follows:

(a)   Dollar Limitation. For Limitation Years beginning on or after January 1, 2008, the Dollar Limitation is $46,000 as adjusted in accordance with Code §415(d).

(b)   Compensation Limitation. For Limitation Years beginning on or after January 1, 2002, the Compensation Limitation is an amount equal to 100% of the Participant's Compensation for the Limitation Year. However, this limitation will not apply to any contribution made for medical benefits within the meaning of Code §401(h) or Code §419A(f)(2) after termination of employment which is otherwise treated as an Annual Addition under Code §415(l)(1) or Code §419A(d)(2).

(c)   Annual Additions. Annual Additions are the sum of the following amounts credited to a Participant's Account for the Limitation Year: (1) Employer contributions; (2) Forfeitures; (3) amounts allocated, after March 31, 1984, to an individual medical account, as defined in Code §415(l)(2), which is part of a pension or annuity plan maintained by the Employer; and (4) amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, that are attributable to post-retirement medical benefits, allocated to the separate account of a Key Employee, as defined in Code §419A(d)(3), under a welfare fund, as defined in Code §419(e), maintained by the Employer. However, a Participant's Annual Additions do not include Rollover Contributions, Transfer Contributions, loan repayments, repayments of prior Plan distributions or prior distributions of mandatory contributions, deductible contributions to a SEP, or voluntary deductible contributions.

(d)   Special ESOP Rules. For purposes of this Section, (1) in determining the amount of the Employer's contribution for purposes of paragraph (a) and (b) above, the amount of Employer contributions will be determined based upon the lesser of (A) the fair market value of the Company Stock allocated to the Participant's Account from Employer contributions to the Plan (determined at the time of the contribution by the most recent valuation) plus any contributions which are not used to purchase Company Stock or pay on an Exempt Loan; and (B) the amount of the Employer's cash contribution to the Plan; and (2) in any Plan Year in which the Employer is not an S Corporation as defined in Code §1361, if no more than one-third of Employer contributions for that Plan Year that are deductible under Code §404(a)(9) are allocated to HCEs, the limitations of this Section will not apply to Forfeitures of Company Stock that was acquired with an Exempt Loan or to Employer contributions that are deductible under Code §404(a)(9)(B) and are charged against a Participant's Account.

6.2   Adjustments to Maximum Annual Addition.

In applying the limitation on Annual Additions set forth in Section 6.1 the following adjustments must be made:

(a)   Short Limitation Year. In a Limitation Year of less than 12 months, the Defined Contribution Dollar Limitation in Section 6.1(a) will be adjusted by multiplying it by the ratio that the number of months in the short Limitation Year bears to 12.

(b)   Participation in Multiple Employer-Sponsored Defined Contribution Plans. If a Participant participates in multiple defined contribution plans sponsored by the Employer which have different Anniversary Dates, the maximum Annual Addition in this Plan for the Limitation Year will be reduced by the Annual Additions credited to the Participant's accounts in the other defined contribution plans during the Limitation Year. If a Participant participates in multiple defined contribution plans sponsored by the Employer which have the same Anniversary Date, then (1) if only one of the plans is subject to Code §412, Annual Additions will first be credited to the Participant's accounts in the plan subject to Code §412; and (2) if none of the plans are subject to Code §412, the maximum Annual Addition in this Plan for a given Limitation Year will either (A) equal the product of (i) the maximum Annual Addition for such Limitation Year minus any other Annual Additions previously credited to

- 41 - -

the Participant's account(s), multiplied by (ii) a fraction, the numerator of which is the Annual Additions which would be credited to a Participant's accounts hereunder without regard to the Annual Additions limitation of Section 6.1 and the denominator of which is the Annual Additions for all plans described in this paragraph, or (B) be reduced by the Annual Additions credited to the Participant's accounts in the other defined contribution plans for such Limitation Year.

6.3   Multiple Plans and Multiple Employers.

All defined benefit plans (whether terminated or not) sponsored by the Employer will be treated as one defined benefit plan, and all defined contribution plans (whether terminated or not) sponsored by the Employer will be treated as one defined contribution plan. In addition, all Affiliated Employers will be considered a single Employer.

6.4   Adjustment for Excessive Annual Additions.

If for any Limitation Year the Annual Additions allocated to a Participant's Account exceeds the maximum amount permitted under Section 6.1 because of an allocation of Forfeitures, a reasonable error in estimating a Participant's Compensation, a reasonable error in determining the amount of elective contributions (within the meaning of Code §402(g)(3)), or because of other limited facts and circumstances that the Commissioner finds justify the availability of the rules set forth in this Section, then such Participant's Account will be adjusted as follows to reduce the excess Annual Additions:

(a)   Reduce Employer Contributions If Participant Is Still Covered By The Plan. First, if the Participant is covered by the Plan at the end of the Limitation Year, the excess in the Participant's Account plus applicable earnings thereon, if any, will be used to reduce Employer contributions (including any allocation of Forfeitures) for such Participant in the next Limitation Year, and in each succeeding Limitation Year if necessary.

(b)   Reduce Employer Contributions If Participant Is Not Covered By The Plan. If the Participant is not covered by the Plan at the end of a Limitation Year, the excess amount, plus applicable earnings thereon, if any, will be held unallocated in a suspense account. The suspense account will be applied to reduce future Employer contributions (including the allocation of any Forfeitures) for all remaining Participants in the next Limitation Year, and in each succeeding Limitation Year if necessary.

(c)   Suspense Account. If a suspense account is in existence at any time during a Limitation Year pursuant to this Section, such suspense account will not participate in the allocation of the Trust's investment gains and losses. If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participants' Accounts before any Employer Contributions may be made to the Plan for that Limitation Year. Excess amounts may not be distributed to Participants or former Participants.

- 42 - -

                                       Article 7                      

Loans, Insurance and Directed Investments

7.1   Loans to Participants.

Loans to Participants are not permitted.

7.2   Insurance on Participants.

The purchase of Policies on the life of a Participant is not permitted except as otherwise provided in Section 7.3 with regard to "key man" insurance.

7.3   Key Man Insurance.

The Administrator may instruct the Trustee to purchase insurance Policies on the life of any Participant whose employment is deemed to be key to the Employer's financial success. Such "key man" Policies will be deemed an investment of the Trust and will be payable to the Trust as the beneficiary. The Trustee may exercise any and all rights under the Policies. Neither the Trustee, Employer, Administrator, nor any fiduciary will be responsible for the validity of any such Policy or the failure of any insurer to make payments thereunder, or for the action of any person that may delay payment or render a Policy void in whole or in part. No insurer will be deemed a party to this Plan for any purpose or to be responsible for its validity; nor will it be required to look into the terms of the Plan nor to question any action of the Trustee. The obligations of the insurer will be determined solely by the Policy's terms and any other written agreements between it and the Trustee. The insurer will act only at the written direction of the Trustee, and will be discharged from all liability with respect to any amount paid to the Trustee. The insurer will not be obligated to see that any money paid to the Trustee or any other person is properly distributed or applied.

- 43 - -

                                      Article 8                      

Duties of the Administrator

8.1   Appointment, Resignation, Removal and Succession.

Each Administrator appointed will continue until his death, resignation, or removal , and any Administrator may resign by giving 30 days written notice to the Sponsoring Employer. If an Administrator dies, resigns, or is removed , his successor will be appointed as promptly as possible, and such appointment will become effective upon its acceptance in writing by such successor. Pending the appointment and acceptance of any successor Administrator, any then acting or remaining Administrator will have full power to act.

8.2   General Powers and Duties.

The powers and duties of the Administrator will include (a) appointing the Plan's attorney, accountant, actuary, or any other party needed to administer the Plan; (b) directing the Trustees with respect to payments from the Trust Fund; (c) deciding if a Participant is entitled to a benefit; (d) communicating with Employees regarding their Plan participation and benefits, including the administration of all claims procedures; (e) filing any returns and reports with the Internal Revenue Service, Department of Labor, or other governmental agency; (f) reviewing and approving any financial reports, investment reviews, or other reports prepared by any party under (e) above; (g) establishing a funding policy and investment objectives consistent with the purposes of the Plan and ERISA; (h) construing and resolving any question of Plan interpretation; and (i) making any findings of fact the Administrator deems necessary to proper Plan administration. Notwithstanding any contrary provision of this Plan, benefits under this Plan will be paid only if the Administrator decides in its discretion that the applicant is entitled to them. The Administrator's interpretation of Plan provisions, and any findings of fact, including eligibility to participate and eligibility for benefits, are final and will not be subject to "de novo" review unless shown to be arbitrary and capricious.

8.3   Functions of Committee.

If a Committee is established, a member of the Committee will serve until his or her death, disability, removal by the Sponsoring Employer, or resignation. If a vacancy arises from the death, disability, removal, or resignation of a member of the Committee, the Sponsoring Employer may, but is not required to, appoint a successor to serve in his or her place. The Committee will act by majority vote. The proper expenses of the Committee, and the compensation of its agents, if any, that are appointed pursuant to Section 8.7, will be paid directly by the Employer.

8.4   Multiple Administrators.

If more than one Administrator has been appointed by the Sponsoring Employer, the Administrators may delegate specific responsibilities among themselves, including the authority to execute documents unless the Sponsoring Employer revokes such delegation. The Sponsoring Employer and Trustee will be notified in writing of any such delegation of responsibilities, and the Trustee thereafter may rely upon any documents executed by the appropriate Administrator.

8.5   Correcting Administrative Errors.

The Administrator will take such steps as it considers necessary and appropriate to remedy administrative or operational errors, including, but not be limited to, the following: (a) any action pursuant to (1) any Employee Plans Compliance Resolution System (EPCRS) that is issued by the Internal Revenue Service, (2) any asset management or fiduciary conduct error correction program that is issued by the Department of Labor, or (3) any other correction program issued by any Department or governmental agency; (b) a reallocation of Plan assets; (c) an adjustment in the amount of future payments to any Participant, Beneficiary or Alternate Payee; and (d) the institution, prosecution, and/or settlement of legal actions to recover benefit payments made in error or on the basis of incorrect or incomplete information.

8.6   Promulgating Notices and Procedures.

The Sponsoring Employer and Administrator are given the power and responsibility to promulgate certain written notices, policies and/or procedures under the terms of the Plan and disseminate them to Participants, and the Administrator may satisfy such responsibility by the preparation of any such notice, policy and/or procedure in a written form which can be published and communicated to a Participant in one or more of the following ways: (a) by distribution in hard copy; (b) through distribution of a summary plan description or summary of material modifications thereto which sets forth the policy or procedure with respect to a right, benefit or feature offered under the Plan; (c) by e-mail, either to a Participant's personal e-mail address or his or her Employer-maintained e-mail address; and (d) by publication on a web-site accessible by the Participant, provided the Participant is notified of said web-site publication. Any notice, policy and/or procedure provided through an electronic medium will only be valid if

- 44 - -

the electronic medium which is used is reasonably designed to provide the notice, policy and/or procedure in a manner no less understandable to the Participant than a written document, and under such medium, at the time the notice, policy and/or procedure is provided, the Employee may request and receive the notice, policy and/or procedure on a written paper document at no charge.

8.7   Employment of Agents and Counsel.

The Administrator may appoint actuaries, accountants, custodians, counsel, agents, consultants, service companies and other persons deemed necessary or desirable in the administration and operation of the Plan. Any person or company so appointed will exercise no discretionary authority over investments or the disposition of Trust assets, and their services and duties will be ministerial only and will be to provide the Plan with those things required by law or by the terms of the Plan without in any way exercising any fiduciary authority or responsibility under the Plan. The duties of a third party Administrator will be to safe-keep the records for all Participants and to prepare all required actuarial services and disclosure forms under the supervision of the Administrator and any Fiduciaries of the Plan. It is expressly stated that the third party Administrator's services are only ministerial in nature and that under no circumstances will such third party Administrator (a) exercise any discretionary authority whatsoever over Plan Participants, Plan investments, or Plan benefits; or (b) be given any authority or discretion concerning the management and operation of the Plan that would cause them to become Fiduciaries of the Plan.

8.8   Compensation and Expenses.

The Administrator may receive such compensation as agreed upon between the Sponsoring Employer and the Administrator, but any person who already receives full-time pay from the Employer may not receive any fees from the Plan for services to the Plan as Administrator or in any other capacity, except for reimbursement for expenses actually and properly incurred. The Sponsoring Employer will pay all "settlor" expenses (as described in DOL Advisory Opinion 2001-01-A) incurred by the Administrator, the Committee or any party appointed under Section 8.7 in the performance of their duties. The Sponsoring Employer may, but is not required to pay, all "non-settlor" expenses incurred by the Administrator, the Committee, or any party appointed under Section 8.7 in the performance of their duties. Any "non-settlor" expenses incurred by the Administrator, the Committee or any party appointed under Section 8.7 that the Sponsoring Employer elects not to pay will be reimbursed from Trust Fund assets. Any expenses paid from the Trust Fund will be charged to each Adopting Employer in the ratio that each Adopting Employer's Participants' Accounts bears to the total of all the Participants' Accounts maintained by this Plan, or in any other reasonable method elected by the Administrator.

8.9   Claims Procedures.

The claims procedure required under §503 of ERISA and the regulations thereunder is set forth in a written policy established by the Administrator. Such policy will be the sole and exclusive remedy for an Employee, Participant or Beneficiary ("Claimant") to make a claim for benefits under the Plan.

8.10   Qualified Domestic Relations Orders.

A Qualified Domestic Relations Order, or QDRO, is a signed domestic relations order issued by a State or a Commonwealth court which creates, recognizes or assigns to an alternate payee(s) the right to receive all or part of a Participant's Plan benefit. An alternate payee is a Spouse, former Spouse, child, or other dependent of a Participant who is treated as a Beneficiary under the Plan as a result of the QDRO. The Administrator will determine if a domestic relations order received by the Plan is a Qualified Domestic Relations Order based on an administrative policy regarding Qualified Domestic Relations Orders that is promulgated under Section 8.6 by the Administrator.

8.11   Appointment of Investment Manager.

The Administrator, with the consent of the Employer, may appoint an Investment Manager to manage and control the investment of all or any portion of the Trust. Each Investment Manager will be a person (other than the Trustee) who (a) has the power to manage, acquire, or dispose of Plan assets, (b) is an investment adviser, a bank, or an insurance company as described in ERISA §3(38)(B), and (c) acknowledges fiduciary responsibility to the Plan in writing. The Administrator will enter into an agreement with the Investment Manager specifying the duties and compensation of the Investment Manager and specifying any other terms and conditions under which the Investment will be retained. The Trustee is not liable for any act or omission of an Investment Manager and is not liable for following an Investment Manager's advice with respect to duties delegated by the Administrator to the Investment Manager. The Administrator can determine the portion of the Plan's assets to be invested by a designated Investment Manager and can establish investment objectives and guidelines for the Investment Manager to follow.

- 45 - -

                                          Article 9                      

Trustee Provisions

9.1   Appointment, Resignation, Removal and Succession.

This Plan will have one or more individual Trustees, a corporate Trustee, or any combination thereof, appointed as follows:

(a)   Appointment. Each Trustee will be appointed and will serve until a successor has been named or until such Trustee's resignation, death, incapacity, or removal, in which event the Sponsoring Employer will name a successor Trustee. The term Trustee will include the original and any successor Trustees.

(b)   Resignation. A Trustee may resign at any time by giving written notice to the Sponsoring Employer, unless such notice is waived by the Sponsoring Employer. The Sponsoring Employer may remove a Trustee at any time by giving such Trustee written notice. Such removal may be with or without cause. Unless waived in writing by the Sponsor, if any Trustee who is an Employee or an elected or appointed official resigns or terminates employment with the Sponsoring Employer or an Adopting Employer, such termination will constitute an immediate resignation as a Trustee of the Plan.

(c)   Successor Trustee. Each successor Trustee will succeed to the title to the Trust by accepting the appointment in writing and by filing such acceptance with the former Trustee and the Sponsoring Employer. The former Trustee, upon receipt of such acceptance, will execute all documents and perform all acts necessary to vest the Trust Fund's title of record in any successor Trustee. No successor Trustee will be personally liable for any act or failure to act of any predecessor Trustee.

(d)   Merger. If a corporate Trustee, before or after qualification, changes its name, consolidates or merges with another corporation, or otherwise reorganizes, any resulting corporation which succeeds to the fiduciary business of such Trustee will become a Trustee hereunder in lieu of such corporate Trustee.

9.2   Investment Alternatives of the Trustee.

The Trustee will implement an investment program designed to invest primarily in Company Stock and to accomplish the Employer's other investment objectives. In addition to powers given by law, the Trustee is expressly permitted to do the following:

(a)   Property. The Trustee may invest in any form of property, including common and preferred stocks, exchange covered call options, bonds, money market instruments, mutual funds, savings accounts, certificates of deposit, Treasury bills, insurance policies and contracts, or in any other property, real or personal, foreign or domestic, having a ready market including securities issued by an institutional Trustee and/or affiliate of such Trustee. An institutional Trustee may invest in its own deposits that bear a reasonable interest rate. The Trustee may retain, manage, operate, repair, improve and mortgage or lease for any period on such terms as it deems proper any real estate or personal property held by the Trustee, and may demolish any building or other improvements in whole or part. The Trustee may erect buildings or other improvements, make leases that extend beyond the term of this Trust, and foreclose, extend, renew, assign, release or partially release and discharge mortgages or other liens.

(b)   Cash Reserves. The Trustee may retain in cash as much of the Trust Fund as the Trustee may deem advisable to satisfy the liquidity needs of the Plan and to deposit any cash held in the Trust Fund in a bank account without liability for the highest rate of interest available. If a bank is acting as Trustee, such Trustee is specifically given authority to invest in deposits of such Trustee. The Trustee may also hold cash un-invested at any time and from time to time and in such amount or to such extent as the Trustee deems prudent, and the Trustee will not be liable for any losses which may be incurred as the result of the failure to invest same, except to the extent that may otherwise be provided herein.

(c)   Other Investments. The Trustee may accept and retain for such time as the Trustee deems advisable any securities or other property received or acquired as Trustee, whether or not such securities or property would normally be purchased as investments hereunder.

- 46 - -

(d)   Registration of Securities. The Trustee may cause any property of the Trust to be issued, held, or registered in its own name or in the name of a nominee, provided, however, that the nominee is (a) a bank or trust company that is subject to supervision by the United States or a State, or a nominee of such bank or trust company; (b) a broker or dealer registered under the Securities Exchange Act of 1934, or a nominee or such broker or dealer; or (c) a clearing agency as defined in section 3(a)(23) of the Securities Exchange Act of 1934, or its nominee. The Trustee may also hold any investments in bearer form if the Trustee at all times shows such investments as part of the Trust.

(e)   Pooled Funds. The Trustee may transfer any assets of the Trust Fund to a collective trust established to permit the pooling of funds of separate pension and profit-sharing trusts or to any other common, collective, or commingled trust fund which has been or may hereafter be established and maintained by the Trustee and/or affiliates of an institutional Trustee. Such commingling of assets of the Fund with assets of other qualified trusts is specifically authorized, and to the extent of the investment of the Trust Fund in such a group or collective trust, the terms of the instrument establishing the group or collective trust will be a part hereof as though set forth herein.

(f)   Reorganizations. The Trustee may join in or oppose the reorganization, recapitalization, consolidation, sale or merger of corporations or properties, upon such terms as the Trustee deems wise.

(g)   Proxies. The Trustee may vote proxies and if appropriate pass them on to any investment manager which may have directed the investment in the equity giving rise to the proxy.

(h)   Ownership. The Trustee may exercise all ownership rights with respect to any assets held in the Trust.

(i)   Loans to the Trust. The Trustee may borrow or raise money for purposes of the Plan in such amounts, and upon such terms and conditions, as the Trustee deems advisable; and for any sum so borrowed, the Trustee may issue a promissory note as Trustee, and secure repayment of the loan by pledging all, or any part, of the Trust Fund as collateral. No person lending money to the Trustee will be bound to see to the application of the money lent or to inquire into the validity or propriety of any borrowing.

(j)   Agreements With Banks. The Trustee may with the consent of the Sponsoring Employer and upon such terms as they in their discretion deem necessary, enter into an agreement with a bank or trust company providing for (a) the deposit of all or part of the funds and property of the Trust with such bank or trust company, (b) the appointment of such bank or trust company as the agent or custodian of the Trustees for investment purposes, with such discretion in investing and reinvesting the funds of the Trust as the Trustees deem it necessary or desirable to delegate.

(k)   Litigation. The Trustee may begin, maintain, or defend any litigation necessary in connection with the administration of the Plan, except that the Trustee will not be obliged or required to do so unless indemnified to its satisfaction.

(l)   Claims, Debts and Damages. The Trustee may settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from the Plan.

(m)   Margin Accounts, Options and Commodities. The Trustee may borrow on margin, buy options, write covered options, options spreads/straddles, and engage in future/commodities trading.

(n)   Miscellaneous. The Trustee may do all such acts and exercise all such rights, although not specifically mentioned herein, as the Trustee deems necessary to carry out the purposes of the Plan. The Trustee will not be restricted to securities or other property of the character expressly authorized by applicable law for trust investments, subject to the requirement that the Trustee discharge his duties with the care, skill, prudence, and diligence, under the circumstances then prevailing, that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of similar character and with similar aims by diversifying the investments to minimize the risks of large losses unless under the circumstances it is clearly prudent not to do so.

- 47 - -

9.3   Valuation of the Trust.

On each Valuation Date, the Trustee will determine the net worth of the Trust Fund. The fair market value of securities listed on a registered stock exchange will be the prices at which they were last traded on such exchange preceding the close of business on the Valuation Date. If the securities were not traded on the Valuation Date, or if the exchange on which they are traded was not open for business on the Valuation Date, the securities will be valued at the prices at which they were last traded prior to the Valuation Date. An unlisted security will be valued at its bid price next preceding the close of business on the Valuation Date, which bid price will be obtained from a registered broker or an investment banker. To determine the fair market value of Company Stock for which trading or bid prices cannot be obtained, the Trustee must use an independent appraiser who meets the requirements of regulations prescribed under Code §170(a)(1). To determine the fair market value of assets other than securities for which trading or bid prices can be obtained, the Trustee may use any reasonable method to determine the value of such assets, or may elect to employ one or more appraisers for that purpose and rely on the values established by such appraiser or appraisers.

9.4   Compensation and Expenses.

The Trustee will be reimbursed for all of its expenses, either from the Trust Fund or the Sponsoring Employer, and will be paid reasonable compensation as agreed upon from time to time with the Sponsoring Employer; but no person who receives full-time pay from the Employer will receive any fees for services to the Plan as Trustee or in any other capacity, except for reimbursement of expenses properly and actually incurred. Any expenses paid from the Trust will be charged to each Adopting Employer in the ratio that each Adopting Employer's Participants' Accounts bears to the total of all the Participants' Accounts maintained by this Plan, or in any other reasonable method elected by the Administrator.

9.5   Payments From the Trust Fund.

The Trustee will pay Plan benefits and other payments as the Administrator directs, and the Trustee will not be responsible for the propriety of such payments. Any payment made to a Participant, or a Participant's legal representative or Beneficiary in accordance with the terms of the Plan will, to the extent of such payment, be in full satisfaction of all claims arising against the Trust, the Trustee, the Employer, and the Plan Administrator. Any payment or distribution made from the Trust is contingent on the recipient executing a receipt and release acceptable to the Trustee, Administrator, or Employer.

9.6   Payment of Taxes.

The Trustee will pay all taxes of the Trust Fund, including property, income, transfer and other taxes which may be levied or assessed upon or in respect of the Trust Fund or any money, property or securities forming a part of the Trust Fund. The Trustee may withhold from distributions to any payee such sum as the Trustee may reasonably estimate as necessary to cover federal and state taxes for which the Trustee may be liable, which are, or may be, assessed with regard to the amount distributable to such payee. Prior to making any payment, the Trustee may require such releases or other documents from any lawful taxing authority and may require such indemnity from a payee or distributee as the Trustee deems necessary.

9.7   Accounts, Records and Reports.

The Trustee will keep accurate records reflecting its administration of the Trust and will make them available to the Administrator for review and audit. At the request of the Administrator, the Trustee will, within 90 days of such request, file with the Administrator an accounting of its administration during such period or periods as the Administrator determines. The Administrator will review the accounting and notify the Trustee within 90 days if the report is disapproved, providing the Trustee with a written description of the items in question. The Trustees will have 60 days to provide the Administrator with a written explanation of the items in question. If the Administrator again disapproves of the report, the Trustee will file its accounting in a court of competent jurisdiction for audit and adjudication.

9.8   Employment of Agents and Counsel.

The Trustee may employ such agents, counsel, consultants, or service companies as it deems necessary and may pay their reasonable expenses and compensation. The Trustee will not be liable for any action taken or omitted by the Trustee in good faith pursuant to the advice of such agents and counsel. Any agent, counsel, consultant, service company and/or its successors will exercise no discretionary authority over investments or the disposition of Trust assets, and their services and duties will be ministerial only and will be to provide the Plan with those things required by law or by the terms of the Plan without in any way exercising any fiduciary authority or responsibility under the Plan.

- 48 - -

9.9   Division of Duties and Indemnification.

The division of duties and the indemnification of the Trustees of this Plan will be governed by the following provisions:

(a)   No Guarantee Against Loss. The Trustees will have the authority and discretion to manage and control the Trust Fund to the extent provided in this instrument, but they do not guarantee the Trust Fund in any manner against investment loss or depreciation in asset value, or guarantee the adequacy of the Fund to meet and discharge all or any liabilities of the Plan. Furthermore, the Trustees will not be liable for the making, retention or sale of any investment or reinvestment made by it, as herein provided, or for any loss to or diminution of the Trust Fund, or for any other loss or damage which may result from the discharge of its duties hereunder, except to the extent it is judicially determined that the Trustees have failed to exercise the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and like aims.

(b)   Representations of the Sponsoring Employer. The Sponsoring Employer warrants that all directions issued to the Trustees by it or the Plan Administrator will be in accordance with the terms of the Plan.

(c)   Directions by Others. The Trustees are not answerable for an action taken pursuant to any direction, consent, certificate, or other paper or document on the belief that the same is genuine and signed by the proper person. All directions by the Sponsoring Employer, a Participant or Administrator must be in writing. The Administrator will deliver to the Trustee (1) certificates evidencing the individual or individuals authorized to act as the Administrator and (2) specimens of their signatures.

(d)   Duties and Obligations Limited by the Plan. The duties and obligations of the Trustee are limited to those expressly imposed upon it by the Plan or subsequently agreed upon by the parties. Responsibility for administrative duties required under the Plan or applicable law not expressly imposed upon or agreed to by the Trustee, will rest solely with the Sponsoring Employer and Administrator.

(e)   Indemnification of the Trustees. The Trustees will be indemnified and saved harmless from and against any and all liability to which the Trustees may be subjected, including all expenses reasonably incurred in its defense, for any action or failure to act resulting from compliance with the instructions of the Sponsoring Employer, the employees or agents of the Sponsoring Employer, the Plan Administrator, or any other fiduciary to the Plan, and for any liability arising from the actions or non-actions of any predecessor Trustees or other fiduciary of the Plan.

(f)   Trustees Not Responsible for Application of Payments. The Trustees will not be responsible in any way for the application of any payments it is directed to make or for the adequacy of the Fund to meet and discharge any and all liabilities under the Plan.

(g)   Multiple Trustees. If more than one Trustee is appointed, any single Trustee may act independently in undertaking any act and/or transaction on behalf of the Trustees, including signing documents or checks, unless the Sponsoring Employer requires that all acts and/or transactions taken on behalf of the Trust, including signing documents or checks, must have the consent of a majority of the Trustees. The Sponsoring Employer may from time to time also place other restrictions on the Trustees.

(h)   Trustees as Participants or Beneficiaries. Trustees will not be prevented from receiving any benefits to which they may be entitled as Participants or Beneficiaries as long as the benefits are computed and paid on a basis consistent with the terms of the Plan as applied to other Participants and Beneficiaries.

(i)   Limitation of Liability. No Trustee will be liable for the act of any other Trustee or fiduciary unless the Trustee has knowledge of such act.

- 49 - -

(j)   No Self-Dealing. The Trustees will not (1) deal with the assets of the Trust in their own interest or for their own account; (2) in their individual or in any other capacity, act in any transaction involving the Trust on behalf of a party (or represent a party) whose interests are adverse to the interests of the Plan, or its Participants or Beneficiaries; or (3) receive any consideration for their own personal accounts from any party dealing with the Plan in connection with a transaction involving assets of the Trust.

9.10   Investment Manager.

The Trustee is not liable for acts or omissions of an Investment Manager appointed by the Administrator under Section 8.11, and the Trustee is not liable for following the advice of an Investment Manager with respect to any duties delegated by the Administrator to the Investment Manager.

9.11   Exclusive Benefit Rule.

All contributions made by the Employer to the Trust Fund will be used for the exclusive benefit of the Participants and their Beneficiaries and will not be used for nor diverted to any other purpose except the payment of the costs of maintaining the Plan.

9.12   Voting Company Stock.

The Trustee will vote all Company Stock held by it at such time and in such manner as the Trustee decides, subject to the following provisions:

(a)   Company Stock Pledged As Security. If any agreement entered into by the Trustee provides for voting of any Company Stock pledged as security for any obligation of the Plan, such Company Stock will be voted in accordance with such agreement.

(b)   Registration-Type Stock. Notwithstanding paragraph (a), each Participant may direct the Trustee as to the manner in which Company Stock allocated to his or her Company Stock Account is to be voted provided such Company Stock is a registration-type class of security (as defined in section 12 of the Securities Exchange Act of 1934).

(c)   Non-Registration-Type Stock. With respect to Company Stock that is not a registration-type class of security, each Participant may direct the Trustee as to the manner in which Company Stock which is allocated to his or her Company Stock Account is to be voted on any corporate matter which involves the voting of such stock with respect to the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such similar transaction as may be prescribed in Treasury regulations.

(d)   Failure of Participant to Give Directions. If a Participant has the right to direct the Trustee as to the manner in which Company Stock allocated to his Company Stock Account is to be voted and such Participant fails or refuses to give the Trustee timely instructions (or such instructions are invalidated for any reason) as to how to vote any Company Stock as to which the Trustee otherwise has the right to vote, the Trustee may not exercise its power to vote such Company Stock.

9.13   Application of Cash.

Employer contributions made to the Plan in cash and other cash received by the Trustee will first be applied to pay Current Obligations.

9.14   Restrictions on Company Stock Transactions.

The Plan may not obligate itself to acquire Company Stock from a particular holder thereof at an indefinite time determined upon the happening of an event such as the death of the holder. Furthermore, the Plan may not obligate itself to acquire Company Stock under a put option binding upon the Plan. However, the Plan may be given an option to assume, at the time a put option is exercised, the rights and obligations of the Employer under a put option binding upon the Employer. In addition, all purchases of Company Stock will be made at a price which, in the judgment of the Administrator, does not exceed the fair market value thereof. All sales of Company Stock will be made at a price which, in the judgment of the Admin­istrator, is not less than the fair market value thereof.

9.15   Exempt Loans.

All loans to the Plan made or guaranteed by a disqualified person must satisfy all requirements applicable to Exempt Loans set forth in regulation §54.4975-7(b)(4) to §54.4975-7(b)(7),  regulation §54.4975-7(b)(13), and Department of Labor regulation §2550.408b-3, and all provisions of those regulations applicable to Company Stock purchased with the proceeds of an Exempt Loan or which is used as collateral for an Exempt Loan must be complied with, including, but not limited to, the following provisions:

- 50 - -

(a)   Definition of "Disqualified Person." For purposes of this Section, a "disqualified person" is any person who is a disqualified person or party in interest under ERISA.

(b)   Types of Loans and Guarantees. A loan for purposes of this Section includes a direct loan of cash, a purchase-money transaction, or an assumption of the obligation of the Trust. A guarantee for purposes of this Section includes an unsecured guarantee and the use of assets of a disqualified person as collateral for a loan, even though the use of assets may not be a guarantee under applicable state law.

(c)   Interest Rate. An Exempt Loan must provide for a reasonable rate of interest. However, the interest rate and the price of the Company Stock purchased with the proceeds of an Exempt Loan must not be such that Plan assets can be drained off.

(d)   Loan Must Primarily Benefit Participants and Beneficiaries. An Exempt Loan must primarily be for the benefit of Plan Participants and their Beneficiaries.

(e)   Use of Proceeds. The proceeds of an Exempt Loan must be used within a reasonable time to acquire Company Stock, to repay the Exempt Loan, or to repay prior Exempt Loans. The proceeds of a new loan used to repay a prior Exempt Loan must also satisfy the other requirements of this Section.

(f)   Put Option. No Company Stock acquired with the proceeds of an Exempt Loan may be subject to a put, call or other option, or a buy-sell or other arrangement while held by, or when distributed, from the Plan, whether or not the Plan has continued to operate as an employee stock ownership plan.

(g)   Liability of Plan to Loan Payee. No person who is entitled to payment under an Exempt Loan will have any right to (1) the assets of the Plan, other than to the collateral given for the Exempt Loan; (2) any contributions, other than contributions of Company Stock, made to the Plan to repay the Exempt Loan; and (3) earnings attributable to such collateral and the investment of such contributions.

(h)   Maximum Annual Repayment. Payments made during the Plan Year with respect to an Exempt Loan cannot exceed an amount equal to the sum of the contributions and earnings received during or prior to the Plan Year, less such payments made in prior Plan Years. In addition, such contributions and earnings must be accounted for separately until such time as the Exempt Loan is repaid in full.

(i)   Default. In the event of a default on an Exempt Loan, the value of Plan assets transferred in satisfaction of the loan cannot exceed the amount of default. If a lender is a "disqualified person," an Exempt Loan must provide for a transfer of Plan assets upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the loan. For purposes hereof, the making of a guarantee does not make a person a lender.

9.16   Diversification Rights of Qualified Participants.

Notwithstanding any provision in the Plan to the contrary, a Qualified Participant will be permitted to direct the Trustee as to the investment of amounts credited to his or her Company Stock Account in accordance with the following provisions:

(a)   Definitions. For purposes of this Section, the term Qualified Election Period means the six-Plan Year period beginning with the Plan Year in which the Participant first becomes a Qualified Participant (or the first Plan Year beginning after December 31, 1986); and the term Qualified Participant means a Participant who has attained Age 55 and who has been a Participant in the Plan for at least ten years.

(b)   Method of Direction. The Participant's direction will be provided to the Administrator in writing, and will be effective no later than 180 days after the close of the Plan Year to which the direction applies.

(c)   Determining the Amount Subject to Diversification. A Qualified Participant may elect within 90 days after the close of each Plan Year in the Qualified Election Period to direct the Trustee as to the investment of 25% of the balance in his or her Company Stock Account attributable to Company Stock

- 51 - -

acquired by the Plan after December 31, 1986 (to the extent such portion exceeds the amount to which a prior election under this paragraph applies). Within 90 days after the close of the last Plan Year in a Participant's Qualified Election Period, a Qualified Participant may direct the investment of 50% of the balance in his or her Company Stock Account attributable to Company Stock acquired by the Plan after December 31, 1986 (to the extent such portion exceeds the amount to which a prior election under this paragraph applies). The portion of a Participant's Company Stock Account which is attributable to Company Stock acquired by the Plan after December 31, 1986 will be determined by multiplying the number of shares of such stock held in the Participant's Account by a fraction, the numerator of which is the number of such shares acquired after December 31, 1986 and allocated to Participants' Company Stock Accounts (not to exceed the number of shares held by the Plan on the date of distribution) and the denominator of which is the total number of such shares of Company Stock held by the Plan on the date the individual becomes a Qualified Participant. Company Stock not readily tradable must be valued by an independent appraiser before diversification. Any such independent appraiser must meet the requirements prescribed under Code §170(a)(1).

(d)   Exception For Small Accounts. Notwithstanding paragraph (b), if the fair market value of a Qualified Participant's Company Stock Account is $500 or less on the Valuation Date immediately preceding the first day the Qualified Election Period, then such Company Stock Account will not be subject to the diversification rights under this Section. In determining if the fair market value exceeds $500, Company Stock held in all employee stock ownership plans and tax credit employee stock ownership plans maintained by the Employer or any Affiliated Employer will be considered as held by the Plan.

(e)   Investment Options. Subject to a written policy adopted the Administrator, the portion of a Qualified Participant's Company Stock Account covered by the diversification election in this Section will either (1) be distributed to the Qualified Participant within 90 days after the last day of the period in which the election can be made, but the entire such distribution, if it is in excess of $5,000, will be subject to the consent requirements under Section 5.8; (2) be transferred no later than 90 days after the last day of the period in which the election can be made to another qualified defined contribution plan of the Employer that accepts such transfers, provided such plan permits Employee-directed investments in at least three distinct investment options and does not invest in Company Stock to a substantial degree; or (3) be invested, at the election of the Qualified Participant, in one or more alternative investments, provided that if the Administrator elects to offer this option as part of the written policy adopted hereunder, the Plan must provide at least three distinct investment options.

9.17   Superseding Trust or Custodial Agreement.

If any Trust assets are invested in a separate trust or custodial account maintained by a Trustee or custodian, the provisions of the separate trust or custodial agreement will supersede all provisions of this Article with respect such assets except, in the absence of a specific provision in such separate trust or custodial agreement regarding the valuation of securities held by the Trust, Section 9.3. If such separate trust or custodial account should for any reason fail, be found invalid or terminate prior to the termination of this Plan and the distribution of all the assets hereof, this Article 10 will be deemed to have again become effective immediately prior to such failure, invalidity or termination.

- 52 - -

                                         Article 10                      

Adopting Employer Provisions

10.1   Plan Contributions.

Unless otherwise agreed to by the parties, or unless otherwise required by law, no Employer will have any obligation to make contributions to this Plan for or on behalf of the Employees of any other Employer. If an Employee is employed by more than one Employer, any contributions made on his or her behalf will be prorated between those Employers on the basis of Compensation received from each Employer. If any Employer is unable to make a contribution for any Plan Year, any Employer which is an Affiliated Employer of such Employer may make an additional contribution to the Plan on behalf of any Employee of the non-contributing Employer.

10.2   Plan Amendments.

Any amendment to this Plan that is adopted by the Sponsoring Employer, at any time, will be deemed to be accepted by any Adopting Employer.

10.3   Plan Expenses.

Any expenses paid from the Trust will be charged to each Adopting Employer in the ratio that each Adopting Employer's Participants' Accounts bears to the total of all the Participants' Accounts maintained by this Plan, or in any other reasonable method elected by the Administrator.

10.4   Employee Transfers.

An Employee's transfer to or from an Employer or Adopting Employer will not affect his or her Participant's Account balance and total Years of Service or Periods of Service.

10.5   Multiple Employer Provisions Under Code §413(c).

Notwithstanding any other provision in the Plan, unless the Plan is a collectively bargained plan under Regulation §1.413-1(a), the following provisions apply to any Adopting Employer that is not also an Affiliated Employer:

(a)   Instances of Separate Employer Testing. Employees of any such Adopting Employer will be treated separately for testing under Code §401(a)(4), §401(k), §401(m) and, if the Sponsoring Employer and the Adopting Employer do not share Employees, Code §416. Furthermore, the terms of Code §410(b) will be applied separately on an employer-by-employer basis by the Sponsoring Employer(and the Adopting Employers which are part of the Affiliated Group which includes the Sponsoring Employer) and each Adopting Employer that is not an Affiliated Employer of the Sponsoring Employer, taking into account the generally applicable rules described in Code §401(a)(5), §414(b) and §414(c).

(b)   Instances of Single Employer Testing. Employees of the Adopting Employer will be treated as part of a single Employer plan for purposes of eligibility to participate under Article 2 and under the provisions of Code §410(a). Furthermore, the terms of Code §411 relating to Vesting will be applied as if all Employees of all such Adopting Employers and the Sponsoring Employer were employed by a single Employer, except that the rules regarding Breaks in Service will be applied under such Regulations as may be prescribed by the Secretary of Labor.

(c)   Common Trust. Contributions made by any such Adopting Employer will be held in a common Trust Fund with contributions made by the Sponsoring Employer, and all such contributions will be available to pay the benefits of any Participant (or Beneficiary thereof) who is an Employee of the Sponsoring Employer or any such Adopting Employer.

(d)   Common Disqualification Provision. The failure of either the Sponsoring Employer or any such Adopting Employer to satisfy the qualification requirements under the provisions of Code §401(a), as modified by the provisions of Code §413(c), will result in the disqualification of the Plan for all such Employers maintaining the Plan.

10.6   Termination of Adoption.

An Adopting Employer may terminate participation in the Plan by delivering written notice to the Sponsoring Employer, to the Administrator and to the Trustee (but in accordance with Article 11, only the Sponsoring Employer can terminate the Plan). Upon any such termination of adoption by an Adopting Employer, the Adopting Employer may request a transfer of Trust Fund assets attributable to its Employees from this Plan to any successor qualified retirement plan maintained by the Adopting Employer or its successor. If such request is not made, or if the Administrator refuses to make the transfer because in its

- 53 - -

considered opinion such transfer would operate to the detriment of any Participant, jeopardize the continued qualification of the Plan, or not comply with any requirements of the Internal Revenue Service, Participants who are no longer Employees because an Adopting Employer terminates its Plan participation will only be entitled to the commencement of their benefits in accordance with Section 10.7 below.

10.7   Payment of Benefits Upon Termination of Adoption.

If Plan assets attributable to a terminated Adopting Employer are not transferred to another qualified retirement plan for any of the reasons described in Section 10.6, Participants who are no longer Employees because of such termination of adoption will only be entitled to the commencement of their benefits as follows: (1) in the case of Participants who are no longer Employees and the terminated Adopting Employer is an Affiliated Employer of the Sponsoring Employer, in accordance with Article 5 after their retirement, death, Disability or other termination of employment from the Adopting Employer or former Adopting Employer; and (2) in the case of Participants who are no longer Employees and the terminated Adopting Employer is not an Affiliated Employer of the Sponsoring Employer, within a reasonable time thereafter as if the Plan had been terminated under Section 11.2.

- 54 - -

                                   Article 11                      

Amendment, Termination, Merger and Transfers

11.1   Plan Amendment.

The Plan can be amended at any time in accordance with the following provisions:

(a)   Manner of Amendment. Any amendments can be made by either (1) substituting pages with the new elections (or new addendum) and executing an "Amendment By Page Substitution" and attaching it as part of the Plan; (2) by executing an "Amendment By Section Replication" in which the section or sections (or addendum or addendums) to be changed are reproduced with the new elections indicated, and attaching it as part of the Plan; or (3) by executing a properly worded corporate resolution and attaching it as part of the Plan.

(b)   General Requirements. An amendment must be in writing. However, no amendment or modification (1) can increase the responsibilities of the Trustee or Administrator without their written consent; (2) can deprive any Participant or Beneficiary of the benefits to which he is entitled from the Plan; (3) can result in a decrease in the amount of any Participant's Account except as may be permitted under the terms of Code §412(c)(8) if applicable; or (4) can, except as otherwise provided, permit any part of the Trust Fund (other than as required to pay taxes and administration expenses) to be used for or diverted to purposes other than the exclusive benefit of the Participants or their Beneficiaries, or cause or permit any portion of the Trust Fund to revert to or become the property of the Employer. In addition, unless the provisions of paragraph (c) below are satisfied, no amendment to the Plan will have the effect of eliminating or restricting the ability of a Participant or other payee to receive payment of his or her Account balance or benefit entitlement under a particular optional form of benefit provided under the Plan. Any amendment to the Plan by the Sponsoring Employer under this Section also applies to any Affiliated Employer that participates under the Plan as an Adopting Employer. The Sponsoring Employer's amendment of the Plan from one type of defined contribution plan (e.g., a money purchase plan) into another type of defined contribution plan (e.g., a profit sharing plan) will not result in a partial termination or any other event that would require full vesting of some or all Plan Participants.

(c)   Elimination of Optional Forms of Benefit. No Plan amendment will be effective to eliminate or restrict an optional form of benefit. However, the preceding sentence will not apply to a Plan amendment that eliminates or restricts the ability of a Participant to receive payment of the Participant's Account under a particular optional form of benefit (including annuities and installments) if the amendment provides a single-sum distribution form that is otherwise identical to the optional form of benefit being eliminated or restricted. For this purpose, a single-sum distribution form is otherwise identical only if the single-sum distribution form is identical in all respects to the eliminated or restricted optional form of benefit (or would be identical except that it provides greater rights to the Participant) except with respect to the timing of payments after commencement.

(d)   Certain Corrective Amendments. In order to satisfy the minimum coverage requirements of Code §410(b), the nondiscriminatory amount requirement of Regulation §1.401(a)(4)-1(b)(2) or the nondiscriminatory plan amendment requirement of Regulation §1.401(a)(4)-1(b)(4), a corrective amendment or change of the choice of options in the Plan may retroactively increase allocations for Employees who benefited under the Plan during the Plan Year being corrected, or may grant allocations to Employees who did not benefit under the Plan during the Plan Year being corrected. To satisfy the nondiscriminatory current availability requirement of Regulation §1.401(a)(4)-4(b) for benefits, rights or features, a corrective amendment or change of the choice of options in Plan may make a benefit, right or feature available to Employees to whom it was previously not available. A corrective amendment or change of the choice of options in the Plan will not be effective prior to the date of adoption unless it satisfies the applicable requirements of Regulation §1.401(a)(4)-11(g)(3)(ii) through (vii), including the requirement that, in order to be effective for the preceding Plan Year, such amendment or change of the choice of options in the Plan must be adopted by the 15th day of the 10th month after the close of the preceding Plan Year.

- 55 - -

11.2   Termination By Sponsoring Employer.

The Sponsoring Employer at any time can terminate the Plan and Trust in whole or in part in accordance with the following provisions:

(a)   Termination of Plan. The Sponsoring Employer can terminate the Plan and Trust by filing written notice thereof with the Administrator and Trustee and by completely discontinuing contributions to the Plan. Upon any such termination, the Trust Fund will continue to be administered until complete distribution has been made to the Participants and other payees, which distribution must occur as soon as administratively feasible after the termination of the Plan, and must be made in accordance with the provisions of Article 5 of the Plan. However, the Administrator may elect not to distribute the Accounts of Participants and other payees upon termination of the Plan but instead to transfer the entire Trust Fund assets and liabilities attributable to this terminated Plan to another qualified plan maintained by the Employer or its successor.

(b)   Vesting Requirement Upon Plan Termination. Upon a complete discontinuance of contributions under the Plan, then (1) any Participant who is affected by such complete termination or, if applicable, such complete discontinuance of contributions; (2) any Participant who has not terminated employment with the Employer; (3) any Participant who has terminated employment with the Employer and has not received a complete distribution of the Participant's Vested Aggregate Account balance; and (4) any Participant who has terminated employment but has not incurred five consecutive Breaks in Service, will have a 100% Vested Interest in his or her unpaid Participant's Account.

(c)   Vesting Requirement Upon Partial Termination. Upon a partial termination of the Plan, only a Participant whose employment has been terminated because of the event which causes the partial termination but who has not incurred five consecutive Breaks in Service will have a 100% Vested Interest in his or her unpaid Participant's Account as of the date of partial termination.

(d)   Discontinuance of Contributions. The Sponsoring Employer may at any time completely discontinue contributions to the Plan but continue the Plan in operation in all other respects, in which event the Trust will continue to be administered until eventual distribution of all benefits has been made to the Participants and other payees in accordance with Article 5 after their death, retirement, Disability or other termination of employment. Any discontinuance of contributions without a notice of termination from the Sponsoring Employer to the Administrator and Trustee will not constitute a Plan termination.

11.3   Merger or Consolidation.

This Plan and Trust may not be merged or consolidated with, nor may any of its assets or liabilities be transferred to, any other plan, unless the benefits payable to each Participant if the Plan was terminated immediately after such action would be equal to or greater than the benefits to which such Participant would have been entitled if this Plan had been terminated immediately before such action. If the Employer acquires another company in a "Section 410(b)(6)(c) transaction, employees of the acquired company may be excluded from this Plan regardless of the provisions of Section 2.1 of the Plan during the period beginning on the date of the transaction and ending on the last day of the Plan Year beginning after the date of the Transaction. A Section 410(b)(6)(c) transaction is an asset or stock acquisition, merger, or similar transaction involving a change in the employer of the employees of a business.

- 56 - -

                                         Article 12                      

Miscellaneous Provisions

12.1   No Contract of Employment.

Except as otherwise provided by law, neither the establishment of this Plan, any modification hereto, the creation of any fund or account, nor the payment of any benefits, will be construed as giving any Participant or other person any legal or equitable rights against the Employer, any officer or Employee thereof, or the Trustee, except as herein provided. Further, under no circumstances will the terms of employment of any Participant be modified or otherwise affected by this Plan.

12.2   Title to Assets.

No Participant or Beneficiary will have any right to, or any interest in, any assets of the Trust upon separation from service with the Employer, Affiliated Employer, or Adopting Employer, except as otherwise provided by the terms of the Plan.

12.3   Qualified Military Service.

Notwithstanding any other provision of the Plan, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code §414(u).

12.4   Fiduciaries and Bonding.

Plan Fiduciaries will have only those powers and duties specifically given to them under the terms of the Plan. Each fiduciary other than a bank, an insurance company, or a fiduciary of an Employer which has no common-law employees, will be bonded in an amount not less than 10% of the amount of funds under such fiduciary's supervision, but the bond will not be less than $1,000 or more than $500,000 (or any other amount as required by law). The bond will provide protection to the Plan against any loss for acts of fraud or dishonesty by a fiduciary acting alone or in concert with others. The cost of such bond will be an expense of either the Employer or the Trust, at the election of the Sponsoring Employer. Effective as of the first day of the first plan year beginning after August 17, 2006, each fiduciary who is required to be bonded and any entity that has not registered as a broker or a dealer under §15(b) of the Securities Exchange Act of 1934 and that is not subject to the fidelity bond requirements of a self-regulatory organization as defined in ERISA §412(a) as amended by PPA will secure a bond equal to 10% of the Plan's assets under such fiduciary's direct or indirect control (but not less than $1,000 or more than $500,000).

12.5   Severability of Provisions.

If any Plan provision is held invalid or unenforceable, such invalidity or unenforceability will not affect any other provision of this Plan, and this Plan will be construed and enforced as if such provision had not been included.

12.6   Interpretation of the Plan.

The following provisions apply to the interpretation of the Plan and Trust:

(a)   Names. Names that are used in this Plan should be used consistently in any appendixes, policies, procedures, and/or any other documents which are legally binding upon the Plan. However, in documents that are not considered to be part of this Plan, appendixes, policies or procedures that are not legally binding upon the Plan; and that may be are distributed to individuals (such as the SPDs, SMMs, notices, and election forms), names may use plain English terms.

(b)   Gender. Words that are used in the masculine gender may be construed as though they are also used in the feminine or neuter gender, where applicable (and vice versa).

(c)   Number. Words that are used in the singular form may be construed as though they are also used in the plural form, where applicable (and vice versa).

(d)   Headings and Subheadings. Headings and subheadings are inserted for convenience of reference. Headings and subheadings constitute no part of this Plan and/or Trust and are not to be considered in its construction or interpretation.

(e)   Single Subparagraphs. This Plan may have Sections and/or paragraphs that contain a single subparagraph; such document construction will not constitute a Scrivener's error.

- 57 - -

(f)   Effective Dates. This Plan contains various effective dates, which include, but are not limited to: (1) the effective date of the Plan and, if applicable, the effective date of the amended and restated Plan; and (2) the effective dates of legally required or permitted provisions.

(g)   Application of Law. This Plan will be construed and interpreted in accordance with the Code and ERISA. However, if the Plan needs to be construed and interpreted according to a State's or Commonwealth's laws (to the extent that such laws are not preempted by the provisions of the Code and ERISA), then this Plan will be construed and interpreted according to the laws of the State or Commonwealth in which the Sponsoring Employer maintains its principal place of business.

12.7   Legal Action.

Unless otherwise prohibited by law, either the Sponsoring Employer or the Trust, in the sole discretion of the Sponsoring Employer, will reimburse the Trustee and/or the Administrator for all costs, attorneys fees and other expenses associated with any such claim, suit or proceeding.

12.8   Qualified Plan Status.

This Plan and Trust are intended to be a qualified retirement plan under the provisions of Code §401(a) and §501(a).

12.9   Mailing of Notices to Administrator, Employer or Trustee.

Notices, documents or forms required to be given to or filed with the Administrator, Employer or Committee will be either hand delivered or mailed by first class mail, postage prepaid, to the Committee or the Employer, at the Employer's principal place of business. Any notices, documents or forms required to be given to or filed with the Trustee will be either be hand delivered or mailed by first class mail, postage prepaid, to the Trustee at its principal place of business.

12.10   Participant Notices and Waivers of Notices.

Whenever written notice is required to be given under the terms of this Plan, it will be deemed to be given on the date such written notice is either hand delivered to the recipient or deposited at a United States Postal Service Station, first class mail, postage paid. Notice may be waived by any party entitled to receive written notice concerning any matter under the terms of this Plan.

12.11   No Duplication of Benefits.

There will be no duplication of benefits under the Plan because of employment by more than one participating Employer.

12.12   Evidence Furnished Conclusive.

Anyone required to give evidence under the terms of the Plan may do so by certificate, affidavit, document or other information that the person to act in reliance may consider pertinent, reliable and genuine, and to have been signed, made or presented by the proper party or parties. The Plan Fiduciaries will be fully protected in acting and relying upon any evidence described under this Section.

12.13   Release of Claims.

A payment to a Participant or Beneficiary, his or her legal representative, or to a guardian or committee appointed for such Participant or Beneficiary, will, to the extent thereof, be in full satisfaction of all claims hereunder against the Administrator and Trustee, either of whom may require such Participant, legal representative, Beneficiary, guardian or committee, as a condition precedent to such payment, to execute a receipt and release thereof in such form as determined by the Administrator or Trustee.

12.14   Multiple Copies of Plan And/or Trust.

This Plan, the related Trust Agreement and the related may be executed in any number of counterparts, each of which will be deemed an original, but all of which will constitute one and the same Agreement or Trust Agreement, as the case may be, and will be binding on the respective successors and assigns of the Employer and all other parties.

12.15   Limitation of Liability and Indemnification.

In addition to and in furtherance of any other limitations provided in the Plan, and to the extent permitted by applicable law, the Employer will indemnify and hold harmless its board of directors (collectively and individually), if any, the Administrative/Advisory Committee (collectively and individually), if any, and its officers, Employees, and agents against and with respect to any and all expenses, losses, liabilities, costs, and claims, including legal fees to defend against such liabilities and claims, arising out of their good-faith discharge of responsibilities under or incident to the Plan, excepting only expenses and liabilities resulting from willful misconduct. This indemnity will not preclude such further indemnities as may be available under insurance purchased by the Employer or as may be provided by the Employer under any by-law, agreement, vote of shareholders or disinterested directors, or

- 58 - -

otherwise, as such indemnities are permitted under state law. Payments with respect to any indemnity and payment of expenses or fees under this Section will be made only from assets of the Employer, and will not be made directly or indirectly from assets of the Trust.

12.16   Written Elections and Forms.

Whenever the word "written" or the words "in writing" are used, such words will include any method of communication permitted by the DOL with respect to such documentation. In a similar manner, the word "form" will include any other method of election permitted under current law. Such alternative methods will include, but not be limited to, electronic modes to the extent permitted by law.

12.17   Assignment and Alienation of Benefits.

Except as may otherwise be permitted under Code §401(a)(13)(C), or as may otherwise be permitted under a Qualified Domestic Relations Order as provided in Section 8.10, or as may otherwise be permitted under Section 7.1 relating to loans to Participants, no right or claim to, or interest in, any part of the Trust Fund, or any payment therefrom, will be assignable, transferable, or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution, or levy of any kind, and the Trustees will not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute, or anticipate the same, except to the extent required by law.

12.18   Exclusive Benefit Rule.

All contributions made by the Employer or an Affiliated Employer to the Trust Fund will be used for the exclusive benefit of the Participants who are Employees of the Employer or Affiliated Employer and for their Beneficiaries and will not be used for nor diverted to any other purpose except the payment of the costs of maintaining the Plan. All contributions made by an Adopting Employer who is not an Affiliated Employer will be used for the exclusive benefit of the Participants who are Employees of the Adopting Employer and for their Beneficiaries and will not be used for nor diverted to any other purpose except the payment of the Adopting Employers' proportionate costs of maintaining the Plan.

12.19   Dual and Multiple Trusts.

Plan assets are may be held in two or more separate trusts, or in trust and by an insurance company or by a trust and under a custodial agreement. Assets may also be held in a common trust.

- 59 - -

This Plan and Trust have been executed by the Sponsoring Employer and the Trustees as of the day, month and year set forth on page 1 of this Agreement.

     Capitol Bancorp Ltd.

             By         /s/ Cristin K. Reid                                                                                       

     Name:    Cristin K. Reid

     Title:      Corporate President

     Trustees

/s/ Cristin K. Reid                                                                                           

     Cristin K. Reid

/s/ David O’Leary                                                                                          

     David O'Leary

/s/ Bruce A. Thomas                     

     Bruce A. Thomas

- 60 - -

Appendix A

Adopting Employers

Name	Type of Entity	State of Organization	Date of Participation
Grand Haven Bank	Banking Corporation	Michigan	January 1, 1994
Paragon Bank & Trust	Banking Corporation	Michigan	January 1, 1996
Ann Arbor Commerce Bank	Banking Corporation	Michigan	January 1, 1997
Capitol National Bank	Banking Corporation	Michigan	January 1, 1997
Macomb Community Bank	Banking Corporation	Michigan	January 1, 1997
Oakland Commerce Bank	Banking Corporation	Michigan	January 1, 1997
Portage Commerce Bank	Banking Corporation	Michigan	January 1, 1997
Brighton Commerce Bank	Banking Corporation	Michigan	January 8, 1997
Kent Commerce Bank	Banking Corporation	Michigan	July 1, 1998
Muskegon Community Bank	Banking Corporation	Michigan	July 1, 1998
Detroit Commerce Bank	Banking Corporation	Michigan	January 1, 1999
Elkhart Community Bank	Banking Corporation	Indiana	January 1, 2000
Arrowhead Community Bank	Banking Corporation	Arizona	July 1, 2002
Bank of Tucson	Banking Corporation	Arizona	July 1, 2002
Camelback Community Bank	Banking Corporation	Arizona	July 1, 2002
East Valley Community Bank	Banking Corporation	Arizona	July 1, 2002
Mesa Bank	Banking Corporation	Arizona	July 1, 2002
Southern Arizona Community Bank	Banking Corporation	Arizona	July 1, 2002
Valley First Community Bank	Banking Corporation	Arizona	July 1, 2002
Sunrise Bank of Albuquerque	Banking Corporation	New Mexico	January 1, 2003
Sunrise Bank of Arizona	Banking Corporation	Arizona	January 1, 2003
Black Mountain Community Bank	Banking Corporation	Nevada	January 1, 2004
Desert Community Bank	Banking Corporation	Nevada	January 1, 2004
Goshen Community Bank	Banking Corporation	Indiana	January 1, 2004
Red Rock Community Bank	Banking Corporation	Nevada	January 1, 2004
Yuma Community Bank	Banking Corporation	Arizona	January 1, 2004
First Carolina State Bank	Banking Corporation	North Carolina	July 1, 2004
Sunrise Bank of San Diego	Banking Corporation	California	July 1, 2004
Napa Community Bank	Banking Corporation	California	July 1, 2005
Bank of Las Vegas	Banking Corporation	Nevada	January 1, 2006
Capitol Wealth, Inc.	Corporation	Michigan	January 1, 2006
Bank of Escondido	Banking Corporation	California	January 1, 2007
Peoples State Bank	Banking Corporation	Georgia	January 1, 2007

Amendment No. 1 to

Capitol Bancorp Limited

Amended and Restated

Employee Stock Ownership Plan

Effective January 1, 2008

Comprehensive Amendment for

The Regulations under Code §415 and Normal Retirement Age, the Heinz Decision, Etc.

Se    Section 1.General Information and General Provisions

  1.1 Plan Name:  Capitol Bancorp Ltd. Employee Stock Ownership Plan(the "Plan").

  1.2 Plan Sponsor:  Capitol Bancorp Ltd. (the "Sponsoring Employer").

    1.3   Enactment Date. This Amendment is entered into as of January 1, 2008, by the Sponsoring Employer.

    1.4   Supersedure. This Amendment supersedes any conflicting provisions of the Plan.

    1.5   Good Faith Compliance. This Amendment is intended as good faith compliance with the final Regulations under Code §415; the final Regulations relating to Normal Retirement Age under final Regulation §1.401(a)-1; the final Regulations relating to the methodology of an ESOP to determine the amount of S corporation stock held by a disqualified person for purposes of determining a nonallocation year; the Heinz Decision; the modification to the applicable mortality table and applicable interest rate under Code §417(e); and/or the elimination of gap period income on excess contributions and excess aggregate contributions that are permissive or are required for plan years beginning in 2007 and/or 2008, and/or Limitation Years beginning on or after July 1, 2007 (except as otherwise provided).

Se    Section 2.Code §415 Limitations

    2.1    o Not Applicable.The Plan terminated prior to the first day of the first Limitation Year beginning on or after July 1, 2007.

    2.2    x Effective Date.This Section is effective as of the first day of the first Limitation Year beginning on or after July 1, 2007 (except as otherwise provided).

    2.3   Maximum Annual Benefit.

 x Not Applicable.The Plan is not a defined benefit plan.  (Skip to Section 2.4)

In the case of a defined benefit plan, this Section applies regardless of whether any participant is or has ever been a participant in another qualified plan maintained by the Employer.

(a)   Maximum Benefit.The Annual Benefit otherwise payable to a participant at any time will not exceed the Maximum Permissible Amount. If the benefit the participant would otherwise accrue in a Limitation Year would produce an Annual Benefit in excess of the Maximum Permissible Amount, the rate of accrual will be reduced so that the Annual Benefit is equal to the Maximum Permissible Amount. The Maximum Permissible Amount for a participant who has not attained normal retirement age shall be applied to the actuarial equivalent of:

o Not Applicable.The Plan is not a defined benefit plan.

o Participant’s Accrued Benefit. The participant's accrued benefit otherwise payable under the Plan at normal retirement age (or current age, if later), based on the participant’s applicable completed years of benefit service to date.

o Participant’s Projected Benefit. The participant's Projected Annual Benefit to which the participant would be entitled at normal retirement age (or current age, if later).

  (b)   Treatment of Voluntary Employee Contributions, Mandatory Employee Contributions, and Rollover Contributions.If a participant makes voluntary employee contributions under the terms of this Plan, then the amount of such voluntary employee contributions are treated as Annual Additions to a qualified Defined Contribution Plan pursuant to Code §414(k) for purposes of Section 2.4 and are not taken into account in determining the Annual Benefit under the portion of the Plan that is a defined benefit Plan. Furthermore, if a

1

participant is required to make mandatory employee contributions as defined in Code §411(c)(2)(C) and Regulation §1.411(c)-1(c)(4) as a condition of employment, as a condition of participation in the Plan, or as a condition of obtaining benefits (or additional benefits) under the Plan attributable to employer contributions, then the Annual Benefit for Code §415(b) purposes does not include the Annual Benefit attributable to mandatory employee contributions. The Annual Benefit attributable to mandatory employee contributions is determined by applying the factors applicable to mandatory employee contributions as described in Code §411(c)(2)(B) and (C) and the Regulations promulgated thereunder to those mandatory employee contributions to determine the amount of a straight life annuity commencing at the annuity starting date, regardless of whether the requirements of Code §411 and §417 apply to the Plan. Lastly, if the Plan permits an employee to make rollover contributions (as described in Code §401(a)(31), §402(c)(1), §403(a)(4), §403(b)(8), §408(d)(3), and §457(e)(16)) to the Plan, then rollover contributions are not taken into account in determining the Annual Benefit for Code §415(b) purposes.

(c)   Treatment of Transfer Accrued Benefits.Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, the treatment of accrued benefits that are transferred to this Plan (and that do not constitute rollover contributions (as described in Code §401(a)(31), §402(c)(1), §403(a)(4), §403(b)(8), §408(d)(3)) is determined pursuant to the rules of Regulation 1.415(b)-1(b)(3).

(d)   Code §415 Limits Increased By EGTRRA.Notwithstanding anything in the Plan to the contrary, benefit increases resulting from the increase in the limitations of Code §415 pursuant to §611 of EGTRRA (including, but not limited to, the Defined Benefit Dollar Limitation, the Maximum Permissible Amount, and the age at which the actuarial equivalent of the Defined Benefit Dollar Limitation is actuarially reduced or increased) shall be provided to:

o Not Applicable.The Plan is not a defined plan.

o New Plan andAll Participants.The Plan’s Effective Date is after the first day of the first Limitation Year ending after December 31, 2001. The provisions of the paragraph apply to all participants.

o Existing Plan andParticipants with Accrued Benefits. All current participants and all former participants (with benefits limited by Code §415(b)) who have accrued benefits under the Plan immediately prior to the first day of the first Limitation Year ending after December 31, 2001 (other than an accrued benefit resulting from a benefit increase solely as a result of the increases in limitations under Code §415(b)).

o Existing Plan andParticipants with One Hour of Service. All employees participating in the Plan who have one hour of service on or after the first day of the first Limitation Year ending after December 31, 2001.

(e)   Multi-Employer Plan Not Aggregated With Non-Multi-Employer Plan.For Limitation Years beginning after December 31, 2001, a multi-Employer plan (as defined in Code §414(f)) in which the Employer participates shall not be combined or aggregated with a non-multi-Employer plan that is sponsored by the Employer for purposes of applying the Defined Benefit Compensation Limitation of Code §415(b)(1)(B) to the non-multi-Employer plan. If this Plan is a multi-Employer plan, then this Plan shall not be combined or aggregated with any other multi-Employer plan for purposes of apply the limitations of Code §415 and this Section. Furthermore, effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, if this Plan is a multi-Employer Plan, then only the benefits under this multi-Employer Plan that are provided by an Employer are aggregated with benefits under plans maintained by that Employer that are not multi-Employer plans.  Where the Employer maintains both a plan which is not a multi-Employer plan and a multi-Employer plan, only the benefits under the multi-Employer plan that are provided by the Employer are aggregated with benefits under the Employer’s plans other than multi-Employer plans (in lieu of including benefits provided by all employers under the multi-Employer plan pursuant to the Regulation §1.415(a)-1(e)).

(f)   Grandfather Rule for Preexisting Benefits. Notwithstanding anything in the Plan to the contrary, the Plan satisfies the limitations of this Section and Code §415(b) for a participant with respect to benefits accrued or payable under the Plan as of the last day of the Limitation Year that is immediately prior to the first day of the first Limitation Year beginning on or after July 1, 2007 pursuant to the Plan’s provisions (including Plan provisions relating to the Plan’s limitation year) that were both adopted and in effect before April 5, 2007, but only if such Plan provisions meet the applicable requirements of statutory provisions, Regulations, and other

2

published guidance relating to Code §415 in effect immediately before the first day of the first Limitation Year beginning on or after July 1, 2007. The rule of the preceding sentence applies even if the Plan had not been amended to reflect changes to Code §415(b) made by the Pension Funding Equity Act of 2004 and the Pension Protection Act of 2006. Furthermore, the rule of the first sentence applies even if Code §415(c)(3) Compensation for a Limitation Year that is used for purposes of applying the limitations of Code §415(b)(1)(B) reflects Code §415(c)(3) Compensation for a plan year that is in excess of the limitation under Code §401(a)(17) that applies to that plan year. If benefits under the Plan are accrued after the first day of the first Limitation Year beginning on or after July 1, 2007, then the sum of the benefits grandfathered under the first sentence of this paragraph and benefits accrued after the first day of the first Limitation Year beginning on or after July 1, 2007 must satisfy the requirements of Code §415, taking into account the requirements of Final Regulation §1.415(a)-1, §1.415(b)-1, §1.415(c)-1, §1.415(c)-2, §1.415(d)-1, §1.415(f)-1, §1.415(g)-1, and §1.415(j)-1.

(g)   Safe Harbor for Annual Adjustments to Distributions. Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, if an amendment to the Plan incorporates the adjustments to the Code §415(b) limits by increasing a distribution that has previously commenced, then the amendment complies with the provisions of Code §415(b) if:

(1) The employee has received one or more distributions that satisfy the requirements of Code §415(b) before the date the adjustment to the applicable limits is effective (as determined under Regulation §1.415(d)-1(a)(3));

(2) The increased distribution is solely as a result of the amendment of the Plan to reflect the adjustment to the applicable limits pursuant to Code §415(d); and

(3) The amounts payable to the employee on and after the effective date of the adjustment (as determined under Regulation §1.415(d)-1(a)(3)) are not greater than the amounts that would otherwise be payable without regard to the adjustment, multiplied by a fraction determined for the Limitation Year, the numerator of which is the limitation under Code §415(b) (which is the lesser of the Code §415(b)(1)(A) Defined Benefit Dollar Limitation, as adjusted for age at commencement, and the Code §415(b)(1)(B) Defined Benefit Compensation Limitation) in effect with respect to the distribution taking into account the Code §415(d) adjustment, and the denominator of which is the limitation under Code §415(b) in effect for the distribution immediately before the adjustment.

(h)   Safe Harbor for Periodic Adjustments to Distributions. Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, if an amendment to the Plan increases a distribution that has previously commenced, then the amendment complies with the provisions of Code §415(b) and is made using the safe harbor methodology if:

(1) The employee has received one or more distributions that satisfy the requirements of Code §415(b) before the date on which the increase is effective; and

(2) The amounts payable to the employee on and after the effective date of the increase are not greater than the amounts that would otherwise be payable without regard to the increase, multiplied by the Cumulative Adjustment Fraction. For purposes of this paragraph, the term “Cumulative Adjustment Fraction” means the product of all of the fractions described in paragraph (g)(3) above that would have applied after benefits commence if the Plan had been amended each year to incorporate the Code §415(d) adjustments to the applicable Code §415(b) limits and had otherwise satisfied the safe harbor methodology described in paragraph (g). For purposes of the preceding sentence, if for the Limitation Year for which the increase to the Code §415(b)(1)(A) Defined Benefit Dollar Limitation pursuant to EGTRRA §611(a)(1)(A) is first effective (generally, the first Limitation Year beginning after December 31, 2001) and the Code §415(b)(1)(A) Defined Benefit Dollar Limitation applicable to a participant is less than the Code §415(b)(1)(B) Defined Benefit Compensation Limitation for the participant, then the fraction described in paragraph (g)(3) above for that Limitation Year is 1.0.

3

2.4   Maximum Annual Addition.

o Not Applicable.The Plan is not a defined contribution plan, or is a defined benefit plan that does not permit mandatory or voluntary employee contributions. (Skip to Section 2.5)

In the case of a defined contribution plan, the maximum Annual Addition made to a participant's various accounts (including, if applicable, a voluntary employee contribution account and/or a mandatory employee contribution account) maintained under the Plan for any Limitation Year will not exceed the lesser of the Dollar Limitation set forth in Section 2.4(a) or the Compensation Limitation set forth in Section 2.4(b), as adjusted in the remainder of this Section, as follows:

(a)   Dollar Limitation. The Dollar Limitation is $40,000, as adjusted by the Treasury in accordance with Code §415(d).

(b)   Compensation Limitation.The Compensation Limitation is an amount equal to 100% of the participant's Code §415(c)(3) Compensation for the Limitation Year. However, this limitation will not apply to any contribution made for medical benefits within the meaning of Code §401(h) or Code §419A(f)(2) after separation from service which is otherwise treated as an Annual Addition under Code §415(l)(1) or Code §419A(d)(2).

(c)   Adjustments to Maximum Annual Addition.In applying the limitation on Annual Additions set forth herein, the following adjustments must be made:

(1) Short Limitation Year.In a Limitation Year of less than 12 months, the Defined Contribution Dollar Limitation in (a) will be adjusted by multiplying it by the ratio that the number of months in the short Limitation Year bears to 12.

(2) Plans with Different Limitation Years.If a participant participates in multiple Defined Contribution Plans sponsored by the Employer with different Limitation Years, the maximum Annual Addition in this Plan for the Limitation Year will be reduced by the Annual Addition credited to the participant's accounts in the other plans for such Limitation Year.

(3) Plans with the Same Limitation Year.If a participant participates in multiple Defined Contribution Plans sponsored by the Employer which have the same Limitation Year, then (A) if only one of the plans is subject to Code §412, Annual Additions will first be credited to the participant's accounts in the plan so subject; and (B) if none of the plans are subject to Code §412, the maximum Annual Addition in this Plan for a given Limitation Year will either (i) equal the product of the maximum Annual Addition for such Limitation Year minus any other Annual Additions previously credited to the participant's account, multiplied by the ratio that the Annual Additions which would be credited to a participant's accounts hereunder without regard to the limitations in Section 2.5 bears to the Annual Additions for all plans described in this paragraph, or (ii) be reduced by the Annual Additions credited to the participant's accounts in the other plans for such Limitation Year.

(4) Adjustment for Excessive Annual Additions.If for any Limitation Year the Annual Additions allocated to a participant's account exceeds the maximum Annual Addition permitted under this Section, then the Sponsoring Employer will follow the rules of any Employee Plans Compliance Resolution System (EPCRS) that is issued by the Internal Revenue Service.

2.5   Aggregation of Plans. Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, this Section aggregates plans for purposes of applying the provisions of this Section and the rules of Regulation §1.415(f)-1.

(a)   General Rule. Except as provided in this Section and Regulation §1.415(f)-1, for purposes of applying the limitations of this Section, Code §415(b), and Code §415(c) applicable to a participant for a particular Limitation Year:

(1) More Than One Defined Benefit Plan.All defined benefit plans (without regard to whether a plan has been terminated) ever maintained by the Employer (or a predecessor Employer) under which the participant has accrued a benefit are treated as one defined benefit plan and the sum of the participant's Annual Benefits from all such defined benefit plans may not exceed the Maximum Permissible Amount.

4

A participant's benefits in this Plan shall be limited to an amount whereby the participant's Employer-provided benefits under all defined benefit plans ever maintained by the Employer (determined as of the same age) do not exceed the Maximum Permissible Amount applicable at that age;

(2) More Than One Defined Contribution Plan. All Defined Contribution Plans (without regard to whether a plan has been terminated) ever maintained by the Employer (or a predecessor Employer) under which the participant receives Annual Additions are treated as one Defined Contribution Plan; and

(3) More Than One 403(b) Contract/Plan.All 403(b) annuity contracts purchased by an Employer (including plans purchased through salary reduction contributions) for the participant are treated as one 403(b) annuity contract.

(b)   Affiliated Employers and Leased Employees.All employees of all affiliated employers (a controlled group of corporations as defined in Code §414(b); a trade or business (regardless of whether incorporated) under common control under Code §414(c); any organization (regardless of whether incorporated) which is a member of an affiliated service group under Code §414(m); and any other entity required to be aggregated under Code §414(o)) are treated as employed by a single Employer for purposes of Code §415. Any defined benefit plan or Defined Contribution Plan maintained by any affiliated employer is deemed maintained by all affiliated employers. Furthermore, pursuant to Code §414(n), with respect to any recipient for whom a leased employee (within the meaning of Code §414(n)(2)) performs services, the leased employee is treated as an employee of the recipient, but contributions or benefits provided by the leasing organization that are attributable to services performed for the recipient are treated as provided under the plan maintained by the recipient. However, pursuant to Code §414(n)(5), the rule of the previous sentence does not apply to a leased employee with respect to services performed for a recipient if:

(1) Covered by Safe Harbor Plan.The leased employee is covered by a plan that is maintained by the leasing organization and that meets the requirements of Code §414(n)(5)(B); and

(2) Not More than 20% of Non-Highly Workforce.Leased employees do not constitute more than 20 percent of the recipient’s non-highly compensated workforce.

(c)   Formerly Affiliated Plan of an Employer.A Formerly Affiliated Plan of an Employer is taken into account for purposes of applying the aggregation rules of this Section to the Employer, but the Formerly Affiliated Plan of an Employer is treated as if it had terminated immediately prior to the cessation of affiliation with sufficient assets to pay benefit liabilities under the plan, and had purchased annuities to provide plan benefits.  Furthermore, the rules for determining Annual Benefits under a terminated defined benefit plan under which annuities are purchased to provide plan benefits shall be determined pursuant to Regulation §1.415(b)-1(b)(5)(i).  For purposes of this paragraph, the term “Formerly Affiliated Plan of an Employer” means a plan that, immediately prior to the Cessation of Affiliation, was actually maintained by one or more of the entities that constitute the Employer (as determined under the employer affiliation rules described in Regulation §1.415(a)-1(f)(1) and (2)), and immediately after the Cessation of Affiliation, is not actually maintained by any of the entities that constitute the Employer (as determined under the employer affiliation rules described in Regulation §1.415(a)-1(f)(1) and (2)). For purposes of this paragraph, the term “Cessation of Affiliation” means the event that causes an entity to no longer be aggregated with one or more other entities as a single Employer under the employer affiliation rules described in Regulation §1.415(a)-1(f)(1) and (2) (such as the sale of a subsidiary outside a controlled group), or that causes a plan to not actually be maintained by any of the entities that constitute the Employer under the employer affiliation rules of Regulation §1.415(a)-1(f)(1) and (2) (such as a transfer of plan sponsorship outside of a controlled group).

(d)   Predecessor Employer.For purposes of Code §415 and Regulations promulgated thereunder, a former employer is a predecessor employer with respect to a participant in the Plan maintained by the Employer if the Employer maintains the Plan under which the participant had accrued a benefit while performing services for the former employer (for example, the Employer assumed sponsorship of the former employer’s plan, or the Plan received a transfer of benefits from the former employer’s plan), but only if that benefit is provided under the Plan maintained by the Employer. In applying the limitations of Code §415  to a participant in the Plan maintained by the Employer, the Plan must take into account benefits provided to the participant under plans that are maintained by the predecessor employer and that are not maintained by the Employer; the Employer

5

and predecessor employer constituted a single Employer under the rules described in Regulation §1.415(a)-1(f)(1) and (2) immediately prior to the cessation of affiliation (as if they constituted two, unrelated employers under the rules described in Regulation §1.415(a)-1(f)(1) and (2) immediately after the cessation of affiliation) and cessation of affiliation was the event that gives rise to the predecessor employer relationship, such as a transfer of benefits or plan sponsorship. However, with respect to the Employer of the participant, a former entity that antedates the Employer is a predecessor employer with respect to the participant if, under the facts and circumstances, the Employer constitutes a continuation of all or a portion of the trade or business of the former entity. This occurs where formation of the Employer constitutes a mere formal or technical change in the employment relationship and continuity otherwise exists in the substance and administration of the business operations of the former entity and the Employer.

(e)   Nonduplication. In applying the limitations of Code §415 to the Plan maintained by an Employer, if the Plan is aggregated with another plan pursuant to the aggregation rules of this Section, then a participant’s benefits are not counted more than once in determining the participant’s aggregate Annual Benefit or Annual Additions, pursuant to the rules of Regulation §1.415(f)-1(d)(1).

(f)   Determination of Years of Participation for Multiple Plans.If two or more defined benefit plans are aggregated under Code §415(f) for a particular Limitation Year, in applying the reduction for participation of less than ten years (as described in Code §415(b)(5)(A)) to the Code §415(b)(1)(A) Defined Benefit Dollar Limitation, time periods that are counted as Years of Participation under any of the plans are counted in computing the limitation of the aggregated plans under this Section.

(g)   Determination of Years of Service for Multiple Plans.If two or more defined benefit plans are aggregated under Code §415(f) for a particular Limitation Year, in applying the reduction for service of less than ten years (as described in Code §415(b)(5)(B)) to the Code §415(b)(1)(B) Defined Benefit Compensation Limitation, time periods that are counted as years of service under any of the plans are counted in computing the limitation of the aggregated plans under this Section.

(h)   Previously Unaggregated Plans. The following rules apply to situations in which two or more existing plans, which previously were not required to be aggregated pursuant to Code §415(f), are aggregated during a particular Limitation Year and, as a result, the limitations of Code §415(b) or (c) are exceeded for that Limitation Year:

(1) Defined Contribution Plans. Two or more Defined Contribution Plans that are not required to be aggregated pursuant to Code §415(f) as of the first day of a Limitation Year satisfy the requirements of Code §415 with respect to a participant for the Limitation Year if they are aggregated later in that Limitation Year, provided that no Annual Additions are credited to the participant’s account after the date on which the plans are required to be aggregated.

(2) Defined Benefit Plans.Two or more defined benefit plans that are not required to be aggregated pursuant to Code §415(f) as of the first day of a Limitation Year satisfy the requirements of Code §415 with respect to a participant for the Limitation Year if they are aggregated later in that Limitation Year, provided that no plan amendments increasing benefits with respect to the participant under either plan are made during the Limitation Year of the occurrence of the event causing the Plan to be aggregated.

(3) All Years of Aggregation in which Accrued Benefits Are Frozen.Two or more defined benefit plans that are required to be aggregated pursuant to Code §415(f) during a Limitation Year subsequent to the Limitation Year during which the plans were first aggregated satisfy the requirements of Code §415 with respect to a participant for the Limitation Year if they are aggregated, provided there have been no increases in the participant's accrued benefit derived from Employer contributions (including increases as a result of increased compensation or years of benefit service) under any of the plans within the period during which the plans have been aggregated.

6

(i)   Multiple Plan Fraction.The provisions of Code §415(e) shall not apply to this Plan for Limitation Years beginning on or after January 1, 2000 (or, if later, the first day of the Limitation Year in which Code §415(e) is not applicable to the Plan in whole or in part, pursuant to the provisions of the prior Plan document or separate Plan amendment).

2.6   Definitions.As used in this Section 2, and for all other purposes of the Plan, the following words and phrases will have the following meanings:

(a)   Annual Additions.The term "Annual Additions" means the sum of the following amounts credited to a participant's Account for the Limitation Year:

(1) Employer contributions, even if such Employer contributions are excess contributions (as described in Code §401(k)(8)(B)) or excess aggregate contributions (as described in Code §401(m)(6)(B)), or such excess contributions or excess aggregate contributions are corrected through distribution;

(2) Employee contributions, which includes mandatory employee contributions (as defined in Code §411(c)(2)(C) and the Regulations promulgated thereunder) and voluntary employee contributions;

(3) Forfeitures;

(4) Contributions allocated to any individual medical account, as defined in Code §415(l)(2), which is part of a pension or annuity plan established pursuant to Code §401(h) and maintained by the Employer;

(5) Amounts attributable to post-retirement medical benefits allocated to a separate account for a key employee (any employee who, at any time during the plan year or any preceding plan year, is or was a key employee pursuant to Code §419A(d)), maintained by the Employer; and

(6) Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, the difference between the value of any assets transferred to the Plan and the consideration, where an employee or the Employer transfers assets to the Plan in exchange for consideration that is less than the fair market value of the assets transferred to the Plan;

Notwithstanding the foregoing, a participant's Annual Additions do not include the following:

(1) The restoration of an employee's accrued benefit by the Employer in accordance with Code §411(a)(3)(D) or Code §411(a)(7)(C) or resulting from the repayment of cashouts (as described in Code §415(k)(3)) under a governmental plan (as defined in Code §414(d)) for the Limitation Year in which the restoration occurs., regardless of whether the Plan restricts the timing of repayments to the maximum extent allowed by Code §411(a);

(2) Catch-up contributions made in accordance with Code §414(v) and Regulation §1.414(v)-1;

(3) Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, a Restorative Payment that is allocated to a participant’s account. For purposes of this paragraph, the term “Restorative Payment” is a payment made to restore some or all of the Plan’s losses resulting from an action (or a failure to act) by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan) under ERISA or under other applicable federal or state law, where Plan participants who are similarly situated are treated similarly with respect to the payments. This includes payments to the Plan made pursuant to a Department of Labor order, the Department of Labor’s Voluntary Fiduciary Correction Program, or a court-approved settlement, to restore losses to a qualified Defined Contribution Plan. Payments made to the Plan to make up for losses due merely to market fluctuations and other payments that are not made on account of a reasonable risk of liability for breach of a fiduciary duty under Title I of ERISA are not Restorative Payments and generally constitute contributions that give rise to Annual Additions;

(4) Excess deferrals that are distributed in accordance with Regulation §1.402(g)-1(e)(2) or (3);

(5) Rollover contributions (as described in Code §401(a)(31), §402(c)(1), §403(a)(4), §403(b)(8), §408(d)(3), and §457(e)(16));

7

(6) Repayments of loans made to a participant from the Plan;

(7) Repayments of prior Plan distributions described in Code §411(a)(7)(B) (in accordance with Code §411(a)(7)(C)) and Code §411(a)(3)(D) or repayment of contributions to a governmental plan (as defined in Code §414(d)) as described in Code §415(k)(3);

(8) The direct transfer of benefits or employee contributions from a qualified plan to a Defined Contribution Plan;

(9) The reinvestment of dividends on Employer securities under an employee stock ownership plan pursuant to Code §404(k)(2)(A)(iii)(II);

(10) Employee contributions to a qualified cost of living arrangement within the meaning of Code §415(k)(2)(B);

(b)   Annual Benefit. The term "Annual Benefit" means a retirement benefit under the Plan that is payable annually in the form of a straight life annuity. The Annual Benefit does not include the benefit attributable to either voluntary employee contributions, mandatory employee contributions, or rollover contributions (as described in Code §401(a)(31), §402(c)(1), §403(a)(4), §403(b)(8), §408(d)(3), and §457(e)(16)), determined pursuant to the rules of Regulation 1.415(b)-1(b)(2). Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, the treatment of accrued benefits that are transferred to this Plan (and that do not constitute rollover contributions (as described in Code §401(a)(31), §402(c)(1), §403(a)(4), §403(b)(8), §408(d)(3)) is determined pursuant to the rules of Regulation 1.415(b)-1(b)(3).

(1) Actuarial Adjustments To Annual Benefit.Except as otherwise provided in subparagraph (2) below, a benefit payable in a form other than a straight life annuity must be adjusted to be the actuarial equivalent of a straight life annuity before applying the limitations of this Section as follows:

(A)   Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, for any benefit paid in a form to which Code §417(e)(3) does not apply, the actuarially equivalent straight life annuity benefit is the greater of:

(i) The annual amount of the straight life annuity (if any) payable to the participant under the Plan commencing at the same annuity starting date as the form of benefit payable to the participant; or

(ii)   The annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the form of benefit payable to the participant, computed using a 5% interest assumption and the applicable mortality table for that annuity starting date.

(B)   For a distribution to which Code §417(e)(3) applies and which has an annuity starting date occurring in plan years beginning in 2004 or 2005, the Actuarially Equivalent straight life annuity benefit is the greater of:

(i)   The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using the Plan’s interest rate and mortality tabulation factors; or

(ii)   The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using a 5.5% interest assumption and the applicable mortality table.

o  PFEA Transition Rule. Notwithstanding the previous provisions of this paragraph (b)(1)(B), with respect to a distribution to which Code §417(e)(3) applies and which has an annuity starting date after December 31, 2003 and before January 1, 2005, the Actuarially Equivalent straight life annuity benefit shall not be less than the greater of:

8

(i) The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using the Plan’s interest rate and mortality tabulation factors; or

(ii) The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using the applicable interest rate in effect as of the last day of the last plan year beginning before January 1, 2004 and the applicable mortality table.

(C)   For a distribution to which Code §417(e)(3) applies and which has an annuity starting date occurring in plan years beginning after 2005, the Actuarially Equivalent straight life annuity benefit is the greatest of:

(i) The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using the Plan’s interest rate and mortality tabulation factors;

(ii) The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using a 5.5% interest assumption and the applicable mortality table; or

(iii) The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable (computed using the applicable interest rate and the applicable mortality table), divided by 1.05.

(2) Certain Benefit Forms for which No Adjustment Is Required.Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, for purposes of the adjustments described in paragraph (1) above, the following benefits are not taken into account for which no actuarial adjustment to the Annual Benefit is required:

 (A) Survivor benefits payable to a surviving spouse under a qualified joint and survivor annuity to the extent that such benefits would not be payable if the participant’s benefit were not paid in the form of a qualified joint and survivor annuity. However, if benefits are paid partly in the form of a qualified joint and survivor annuity and partly in some other form (such as a single-sum distribution), the rule under which survivor benefits are not included in determining the Annual Benefit applies to the survivor annuity payments under the portion of the benefit that is paid in the form of a qualified joint and survivor annuity.

(B) Ancillary benefits that are not directly related to retirement benefits, such as preretirement disability benefits not in excess of the qualified disability benefit, preretirement incidental death benefits (including a qualified preretirement survivor annuity), and post-retirement medical benefits. However, even though a Social Security supplement described in Code §411(a)(9) and Regulation §1.411(a)-7(c)(4) may be an ancillary benefit, the Social Security supplement is included in determining the Annual Benefit because the Social Security supplement is payable upon retirement and therefore is directly related to retirement income benefits.

 (C) A benefit that is paid in a form that is not a straight life annuity that takes into account the inclusion in that form of an Automatic Benefit Increase Feature, if:

(i)   The benefit is paid in a form to which Code §417(e)(3) does not apply; and

(ii)   The Plan satisfies the following requirements: The form of benefit without regard to the Automatic Benefit Increase Feature satisfies the requirements of Code §415(b) and the Regulations, and in no event will the amount payable to the participant under the form of benefit in any Limitation Year be greater than the Code §415(b) limit applicable at the annuity starting date (which is the lesser of the age-adjusted Code §415(b)(1)(A) Defined Benefit Dollar Limit or the Code §415(b)(1)(B) Defined Benefit Compensation Limitation), as increased in subsequent years pursuant to Code §415(d) and Regulation §1.415(d)-1. If the form of benefit without regard to the Automatic Benefit Increase Feature is not a straight life annuity, then the preceding sentence is applied by reducing

9

the Code §415(b) limit applicable at the annuity starting date to an Actuarially Equivalent amount (determined using the assumptions specified in paragraph (b)(1)(A)(ii)) that takes into account the death benefits under the form of benefit (other than the survivor portion of a qualified joint and survivor annuity).

For purposes of this paragraph (C), the term “Automatic Benefit Increase Feature” means a form of benefit that provides for automatic, periodic increases to the benefits paid in that form, such as a form of benefit that automatically increases the benefit paid under that form annually according to a specified percentage or objective index, or a form of benefit that automatically increases the benefit paid in that form to share favorable investment returns on plan assets.

(3) Determination of Annual Benefit in the case of Multiple Annuity Starting Dates. Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, if a participant has or will have distributions commencing at more than one annuity starting date, then the limitations of Code §415 must be satisfied as of each of the annuity starting dates, taking into account the benefits that have been or will be provided at all of the annuity starting dates. In determining the Annual Benefit for such a participant as of a particular annuity starting date, the Plan must actuarially adjust the past and future distributions with respect to the benefits that commenced at the other annuity starting dates. The determination of whether a new annuity starting date has occurred is made without regard to the rule of Regulation §1.401(a)-20, Q&A-10(d) (under which the commencement of certain distributions may not give rise to a new annuity starting date). The rules provided in this paragraph apply for purposes of determining the Annual Benefit of a participant where a new distribution election is effective during the current Limitation Year with respect to a distribution that previously commenced. The rules of this paragraph also apply for determining the Annual Benefit of a participant for purposes of applying the limitations of Code §415(b) where benefit payments are increased as a result of the Plan’s terms or a Plan amendment applying a cost-of-living adjustment or similar benefit increase, unless such increase to benefit payments that is a result of the Plan’s terms or a Plan amendment applying a cost-of-living adjustment or similar benefit increase:

(A) Has previously been accounted for as part of the Annual Benefit under the rules of this paragraph (b)(3);

(B) Is not required to be accounted for as part of the annual benefit, pursuant to the exception for certain automatic benefit increase features under Regulation §1.415(b)-1(c)(5);

(C) Is pursuant to a plan provision that automatically incorporates Code §415(d) cost-of-living adjustments under Regulation §1.415(a)-1(d)(3)(v); or

(D) Complies with one of the safe harbors described in Regulation §1.415(d)-1(a)(5) or (6) (providing safe harbors for annual and other periodic adjustments to distributions).

(c)   Code §401(a)(17) Compensation Limit.The term "Code §401(a)(17) Compensation Limit" means, for any Limitation Year beginning on or after July 1, 2007, the statutory limit that applies to each participant’s Code §415(c)(3) Compensation for a specific Limitation Year which is taken into account under the Plan; such Code §415(c)(3) Compensation shall not exceed $200,000. However, the $200,000 statutory limit on Code §415(c)(3) Compensation shall be adjusted for cost-of-living increases in accordance with Code §401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to Code §415(c)(3) Compensation for the Limitation Year that begins with or within such calendar year. If a Limitation Year is less than 12 consecutive months, then the Code §401(a)(17) Compensation Limit will be multiplied by a fraction, the numerator of which is the number of months in the Limitation Year, and the denominator of which is 12. If Code §415(c)(3) Compensation for any prior Limitation Year is used in determining a participant’s Annual Benefit for the current Limitation Year, then Code §415(c)(3) Compensation for such prior Limitation Year is subject to the applicable Code §401(a)(17) Compensation Limit as in effect for that prior Limitation Year.

(d)   Code §415(c)(3) Compensation.The term "Code §415(c)(3) Compensation" means the compensation during the entire Limitation Year (or such other compensation determination period that statutorily applies) used to determine an employee's Annual Addition limitation and/or Annual Benefit limitation and is based on the selection below:

  x Form W-2 Compensation.

10

o  Code §3401 Compensation.

o  Safe Harbor Code §415 Compensation.

Code §415(c)(3) Compensation is subject to the following rules:

(1) Exclusions to Compensation Do Not Apply.Code §415(c)(3) Compensation includes any amounts that may be excluded from compensation for purposes of a participant’s allocations or the calculation of the participant’s accrued benefit.

(2) Inclusion of Certain Amounts.Code §415(c)(3) Compensation includes any elective deferral as defined in Code §402(g)(3) and any amount which is contributed or deferred by the Employer at the election of the employee which are not includible in gross income by reason of Code §125 (and deemed Code §125 compensation), Code §132(f)(4), or Code §457.

(3) Treatment of Post-Severance Compensation.Effective January 1, 2005, Code §415(c)(3) Compensation includes Post-Severance Compensation.

(4) Code §401(a)(17) Annual Compensation Limit.Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, Code §415(c)(3) Compensation for any Limitation Year shall not exceed the Code §401(a)(17) Compensation Limit that applies to that Limitation Year. If the Limitation Year is not the calendar year, then the Code §401(a)(17) Compensation Limit that applies to such Limitation Year is the Code §401(a)(17) Compensation Limit in effect for the respective calendar year in which such Limitation Year begins.

(5) Compensation Earned in Limitation Year but Paid in Next Limitation Year.Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, at the discretion of the Sponsoring Employer and applied in a uniform manner, Code §415(c)(3) Compensation for a Limitation Year may include amounts earned during that Limitation Year but not paid during that Limitation Year solely because of the timing of pay periods and pay dates if:

(A) These amounts are paid during the first few weeks of the next Limitation Year;

(B) The amounts are included on a uniform and consistent basis with respect to all similarly situated employees; and

(C) No Code §415(c)(3) Compensation is included in more than one Limitation Year.

(e)   Defined Benefit Compensation Limitation.The term "Defined Benefit Compensation Limitation" means 100% of a participant's Highest Average Compensation, payable in the form of a straight life annuity. Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, if, after having a severance from employment with the Employer maintaining the Plan, an employee is rehired by the Employer, then the employee’s Defined Benefit Compensation Limit under Code §415(b)(1)(B) is the greater of:

(1) 100 percent of the participant’s Highest Average Compensation for the period of the participant’s three consecutive years of service or 1-year periods of service, as applicable, as determined prior to the employee’s severance from employment with the Employer maintaining the Plan (and if the provisions of paragraph (g)(6) apply to the Plan, as adjusted pursuant to paragraph (f)(3) below); or

(2) 100 percent of the participant’s Highest Average Compensation for the period of the participant’s three consecutive years of service or 1-year periods of service, as applicable, with the period of the participant’s three consecutive years of service or 1-year periods of service, as applicable, determined pursuant to Regulation §1.415(b)-1(a)(5)(iii).

(f)   Defined Benefit Dollar Limitation.Effective for Limitation Years ending after December 31, 2001, the term "Defined Benefit Dollar Limitation" means $160,000 payable in the form of a straight life annuity. Effective January 1st of each year, the $160,000 Defined Benefit Dollar Limitation will be automatically adjusted under Code §415(d) in such manner as the Treasury may prescribe. The limitation as adjusted under Code §415(d)

11

will apply to Limitation Years ending with or within the calendar year of the date of the adjustment. The Defined Benefit Dollar Limitation of this paragraph applies to:

x  Not Applicable.The Plan is not a defined benefit plan.

o  New Plan andAll Participants.The Plan’s Effective Date is after the first day of the first Limitation Year ending after December 31, 2001. The provisions of the paragraph apply to all participants.

o  Existing Plan andParticipants with Accrued Benefits. All current participants and all former participants (with benefits limited by Code §415(b)) who have accrued benefits under the Plan immediately prior to the first day of the first Limitation Year ending after December 31, 2001 (other than an accrued benefit resulting from a benefit increase solely as a result of the increases in limitations under Code §415(b)).

o  Existing Plan andParticipants with One Hour of Service. All employees participating in the Plan who have one Hour of Service on or after the first day of the first Limitation Year ending after December 31, 2001.

(g)   Defined Contribution Plan.The term “Defined Contribution Plan” means a defined contribution plan within the meaning of Code §414(i) (including the portion of a plan treated as a defined contribution plan under the rules of Code §414(k)) that is:

(1) A plan described in Code §401(a) which includes a trust which is exempt from tax under Code §501(a);

(2) An annuity plan described in Code §403(a);

(3) A simplified employee pension described in Code §408(k);

(4) An arrangement which is treated as a Defined Contribution Plan for purposes of this Section, Code §415 and the Regulations promulgated thereunder, according to the following rules:

(A) Mandatory employee contributions (as defined in Code §411(c)(2)(C) and Regulation §1.411(c)-1(c)(4), regardless of whether the Plan is subject to the requirements of Code §411) to this Plan (a defined benefit plan) are treated as contributions to a Defined Contribution Plan. For this purpose, contributions that are picked up by the Employer as described in Code §414(h)(2) are not considered employee contributions.

(B) Contributions allocated to any individual medical benefit account which is part of a pension or annuity plan established pursuant to Code §401(h) are treated as contributions to a Defined Contribution Plan pursuant to Code §415(l)(1).

(C) Amounts attributable to post-retirement medical benefits allocated to an account established for a key employee (any employee who, at any time during the plan year or any preceding plan year, is or was a key employee pursuant to Code §419A(d)(1)) are treated as contributions to a Defined Contribution Plan pursuant to Code §419A(d)(2).

(D) Annual Additions under an annuity contract described in Code §403(b) are treated as Annual Additions under a Defined Contribution Plan.

(h)   Employer.The term “Employer” shall mean the Sponsoring Employer as set forth in Section 1.2, and any other entity that adopts the Plan.

(i)   Highest Average Compensation. The term "Highest Average Compensation" means the following:

(1) Definition prior to 2006.For Limitation Years beginning prior to January 1, 2006, the term "Highest Average Compensation" means a participant's average Code §415(c)(3) Compensation for the three consecutive years of service or 1-year periods of service with the Employer that produces the highest average. If a participant has separated from service, the participant's Highest Average Compensation will be automatically adjusted by multiplying such Code §415(c)(3) Compensation by the cost of living

12

adjustment factor prescribed by the Treasury under Code §415(d) in such manner as the Treasury may prescribe. The adjusted Code §415(c)(3) Compensation will apply to Limitation Years ending with or within the calendar year of the date of the adjustment.

(2) Definition after 2005.For Limitation Years beginning after December 31, 2005, the term "Highest Average Compensation" means an employee’s average Code §415(c)(3) Compensation for the three consecutive years of service or 1-year periods of service with the Employer that produces the highest average. If an employee has separated from service, the employee’s Highest Average Compensation will be automatically adjusted by multiplying such Code §415(c)(3) Compensation by the cost of living adjustment factor prescribed by the Treasury under Code §415(d) in such manner as the Treasury may prescribe. The adjusted Code §415(c)(3) Compensation will apply to Limitation Years ending with or within the calendar year of the date of the adjustment. In no event shall an employee’s Highest Average Compensation be limited to the period during which the employee was a participant in the Plan. Highest Average Compensation of this paragraph applies to:

x  Not Applicable.The Plan is not a defined benefit plan.

o  New Plan andAll Participants.The Plan’s Effective Date is after the first day of the first Limitation Year ending after December 31, 2005. The provisions of the paragraph apply to all participants.

o  Existing Plan andParticipants with Accrued Benefits. All current participants and all former participants (with benefits limited by Code §415(b)) who have accrued benefits under the Plan immediately prior to the first day of the first Limitation Year ending after December 31, 2005 (other than an accrued benefit resulting from a benefit increase solely as a result of the increases in limitations under Code §415(b)).

o  Existing Plan andParticipants with One Hour of Service. All employees participating in the Plan who have one Hour of Service on or after the first day of the first Limitation Year ending after December 31, 2005.

(3) Highest Average Compensation for a Participant who incurs Severance of Employment.Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007 and pursuant to Code §415(d)(1)(B), if the provisions of paragraph (g)(6) apply to the Plan, then with regard to participants who have had a severance from employment with the Employer maintaining the Plan, the Defined Benefit Compensation Limit described in Code §415(b)(1)(B) is adjusted annually to take into account increases in the cost of living. For any Limitation Year beginning after the severance occurs, the adjustment of the Defined Benefit Compensation Limit is made by multiplying the Annual Adjustment Factor (as defined below) by the Defined Benefit Compensation Limit applicable to the participant in the prior Limitation Year; the Annual Adjustment Factor is prescribed by the Commissioner. For purposes of this paragraph, the term “Annual Adjustment Factor” for a calendar year means a fraction, the numerator of which is the value of the applicable index for the calendar quarter ending September 30 of the preceding calendar year, and the denominator of which is the value of such index for the calendar quarter ending September 30 of the calendar year prior to that preceding calendar year. The applicable index is determined consistent with the procedures used to adjust benefit amounts under Social Security Act §215(i)(2)(A). If the value of the fraction described in the previous sentence of this paragraph is less than one for a calendar year, then the adjustment factor for the calendar year is equal to one. In such a case, the Annual Adjustment Factor for future calendar years will be determined in accordance with revenue rulings, notices, or other published guidance prescribed by the Commissioner.

(4) Highest Average Compensation for a Rehired Participant.Notwithstanding anything in the Plan to the contrary, effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, if a participant has had a severance from employment with the Employer maintaining the plan and is subsequently rehired by the Employer, then the three consecutive years of service or 1-year periods of service is calculated by excluding all years for which the participant performs no services for and receives no compensation from the Employer maintaining the plan (hereafter referred to as the “Break Period”). This calculation will be made by treating the year of service or 1-year period of service, as applicable, immediately prior to the Break Period and the year of service or 1-year period of service, as applicable, immediately after the Break Period as if such years of service or 1-year periods of service, as applicable, were consecutive.

13

(j)   Limitation Year. The term "Limitation Year" means the 12-consecutive month period as defined in the Plan. If the Limitation Year is amended to a different 12-consecutive month period, then the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made.

(k)   Maximum Permissible Amount.The term "Maximum Permissible Amount" means, effective for Limitation Years ending after December 31, 2001 (except, if applicable, as provided in subsection (4) below), the lesser of the Defined Benefit Dollar Limitation or the Defined Benefit Compensation Limitation (both adjusted where required, as provided in (1) and, if applicable, in (2) or (3) below, and limited, if applicable, as provided in (4) below).  Maximum Permissible Amount of this paragraph (g) applies to:

x  Not Applicable.The Plan is not a defined benefit plan.

o  New Plan andAll Participants.The Plan’s Effective Date is after the first day of the first Limitation Year ending after December 31, 2001. The provisions of the paragraph apply to all participants.

o  Existing Plan andParticipants with Accrued Benefits. All current participants and all former participants (with benefits limited by Code §415(b)) who have accrued benefits under the Plan immediately prior to the first day of the first Limitation Year ending after December 31, 2001 (other than an accrued benefit resulting from a benefit increase solely as a result of the increases in limitations under Code §415(b)).

o  Existing Plan andParticipants with One Hour of Service. All employees participating in the Plan who have one Hour of Service on or after the first day of the first Limitation Year ending after December 31, 2001.

(1) Service Adjustment.If the participant has fewer than ten (10) Years of Participation in the Plan, the Defined Benefit Dollar Limitation shall be multiplied by a fraction, (A) the numerator of which is the number of Years of Participation (or part thereof) in the Plan and (B) the denominator of which is ten (10). If the Plan is not a multi-Employer Plan and the participant has fewer than ten (10) years of service or 1-year periods of service with the Employer, the Defined Benefit Compensation Limitation shall be multiplied by a fraction, (A) the numerator of which is the number of years of service or 1-year periods of service (or part thereof) with the Employer and (B) the denominator of which is ten (10).

(2) Adjustment For Benefits Commencing Before Age 62.Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, for a distribution with an annuity starting date that occurs before the participant attains the age of 62, the age-adjusted Code §415(b)(1)(A) Defined Benefit Dollar Limit is determined as the actuarial equivalent of the annual amount of a straight life annuity commencing at the annuity starting date that has the same actuarial present value as a deferred straight life annuity commencing at age 62, where annual payments under the straight life annuity commencing at age 62 are equal to the Code §415(b)(1)(A) Defined Benefit Dollar Limit (as adjusted pursuant to Code §415(d) and Regulation §1.415(d)-1 for the Limitation Year, pursuant to paragraph (1) above, if required), and where the Actuarially Equivalent straight life annuity is computed using a 5% interest rate and the applicable mortality table that is effective for that annuity starting date (and expressing the participant’s age based on completed calendar months as of the annuity starting date). However, if the Plan has an immediately commencing straight life annuity payable both at age 62 and the age of benefit commencement, then the age-adjusted Code §415(b)(1)(A) Defined Benefit Dollar Limit is equal to the lesser of:

(A) The limit as otherwise determined under this paragraph (g)(2); and

(B) The amount that is equal to the Code §415(b)(1)(A) Defined Benefit Dollar Limit (as adjusted pursuant to Code §415(d) and Regulation §1.415(d)-1 for the Limitation Year, pursuant to paragraph (1) above, if required) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the Plan to the annual amount of the straight life annuity under the plan commencing at age 62, with both annual amounts determined without applying the rules of Code §415.

For purposes of determining the Actuarially Equivalent amount described in this paragraph (g)(2), to the extent that a forfeiture does not occur upon the participant’s death before the annuity starting date:

14

(A) If a mortality decrement applies upon death, then an adjustment shall be made to reflect the probability of the participant’s death between the annuity starting date and the participant’s attainment of age 62. To the extent that a forfeiture occurs upon the participant’s death before the annuity starting date, an adjustment must be made to reflect the probability of the participant’s death between the annuity starting date and the participant’s attainment of age 62.

(B) If a mortality decrement does not apply upon death, then no adjustment shall be made to reflect the probability of the participant’s death between the annuity starting date and the participant’s attainment of age 62. To the extent that a forfeiture occurs upon the participant’s death before the annuity starting date, an adjustment must be made to reflect the probability of the participant’s death between the annuity starting date and the participant’s attainment of age 62. Furthermore, the Plan treats no forfeiture as occurring upon a participant’s death if the Plan does not charge participants for providing a qualified pre-retirement survivor annuity (QPSA) on the participant’s death, but only if the Plan applies this treatment both for adjustments before age 62 and adjustments after age 65. Thus, in computing the age-adjusted Code §415(b)(1)(A) Defined Benefit Dollar Limit, no adjustment is made to reflect the probability of a participant’s death after the annuity starting date and before age 62 or after age 65 and before the annuity starting date.

Notwithstanding any other provision of this paragraph (g)(2), the age-adjusted Code §415(b)(1)(A) Defined Benefit Dollar Limit applicable to a participant does not decrease on account of an increase in age or the performance of additional service.

(3) Adjustment For Benefits Commencing After Age 65.Effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, for a distribution with an annuity starting date that occurs after the participant attains the age of 65, the age-adjusted Code §415(b)(1)(A) Defined Benefit Dollar Limit is determined as the actuarial equivalent of the annual amount of a straight life annuity commencing at the annuity starting date that has the same actuarial present value as a straight life annuity commencing at age 65, where annual payments under the straight life annuity commencing at age 65 are equal to the Code §415(b)(1)(A) Defined Benefit Dollar Limit (as adjusted pursuant to Code §415(d) and Regulation §1.415(d)-1 for the Limitation Year, pursuant to paragraph (1) above, if required), and where the Actuarially Equivalent straight life annuity is computed using a 5% interest rate and the applicable mortality table that is effective for that annuity starting date (and expressing the participant’s age based on completed calendar months as of the annuity starting date). However, if the Plan has an immediately commencing straight life annuity payable as of the annuity starting date and an immediately commencing straight life annuity payable at age 65, then the age-adjusted Code §415(b)(1)(A) Defined Benefit Dollar Limit is equal to the lesser of:

(A) The limit as otherwise determined under this paragraph (g)(3); and

(B) The amount that is equal to the Code §415(b)(1)(A) Defined Benefit Dollar Limit (as adjusted pursuant to Code §415(d) and Regulation §1.415(d)-1 for the Limitation Year, pursuant to paragraph (1) above, if required) multiplied by the ratio of the annual amount of the Adjusted Immediately Commencing Straight Life Annuity (as defined below) under the Plan to the Adjusted Age 65 Straight Life Annuity (as defined below).

For purpose of paragraph (g)(3)(B), the term “Adjusted Immediately Commencing Straight Life Annuity” means the annual amount of the immediately commencing straight life annuity payable to the participant, computed disregarding the participant’s accruals after age 65 but including actuarial adjustments even if those actuarial adjustments are applied to offset accruals, and determined without applying the rules of Code §415. The term “Adjusted Age 65 Straight Life Annuity” means the annual amount of the straight life annuity that would be payable under the Plan to a hypothetical participant who is 65 years old and has the same accrued benefit (with no actuarial increases for commencement after age 65) as the participant receiving the distribution (determined disregarding the participant’s accruals after age 65 and without applying the rules of Code §415).

For purposes of determining the Actuarially Equivalent amount described in this paragraph (g)(3), to the extent that a forfeiture does not occur upon the participant’s death before the annuity starting date, no adjustment is made to reflect the probability of the participant’s death between the participant’s attainment of age 65 and the annuity starting date. To the extent that a forfeiture occurs upon the participant’s death before the annuity starting date, an adjustment must be made to reflect the probability

15

of the participant’s death between the participant’s attainment of age 65 and the annuity starting date. Furthermore, if a mortality decrement does not apply upon death, then the Plan treats no forfeiture as occurring upon a participant’s death if the Plan does not charge participants for providing a qualified pre-retirement survivor annuity (QPSA) on the participant’s death, but only if the Plan applies this treatment both for adjustments before age 62 and adjustments after age 65. Thus, in computing the age-adjusted Code §415(b)(1)(A) Defined Benefit Dollar Limit, no adjustment is made to reflect the probability of a participant’s death after the annuity starting date and before age 62 or after age 65 and before the annuity starting date.

 (4) Adjustment For Multi-Employer Plan.Notwithstanding the above, if the Plan is a multi-Employer Plan, then for Limitation Years beginning before January 1, 2002, the Maximum Permissible Amount will not exceed the Defined Benefit Compensation Limitation. In the case of a participant who has fewer than 10 years of service or 1-year periods of service with the Employer, the Defined Benefit Compensation Limitation shall be multiplied by a fraction, (A) the numerator of which is the number of years of service or 1-year periods of service (or part thereof) with the Employer and (B) the denominator of which is 10.

(5) Minimum Benefit Permitted.Notwithstanding anything else in this Section to the contrary, effective as of the first day of the first Limitation Year beginning on or after July 1, 2007, the Annual Benefit (without regard to the age at which benefits commence) payable with respect to a participant under this Plan is not considered to exceed the Defined Benefit Compensation Limitation if:

(A) The benefits (other than benefits not taken into account in the computation of the Annual Benefit under the rules of Regulation §1.415(b)-1(b) or (c)) payable under with respect to such participant under this Plan and all other defined benefit plans (regardless of whether terminated) ever maintained by the Employer do not in the aggregate exceed $1,000 multiplied by the participant's number of years of service or 1-year periods of service or parts thereof (not to exceed 10) for the Limitation Year, or for any prior Limitation Year; and

(B) The Employer (or a predecessor Employer) has not at any time maintained a Defined Contribution Plan in which the participant participated.

For purposes of paragraph (A), the benefits payable with respect to the participant under the Plan for a Limitation Year reflect all amounts payable under the Plan for the Limitation Year (other than benefits not taken into account in the computation of the Annual Benefit under the rules of Regulation §1.415(b)-1(b) or (c)), and are not adjusted for form of benefit or commencement date.

If this Plan is a multiemployer Plan described in Code §414(f), then this special $10,000 exception to the Defined Benefit Compensation Limitation applies to a participant in the multiemployer Plan described in Code §414(f) without regard to whether that participant ever participated in one or more other plans maintained by an Employer who also maintains the multiemployer Plan, provided that none of such other plans were maintained as a result of collective bargaining involving the same employee representative as the multiemployer Plan.

If a participant is required to make mandatory employee contributions as defined in Code §411(c)(2)(C) and Regulation §1.411(c)-1(c)(4) as a condition of employment, as a condition of participation in the Plan, or as a condition of obtaining benefits (or additional benefits) under the Plan attributable to Employer contributions, then mandatory employee contributions under the Plan are not considered a separate Defined Contribution Plan maintained by the Employer and  the special $10,000 exception to the Defined Benefit Compensation Limitation applies to this contributory Plan. Similarly, an individual medical account under Code §401(h) or an account for postretirement medical benefits established pursuant to Code §419A(d)(1) is not considered a separate Defined Contribution Plan maintained by the Employer.

(6) Cost of Living Adjustment.If the Annual Benefit payable to a terminated participant who has not received a complete distribution of the participant’s nonforfeitable accrued benefit is limited by either the Defined Benefit Dollar Limitation or the Defined Benefit Compensation Limitation, such benefit may, at the discretion of the Sponsoring Employer and applied in a uniform manner, be increased in accordance with cost of living adjustments under Code §415(d).

16

(l)   Projected Annual Benefit.The term "Projected Annual Benefit" means the Annual Benefit to which the participant would be entitled assuming (1) the participant will continue employment with an Employer until normal retirement age (or current age, if later), and (2) the participant's compensation for the current Limitation Year and all other relevant factors used to determine benefits will remain constant for all future Limitation Years.

(m)   Post-Severance Compensation.For Limitation Years beginning on or after July 1, 2007, the term "Post-Severance Compensation" means the amount (or, if paragraph (2), (3), and/or (4)  is checked, then the following amounts) that would have been included in the definition of compensation if the amounts were paid prior to the employee’s severance from employment with the Employer and that are paid to the employee by the later of 2½ months after termination of employment with the Employer or the end of the Limitation Year that includes the employee’s date of severance from employment with the Employer:

(1) Regular Pay after Severance from Employment. Regular pay after severance from employment will be considered Post-Severance Compensation if:

(A) The payment is regular compensation for services during the employee’s regular working hours, or compensation for services outside the employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

(B) The payment would have been paid to the employee prior to a severance from employment if the employee had continued in employment with the Employer.

 x
(2) Leave Cashouts and Deferred Compensation. If this paragraph (2) is checked, thenleave cash outs and deferred compensation will be considered Post-Severance Compensation if the amount is either:

(A) Payment for unused accrued bona fide sick, vacation, or other leave, but only if the employee would have been able to use the leave if employment had continued; or

(B) Received by an employee pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid to the employee at the same time if the employee had continued in employment with the Employer and only to the extent that the payment is includible in the employee’s gross income.

  o

(3) Imputed Compensation when Participant Becomes Disabled in DC Plan. If this paragraph (3) is checked and a participant in a Defined Contribution Plan becomes permanently and totally disabled (as defined in Code §22(e)(3)), then notwithstanding anything in this Section to the contrary, Code §415(c)(3) Compensation will be imputed during the time that the participant is permanently and totally disabled. The rate that Code §415(c)(3) Compensation will be imputed to such participant is equal to the rate of Code §415(c)(3) Compensation that was paid to the participant immediately before becoming permanently and totally disabled. The total period in which Code §415(c)(3) Compensation will be imputed to a participant in the Defined Contribution Plan who becomes permanently and totally disabled will be determined pursuant to a nondiscriminatory policy established by the Administrator; however, if Code §415(c)(3) Compensation is imputed to a participant who is a highly compensated employee (as defined in Code §414(q) and any elections made in the Plan) pursuant to this paragraph, then the continuation of any non-safe harbor non-elective contributions to such participant will be for a fixed or determinable period pursuant to Code §415(c)(3)(C).

  o (4) Continuation of Compensation while in Qualified Military Service. If this paragraph (4) is checked, then notwithstanding anything in this Section to the contrary, Code §415(c)(3) Compensation includes payments to an individual who does not currently perform services for the Employer by reason of qualified military service (as that term is used in Code §414(u)(1)), to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering qualified military service.

(n)   Year of Participation.The term "Year of Participation" means a 12-month accrual computation period (computed to fractional parts of a year) in which the following conditions are met: (1) the participant is credited with at least the number of Hours of Service (or Period of Service if the elapsed time method is used) for benefit accrual purposes, required under the Plan to accrue a benefit for the accrual computation period, and (2) the participant is included as a participant under the eligibility provisions of the Plan for at least one day of the

17

accrual computation period. If these two conditions are met, the portion of a Year of Participation credited to the participant will equal the amount of benefit accrual service credited to the participant for such accrual computation period. A participant who is permanently and totally disabled within the meaning of Code §415(c)(3)(C)(i) for an accrual computation period will receive a Year of Participation with respect to that period. In addition, for a participant to receive a Year of Participation (or part thereof) for an accrual computation period, the Plan must be established no later that the last day of such computation period. In no event will more than one Year of Participation be credited for any 12-month period.

Se    Section 3.  Retroactive Revocation of Prior Amendment on account of the Heinz Decision

3.1   x  Not Applicable.The Plan was not amended impermissibly to restrict the form or timing of distributions from the Plan.

3.2   o  Effective Date.This Section is effective as of _______________________________________.

3.3   Retroactive Revocation. If Section 3.2 is checked, then the Original Amendment is hereby revoked retroactively with respect to:

o  All Accrued Benefits. Benefits that had accrued as the Applicable Amendment Date and benefits that have accrued after the Applicable Amendment Date.

o  Only Accrued Benefits as the Applicable Amendment Date. Benefits that had accrued as the Applicable Amendment Date. Benefits that have accrued after the Applicable Amendment Date will continue to be subject to the restrictions with respect to the form or timing of distributions from the Plan as enumerated in the Original Amendment.

3.4   Effect of Revocation.If Section 3.2 is checked, then the following provisions apply:

(a)   Benefits to Affected Participants. Benefit payments (including any appropriate interest or actuarial increase) will resume to Affected Participants on the execution date of this amendment in the applicable optional form of benefit. Furthermore, if the Plan is a defined benefit plan, then the Plan will comply with the requirements of Regulation §1.417(e)-1 (rules relating to retroactive annuity starting dates), including a makeup payment to each Affected Participant equal to the amount of the monthly payments due since Applicable Amendment Date, with appropriate interest.

(b)   Opportunityfor Eligible Participants.An Eligible Participant must be given an opportunity to elect retroactively the commencement of payment of benefits as of the first date on which (a) this Section 3 is effective and (b) the participant was eligible to commence receipt of benefits. Furthermore, if the Plan is a defined benefit plan, then the Plan will comply with the requirements of Regulation §1.417(e)-1 (rules relating to retroactive annuity starting dates). The following provisions apply to Eligible Participants:

 (1) Election Period. The election period begins within a reasonable time period after Eligible Participants have received notification of the option in accordance with paragraph (2) below and ends no sooner than six months after notification. Reasonable efforts must be taken to notify all Eligible Participants, including the use of the Internal Revenue Service Letter Forwarding Program.

(2) Notification Requirement.The Plan must provide notice of the option set forth in this paragraph (b) to each Eligible Participants. In addition to satisfying any generally applicable notice requirements, the notice of the option to commence payment of benefits must be designed to be readily understandable by the average Plan participant. The notice must explain the option to commence retroactive payment of benefits and the period for making the election as described in paragraph (1).

3.5   Definitions. If Section 3.2 is checked, then the following definitions apply to this Section:

(a)   Affected Participant.The term “Affected Participant” means either (1) a participant who commenced receipt of benefits and whose benefit payments had ceased as a result of the Original Amendment, or (2) a participant who had applied for benefits (including election of the optional form of benefit) and whose application for

18

benefits (including the form of payment) either was approved but benefits were suspended before payments commenced as a result of the Original Amendment, or was denied as a result of the Original Amendment.

(b)   Applicable Amendment Date.The term “Applicable Amendment Date” means the later of the effective date of the Original Amendment or the date that the Original Amendment was adopted.

(c)   Eligible Participant.The term “Eligible Participant” is a participant who:

(1) At any time after the Applicable Amendment Date, was eligible to commence the receipt of benefits under the Plan, determined without regard to the suspension of benefit provisions of the Original Amendment;

(2) At the same time, engaged in service for which benefits were not permitted to commence, as determined taking into account the Original Amendment; and

(3) Is not an Affected Participant (e.g., is a participant who did not apply for benefits).

(d)   Original Amendment.The term “Original Amendment” means a previously-executed amendment that impermissibly restricted the form or timing of distributions from the Plan.

Section 4.   Modification to Applicable Mortality Table and Applicable Interest Rate under Code §417(e)

4.1    x Not Applicable.The Plan is not a defined benefit plan.

4.2    o Change to Applicable Mortality Table and Applicable Interest Rate under Code §417(e).The following provisions apply to a participant’s annuity starting date that occur on or after the first day of the first plan year beginning in 2008:

(a)   Code §417(e)(3) GATT Applicable Mortality Table.Notwithstanding any other Plan provisions to the contrary, the applicable mortality table used for purposes of adjusting any benefit under the limitations of Code §415(b)(2)(B), (C), or (D) and the applicable mortality table used for purposes of satisfying the requirements of Code §417(e)(3) is the applicable §417(e)(3) mortality table that applies to distributions with annuity starting dates (other than a retroactive annuity starting date) on that date. For a plan year that begins in 2008, the applicable mortality table is the “2008 Applicable Mortality Table” as provided by Revenue Ruling 2007-67, which is based upon a fixed blend of 50 percent of the static male combined mortality rates and 50 percent of the static female combined mortality rates published in proposed Regulation §1.430(h)(3)-1 for valuation dates occurring in 2008; such mortality table shows, for each age, the number living based upon a starting population of one million lives at age 1 (lx), and the annual rate of mortality (qx). The applicable §417(e)(3) mortality table for each subsequent year (the “Subsequent Applicable Mortality Table”) will be provided by the Treasury; will generally be determined from the Code §430(h)(3)(A) mortality tables on the same basis as the 2008 Applicable Mortality Table; and will automatically apply to distributions with annuity starting dates (other than a retroactive annuity starting date) to which the specific Subsequent Applicable Mortality Table applies, without the necessity of amending the Plan.

(b)   Code §417(e)(3) GATT Applicable Interest Rate.Notwithstanding any other Plan provisions to the contrary, the applicable interest rate is the adjusted first, second, and third segment rates applied under rules similar to the rules of Code §430(h)(2)(C) for the month before the date of distribution or such other time as the Treasury may by Regulations prescribe. For purposes of the prior sentence, the adjusted first, second, and third segment rates are the first, second, and third segment rates which would be determined under Code §430(h)(2)(C) if:

 (1) Code §430(h)(2)(D) were applied by substituting the average yields for the month described in clause (2) for the average yields for the 24-month period described in such section;

 (2) Code §430(h)(2)(G)(i)(II) were applied by substituting “Code §417(e)(3)(A)(ii)(II)” for “Code §412(b)(5)(B)(ii)(II)”; and

19

 (3) The applicable percentage under Code §430(h)(2)(G) were determined according to the following table:

In the case of plan years beginning:	The applicable percentage is:
2008	20%
2009	40%
2010	60%
2011	80%

Section 5.   Modification to Normal Retirement Age

5.1    o Not Applicable.The Plan’s definition of Normal Retirement Age complies Regulation §1.401(a)-1 that was issued June 11, 2007.

5.2   x  Not Applicable.The Plan is not subject to Code §412. Even though the Plan’s Normal Retirement Age may not comply with Regulation §1.401(a)-1 that was issued June 11, 2007, the Sponsoring Employer elects not to amend the Plan’s definition of Normal Retirement Age.

5.3   o  Effective Date.This Section is effective as of _______________________________________. (Note: This date is generally May 22, 2007, but may be a later date based upon the guidance of Notice 2007-69. In the case of a governmental plan (as defined in Code §414(d)), this date is the first day of the first plan year beginning on or after January 1, 2009. In the case of a plan maintained pursuant to one or more collective bargaining agreements that have been ratified and are in effect on May 22, 2007, this date is the first day of the first plan year that begins after the last of the agreements terminates determined without regard to any extension thereof (or, if earlier, May 22, 2010).

5.4   Modification of the Definition of Normal Retirement Age.If Section 5.3 is checked, then the Plan’s definition of Normal Retirement Age is amended as follows: (Choose one)

o  Age Only.The term “Normal Retirement Age” means the time that a participant attains the age of ___________.

o  Age and Participation.The term “Normal Retirement Age” means the later of (a) the time that a participant attains the age of ___________, or (b) the ___________ anniversary of the time that a participant commenced participation in the Plan. (Note: The blank of clause (b) cannot exceed 5th)

o  Other.The term “Normal Retirement Age” means ________________________________________________.

5.5   Limited Exemption from Code §411(d)(6).If Section 5.3 is checked, then although this Section amends the Normal Retirement Age under the Plan to a later Normal Retirement Age pursuant to Regulation §1.401(a)-1(b)(2) which may eliminate a right to an in-service distribution prior to the amended Normal Retirement Age, this Section does not violate Code §411(d)(6) pursuant to Regulation §1.411(d)-4, Q&A-12.

5.6   No Exemption from Other Code Provisions.If (a) Section 5.3 is checked and (b) this Section 5.6 is applicable, then since the Plan and this Section are not exempt from the requirements of Code §411(a)(9) (if the Plan is a defined benefit plan, then requiring that the Plan’s normal retirement benefit not be less than the greater of any early retirement benefit payable under the Plan or the benefit under the Plan commencing at Normal Retirement Age), Code §411(a)(10) (if this Section changes the Plan’s vesting rules), Code §411(d)(6) (other than elimination of the right to an in-service distribution prior to the amended Normal Retirement Age), and/or Code §4980F (if the Plan is a defined benefit plan, then relating to a reduction in the rate of future benefit accruals), the following provision(s) are amended and/or added to the Plan:

o  Not Applicable.The provisions of this Section 5.6 have been satisfied and/or are not applicable, and provisions are not required to be amended and/or added to the Plan.

20

o  Plan Provision(s): _________________________________________________________________________. (Note: Describe Plan provision(s) that will cure any violation of the Code provisions of this Section 5.6. For example, if the pre-amended Normal Retirement Age was age 40, then the Plan may need a provision that  provides that all participants who are participating in the Plan and who attain age 40 will become 100% vested in their accounts/accrued benefits.)

Section 6.    Elimination of Gap Period Income on Excess Contributions and Excess Aggregate Contributions

6.1   x  Not Applicable.The Plan is not a 401(k) plan as described in Code §401(k)(2) or a 401(m) plan as described in Code §401(m).

6.2   o  Not Applicable.Even though the Plan is a 401(k) plan as described in Code §401(k)(2) and/or a 401(m) plan as described in Code §401(m), the Sponsoring Employer elects that the Plan will retain the calculation of gap period income on excess contributions and/or excess aggregate contributions.

6.3   o  Effective Date.This Section is effective as of _______________________________________. (Note: This date cannot be earlier than the first day of the first plan year beginning on or after January 1, 2008)

6.4   Elimination of Gap Period Income.If Section 6.3 is checked, then the following provisions apply: (check all that apply)

o  Elimination of Gap Period Income for Excess Contributions. If this paragraph is checked, then excess contributions as defined in Regulation §1.401(k)-6 will be adjusted for any income or loss up to the last day of the plan year, without considering the gap period (the period between the end of the plan year and the date of distribution) or any adjustment for income or loss during the gap period.

o  Elimination of Gap Period Income for Excess Aggregate Contributions.If this paragraph is checked, then excess aggregate contributions as defined in Regulation §1.401(m)-5 will be adjusted for any income or loss up to the last day of the plan year, without considering the gap period (the period between the end of the plan year and the date of distribution) or any adjustment for income or loss during the gap period.

Section 7.   Modification in Methodology to Determine the Amount of S-Corp Stock for an ESOP

7.1   o  Not Applicable.The Plan is not an ESOP.

7.2   x  Not Applicable.Even though the Plan is an ESOP, the Sponsoring Employer elects not to adopt this discretionary amendment of Section 7.

7.3   o  Effective Date.This Section is effective as of _______________________________________. (Note: This date cannot be earlier than the first day of the first plan year beginning on or after January 1, 2007)

7.4   Prohibited Allocation of Company Stock of an S Corporation.If Section 7.3 is checked, then notwithstanding any provision of this Plan to the contrary, no portion of the assets of the Plan attributable to (or allocable in lieu of) company stock issued by an S corporation may, during a nonallocation year, be allocated directly or indirectly for the benefit of any disqualified person under this Plan or under any other qualified plan of the Employer, subject to the following provisions:

(a)   Nonallocation Year.The term "nonallocation year" means any plan year in which (1) the Plan holds company stock of an S corporation, and (2) "disqualified persons" own at least 50% of such company stock. In determining ownership under clause (2), the rules of Code §318(a) will apply, except that in applying Code §318(a)(1), the members of an individual's family will include members of the family described in subparagraph (4) below, and Code §318(a)(4) will not apply. In addition, notwithstanding the employee trust exception in Code §318(a)(2)(B)(i), an individual will be treated as owning deemed-owned shares of the individual, and solely for purposes of applying subparagraph (e) below, this subparagraph will be applied after the attribution rules of subparagraph (e) have been applied.

21

(b)   Disqualified Person.The term "disqualified person" means any person whose number of deemed-owned shares in the S corporation is at least 10% of the deemed-owned shares in such corporation, or whose number of shares of deemed-owned shares in the S corporation, when aggregated with the deemed-owned shares of his or her family members, is at least 20% of the number of deemed-owned shares of stock in the S corporation. Any member of a disqualified person's family with deemed-owned shares will be treated as a disqualified person if not otherwise treated as a disqualified person under this subparagraph.

(c)   Deemed-Owned Shares.The term "deemed-owned shares" means, with respect to any person, (1) company stock of the S corporation which is allocated to such person under the Plan, and (2) the person's share of such company stock which is held by the Plan but is not allocated to participants. A person's share of unallocated S corporation company stock held by the Plan is the amount of such unallocated company stock which would be allocated to him or her if such unallocated company stock were allocated to all participants in the same proportion as the most recent company stock allocation under the Plan.

(d)   Member of the Family.The term "member of the family" means, with respect to any individual, (1) the spouse of the individual; (2) an ancestor or lineal descendant of the individual or the individual's spouse; (3) a brother or sister of the individual or his or her spouse and any lineal descendant of the brother or sister; and (4) the spouse of any individual described in clause (2) or (3). However, a spouse who is legally separated from such individual under a decree of divorce or separate maintenance will not be treated as such individual's spouse.

(e)   Treatment of Synthetic Equity.For purposes of subparagraphs (a) and (b), in the case of a person who owns synthetic equity in the S corporation, except to the extent provided in regulations, the shares of stock in the corporation on which the synthetic equity is based will be treated as outstanding stock in the corporation and deemed-owned shares of such person if the treatment of synthetic equity of one or more such persons results in (1) the treatment of any person as a disqualified person, or (2) the treatment of any year as a nonallocation year. For purposes hereof, synthetic equity is treated as owned by a person in the same manner as stock is treated as owned by a person under Code §318(a)(2) and (3). If, without regard to this subparagraph, a person is treated as a disqualified person or a year is treated as a nonallocation year, this subparagraph will not be construed to result in the person or year not being so treated.

(f)   Synthetic Equity.The term "synthetic equity" means any stock option, warrant, restricted stock, deferred issuance stock right, or similar interest or right that gives the holder the right to acquire or receive stock of the S corporation in the future. Except to the extent provided in Regulations, synthetic equity also includes a stock appreciation right, phantom stock unit, or similar right to a future cash payment based on the value of such stock or appreciation in such value.

22

Se    Section 8.  Signature Provisions

8.1   Signature of the Authorized Representative of the Sponsoring Employer:

By    /s/ Cristin K. Reid                                                                                              Date:  January 1, 2008

Print Name:  Cristin K. Reid                                                                                        Title:  Corporate President

23

EX-13

EXHIBIT 13

TABLE OF CONTENTS

 Arrowhead Community Bank

 Asian Bank of Arizona

 Bank of Tucson

 Camelback Community Bank

 Mesa Bank

 Southern Arizona Community Bank

 Sunrise Bank of Albuquerque

 Sunrise Bank of Arizona

 Valley First Community Bank

 Yuma Community Bank

 Bank of Escondido

 Bank of Feather River

 Bank of San Francisco

 Bank of Santa Barbara

 Napa Community Bank

 Point Loma Community Bank

 Sunrise Bank of San Diego

 Sunrise Community Bank

 Fort Collins Commerce Bank

 Larimer Bank of Commerce

 Loveland Bank of Commerce

 Ann Arbor Commerce Bank

 Bank of Auburn Hills

 Bank of Maumee

 Bank of Michigan

 Brighton Commerce Bank

 Capitol National Bank

 Detroit Commerce Bank

 Elkhart Community Bank

 Evansville Commerce Bank

 Goshen Community Bank

 Grand Haven Bank

 Kent Commerce Bank

 Macomb Community Bank

 Muskegon Commerce Bank

 Oakland Commerce Bank

 Ohio Commerce Bank

 Paragon Bank & Trust

 Portage Commerce Bank

 Bank of Belleville

 Community Bank of Lincoln

 Summit Bank of Kansas City

 1st Commerce Bank

 Bank of Las Vegas

 Black Mountain Community Bank

 Desert Community Bank

 Red Rock Community Bank

 USNY Bank

 Bank of Bellevue

 Bank of Everett

 Bank of Tacoma

 High Desert Bank

 Issaquah Community Bank

 Bank of Valdosta

 Community Bank of Rowan

 First Carolina State Bank

 Peoples State Bank

 Sunrise Bank of Atlanta

 Bank of Fort Bend

 Bank of Las Colinas

 Amera Mortgage Corporation

 Capitol Wealth

LETTER FROM THE CHAIRMAN

Dear Shareholder:

During the course of 2007, the American banking industry was bombarded with negative events leading to declines in earnings and, of course, market value reductions. The housing and mortgage industry fallout, margin compression and credit quality deterioration produced an economic tsunami affecting most every financial institution in the United States.

For Capitol Bancorp, earnings for the year were cut in half from $42.4 million ($2.57 per diluted share) to $21.9 million ($1.27 per diluted share). Capitol Bancorp’s stock price was reduced from $46.20 per share to $20.12 per share. Talk of recession shared the front page of our newspapers with the Iraq War and presidential politics.

Although the business of Capitol Bancorp banks is not based on subprime residential lending, we, like all financial institutions, are affected by it. It is during these times that it is important to stay focused on our objective as a community bank company — to develop a national affiliation of community banks which represents all major regions of the United States.

REGIONAL BALANCE

One of the risks of a small community bank is geographical concentration. It is a risk which is difficult to offset. If the community suffers economically, then there is a high probability that the community bank will suffer with it. When a series of affiliated community banks are clustered within the same region, then all are affected by the economic fortunes of that region. We have witnessed regional economic downturns throughout our history.

If a community bank company can be established with a material presence in every major region of the United States, then a regional weakness will not serve to derail the performance of the whole company. It is this point which reveals the underlying objective of Capitol Bancorp. Ironically, it is the weakened performance of the Great Lakes Region which vividly makes this point.

We have identified and are operating in 10 separate regions of the United States today. The Great Lakes Region has undergone a most difficult economic adjustment largely as a result of its auto industry concentration. Because we began in the Great Lakes Region years ago, we remain overly concentrated in this region today. Specifically, 41.7% of our total assets rest in the Great Lakes. Although this is down from 46.7% in 2006, it remains disproportionate to the other regions of the United States.

BANK DEVELOPMENT

The cover of this report suggests the feverish pace with which we have operated over the

2

past year, moving Capitol Bancorp a step closer to regional balance. In 2007 we added 11 new community banks, more than any other previous year in our history. This included two banks in Texas; two in California; two in Colorado; two in Washington; one in Oregon; one in New York; and one in Nebraska. New bank development promotes growth.Our asset growth rate for 2007 was 20.6%, moving from $4.1 billion to more than $4.9 billion over the course of the year. During that period portfolio loans increased from $3.5 billion to more than $4.3 billion representing an increase of 23.7%.

Unlike a new branch of an existing bank, the development of a new bank is a challenging undertaking. It requires a high level of direct, personal involvement by the officer group of Capitol Bancorp. Selection of the president and a board of directors is both crucial and time consuming. Location, staffing and the development of a marketing strategy each require large concentrations of time and energy. The regulatory process is cumbersome at best. Finally, raising the necessary local capital provides its own obstacles. This is why we are particularly pleased with the 11 successful development efforts of 2007.

IN 2008

As the cover of this report also portrays, we continue to follow our strategic highway to develop a regionally-balanced national affiliation of community banks. Over the course of the current year, we will continue to pursue our objective with the addition of several new bank affiliates. We will continue our intensified effort to promote an exemplary risk management program. We will continue to strengthen our core information technology, providing enhancements to the product offerings at our bank affiliates. In this regard, we expect to have completed our remote deposit project which began in 2007.

LOUIS ALLEN AND ROBERT CARR

The past year proved to be particularly difficult for all of us here at Capitol Bancorp with the passing of our dear friends and colleagues, Louis Allen and Robert Carr. Lou joined our Board of Directors in 1994 and served with distinction. He was particularly helpful to us over these years drawing on a lifetime of experience as a banker.

Bob was president of our first bank, Capitol National Bank, which opened in 1982. He served as a valuable mentor to many of the bank presidents who followed as we developed additional banks across the country. Bob ultimately served as vice chairman of Capitol Bancorp. He, along with a small handful of others, was truly a founder of Capitol Bancorp. We all learned a great deal about banking from Bob. He challenged every step taken by Capitol Bancorp as it grew; constantly reminding us that banking is a “people business.” We will continue to build on the legacy of Lou Allen and Bob Carr.

3

CONCLUSION

At year end Capitol Bancorp banks represented 60 bank presidents; 636 board of director seats; 60 different bank names; and operations in 17 states. There are today more than 1,700 employees. Our customers expect a high level of service from people without being forwarded to an 800 number.

As the “largest small bank company in America” we need to remain constantly vigilant to the importance of service and to the importance of the fact that “CBC banking” is, has been and will continue to be a “people business.”

Thank you for your support of our efforts.

JOSEPH D. REID

Chairman & CEO

Capitol Bancorp Limited

We have identified and are operating in 10 separate regions of the United States today.

We will continue to pursue our objective of a regionally-balanced national affiliation of community-based banks.

THE QUINTESSENTIAL

COMMUNITY BANKER

“Banking always has

been, and always will be,

a people business.”

Robert C. Carr

1939 - 2007

BOARD OF DIRECTORS

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Michael L. Kasten

Vice Chairman, Capitol Bancorp Limited

Managing Partner

Kasten Investments, LLC

Lyle W. Miller

Vice Chairman, Capitol Bancorp Limited

President

L.W. Miller Holding Co.

David J. O’Leary

Secretary, Capitol Bancorp Limited

Chairman

O’Leary Paint Company

Paul R. Ballard

Retired President & CEO

Portage Commerce Bank

David L. Becker

Retired Founder

Becker Insurance Agency, PC

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, DO

Gary A. Falkenberg, PC

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.

and H. N. Genova Development

Michael F. Hannley

President & CEO

Bank of Tucson

Richard A. Henderson

President

Henderson & Associates, PC

Lewis D. Johns

President

Mid-Michigan Investment Co.

John S. Lewis

President of Bank Performance

Capitol Bancorp Limited

Leonard Maas

President

L&M Maas Investments, LLC

Myrl D. Nofziger

President

Hoogenboom Nofziger

Cristin K. Reid

Corporate President

Capitol Bancorp Limited

Ronald K. Sable

President

Concord Solutions Ltd.

4

FINANCIAL HIGHLIGHTS

In millions, except per share amounts

5

ARIZONA REGION

John S. Lewis, Region President

  7Arrowhead Community Bank

  8Asian Bank of Arizona

  9Bank of Tucson

10Camelback Community Bank

11Mesa Bank

12      Southern Arizona Community Bank

13Sunrise Bank of Albuquerque

14      Sunrise Bank of Arizona

15      Valley First Community Bank

16      Yuma Community Bank

6

ARROWHEAD COMMUNITY BANK

Arlene Kulzer, President & CEO

Individual success stories have been among the highlights of 2007. Arrowhead Community Bank has continued its steady growth trend and our associated financial institutions, including Capitol Wealth Advisors and Equipment Leasing Services, have both spurred and shared in that forward movement. Like all accomplished entrepreneurs, we understand success does not just come to those who want it — success is reserved for those who focus and pursue it.

Over the past year, Linda Reynolds, owner of Care from the Heart, a non-medical in-home care provider, realized her dream of owning her own building in the Sun City market. Reynolds shared her dream with West USA Realty agent Audrey Hickman and through their combined efforts they found a perfectly located — albeit a larger building than Reynolds required. Focusing on the desired end result, Reynolds and Hickman soon secured letters of interest and signed contracts from prospective tenants. At this point they sought the assistance of Arrowhead’s Deb Charlesworth, who assembled an attractive financing package.

When Dr. Amol Rakkar and his wife, Dr. Navjot Rakkar, mentioned their desire to prepare for their children’s education, Charlesworth introduced the Rakkars to our Capitol Wealth Advisors investment executive, Richard Oliver. After several Saturday sessions with the Rakkars, Oliver was able to establish a tax exempt account for their children’s future education and assist the doctors in investing in other products designed to provide them with peace of mind and financial security. The Rakkars were so impressed with the service they received they referred Dr. Sra to the bank.

After interviewing Dr. Sra, Charlesworth introduced him to an account executive at Equipment Leasing Services. The account executive was able to rewrite Dr. Sra’s equipment leases, saving him more than $25,000 per month in lease payments.

At Arrowhead Community Bank, our team members are committed to working with our strategic partners for the benefit of our loyal clients. This cooperative approach to business has been the key to our success in the past and it will continue to be the key to our future.

— Arlene Kulzer, President & CEO

Success is reserved for those who focus and pursue it.

17235 North 75th Avenue, Suite B100 | Glendale, AZ 85308

623.776.0800 | www.arrowheadcommunitybank.com

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

Hon. Thomas R. Eggleston Sr.

Retired

Vice Mayor of Glendale

George L. Evans, PE, RLS

President & Co-Founder

Evans, Kuhn & Associates, Inc.

Richard J. Hilde

Retired CEO

EPW Inc.

David R. Hunter, DDS

Orthodontist

David R. Hunter DDS, PC

Arlene Kulzer

President & CEO

Arrowhead Community Bank

James J. McCue

Aviation Consultant

Sherwin Industries

Terrance C. Mead

Attorney at Law

Mead & Associates, PC

John C. Ogden

Retired CEO

SunCor Development Company

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

W. Patrick Daggett

Chair, Directors Loan

Committee

Amy Lou Blunt

Executive Vice President & CCO

Deborah M. Charlesworth

Senior Vice President

Mary Catherine Mireles

Senior Vice President

Richard L. Oliver

Senior Vice President

William H. Smith

Senior Vice President

Michael T. Ganahl

Vice President

Stacey J. Morrison

Vice President

Ann L. Nestler

Vice President

Nancy M. Seid

Vice President

7

ASIAN BANK OF ARIZONA

Leslie M. Gin, President

Asian Bank of Arizona has been successful over the past year in establishing name recognition in our market area. Our multi-faceted marketing strategy is beginning to produce results.

Starting with our location in the COFCO Chinese Cultural Center, the bank is a part of the most identifiable Asian landmark in Arizona. The Community Art Wall inside the bank is a popular attraction for our diverse clientele. Art representing China, India, Japan and the Philippines was displayed in 2007.

Last year we were invited by the Arizona Chinese News to write a financial education article in the weekly Chinese-language newspaper with statewide readership. This has resulted in numerous inquiries, several new account openings and further name recognition for the bank. Due to the popularity of these articles, the Las Vegas Chinese Daily News, which recently expanded to the Phoenix area, also started publishing our articles for its two-city readership.

Asian Bank last year hosted the Greater Phoenix Chamber of Commerce monthly mixer for about 80 business members, many of whom had never been to the Chinese Cultural Center. Featuring food, entertainment and a free drawing, the two-hour event took place in the Chinese gardens next to the bank. Our guests were amazed by our beautiful and vibrant business center.

Asian Bank continues to host the monthly meetings for the Philippine Chamber of Commerce, the National Association of Asian American Professionals and the Chinese American Citizens Alliance. This “open door” strategy is yet another way to increase exposure for the bank while providing a worthwhile service for non-profit organizations.

In May 2007, I was recognized as a Friend of the Pan Asian Community Alliance in Tucson for championing cultural diversity and for philanthropic services and achievements. Last summer, I was also elected to the Maricopa County Community College Foundation Board.

In 2007 the bank added five new board members; four based in Phoenix and one in Tucson. All five have been active in providing lucrative business referrals.

Our multi-faceted marketing strategy is designed to build a bank that lasts, serving the diverse cultures that make up the American Southwest.

— Leslie M. Gin, President

Serving the diverse cultures that make up the American Southwest.

668 North 44th Street, Suite 123 | Phoenix, AZ 85008

602.263.8888 | www.asianbankaz.com

BOARD OF DIRECTORS

Jay A. Bansal

Attorney at Law

Law Offices of Jay A. Bansal

David M. Chei, DMD

Doctor of Dentistry

Somer Dental PLLC

Jae M. Chin

Business Owner

JC Prince LLC

Michael J. Devine

Attorney at Law

Leslie M. Gin

President

Asian Bank of Arizona

Robert E. Hite

President

Securitech, Inc.

John S. Lewis

President of Bank Performance

Capitol Bancorp Limited

Rano K. Singh-Sidhu

Business Owner

DPS Biotech SW

OFFICERS

John S. Lewis

Chairman

Michael J. Devine

Secretary

Leslie M. Gin

President

James A. Klussman

Executive Vice President & CCO

Bruce A. Kottwitz

Vice President

Ryan J. Mulligan

Vice President

Beverly F. Santiago

Vice President

Steven C. Soong

Vice President

8

BANK OF TUCSON

Michael F. Hannley, President & CEO

Bank of Tucson exceeded every financial goal we set for 2007. At the same time that we enjoyed our success we knew that providing “banking as usual” would not assure our continued prosperity. As a result, 2007 was a year of change. The change was driven primarily by an all-out effort to improve on the bank’s stellar performance while also delivering the type of cutting-edge financial products and services we needed in our arsenal to remain ahead of the competition.

Following an in-depth assessment of the bank’s first 11 years and extensive discussions with our board of directors, we adjusted our business plan to take advantage of the changing banking landscape. Our plans for “The Next 10” started with the bank doubling its physical size. We established an “e-banking” department. We provided remote capture of deposits and integrated Capitol Wealth Advisors and brokerage services into our main office in Tucson. At the same time, we are diligently attending to the needs of our customers. After all, it was this type of excellent customer service that was so successful for us during the first 11 years.

Our extraordinary customer service and financial success in Tucson is being replicated in Nogales, Arizona. The dramatic growth of the small loan office we launched four years ago led to the October 2007 opening of our signature building named “Bank of Tucson Business Center” in Nogales. This office, which concentrates on serving companies involved in cross-border commerce and industry, is already making significant contributions to our bottom line and giving our bank a growing presence in Mexico.

Our board of directors has also established an advisory board of entrepreneurs in the community. These new leaders are being trained in the business of banking and are being prepared for potential future openings on the board of directors. This is a crucial investment in our bank’s development.

With the enthusiastic participation of every member of the bank team, we will continue to capitalize on business opportunities made available by the changing economy as we set a new standard for community banking.

— Michael F. Hannley, President & CEO

Bank of Tucson exceeded every financial goal we set for 2007.

4400 East Broadway | Tucson, AZ 85711

520.321.4500 | www.bankoftucson.com

825 North Grand Avenue | Nogales, AZ 85621

520.397.9220 | Nogales Office

BOARD OF DIRECTORS

Bruce I. Ash

President & CEO

Paul Ash Management

Company, LLC

Slivy Edmonds Cotton

Chairman & CEO

Portico LLM Enterprises, LLC

Bradley H. Feder

Managing Partner

Simply Bits, LLC

Michael F. Hannley

President & CEO

Bank of Tucson

Michael J. Harris

Vice President

Long Realty Company

Richard F. Imwalle

President

Richard F. Imwalle & Associates

David Jeong, CPA

President

Jeong Lizardi, PC

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Burton J. Kinerk

Attorney at Law

Kinerk, Beal, Schmidt, Dyer &

Sethi, PC

Harold H. Kitay

Commercial Developer & Owner

Whirlygig Properties, LLC

Humberto S. Lopez

President

HSL Properties, Inc.

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

Sandra 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

Clay A. Naff

Vice President

Robert D. Placzek

Vice President

Patricia A. Taylor

Vice President

9

CAMELBACK COMMUNITY BANK

Gail E. Grace, President & CEO

For Camelback Community Bank, 2007 was a good, yet challenging year. We were fortunate to welcome new staff members who not only generated new customer relationships for the bank but who also benefited from our seasoned employees’ experience and expertise. Old and new alike, everyone was instrumental in Camelback Community Bank being named the #1 bank in its asset category in Ranking Arizona for the fourth consecutive year. We are very proud of this recognition and could not have achieved this without the loyalty of our customers.

Our focus continues to be on forming partnership relationships with our customers, being trusted advisors and helping them achieve their financial goals. We also recognize the importance of giving back to our community. Through various contributions and our staff’s involvement in a number of local organizations, we are helping meet the needs of our diverse community while also gaining positive publicity and exposure for our bank.

In 2008, Camelback Community Bank will celebrate its 10th year in business. Each year, we have continued to improve performance through the growth of our customer base, providing the very best customer service and offering a wide array of products to meet all of their financial needs. As part of recognizing our 10 years in business, we also underwent some renovations, creating a more pleasant environment for both our customers and staff.

The bank is expanding its reach within the Phoenix market. With the many ways in which we can deliver our products and services, we are not limited to serving only customers in our immediate area. Our customers are located throughout the Valley of the Sun and appreciate the ways we make banking as convenient as they need it — whether it’s through the various online options or the extensive ATM network available to them. We strive to keep pace with current technology so we always have the big bank offerings with the community bank delivery.

Camelback Community Bank is fortunate to have the very best staff with a high level of expertise. With our excellent staff and highly engaged board of directors, we have the team necessary to grow the bank profitably for the next 10 years.

— Gail E. Grace, President & CEO

Named the #1 bank in its asset category in Ranking Arizona for the fourth consecutive year.

2777 East Camelback Road, Suite 100 | Phoenix, AZ 85016

602.224.5800 | www.camelbackbank.com

BOARD OF DIRECTORS

Shirley A. Agnos

President Emerita

Arizona Town Hall

Cord D. Armstrong, CPA

Senior Tax Manager

CBIZ Accounting,

Tax & Advisory Services, LLC

Michael J. Devine

Attorney at Law

James L. Essert

Vice President

Portfolio Manager

ING Investment Management Co.

Gail E. Grace

President & CEO

Camelback Community Bank

S. Jill Hastings, JD

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

Chairman

Camelback Community Bank

Robert S. Roda, DDS, MS

Roda & Sluyk Ltd.

Daniel A. Robledo

Senior Vice President

Land America Financial

Group, Inc.

Kenneth Van Winkle Jr.

Attorney at Law

Lewis & Roca, LLP

OFFICERS

Barbara J. Ralston

Chairman

Dan A. Robledo

Vice Chairman

Gail E. Grace

President & CEO

Shirley A. Agnos

Secretary

Timothy J. Hoekstra

Executive Vice President & CCO

Tricia A. Blaylock

Vice President

Darrin R. Davidson

Vice President

Todd W. Grady

Vice President

Jennifer S. Higgins

Vice President

William F. Von Hatten

Vice President

10

MESA BANK

Neil R. Barna, President & CEO

The success of our customers remains the focus of the Mesa Bank team. This will never change. “Our Clientele is our Sales Force” is the motto that guides our daily tasks. Along the way, dramatic events occur that pave the way and smooth our path so we retain the edge required to manage a successful financial entity.

In January, Mesa Bank began operations in our neighboring community of Chandler, Arizona, with East Valley Bank. Client demand required such a move in order to maintain the convenience and attention to service that customers have grown to expect. Newly appointed in 2007 as executive vice presidents, Sandra Zazula and Staci Charles oversee client needs at this location, complementing the fine service provided by our two other existing locations.

Our team of professional bankers set us apart from the rest. “Golden Honors for Golden Service” recognizes the best of the best employees in client relationship building each quarter. Nominations limited to fellow employees make this award even more special. The annual Mesa Bank client appreciation day at the Chicago Cubs’ spring training facility, organized by vice president Conrad Morin, has created a literal waiting list of excited customers. Portfolio manager Rick Sweetnam came up with the idea to spend an evening with employees and their families at an Arizona Diamondbacks baseball game. In only its second year, the turnout for this event doubled from the first year. Finally, the employee Team PICKLE (Professionalism, Integrity, Communication, Knowledge, Loyalty, Exemplified) customer appreciation event draws the attention of everyone that comes into the bank and is the brainchild of Sandra Zazula and her team of bank operations specialists.

Along the way, we celebrated our ninth year of operation by being named the 2007 Business of the Year by the Mesa Chamber of Commerce. We were recognized for our community involvement with the Crystal Award from A.T. Still University in Mesa. Both achievements resulted from our focus on the success of our customers.

It’s all about the client. It’s all about the team. Our success depends on it.

— Neil R. Barna, President & CEO

Named the 2007 Business of the Year by the Mesa Chamber of Commerce.

63 East Main Street, Suite 100 | Mesa, AZ 85201

480.649.5100 | www.mesabankers.com

1733 North Greenfield Road, Suite 101 | Mesa, AZ 85205

480.324.3500 | Mesa Falcon Field Office

1940 North Alma School Road | Chandler, AZ 85224

480.726.6500 | www.eastvalleybank.com | East Valley Bank

BOARD OF DIRECTORS

Neil R. Barna

President & CEO

Mesa Bank

Steve Chader

Operating Principal

Keller Williams Integrity First

Michael J. Devine

Attorney at Law

Debra L. Duvall, EdD

Superintendent

Mesa Public Schools

Robert R. Evans Sr.

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

Managing Member

LeBaron & Carroll LLC

Joseph A. Tameron

CPA & Partner

Skinner, Tameron &

Company, LLP

James K. Zaharis, EdD

President

The Zaharis Group

OFFICERS

Stewart A. Hogue

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

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

11

SOUTHERN ARIZONA COMMUNITY BANK

John P. Lewis, President & CEO

Southern Arizona Community Bank received its highest honor yet when it was presented with the Pinnacle Award by the Northern Pima County Chamber of Commerce in 2007. The award is given to the small business that has done the best job in improving the quality of life in Pima County. We believe this recognition reflects our strong commitment to community involvement and personal service.

One of our most important ongoing areas of community service is to help the businesses, property owners and public facilities on Mount Lemmon recover from devastating wildfires. The bank has provided construction and permanent financing for a number of homes and the rebuilding of the mountain community’s vital general store, which re-opened for business less than a year after it was destroyed. More recently, the bank earned applause for the dedication of the 2,300-square-foot Mount Lemmon community center. As a property owner and business leader, I am honored to serve as an elected member of the community center’s board of directors.

Last year, Southern Arizona Community Bank supported more than 30 nonprofit groups, helping to provide a brighter future for at-risk children, the disabled and the poor. This support has included providing internships for people at the Arizona School for the Deaf and Blind, participation in the American Cancer Society’s Relay for Life, and donations to Big Brothers & Big Sisters of Arizona. In the fall, we presented a minority middle school with a check for $110,000 made possible through the Arizona State Income Tax Credit Initiative. This bequest ultimately resulted in the Institute for Better Education, which administers this tax credit program for more than 140 schools, bringing its banking business to our bank.

The team at Southern Arizona Community Bank celebrated the bank’s ninth anniversary in August 2007. We are proud of the many achievements we have made as a bank and as individuals. Our goal is to build on these achievements so that we can look forward to experiencing even greater satisfaction in the years to come.

— John P. Lewis, President & CEO

Southern Arizona Community Bank was presented with the Pinnacle Award by the Northern Pima County Chamber of Commerce.

6400 North Oracle Road | Tucson, AZ 85704

520.219.5000 | www.southernarizonabank.com

BOARD OF DIRECTORS

William R. Assenmacher

President

TA Caid Industries, Inc.

Jody A. Comstock, MD

Physician & Owner

Skin Spectrum

Amram Dahukey, DPM

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 & Rogers, PC

Jean M. Tkachyk

CFO

University Physicians Healthcare

Paul A. Zucarelli

Principal

CBIZ Benefits & Insurance

Services, Inc.

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 & COO

12

SUNRISE BANK OF ALBUQUERQUE

Steven A. Marcum, President & CEO

The past year was a memorable one primarily because we completed the consolidation and relocation of our business into a historic building we believe is the premier banking facility in the heart of downtown Albuquerque. Located on legendary Route 66, the building’s construction coincided with the birth of the “Mother Road.” Starting in Chicago and ending in Los Angeles, Route 66 symbolized the “road to opportunity” and our building has stood as the landmark for banking in Albuquerque for many years.

We believe the relocation of Sunrise Bank of Albuquerque increases our visibility, enhances our image and provides the foundation for future growth based on relationship banking.

Relationship banking is the essential ingredient for any successful community bank and a fundamental component for our continued success. We will continue to recruit bank board members and seasoned bankers who understand this philosophy and can bring quality relationships to our bank. This strategy paid dividends last year as we saw significant growth and increased quality in our loan portfolio. Our challenge going forward will be to build a larger deposit base. To that end, we have attracted bankers with the experience and energy to replicate the success we enjoyed last year in lending.

We remain committed to giving back to the community we serve with both time and money and that commitment increased last year. For the third consecutive year, we reported 100 percent employee participation in the United Way of Central New Mexico campaign, with a healthy increase in total contributions. We also provided support to many other worthy organizations, including Big Brothers Big Sisters of Central New Mexico, the Juvenile Diabetes Research Foundation, The Food Pantry and Bernalillo County 4-H.

Moving to a historically significant landmark is not about looking back. It is about looking forward because we understand we are creating history each day. Our goal is to be the best community bank in Albuquerque. This is history in the making.

— Steven A. Marcum, President & CEO

Located on legendary Route 66, our building has stood as the landmark for banking in Albuquerque for many years.

219 Central Avenue NW, Suite 100 | Albuquerque, NM 87102

505.244.8000 | www.sunrisebankabq.com

BOARD OF DIRECTORS

Annette Arrigoni

Account Executive

Berger Briggs Real Estate and

Insurance, Inc.

Turner W. Branch

President

Branch Law Firm, PA

Helen A. Elliott, CPA

Elliott, Pohlman & Co., CPAs, PC

Steven A. Marcum

President & CEO

Sunrise Bank of Albuquerque

James Rogers

Chief Manager

Sunland Development Group LLC

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

Chief of Bank Financial Analysis

Capitol Bancorp Limited

OFFICERS

Stephen D. Todd

Chairman

Ronald K. Sable

Vice Chairman

Steven A. Marcum

President & CEO

Robert J. Valdiviez

Executive Vice President & CCO

Benjamin R. Raskob

Senior Vice President

Michael J. Sanchez

Senior Vice President

Antoinette E. Creel

Vice President

Brad L. Sackett

Vice President

13

SUNRISE BANK OF ARIZONA

Douglas E. White, President & CEO

Sunrise Bank of Arizona’s outlook for the future is full of ambition, energy and optimism. Our team has a primary goal of being one of Arizona’s greatest community banks. To achieve this lofty goal we must execute our strategic roadmap to perfection.

We knew it would take a very talented group of skilled team members to grow our bank. In 2007, we added knowledgeable, experienced bankers to our retail, underwriting, client services, business development and commercial lending teams. All of these team members are exceptional banking professionals with tremendous skills. Combining our existing core team with our new additions makes Sunrise Bank of Arizona a formidable competitor within the state of Arizona.

Our board members are an integral part of our team and vital to our future. Their value to our bank has been proven many times in 2007. Our bank’s success in 2008 will be significantly enhanced by the number of referrals and opportunities presented to our team by our directors.

In 2008, we are reintroducing our bank to our community. We are the co-developer and presenter of a financial literacy program for charter schools. We also act as the title sponsor of the 5th Avenue Farmers Market in Scottsdale, Arizona. Our team is active and will increase our efforts with the Hispanic Chamber, United States Hispanic Chamber, Italian Chamber and the Scottsdale Chamber of Commerce. We are a sponsor of the Arcadia Pride 5K run and a contributor to Free Arts of Arizona, Mission of Mercy and the Boys & Girls Club. Every community contribution we make is specifically targeted to benefit children, cultural events, education and/or the arts.

Lastly, we have created two very important teams. The Creative Solutions team takes on our marketing and community challenges. Our Raving Fans team ensures that the recognition of our team members is always the most important thing we do. As we continue to grow our community bank, these two teams will be essential to our success.

— Douglas E. White, President & CEO

Our board members are an integral part of our team and vital to our future.

4350 East Camelback Road, Suite 100A | Phoenix, AZ 85018

480.624.2600 | www.sunrisebankofarizona.com

6263 North Scottsdale Road, Suite 100 | Scottsdale, AZ 85250

480.624.2600

BOARD OF DIRECTORS

Thomas W. Beal

President

Beal Benefit Solutions

Patrick M. Devine

Vice President

CB Richard Ellis Brokerage

Services

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 of Bank

Performance

Capitol Bancorp Limited

Glen M. Lineberry

Principal

Lineberry Associates

Richard Lustiger

General Counsel

Harkins Theaters

Gregory G. McGill

Attorney at Law

Gregory G. McGill, P.C.

Andrew C. Pacheco

Attorney at Law

Sanders & Parks

Joe W. Panter

Partner

Wildflower Bread Co.

Whitestone Financial

Douglas E. White

President & CEO

Sunrise Bank of Arizona

OFFICERS

Michael L. Kasten

Chairman

Richard E. Garcia

Vice Chairman

Douglas E. White

President & CEO

Shari A. White

Secretary

David W. Tracy

Executive Vice President

& CCO

Tyrone D. Couch

Senior Vice President

Gary M. Gibbs

Senior Vice President

Mary S. Madison

Senior Vice President

Richard M. Manning

Senior Vice President

Cindy L. Batten

Vice President

Robert J. Cantazaro

Vice President

Jon M. Chase

Vice President

Byron E. Gaylord

Vice President

Cynthia J. Heaps

Vice President

Joseph M. Koller

Vice President

Jill J. Lowell

Vice President

Kristi M. Richards

Vice President

Alex Solis

Vice President

Eric A. Stellhorn

Vice President

14

VALLEY FIRST COMMUNITY BANK

Judith R. Egan, President & CEO

At Valley First Community Bank we achieved two milestones in 2007. We celebrated the bank’s 10th anniversary and relocated the bank to a larger and more visible location that will accommodate our growth for many years to come.

We also rededicated ourselves to delivering exceptional and unexpected service to our customers. That service delivery starts with our customer guarantee:

“We guarantee every customer that they will personally know at least three of our highly experienced bankers and one of them will always be available when they are needed.”

In addition to our guarantee, we execute several “points of light” that impress and delight our customers, setting us apart from our competition.

Each morning we post the names of scheduled visitors to our bank on the welcome board in our lobby. Every team member also records a new voice message every day so that all callers know whether that team member is present and when they can expect a return call.

Our loan officers are present at loan closings held at title or escrow companies to assist our customers in understanding the voluminous documents they are asked to sign.

Every new customer receives a personal letter from me thanking them for their business and offering them an opportunity to provide feedback on the service they received from our team members.

All of these “points of light” and many other things we do both surprise and delight our customers because they are unexpected and make our customers feel valued and recognized.

O. Robin Sweet, executive director, Gateway Academy: “This is the best banking experience to date. You define what personal banking is all about.”

Henry Scheinerman, president, Today’s Pool and Patio: “You are at the top in customer service. I model my business the same way — customer service is key.”

We look forward to continuing to “wow” our customers in 2008 and for years to come.

— Judith R. Egan, President & CEO

We guarantee every customer that they will personally know at least three of our highly experienced bankers…

7001 North Scottsdale Road, Suite 1000 | Scottsdale, AZ 85253

480.596.0883 | www.valleyfirstbank.com

BOARD OF DIRECTORS

Sam Kathryn Campana

Vice President & Executive Director

National Audubon Society, Inc.

Scott B. Cohen

Attorney at Law

Sacks Tierney PA

Judith R. Egan

President & CEO

Valley First Community Bank

William R. Fitzpatrick, CPA

Eide Bailly

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Frederick L. Kidder

Chief Executive Officer

Scottsdale Area Chamber of Commerce

Stewart Larsen

President & Broker

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, PC Law Firm

OFFICERS

Gordon D. Murphy

Chairman

Michael L. Kasten

Vice Chairman

Sam Kathryn Campana

Secretary

Judith R. Egan

President & CEO

Roni M. Grodnick

Executive Vice President & CCO

Nancy E. Selby

Executive Vice President

Cheryl L. DeGroot

Vice President

Daniel R. Klenske

Vice President

Michele J. Yates

Vice President

15

YUMA COMMUNITY BANK

Katherine M. Brandon, President & CEO

Over the past seven years, the team at Yuma Community Bank has worked diligently to build our bank, yet each new challenging opportunity shows us that we are only getting started. There are more relationships to build, more contracts to be won and more deals to be done. At the same time, we are committed to supporting our community.

The Yuma marketplace has changed profoundly in the past 10 years and continues to grow. The opening of our new bank building on South 4th Avenue in 2005 led to numerous new business opportunities. Just two years later, we are expanding again with a new office in the high-growth area of the Foothills section of Yuma, which is about 15 miles east of our main office. The new office opened its doors in January of 2008.

A new opportunity presented itself when General Motors (GM) recently announced a partnership between the U.S. Army and GM to build a $120 million joint-use hot weather test track for GM. We were proud to support the community in its economic growth as a host sponsor at a GM welcome dinner event. The economic impact on Yuma County as a result of the project promises to be considerable.

Yuma Community Bank presented a financial education program to a group of seventh and eighth grade students at Centennial School. We plan to offer presentations to the same students as they move up in grades through high school graduation. The program is funded by a government grant to reduce the drop-out rate among at-risk teenagers. Offering these students the opportunity to learn banking basics may be the best way to help them develop good financial habits. Over the long-term, it can improve the economic outlook for an entire community and can create new business development opportunities for our bank.

As can be seen, Yuma Community Bank continues to grow along with Yuma County. As we grow, we will maintain our commitment to supporting our community as well.

— Katherine M. Brandon, President & CEO

We are expanding again with a new office in the high-growth area of the Foothills section of Yuma.

2285 South 4th Avenue | Yuma, AZ 85364

928.782.7000 | www.yumabank.com

11242 South Foothills Boulevard | Yuma, AZ 85367

928.945.3888

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.

Michael Didier

Treasurer

Select Seed of Arizona, Inc.

Ram R. Krishna, MD

President

Ram R. Krishna, MD, PC

John T. Osterman

President

Osterman Financial Group

Ronald K. Sable

President

Concord Solutions Ltd.

David S. Sellers

President

Sellers Petroleum

John R. Sternitzke

Owner

Sternco Engineers, Inc.

Pamela K. Walsma

Attorney at Law

Westover, Shadle &

Walsma, PLC

Ronald S. Watson

Real Estate Associate

ERA Matt Fischer Realtor

Robert R. Woodman

Owner

Woodman Realty

Leonard C. Zazula

Corporate Cashier

Capitol Bancorp Limited

OFFICERS

Ronald S. Watson

Chairman

Ram R. Krishna, MD

Vice Chairman

Katherine M. Brandon

President & CEO

Pamela K. Walsma

Secretary

Keith L. Simmonds

Executive Vice President & CCO

Michael G. Barker

Senior Vice President

Theresa N. Wine

Senior Vice President

Terry R. Gadberry

Vice President

Kari M. Reily

Vice President

16

CALIFORNIA REGION

Scott R. Andrews, Region President

18      Bank of Escondido

19      Bank of Feather River

20      Bank of San Francisco

21      Bank of Santa Barbara

22      Napa Community Bank

23      Point Loma Community Bank

24      Sunrise Bank of San Diego

25      Sunrise Community Bank

17

BANK OF ESCONDIDO

Michael R. Peters, President & CEO

Bank of Escondido’s fourth full year of business in 2007 was very rewarding. Our success is related largely to our employees who have built strong professional relationships with customers, the community and with each other. We are proud of our bank’s family atmosphere.

We have benefited from our knowledgeable and influential local board of directors. Their advice and referrals enhance the bank’s performance and their community involvement reflects well on us all.

During 2007, the bank expanded two services that have been very successful. One was the Certificate of Deposit Account Registry Service (CDARS), which has provided individuals, nonprofits, local governments and businesses with FDIC insurance on deposits of up to $50 million. We were recognized as a leader with this product, placing more than $250 million with CDARS in 2007. The other service was wealth management with the addition of a Capitol Wealth Advisors investment executive at our bank.

Bank of Escondido and our employees are committed to improving the quality of life in our community. We are involved with local nonprofit organizations, such as the Escondido Children’s Museum. The bank and employees were also active in the area’s Breast Cancer 3-Day® benefiting Susan G. Komen for the Cure, raising more than $10,000 for the fight against the disease.

We are active with the Downtown Business Association of Escondido (DBA), which promotes economic development in the bank’s area of downtown. The DBA’s weekly Cruisin’ Grand Classic Car Show is a family friendly event, bringing more than 5,000 people to downtown every Friday night from April to October. Community bands perform on our patio during the show, enhancing the hometown feeling and bringing recognition to our bank.

Last June, I was privileged to be named the 2007 Business Leader of the Year by the Escondido Chamber of Commerce. This was a tremendous honor as previous recipients have been pillars of the community.

We market the bank through our quality service, referral network, sponsorships and community involvement rather than advertising. Our success comes primarily from satisfied clients who happily refer friends and associates to the bank. It’s a winning formula.

— Michael R. Peters, President & CEO

I was privileged to be named 2007 Business Leader of the Year by the Escondido Chamber of Commerce.

200 West Grand Avenue | Escondido, CA 92025

760.520.0400 | www.bankescondido.com

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, MD

Anesthesiologist

Anesthesiologist Consultants

of California

Ronald G. Guiles

Senior Partner

GEM Educational Consultants

Mark E. Hayes

Owner

Mark E. Hayes, CPA

Joan M. Meyer, DPM

Podiatric Medicine

And Surgery

Michael F. Murphy

President

Computer Protection

Technology, Inc.

Michael R. Peters

President & CEO

Bank of Escondido

OFFICERS

Michael F. Murphy

Chairman

Christopher S. Burt

Secretary & Executive Vice President

Michael R. Peters

President & CEO

Michael C. Churchwell

Executive Vice President & CCO

Linda I. Blakley

Senior Vice President

Marty Estrada

Vice President

Helen M. Johnson

Vice President

David G. Mitchell

Vice President

Kirsten J. Younkin

Vice President

18

BANK OF FEATHER RIVER

Scott R. Andrews, Chairman

Bank of Feather River opened for business November 6, 2007. Ten days later, more than 200 business and community leaders joined our founding team members for the bank’s grand opening celebration.

The alliance with a Capitol Bancorp affiliate bank as a loan production office during the bank’s organizational phase allowed us to maintain and renew associations with long-time customers.

We have a veteran team of local community bankers in a market that is semi-rural and heavily agricultural. Some of us have been financing the local agricultural industry for 20 years. All of our team members have at least 10 years of experience and have worked together previously. We feel this local experience provides an exceptional advantage for our new bank.

We expect big things in 2008 and for years and decades to come. Our market is solid and growing. Bank of Feather River soon will be moving into a new building at a new location. This move will give us an opportunity to hold an open house and communicate our story to an ever-growing group of clients and prospects. This event will have special importance to both our team and the community since our new office will be located in a new, landmark building for the community. It is located in the heart of the commercially developing area of Yuba City. We will have good signage, high visibility and great traffic flow.

At this time our team, many of which have been involved in community events and service projects for many years, are now doing so under the banner of Bank of Feather River. So while we know our extracurricular work is benefiting deserving families and organizations, the publicity is also benefiting the bank and our shareholders.

The entire staff is extremely enthusiastic about the future of the Bank of Feather River. By serving the agricultural industry and the innovative entrepreneurs who are launching new businesses to serve our expanding community, we anticipate strong and steady growth for the distant future.

— Scott R. Andrews, Chairman

We have a veteran team of local community bankers…some of us have been financing the local agricultural industry for 20 years.

1227 Bridge Street, Suite D | Yuba City, CA 95991

530.755.3700 | www.bankoffeatherriver.com

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Dinesh Bajaj

President

Natural Fashions Inc.

dba Natural Nut

Brent W. Hastey

Owner

Hastey Consulting

Thomas A. Iverson, DDS, MS

Orthodontist – President

Iverson-Vota Dental Corp.

Murry D. Lewis

General Manager

Dow Lewis Motors, Inc.

Sean M. O’Neill

President

Genesis Engineering Inc.

Dennis J. Pedisich

President & CEO

Napa Community Bank

OFFICERS

Scott R. Andrews

Chairman

Adam Fasani

Senior Vice President

& CCO

Jeffrey W. Cryer

President

Feather River Bancorp

Liz Gates

Senior Vice President

& COO

Harman S. Gosal

Vice President

Mary Goss

Vice President

Barbara VanGilder

Vice President

19

BANK OF SAN FRANCISCO

Edward C. Obuchowski, President & CEO

Bank of San Francisco focuses on providing exceptional banking services to business, nonprofit and private banking clients throughout the Bay Area. Our experienced and talented staff is making heads turn our way.

During 2007, we were honored to have the civil and structural engineering firm, T.Y. Lin International, move its banking relationship to us. With more than 1,300 employees in offices throughout the U.S. and Asia, the firm serves clients around the world. In making the decision to change to Bank of San Francisco, T.Y. Lin International valued the experience and knowledge of our team as well as our local decision-making capability and our ability “to deliver” the credit, depository and cash management services needed to support its business.

Serving the banking needs of dental practices is a new market niche for us. This often entails financing the acquisition of practices, providing merchant account and depository services to practices and handling the personal banking needs of dentists. It has been a great way to combine our business and private banking capabilities. Our loan structures, quick credit decisions, team approach and relationship orientation are what our dental clients tell us differentiate us from the competition.

We are committed to serving the nonprofit sector. We were proud to have Lick-Wilmerding, a highly-regarded private high school, become a client. Our ability to design products that suited the school’s unique needs was a driving force in its decision to join Bank of San Francisco.

Our staff continues to be active in the community by serving on various boards and taking part in nonprofit events. For example, last year our employees taught a five-week Junior Achievement program at a local elementary school. We were able to assign an employee to each of the nine grades in the school, something Junior Achievement could not accomplish previously.

The bank’s clients, advisory board, board of directors, investors and referral network are key to helping us “spread the word” about Bank of San Francisco to the Bay Area’s business and nonprofit communities. It is through our “ambassadors” that we are building our bank.

— Edward C. Obuchowski, President & CEO

Serving the banking needs of dental practices…has been a great way to combine our business and private banking capabilities.

575 Market Street, Suite 2400 | San Francisco, CA 94105

415.744.6700 | www.bankofsf.com

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

Chairman, The MCM Group

Former President & CEO

Kelly-Moore Paint Company

James R. Dobberstein

Managing Director & Principal

Shea Labagh Dobberstein CPAs

Arthur F. Evans

Chairman

AF Evans Company, Inc.

Susan E. Lowenberg

Vice President

Lowenberg Corporation

Kelly McCown

Co-Founder/Partner

McCown & Evans LLP

Susan S. Morse, CFA, CFP

Senior Advisor &

Chief Compliance Officer

Mosaic Financial Partners, Inc.

Edward C. Obuchowski

President & CEO

Bank of San Francisco

David J. O’Leary

Chairman

O’Leary Paint Company

George J. Vukasin Jr.

Executive Vice President

Peerless Coffee & Tea

OFFICERS

Joseph P. Cristiano

Chairman

Scott R. Andrews

Vice Chairman

Edward C. Obuchowski

President & CEO

Raymond C. Brown

Executive Vice President

& CCO

Wendy A. Ross

Executive Vice President

Joan T. Bolduc

Senior Vice President

Edward G. Damgen

Senior Vice President

Ikuo Ogata

Senior Vice President

Katherine J. Zinsser

Senior Vice President

Jollin H. Gonzales

Vice President

Lisa Lau

Vice President

& Secretary

Timothy R. Rosenthal

Vice President

20

BANK OF SANTA BARBARA

Andy L. Clark, President

Bank of Santa Barbara is an innovative hometown bank. We have a dynamic staff of seasoned banking professionals and an active board of directors composed of area business leaders who take their roles seriously. Their referrals and advice about business and marketing opportunities make them true partners in every sense of the word.

Over the past year, Bank of Santa Barbara was involved in several successful projects with our strategic partners that generated positive publicity for the bank. Working closely with our partners, our creative team of local bankers is positioning the bank for continued growth and high performance.

Early in the year, we organized, sponsored and moderated a seminar on buying and selling businesses that was attended by 83 local entrepreneurs, including 30 business clients. This seminar helped us co-brand with our strategic partners and solidify our image as a bank that is nimble, cutting-edge and entrepreneurial.

In May, we partnered with legal, accounting and investment firms to host a client appreciation event for more than 250 people at the Arroyo Hondo Preserve. This was an excellent example of hosting an event with co-sponsors whose reputation and client reach in the community are significant and positive.

When the Santa Barbara Breakers debuted last March, Bank of Santa Barbara signed on as a sponsor of the professional basketball team. It was a marketing bonanza for the bank. The paid sponsorship made Bank of Santa Barbara “The Official Bank of the Breakers,” a designation that appeared in all Breakers’ ads and promotional material. We received publicity at the games, throughout the community and on the Web.

Reaffirming our community commitment, the bank began collaborating with the University of California, Santa Barbara to offer a series of for-credit educational seminars for first-year college students. Most of the students are from the Chumash Indian Nation, which is located just north of Santa Barbara.

During 2007, our team made contributions of time and money to 47 local nonprofit organizations, including the Santa Barbara Museum of Natural History where we sponsored the ever popular Butterflies Alive exhibit.

Bank of Santa Barbara — we are more than a bank, we are Santa Barbara.

— Andy L. Clark, President

Signing on as a sponsor of the Santa Barbara Breakers was a marketing bonanza…

12 East Figueroa Street | Santa Barbara, CA 93101

805.730.7860 | www.bankofsantabarbara.com

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Greggory M. Bigger

President

Santa Barbara Bancorp

Ronald M. Blitzer

Co-founder

Be Green Packaging, LLC

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

Timothy O’Connor, MD

President

Ventura Radiation

Oncology Group

Robert M. Ornstein, Esq.

Senior Consultant

Visionworks Associates, LLC

Michael D. White

President

MDW Companies

OFFICERS

Scott R. Andrews

Chairman & CEO

Andy L. Clark

President

Robert H. Rothenberg

Executive Vice President,

Secretary

Greggory M. Bigger

Senior Vice President

Andrew E. Chung

Vice President

Michael D. Duhamel

Vice President

Lisa M. Howard

Vice President

Paveena Luangprasert

Vice President

Darla R. Mahon

Vice President

21

NAPA COMMUNITY BANK

Dennis J. Pedisich, President & CEO

At the start of 2007, Napa Community Bank was poised to capitalize on business opportunities — and capitalize we did! The city of Napa is experiencing a renaissance with unprecedented development in the downtown area, which sits at the southern end of the world-renowned Napa Valley. Among the most exciting projects in the downtown “Oxbow” district are two new luxury hotels — the Ritz-Carlton and the Westin Verasa. Another exciting project is the Oxbow Public Market.

We first met with the principals behind the Oxbow Public Market project in November 2005. From our first meeting we were determined to be part of this exciting retail project, which brings together purveyors of artisan foods, fine wines, locally-grown fresh produce, teas and other goods in a marketplace setting. In spite of hefty competition, we were able to secure the lead financing for the project and to help make it a reality this year. The principals have become great ambassadors for Napa Community Bank and have agreed to appear in one of our client testimonial ads in the local newspaper in early 2008.

Oxbow principal Bart Rhoades had this to say about our bank: “Napa Community Bank has been an indispensable partner in the Oxbow Market project, providing not only financing but also timely advice and insights. We couldn’t be happier with our relationship.”

This is one of many examples of how Napa Community Bank is living up to the company’s core value of entrepreneurship. We are proud to contribute to the economic vitality of the community. We not only create jobs as an employer, but we create jobs by providing financial services, which help local businesses grow and prosper.

As happy as we are with our growth and success in 2007, the management, staff and board of directors at Napa Community Bank are excited to build our bank with the support of Capitol Bancorp and play a growing role in the emergence of our corner of the country.

— Dennis J. Pedisich, President & CEO

The city of Napa is experiencing a renaissance with unprecedented development in the downtown area…

700 Trancas Street | Napa, CA 94558

707.227.9300 | www.napacommunitybank.com

BOARD OF DIRECTORS

Kevin S. Alfaro

Partner

G & J Seiberlich & Co., LLP

Thomas M. Andrews

Owner & CFO

Andrews & Thornley

Construction, Inc.

Geni A. Bennetts, MD

Medical Consulting

Charles H. Dickenson

Partner

Dickenson, Peatman & Fogarty

Jeffrey L. Epps

President

Epps Chevrolet

Betty L. O’Shaughnessy-Woolls

Owner

O’Shaughnessy Estate Winery

John R. Pappas, DDS, MD

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

Chairman, The MCM Group

Former President & CEO

Kelly-Moore Paint Company

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

Chairman

Jeffrey L. Epps

Vice Chairman

Dennis J. Pedisich

President & CEO

Charles H. Dickenson

Secretary

Douglas C. Haigh

Executive Vice President & CCO

James A. Barrett

Senior Vice President

Mark C. Richmond

Senior Vice President

Joen M. McDaniel

Senior Vice President

James K. Fehring

Vice President

Shiloh M. Fehring

Vice President

Patrick J. McArdle

Vice President

Sandra J. Re

Vice President

Sheila G. Rogers

Vice President

22

POINT LOMA COMMUNITY BANK

Anthony D. Calabrese Sr., President & CEO

Point Loma Community Bank has been very well received by the local community since opening in August 2004. Since inception, we have grown our deposits significantly each year and look forward to further growth opportunities in 2008.

We are proud to provide exceptional service to our nearly 2,000 customers, many of whom live in Point Loma. Our clientele receives a warm welcome every time they interact with our employees. We go above and beyond to ensure that our customers feel personally supported and we have often delivered meals during an illness when they are in need of a friend.

Community outreach efforts continue to be our primary focus. We are proud to sponsor the annual Point Loma Summer Concert Series and enjoy hosting these concerts where I act as their Master of Ceremonies. We also contribute significantly to local schools by providing volunteers and sponsorship funds to support educational development of the children in our community. In 2007, we launched a program to sponsor a Meals-on-Wheels route focused on bringing daily meals to the elderly in Point Loma. We also introduced a new college internship program at our office, providing our employees the opportunity to train and develop students from the University of California at San Diego. It should also be noted that our employees share the bank’s desire to give to others, shown by their 100 percent participation in the 2007–08 United Way Campaign.

With multiple years under our belt, we have implemented a strategic marketing plan developed to continue our growth momentum over the next several years. Our new plan focuses on print, radio and public television ads in local media reaching our specific target markets. We also coordinated a direct mail campaign resulting in healthy growth in our Home Equity Line commitments.

As a local business bank, we take pride in supporting our local economy by serving local businesses. We consider ourselves an extension of their staff and enjoy guiding them through their financial decisions.

Now that we are solidly positioned within our community, we are confident that 2008 will show continued market share and financial growth for Point Loma Community Bank!

— Anthony D. Calabrese Sr., President & CEO

We are proud to sponsor the annual Point Loma Summer Concert Series…

1350 Rosecrans Street | San Diego, CA 92106

619.243.7900 | www.pointlomabank.com

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Gregg W. Beaty, DMD

Center for Oral, Maxillofacial &

Implant Reconstructive Surgery

Anthony D. Calabrese Sr.

President & CEO

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 of Bank Performance

Capitol Bancorp Limited

Julius S. Paeske Jr.

President

Commercial Facilities, Inc.

Richard D. Thorn

Attorney at Law & Owner

Ward & Thorn, A Professional

Law Corporation

Mark A. Winkler

Broker Associate

Prudential Realty

OFFICERS

John S. Lewis

Chairman

Anthony D. Calabrese Sr.

President & CEO

Donald H. Gruhl

Senior Vice President

Millicent M. McKibbin

Senior Vice President

Jill M. Faucher

Vice President

Leticia C. Trujillo

Vice President

23

SUNRISE BANK OF SAN DIEGO

Randall S. Cundiff, President & CEO

Our road to continued success is paved with a focus on the “blocking and tackling” of banking, sound fundamentals that have made us successful. Supporting our team with enhanced product knowledge and training are key components in this goal. Our solid foundation is inherent in the synergy of our team and is complimented by the enthusiasm we share for each other. The bank will continue to empower team members with tools to take ownership in developing and maintaining client relationships. Individual efforts that add value to our clients and contribute to the bottom line are the essence of our strategy.

This was present in two new relationships developed in 2007. We helped Bill Luther Property Management create efficiencies through the implementation and personal training for our cash management product. We saved the company time, money and energy by helping it convert to an energized, more efficient operation. In switching the company’s prior 25-year banking relationship to Sunrise Bank, owner Bill Luther said, “We have been absolutely amazed at the level and quality of service we have consistently received from the Sunrise team members. They have delivered everything promised and more. The service level has been excellent.”

Richard Simis, owner of Simac Construction was attracted to Sunrise Bank by his direct access to senior management. We earned his trust and confidence by developing a complete relationship to help him attain long-term growth for his company. “The knowledge, experience and attitude they brought forth just felt right,” he said. “Sunrise Bank reinstilled the relationship bank feel that we were looking for in a partner for the future.”

Product diversification was a reoccurring theme throughout the year. The success of our bank is reliant on strengthening our referral pipeline, utilizing all of the loan products available to us and boosting fee income from the use of our wide array of financial products and services. We continued to build on this plan in 2007 as it will be a key to our future success.

Implementing strategies for strengthening our client relationships was successful for us in 2007 and will continue to be the “blocking and tackling” for years to come.

— Randall S. Cundiff, President & CEO

Sunrise Bank reinstilled the relationship bank feel that we were looking for in a partner for the future.

4570 Executive Drive, Suite 110 | San Diego, CA 92121

858.625.9050 | www.sunrisebanksd.com

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Craig V. Castanos

Owner

Craig V. Castanos, CPA

Randall S. Cundiff

President & CEO

Sunrise Bank of San Diego

Michael R. Labelle

Senior Director

Studley

Jack J. Landers

Commercial Broker

Westland Insurance Brokers

John S. Lewis

President of Bank Performance

Capitol Bancorp Limited

John F. McColl

President

Trinity Capital Group

John M. Rooney

President

Torrey Financial Group

Elizabeth K. Strom

Leasing Director

The Irvine Company Office Properties

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

Miranda E. Klassen

Vice President

Carla M. Kraft

Vice President

Michael H. Markie

Vice President

Bert T. Woods

Vice President

24

SUNRISE COMMUNITY BANK

Stuart E. Bailey, President

Sunrise Community Bank joined the Capitol Bancorp family on February 27, 2007, opening our bank in temporary facilities. We moved to our new permanent 8,000 square foot building on April 1st and got down to the business of becoming the most unique community business bank in the Coachella Valley.

Our goal is to provide business customers with what we call our “Chamber of Commerce” philosophy. We are passionate about becoming our customers’ lifelong business partner, networking our customers through bank-sponsored functions, including our “Breakfast Club” where we invite small groups of related businesses to join our senior officers and board members for breakfast and collectively brainstorm solutions to local business challenges.

We are consistent leaders in providing an array of cash management products for our business customers including online banking, a lockbox product targeted to capture the homeowner association market, and an effective use of account analysis to attract new, profitable deposit relationships.

This year the bank’s mortgage department entered into a strategic partnership with the largest residential real estate company in our market, Keller Williams, to be their mortgage company of choice for over 300 Valley agents. This has led to a significant number of residential mortgage referrals and the expansion of our mortgage department.

Sunrise Community Bank is equally proud of being the first affiliate bank to embrace Capitol Bancorp’s vision of being in the insurance business. In August we joined with Capitol Wealth Advisors in the acquisition of BAIA Insurance Agency, LLC, a local group health and benefits insurance agency, now integrated within our bank’s family of business financial products.

What is our goal for our second full year in business? To add traditional wealth management and financial planning specialists, trust services and property and casualty insurance products. Our ultimate goal is to be the provider of choice in our market for a complete array of complementary financial services. And we’re well on our way!

— Stuart E. Bailey, President

We are proud of being the first affiliate bank to embrace Capitol Bancorp’s vision of being in the insurance business.

41990 Cook Street, Suite 701 | Palm Desert, CA 92211

760.346.6139 | www.sunrisecommunitybank.com

BOARD OF DIRECTORS

Scott R. Andrews

President, California Region

Capitol Bancorp Limited

Stuart E. Bailey

President

Sunrise Community Bank

Debra L. Clark

Partner

Godecke Clark

George L. Gonzalez

President

Sierra Landscape Co., Inc.

Ronald B. Gregory

President

RGA Landscape Architects, Inc.

Brian S. Harnik

Attorney at Law

Roemer & Harnik LLP

Michael C. Hilgenberg

Owner/Operating Principal

Keller Williams Realty

William G. Kleindienst

Architect

WWCOT Mills Architects

Bruce J. Legawiec, CPA

Partner

Baltes, Legawiec & Associates,

CPAs, LLP

Robert S. Smith

President & Principal Engineer

MSA Consulting, Inc.

Richard E. Warfield

Owner

Personalized Property

Management

OFFICERS

Scott R. Andrews

Chairman

Stuart E. Bailey

President

Fereshteh (Tay) Fried

Executive Vice President

Daniel T. Grenci

Executive Vice President

Joann B. Dangwillo

Vice President

William E. Johnston

Vice President

Allison I. Kent

Vice President

Deborah O. McGarrey

Vice President

Jerod R. Pannell

Vice President

25

COLORADO REGION

John S. Lewis, Region President

27      Fort Collins Commerce Bank

28      Larimer Bank of Commerce

29      Loveland Bank of Commerce

26

FORT COLLINS COMMERCE BANK 

C. Gerard Nalezny, President & CEO

Well-rounded relationships are the cornerstone of Fort Collins Commerce Bank. The early success of our bank, I am proud to point out, has helped launch additional Capitol Bancorp affiliate banks in Colorado.

The past year was just our second complete year in business. While the banking competition is fierce, our bank has successfully faced the challenges because the types of business we seek are the relationships that make sense. This steady and consistent approach of serving our clients and earning their business has resulted in many profitable transactions for our bank.

For example, last year we had a client who wanted to sell his restaurant business. We helped him structure the deal and then introduced him to the party that eventually bought the business. Our bank made a loan to the buyer, establishing a full banking relationship. We then worked with the seller to reinvest the proceeds from the sale. Similarly, we have a long-time client who decided to sell his manufacturing business. We helped him position his company to maximize its sales potential and introduced him to the advisors he ultimately selected to facilitate the sale. The Capitol Wealth Advisors investment executive at our bank is working with this client to invest the proceeds.

In the community, our officers are active with organizations that benefit youth and education. I am currently a board member and chairman-elect of the Larimer County Partners Mentoring Youth. I am a speaker and guest lecturer at Colorado State University and a volunteer with the Court Appointed Special Advocates of Larimer County and a local elementary school. We also have officers who volunteer with a parent-teacher organization at another local elementary school and Junior Achievement.

Our business goal is to add value, take care of clients and pursue relationships that make sense. This simple approach has resulted in another successful year for our bank and the anticipation of many more to come. We are proud to be the Capitol Bancorp trailblazer in Colorado, paving the way for other successful affiliates in our state.

— C. Gerard Nalezny, President & CEO

We are proud to be the Capitol Bancorp trailblazer in Colorado, paving the way for other successful affiliates in our state.

3700 South College, Unit 102 | Fort Collins, CO 80525

970.204.1010 | www.fortcollinscommercebank.com

BOARD OF DIRECTORS

Margaret A. Brown

Attorney at Law

Fischer, Brown & Gunn, PC

Rhys P. Christensen

Broker & Partner

Realtec

Thomas W. Hoogendyk

Chief Financial Officer

Hoogendyk and Associates

Danielle C. Korkegi

President

Cellular Junction, Inc.

Mark A. Kross

President & CEO

Larimer Bank of Commerce

C. Gerard Nalezny

President & CEO

Fort Collins Commerce Bank

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Richard F. Spillman, CPA

Hunt, Spillman & Associates, PC

Jack D. Vahrenwald

Attorney at Law

Allen, Vahrenwald & Johnson, LLC

ADVISORY DIRECTOR

Spiro Palmer

Owner & President

Palmer Flowers

OFFICERS

Joseph D. Reid

Chairman

C. Gerard Nalezny

President, CEO & Secretary

Steven R. Luttmann

Vice President

Patricia L. McLaren

Vice President

27

LARIMER BANK OF COMMERCE

Mark A. Kross, President & CEO

In its first seven months of business, Larimer Bank of Commerce has distinguished itself in this small, manufacturing community in Larimer County as a solid, accessible financial institution as evidenced by the support we are receiving from our customers:

“Doing business with Larimer Bank of Commerce is a breath of fresh air. They understand business, add a high degree of intellectual prowess, and are sincere and genuine in the process. Your business will be better by banking with them.”

— Steve Hitz, President

 US-Reports, Inc.

When the bank opened a simple philosophy was established that we call “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

●   Do right by our community

Implementation of these values has been successful because our strongest assets — our employees — make it happen. Together we bring a dynamic, seasoned team of professionals who ensure we provide each customer with a positive and individualized experience. A case in point is senior vice president and commercial loan officer, Jeff Schoonover. Jeff has over 20 years of banking experience serving this community. In addition, I was privileged to assist in the formation of Fort Collins Commerce Bank, another Capitol Bancorp affiliated bank in Colorado, in 2005. Experience with the Capitol Bancorp model, in conjunction with our bank professionals and committed board of directors, differentiates us from the competition.

We look forward to further supporting our community by volunteering our time to Habitat for Humanity, the Sertoma (SERvice TO MAnkind) Club and a youth mentoring program, Larimer County Partners. We embrace the opportunity to further develop banking relationships while building a profitable future.

— Mark A. Kross, President & CEO

Larimer Bank of Commerce has distinguished itself in this small, manufacturing community in Larimer County as a solid, approachable financial institution.

1432 East Mulberry Street, Unit B | Fort Collins, CO 80524

970.224.7200 | www.larimerbank.com

BOARD OF DIRECTORS

Michael L. Allen

President

Allen Plumbing & Heating, Inc.

Robin Bachelet

Owner & Broker

Maxiiimo Development

Venture Pro LLLP

Jason Ells

Partner & Broker

Realtec Commercial Real Estate

Steven A. Hitz

President

US-Reports, Inc.

Peter Kelly

Partner & Real Estate Broker

Everitt Commercial Partners

Mark A. Kross

President & CEO

Larimer Bank of Commerce

Charles L. Lasky

President

Lasky, Fifarek & Hogan, PC

C. Gerard Nalezny

President & CEO

Fort Collins Commerce Bank

Wynne Odell

President

Odell Brewing Company

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

OFFICERS

Joseph D. Reid

Chairman

Charles L. Lasky

Vice Chairman

Mark A. Kross

President & CEO

Leonard Lovin

Executive Vice President & CCO

Jeff Schoonover

Senior Vice President

Ruth T. Johnson

Vice President

28

LOVELAND BANK OF COMMERCE

John A. Busby, President & CEO

Loveland Bank of Commerce opened in October 2007, becoming Capitol Bancorp’s third community bank based in northern Colorado. Located just 50 miles north of Denver, our community is strategically positioned at the intersection of Interstate 25 and US 34. Loveland is often called the “Gateway to the Rocky Mountains” with Rocky Mountain National Park located 35 miles west. Loveland is a thriving community with big-city amenities and a small-town atmosphere.

With more than 125 local shareholders, an active community-based board of directors and a seasoned team of professional bankers, Loveland Bank of Commerce is poised to take advantage of our community’s favorable business climate and vibrant economy. Capitol Bancorp’s community banking model is well suited for Loveland.

Our bank has experienced outstanding growth during the first months of operation and we believe 2008 will be a banner year as we continue to expand our customer base, growing both loans and deposits. Our focus is on relationship banking with products and services directed toward small to medium-sized business owners, real estate professionals, professional practices and local consumers. With attractive product and service offerings, we can address the needs of an individual as well as those of a business.

Loveland Bank of Commerce will remain true to a simple philosophy of “do the right thing” by our clients, employees, shareholders and community. We recognize our continued success is closely tied to relationships built upon this philosophy and Capitol Bancorp’s core values.

We believe it is our responsibility to volunteer and support organizations that improve the overall well-being of our community. For instance, our employees hold leadership roles at the United Way of Larimer County and other organizations that are committed to improving the quality of life for all people in our community.

Our competitive advantage, a dedicated team of bank professionals, an active board of directors and engaged shareholders make for a formidable community bank. We are ready to embrace the challenges, opportunities and excitement associated with operating our new bank in beautiful Loveland, Colorado!

— John A. Busby, President & CEO

Loveland Bank of Commerce is poised to take advantage of our community’s favorable business climate and vibrant economy.

102 East 29th Street | Loveland, CO 80538

970.679.7150 | www.lovelandbankofcommerce.com

BOARD OF DIRECTORS

John A. Busby

President & CEO

Loveland Bank of Commerce

Ryan J. Ferrero

Owner & Manager

Ferrero Chrysler Jeep Dodge

Nanci J. Garnand

Real Estate Agent

RE/MAX Alliance

Eric L. Holsapple, PhD

Partner

Loveland Commercial LLC

Mark A. Kross

President & CEO

Larimer Bank of Commerce

Kenneth G. Larson

President & Treasurer

River Stone Management Co.

Charles L. Lasky

President

Lasky, Fifarek & Hogan, PC

Leon J. McCauley Jr.

President & Founder

McCauley Constructors, Inc.

C. Gerard Nalezny

President & CEO

Fort Collins Commerce Bank

Jon C. Patterson

Partner

Patterson - -Talbert Law Offices

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

OFFICERS

Joseph D. Reid

Chairman

Charles L. Lasky

Vice Chairman

John A. Busby

President, CEO & Secretary

Troy A. Meissner

Senior Vice President & CCO

Stephanie L. Rankin

Vice President & Operations Manager

29

GREAT LAKES REGION

John C. Smythe, Region President

31      Ann Arbor Commerce Bank

32      Bank of Auburn Hills

33      Bank of Maumee

34      Bank of Michigan

35      Brighton Commerce Bank

36      Capitol National Bank

37      Detroit Commerce Bank

38      Elkhart Community Bank

39      Evansville Commerce Bank

40      Goshen Community Bank

41      Grand Haven Bank

42      Kent Commerce Bank

43      Macomb Community Bank

44      Muskegon Commerce Bank

45      Oakland Commerce Bank

46      Ohio Commerce Bank

47      Paragon Bank & Trust

48      Portage Commerce Bank

30

ANN ARBOR COMMERCE BANK

Richard G. Dorner, President & CEO

Ann Arbor Commerce Bank was established 17 years ago as the third bank in the Capitol Bancorp network of community banks. From the outset, we knew the bank would need to be as diverse as the college community we serve, to stand the test of time. As a strong community bank, we reflect the people and businesses we serve, continuing to meet their ever-changing financial needs. As many of our customers have holdings throughout the United States, we have developed community banking on a national landscape.

We embrace the ability to talk with and know our customers. Typically, we serve thousands of walk-in or drive-through transactions during any week. However, many times our customers are in another geographic area. We are able to serve their financial needs through our distinctive international ATM and wire transfer services and through Internet banking and telephone banking. Additionally, upon many occasions, our affiliate banks across the country have been able to help us serve our customers’ unique transcontinental needs.

We have grown during our 17 years and so have our customers. For example, one of our property management clients merged with another local management group. We now work with this new company, which manages about 50 percent of the student properties in our area. Another customer took his start-up business to become one of the leading title companies in the area. Many of our original customers are now multi-generational companies serving a broad customer base. A very successful local real estate investor became our customer in 1990. Ann Arbor Commerce Bank continues to serve his personal and business financial needs and we also work with many of his investors and partners. As we travel our “road to the future,” our affiliation with Capitol Bancorp will continue to help us serve our customers’ increasing financial needs.

Community, customers, staff, board of directors, affiliate banks and shareholders — we strive to create a symbiotic relationship that benefits all.

— Richard G. Dorner, President & CEO

We knew the bank would need to be as diverse as the college community we serve.

2950 State Street South | Ann Arbor, MI 48104

734.887.3100 | www.annarborcommerce.com

BOARD OF DIRECTORS

Henry E. Alvarez, CPA

President & Managing Principal

Curtis, Bailey, Exelby &

Sposito, PC

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, PLLC

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

Co-President

O’Leary Paint Company

Fritz Seyferth

Principal

Fritz Seyferth & Associates

Carl Van Appledorn, MD

President & COO

Urological Surgery

Associates, PC

Warren E. Wright

Chairman & Partner

Renosol Corporation

OFFICERS

James A. Fajen

Chairman

Richard G. Dorner

President & CEO

Henry E. Alvarez

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 D. Gyorke

First Vice President

John Nixon III

First Vice President

Mark S. Aben

Vice President

Noelle C. Grigg

Vice President

Patrick J. McKeon

Vice President

Bryan T. Singer

Vice President

Kathleen Slocum

Vice President

31

BANK OF AUBURN HILLS

Neal J. Searle, President

Located in northern Oakland County, Bank of Auburn Hills is within the shadows of the home of NBA greatness, the Palace, home to the Detroit Pistons. Fittingly, while the past year had its challenges, the bank’s team rose to the occasion.

With the Pistons just down the street fighting for another championship, Bank of Auburn Hills was competing for new deposits in 2007. Using a “Keep Your Money in Michigan” theme, the bank ran a deposit special called “Maximize Michigan Certificate of Deposit.” The CD special was extremely successful.

In addition to Bank of Auburn Hills’ team members focusing on serving the Oakland County business community with their active involvement in five area chambers of commerce, they also helped many local organizations. For example, the bank proudly delivered 100 percent employee participation in the United Way campaign, with total contributions up 15 percent; bank staff and customers contributed generously to the Gloves for Good campaign sponsored by the Lake Orion Sunrise Rotary Club for the benefit of children in Auburn Hills, Pontiac and Lake Orion (via the local Boys & Girls Club); and bank employees donated more than 50 pounds of nonperishable food items to Lighthouse of Oakland County, which provides services to the county’s low-income residents.

The year 2007 brought about recognition, promotion and additions to our staff: Julie Guigar was promoted to operations manager, Jodie Back joined as a credit analyst and Karen Schneider joined as the business development officer. Elena Houlihan, an Auburn Hills entrepreneur, also joined our board of directors.

Innovation and a willingness to challenge the routine is a formula for success that Bank of Auburn Hills will pursue — today and tomorrow. Not unlike that championship-caliber NBA squad down the road.

— Neal J. Searle, President

Innovation and a willingness to challenge the routine is a formula for success...

1988 North Opdyke Road | Auburn Hills, MI 48326

248.370.8200 | www.bankofauburnhills.com

BOARD OF DIRECTORS

Kenneth D. Currie

Business Consultant

Currie and Associates

Frederick Gordon

Attorney at Law

Jason M. Horton

Executive Vice President

REDICO

Richard L. Horvath

VP Finance & Administration

Atlas Copco Tools & Assembly

Systems, Inc.

Elena H. Houlihan

President & Owner

Elena’s

Brian G. McGinnity

Director & EVP Finance

Hirotec America

Michael M. Moran

Chief of Capital Markets

Capitol Bancorp Limited

Frank Salucci, CPA

Capital Resources of Michigan, Inc.

Neal J. Searle

President

Bank of Auburn Hills

John C. Smythe

President, Great Lakes Region

Capitol Bancorp Limited

ADVISORY DIRECTORS

Erwin H. Billig

Chairman

MSX International

David L. Polk, CPA

Principal, Polk & Associates PLC

Gary M. Wetstein, CPA

Retired Chairman of BDO Seidman, LLP

CFO, Non-Invasive Monitoring

Systems, Inc.

William N. Widmyer

Business Consultant and Real Estate

Investor

Marc I. Wittenberg, MD

South Oakland Anesthesia

Associates, PC

OFFICERS

John C. Smythe

Chairman

Brian G. McGinnity

Secretary

Neal J. Searle

President

Brian R. Inglis

Senior Vice President & CCO

Cheryl L. Gault

Vice President

32

BANK OF MAUMEE

H. Lee Dunn Jr., President

At Bank of Maumee, we pride ourselves on offering high-touch, responsive customer service. Our doors opened for business in October of 2006 with a focus on providing small business banking for the greater Toledo area.

Our passion for customer satisfaction was clearly demonstrated in early 2007. It was late on a Monday afternoon when I received a call from a business acquaintance. He and his partners had been working on a deal that had been two years in the making. Final financing was in place but there was a need for short-term funding and the money had to be disbursed by the end of the week or the project would go elsewhere. Two years of effort would be lost. I told the prospective customer the documentation the bank would need to assist him. We had the information the next day and closed the transaction Wednesday morning. One of the partners, Rob Robinson, is a retired senior officer at a midwestern regional bank. He sat down, chuckled and said, “My bank could never have approved and closed this loan as fast as you did.”

Rob asked to attend our May shareholders meeting. He stood up and said, “Without the Bank of Maumee, the Columbus Sports Network would not be in business today.”

Customers really appreciate our responsive local decision-making, in addition to the wide range of Internet banking and cash management services available at Bank of Maumee.

Our officers are active with professional business organizations, such as the Women’s Entrepreneurial Network (WEN), where they meet with peers and develop new business for the bank. Last year, the bank hosted a WEN luncheon that focused on the importance of obtaining Woman Business Enterprise certification for companies owned by women doing business with corporations and government.

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

— H. Lee Dunn Jr., President

Customers really appreciate our responsive local decision-making.

3425 Briarfield Boulevard, Suite 100 | Maumee, OH 43537

419.868.1750 | www.bankofmaumee.com

BOARD OF DIRECTORS

Robert E. Alexander

President & CEO

YMCA of Greater Toledo

Thomas J. Beutler

CPA, CVA

Tebay, Mosley Associates, LLC

Value Defined, LLC

Thomas P. Cox, MD

ProMedica Physicians

Peter A. Dewhirst

Attorney at Law

Shindler, Neff, Holmes,

Schlageter & Mohler, LLP

H. Lee Dunn Jr.

President

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

CB Richard Ellis/Reichle Klein

Olivia K. Summons

Director of Public Relations

Toledo Refinery

Sunoco, Inc.

ADVISORY DIRECTOR

Juan A. Hinojosa

Owner

Mondo Mechanical

OFFICERS

Brian K. English

Chairman

H. Lee Dunn Jr.

President

Richard D. Heltzel

Executive Vice President,

CCO & Secretary

Kevin T. Rahe

Executive Vice President

& SLO

Veronica Fish

Vice President

Roxie A. Hill

Vice President

Susan C. Martin

Vice President

33

BANK OF MICHIGAN

Michael G. Sarafa, President & CEO

In 2007, Bank of Michigan established itself as a major presence in southeast Michigan and was named by Crain’s Detroit Business as the fastest growing bank in the region. We put the proper staffing and safeguards in place to serve our growing niche of money service businesses. This has made Bank of Michigan a place where entrepreneurs want to take their business.

Further activity and interest in the bank was generated by hosting quarterly networking sessions on various topics. For example, attorney and bank board member Randall Denha shared his professional knowledge on living trusts with a group of the bank’s high net-worth customers. These “roundtable” events were well attended and very popular.

Board members Burt Kassab and Neil Desai helped host a group of their respective clients from the medical field at a local country club to network and introduce them to Bank of Michigan and some of our team members. This event has resulted in several large relationships.

In the fall, Bank of Michigan sponsored a reception for CPAs where a legal expert presented the topic “LLCs vs. S Corporations on Formation.” Three board members who are CPAs — Desai, Pat Gregory and Al Yaldo — were instrumental to the success of the event.

This past year, we added two customer service representatives to continue our emphasis on personal banking. We also significantly expanded our free courier program to take our friendly service directly to the customer.

Bank of Michigan continued its proud tradition of community involvement. We participated in the American Cancer Society’s Relay for Life by raising money and sponsoring a booth. I had the privilege of co-hosting Covenant House of Michigan’s 10th anniversary celebration, which raised more than $150,000 to help take care of homeless youth.

In September, Bank of Michigan and three other Capitol Bancorp affiliate banks co-sponsored a real estate conference with more than 200 attendees. Capitol Bancorp Chairman & CEO Joseph D. Reid was the keynote speaker.

We look forward to doing much more business at the bank and work in the community as we further improve the bank’s performance.

— Michael G. Sarafa, President & CEO

Named by Crain’s Detroit Business as the fastest growing bank in the region…

30095 Northwestern Highway | Farmington Hills, MI 48334

248.865.1300 | www.bankofmi.com

BOARD OF DIRECTORS

Ronald G. Acho

Senior Partner

Cummings, McClorey,

Davis & Acho

Anthony G. Antone

Vice President of Development

Kojaian Management Corporation

Randy A. Denha

Attorney at Law

Cox, Hodgman & Giamarco PC

Nitin P. Desai, CPA

Director of Assurance & Tax Services

Martin Arrington Desai & Meyers PL

Patrick J. Gregory, CPA

Managing Director

UHY Advisors

Burt S. Kassab

Vice President

Kullen & Kassab, PC

Martin F. Manna

Managing Partner

Interlink Media

Nick M. Sandiha

Manager

Sandiha Holdings, LLC

Michael G. Sarafa

President & CEO

Bank of Michigan

Bruce A. Thomas

President of Bank Operations

Capitol Bancorp Limited

Al S. Yaldo, CPA

Vice President

Shimoun, Yaldo & Associates, PC

OFFICERS

Bruce A. Thomas

Chairman

Michael G. Sarafa

President & CEO

Thomas M. Linden

Executive Vice President & CCO

Cindy L. Jensen

Executive Vice President

Jack Abbo

Vice President

Barry J. Boozan

Vice President

Roxanne C. Wiemer

Vice President

34

BRIGHTON COMMERCE BANK

Gary T. Nickerson Sr., President & CEO

Brighton Commerce Bank’s employees, board members and customers celebrated the bank’s 10th anniversary in 2007. We marked the milestone in June with a giveaway of 10 Michigan vacation packages to help support our state’s challenged economy.

Being known as the only local community bank in Brighton, we have earned the respect and trust that comes from honest business dealings and providing excellent service. Therefore, we have business opportunities communicated to us by numerous spheres of influence. For instance, we provided the financing to rebuild the Spirit Center, a Veterans Affairs building that was renovated to accommodate the local American Legion. The building now has an enhanced banquet hall to accommodate social functions for veterans as well as the community.

In 2007, we marked the 10th consecutive year that we have reported 100 percent employee participation in the United Way of Livingston County campaign. Our leadership as an early campaign Pacesetter makes us a role model in United Way giving for other businesses in the county. Our board members and officers were active with the United Way throughout the campaign. The bank and employees also volunteer time or money to support 55 local organizations.

The holiday season kicks off in Brighton with our annual customer appreciation open house. Held eight days before Thanksgiving, this event each year attracts more than 200 people, including local VIPs, politicians and customers. The event is beautifully catered by our customer, C&C Catering.

The Birdie Day and Golf Ball Drop in November has become our signature event. Last year was our third year as the major sponsor with proceeds going to the Gleaners Community Food Bank. It grossed more than $17,000 and hundreds of turkeys were donated in exchange for a round of golf at one of our area’s finest golf courses.

As we focus on our second decade in business, the team at Brighton Commerce Bank is committed to earning business by serving our community with honesty and integrity.

— Gary T. Nickerson Sr., President & CEO

Earning business by serving our community with honesty and integrity.

8700 North Second Street |Brighton, MI 48116

810.220.1199 | www.brightoncommerce.com

BOARD OF DIRECTORS

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

Lyle W. Miller

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

Vice President

John M. Hulyk

Vice President

Sandra T. Radtke-Gerkin

Vice President

Corey M. Ruthig

Vice President

35

CAPITOL NATIONAL BANK

Paula D. Cunningham, President & CEO

The Capitol National Bank family will forever embrace the bank’s proud heritage. In 2007, we celebrated the bank’s silver anniversary with more than 200 customers, board members, colleagues and community members, many of whom were here when the bank first opened its doors in 1982.

Our employees with the longest tenure — John Smythe, Toni Raleigh, David Feldpausch, Lori Garcia, Ronda Thompson and Pam Crossley — prove that this really is “a people business.” Lucile Belen, who cut the ribbon for the bank opening 25 years ago, gave the invocation for our silver anniversary celebration.

In 1982, there were eight banks in the Lansing area. Capitol National Bank is the only one remaining with the same name and the same location. Our staff has multiplied tenfold and total assets have increased more than 16 times. We have made local charitable contributions of more than $1 million. The economic development we have funded in greater Lansing is immeasurable.

Our original office was 1,500 square feet. Now we have more than 10,000 square feet with two additional offices in Okemos and Delta Township. We added 11 employees in 2007 and three new board members. We continuously add new products and services to better serve our customers.

However, the most important lesson we learned during the past 25 years was taught by our founding president, the late great Robert C. Carr, who passed away in 2007. The quintessential community banker, Bob taught us that “banking always has been, and always will be, a people business.”

As it was 25 years ago, our goal is to establish and nourish relationships. Rather than transactions, our success is dependent on robust relationships built on trust. Launching a new Health Care Division and working with our Young Entrepreneurs Council, our talented staff, our board of directors and the community will help ensure that we have a compelling story to share 25 years from now.

Our success will always be dependent on the value that we embraced 25 years ago. This is, and always will be, a people business. Happy Birthday to Capitol National Bank!

— Paula D. Cunningham, President & CEO

In 1982, there were eight banks in the Lansing area. Capitol National Bank is the only one remaining with the same name and location.

200 Washington Square North | Lansing, MI 48933

517.484.5080 | www.capitolnational.com

4792 Marsh Road | Okemos, MI 48864

517.347.1006 | Meridian Office

644 Migaldi Lane | Lansing, MI 48917

517.627.8881 | Delta Office

BOARD OF DIRECTORS

Christopher J. Abood, MD

President & CEO

CentisHealth

Nan Elizabeth Casey

Attorney at Law

Fraser Law Firm

Charles J. Clark

President

Clark Construction

Company

Paula D. Cunningham

President & CEO

Capitol National Bank

Frank Garrison

Past President

AFL-CIO of Michigan

Patrick F. Hayes

President

F. D. Hayes Electric

Company

Richard A. Henderson

President

Henderson &

Associates, PC

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

Director of Product

Development &

Management

Capitol Bancorp Limited

Kelly D. Miller

Director of

Specialty Finance

Capitol Bancorp Limited

John D. O’Leary

Co-President

O’Leary Paint Company

Cristin K. Reid

Corporate President

Capitol Bancorp Limited

Robert L. Reid

Owner

Reid Real Estate, LLC

Patricia A. Reynolds

Retired

John C. Smythe

President

Great Lakes Region

Capitol Bancorp Limited

ADVISORY DIRECTOR

Lupe Izzo

Community Volunteer

OFFICERS

John C. Smythe

Chairman

Cristin K. Reid

Vice Chairman

Paula D. Cunningham

President & CEO

Patrick F. Hayes

Secretary

Patricia Lloyd-Barnas

Senior Vice President

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

Vice President

Capitol Wealth Advisors

Deborah R. Keyes

Vice President

Kathryn H. Korpi

Vice President

Jennifer S. Marsh

Vice President

Theodore M. Terzian

Vice President

Capitol Wealth Advisors

Ronda M. Thompson

Vice President

36

DETROIT COMMERCE BANK

Harold G. Curry, President & CEO

Each year, the professionals at Detroit Commerce Bank expand on the bank’s business plan as we pursue our goal of creating the bank of choice in Detroit and southeastern Michigan. Our pledge is to continually improve the bank’s performance by providing the products and services that sustain strong and extensive relationships with business clients. Like the historic Penobscot Building in which our bank is located, we are building a financial institution that will stand tall for generations.

Our team is committed to providing a level of service that makes us a trusted advisor to our clientele. Along the way, we have enhanced our team with seasoned bankers and support staff, expanded our bank facility by 30 percent to accommodate additional employees and added new products and services to ensure that we are serving our clients’ needs now and well into the future.

We continue to increase our community outreach and support by participating on local boards, being involved in and supporting community events and programs, and providing financial training to all members of our diverse community. For example, last year we partnered with Wayne County Community College to present a series of workshops for first-time homebuyers. We also conducted financial education seminars for youth in the state’s foster care program. Our training has helped many young people open their first bank account.

Detroit is truly the renaissance city with a growing downtown area that is generating new business and residential development. We believe that by providing a level of service that sets us apart from the competition, our team is making loyal customers out of our current clients. At the same time, we are positioning the bank to meet the financial needs of prospective clients coming to the downtown area for business or to live.

Detroit Commerce Bank’s sound reputation is developed through our dedication to excellence and community service. Profitably growing our successful bank demands hard work and persistence. Our entire team is up to the challenge.

— Harold G. Curry, President & CEO

We are building a financial institution that will stand tall for generations.

645 Griswold Street, Suite 70 | Detroit, MI 48226

313.967.9700 | www.detroitcommerce.com

BOARD OF DIRECTORS

James P. Allen Sr., Esq.

Attorney at Law

Allen Brothers, PLLC

Ralph J. Burrell

President

SymCon

Harold G. Curry

President & CEO

Detroit Commerce Bank

Donald M. Davis Jr.

Vice President

Human Resources and

Customer Relations

Health Alliance Plan

Edward Deeb

President

Michigan Business &

Professional Association

Curtis L. Ivery, PhD

Chancellor

Wayne County Community

College District

Gregory Kelser

Broadcaster, FSN Detroit

Detroit Pistons

Kelly D. Miller

Director of

Specialty Finance

Capitol Bancorp Limited

Martha K. Richardson

President

Services Marketing

Specialists, Inc.

James F. Stapleton

President

B & R Consultants

Edward Tinsley

Principal

Longfellow Group

Neal F. Zalenko

CPA & Retired 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

Richmond J. Hawkins

Vice President

Valora L. Jackson-Cook

Vice President

Mary Seaberg King

Vice President

Ryan R. Vinco

Vice President

37

ELKHART COMMUNITY BANK

Steven L. Brown, President & CEO

Elkhart Community Bank experienced another year of growth in 2007 and added staff to serve our ever-growing client base.

We are also growing physically as the bank has started renovations on an adjacent building that it purchased. The facility will include a modern kitchen and break room, boardroom and offices for Capitol Wealth Advisors. The building also has a large room that will be available to community groups for special events.

Employee achievements and community involvement in 2007 reflected well on the bank. As the year began, I was honored to be named to a “40 Under 40” list of area business and professional leaders to achieve success before age 40. In December, our supporters cheered as our courier, Paul Randall, competed in the European International Rowing Competition in the 90 and over age group. In between, our employees came to the aid of our neighbors in a nearby community as they cleaned up their property following a devastating tornado. We proudly reported 100 percent employee participation in the United Way campaign.

We remain actively involved with professional and philanthropic organizations while always seeking new client relationships. For instance, Sports-O-Zone USA, a local company, needed financing on their patented machine that kills potentially dangerous bacteria on athletic equipment. Their problem was getting a bank to take the time to learn their business and understand their financing needs. Because little was known of this emerging market, the company was deemed too high a risk by other institutions. Last September, our lending staff analyzed the company’s business plan. Our loan officer researched the company’s market and niche. With this research and our knowledge of the partners and their abilities, the bank was able to assemble an extensive financing package. With the aid of our relationship, the company has leaped into the national spotlight in the battle against infectious organisms that threaten the health of athletes.

Knowing our community and making prudent, yet swift decisions in all questions of credit are what separates Elkhart Community Bank from the competition. We are growing our bank with meaningful relationships.

— Steven L. Brown, President & CEO

Employee achievements and community involvement in 2007 reflected well on the bank.

303 South Third Street | Elkhart, IN 46516

574.295.9600 | www.elkhartbank.com

BOARD OF DIRECTORS

R. Steven Bennett

President

Pilgrim International

Daniel L. Brekke

President

Gateway Builders & Properties

Kenneth W. Brink

President

Elkhart Cattle and Land, LLC

Steven L. Brown

President & CEO

Elkhart Community Bank

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 Corp.

Brian J. Smith, CPA

President

The Heritage Group

OFFICERS

Michael L. Kasten

Chairman

Myrl D. Nofziger

Vice Chairman & Secretary

Steven L. Brown

President & CEO

Lori A. Faltynski

Vice President

Duane S. Klein

Vice President & CCO

Vincent J. VonDerVellen

Vice President

38

EVANSVILLE COMMERCE BANK

Thomas L. Austerman, President

At Evansville Commerce Bank, we believe we must earn the right to use the words “Excellence and Superior Service.” We have set high standards:

● Our bank must be a reliable source of useful financial products with terms customized to the individual.

● We expect our employees to exhibit sophisticated professionalism that assures the customer that we will handle their needs in an empathetic and expeditious manner and that we can and will deliver the results they have a right to anticipate.

● Our employees are required to naturally and routinely go out of their way to express an enthusiastic willingness to help in a way that causes the customer to believe beyond a shadow of a doubt that we want and appreciate their business.

● We ask our employees to remember that rather than being processors of papers and policies, we are people “Helping people live their Dreams!”

● We support our employees’ service efforts with tangibles such as world class products, tools and materials and a historic banking facility second to none.

Are we succeeding? Well, maybe our customers express it best. Here is a testimonial from CPA Robert S. Foncannon, one of many we received from customers this past year:

“After much consideration, I made the decision to move my firm’s accounts to your bank and I couldn’t be more satisfied. I was looking for a bank where we weren’t just a number and we would receive the kind of ‘above and beyond’ customer service that we pride ourselves on at my firm. We have found your staff to be extremely helpful, genuinely concerned and willing to be flexible to meet our needs. Evansville Commerce Bank and its employees care about me and my business. I feel as though I have a partner I can grow with and that will understand and anticipate our future needs and concerns.”

Service excellence shapes the bottom line. We expect to reap the dividends in the years to come.

— Thomas L. Austerman, President

Service excellence shapes the bottom line.

20 NW 4th Street | Evansville, IN 47708

812.492.1800 | www.evansvillecommercebank.com

BOARD OF DIRECTORS

Thomas L. Austerman

President

Evansville Commerce Bank

John W. Beman, MD

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.

John C. Smythe

President, Great Lakes Region

Capitol Bancorp Limited

Andrew T. Spurling

Property Manager

Spurling Management, LLC

Laurence R. Steenberg

President

BST Corporation

Kristen K. Tucker

Vice President

Tucker Publishing Group

Robert B. Wright

President

Wright Motors Inc.

OFFICERS

John C. Smythe

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

39

GOSHEN COMMUNITY BANK

Douglas A. Johnston, President & CEO

Goshen Community Bank touches every one of our customers in a unique way that extends far beyond a general loan or deposit relationship. When our bank opened in 2000, Denny Sorg was one of the bank’s founding board members. Denny, along with his two sons, Randy and Toby, ran Sorg Dodge Inc. in Goshen. Sorg Dodge is a car dealership that has been a staple in the community since the early 1950s. When Denny died suddenly in late 2006, it was a shock to his family, the bank and the community. We worked closely with Randy and Toby to ensure changes in the banking relationship with the dealership were seamless and done in a professional manner. Don Riegsecker from Capitol Wealth Advisors assisted as well in helping Denny’s wife, Judy, with investment transactions.

In the middle of 2007, Randy, Toby and their sister Stephanie approached the bank about buying a dealership in Warsaw, Indiana, just south of Goshen. Denny had looked at expanding in the past but the right opportunity hadn’t developed. The bank was able to put together an SBA 504 loan to purchase the real estate and other loans for the purchase of the business. In a matter of months, Randy and Toby have been able to increase sales significantly and are making important contributions to their new community.

Last November, while hosting our quarterly Women, Wisdom and Wine network and marketing event for women entrepreneurs, the bank attracted the largest turnout yet with more than 70 people attending. Judy Sorg was there, sharing with me her appreciation for the event as well as her joy in spending time with her friends. This signature event has allowed us to strengthen our customer relationships and start new ones.

Denny left his mark on Goshen Community Bank so it is fitting that we help his family achieve their business goals. At Goshen Community Bank, it is more than helping people open accounts. It is about making a positive difference for families and the community.

— Douglas A. Johnston, President & CEO

Making a positive difference for families and the community.

511 West Lincoln Avenue | Goshen, IN 46526

574.533.2006 | www.goshenbank.com

BOARD OF DIRECTORS

David L. Cripe

Doctor of Optometry & Senior Partner

Cripe, Stephens & Stickel

Kevin Deary

President & CEO

Boys & Girls Club of Greater Goshen

Stephen L. Fidler

President

Kuert Concrete, Inc.

Christopher J. Graff

CEO & Chairman

SJC Industries Corp.

Wes Herschberger

CEO

Maple Tronics Computers

Gregory A. Hoogenboom

President

Hoogenboom Nofziger Real Estate

Mgmt. Co., LLC

Douglas A. Johnston

President & CEO

Goshen Community Bank

Michael L. Kasten

Managing Partner

Kasten Investments, LLC

Laura Morris, MD, MBA, FACS

Center for Cancer Care

The Retreat Women’s Health Center

Matthew J. Pletcher, CPA

President

Insight Accounting Group

Fred M. Ramser

Managing Partner

LMA Development

Douglas A. Stanley, DDS

Owner

Douglas A. Stanley, DDS

Alan L. Weldy

VP of Human Resources and

Legal Compliance

Goshen Health System

OFFICERS

Michael L. Kasten

Chairman

Douglas A. Johnston

President & CEO

Gregory A. Hoogenboom

Secretary

Chris R. Wolfe

Senior Vice President

Lori J. Cline

Vice President

Robert J. Eichorst

Vice President

Deborah K. Wilson

Vice President

40

GRAND HAVEN BANK

Thomas A. Creswell, President & CEO

Consistently putting the needs of our customers first has served Grand Haven Bank well in the past, and will guide us well into the future.

As we have expanded the products we offer, we have kept our focus on providing the highest level of service as we build and develop customer relationships. This high level of service may be the only thing that separates us from other financial institutions and it is something we value highly.

We are proud of the fact that our employees and customers have been with Grand Haven Bank for many years – in some cases, since the bank opened in 1995. One customer, Hortech, has been with our bank for more than 12 years. During this time, the company’s annual sales have grown 250 percent and it recently launched a second company, LiveRoof, which has quickly gained national attention.

Every three months, our bank staff meets with a team of Hortech employees to review the company’s financial performance, go over its business plan and discuss plans for the future. Hortech president Dave MacKenzie characterizes his company’s long association with Grand Haven Bank as “truly an organizational relationship.” He says: “It extends from the tellers that service our employees…to the bank president and board members, and involves many members of the Hortech staff as well. I feel that our associates at Grand Haven Bank understand the Hortech culture, organizational structure, risks and potential. Grand Haven Bank partners with us to our mutual benefit.”

At Grand Haven Bank, the emphasis on relationships and service enables us to help our many valued customers such as Hortech. Taking the time to get to know our customers helps us to provide them with superior service. This approach to business — along with our extensive community involvement and volunteer activities — has given our team members the reputation as bankers who care. We know our customers’ names and are making a positive difference in the community — during regular working hours as well as evenings and weekends!

— Thomas A. Creswell, President & CEO

Taking the time to get to know our customers helps us to provide them with superior service.

333 Washington Avenue | Grand Haven, MI 49417

616.846.1930 | www.grandhavenbank.com

BOARD OF DIRECTORS

Jeffrey W. Beswick

Attorney at Law

Varnum, Riddering, Schmidt

& Howlett, LLP

Stanley L. Boelkins

Broker

Capstone Real Estate

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, PC

Steven L. Maas

President

Maas Asset Management, Inc.

Michael A. McKeough

President

McKeough Land

Company, Inc.

Calvin D. Meeusen, CPA

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

Retired

OFFICERS

Calvin D. Meeusen

Chairman

Gerald A. Witherell

Vice Chairman

Thomas A. Creswell

President & CEO

Steven L. Maas

Secretary

Karen K. Benson

Vice President

Christopher P. Cassleman

Vice President

Douglas F. Jones

Vice President & CCO

Thomas R. Ladd

Vice President

Betsy S. Lobdell

Vice President

Sherry J. Patterson

Vice President

41

KENT COMMERCE BANK

Mark J. DeWitt, President & CEO

Our Kent Commerce Bank team worked diligently in 2007 to develop new customer relationships. Adding value through service, teamwork and a commitment to working hard for the benefit of our clients and community remain the foundation for our future. We strive to develop new business opportunities from prospects and clients that share our core values. These relationships grow our bank.

In 2007, Kent Commerce Bank’s team became even more enterprising, focusing our efforts on forming new relationships through changes in local businesses that expanded, acquired new entities or changed ownership. We have actively sought out prospective clients seeking new investments so that we could cultivate new relationships that require the broad range of financial services that we offer.

To facilitate our efforts to reach new clients, the bank welcomed three business development officers to the Kent Commerce team. These professionals have significant experience in the West Michigan market. We have initiated marketing efforts with community newspapers and business journals to support our aggressive business development activities. This has generated more product and brand awareness as we prepare for the bank’s 10th anniversary celebration in 2008.

At the same time, our community commitment grew with the bank’s participation in the ‘Financial Community Build’ for Habitat for Humanity of Kent County. We increased our annual commitment with Healing the Children through the encouragement of board member Bob Bruggink. We enhanced our continuing support of United Way of Kent County with 100 percent employee participation in the 2007-08 campaign. Acknowledging that the young people of West Michigan hold the keys to our future, we maintained our vigorous support of the Grand Rapids Youth Commonwealth, Toys for Tots and the D.A. Blodgett Home for Children. In addition, we have had a bank officer appointed to the Forest Hills Educational Foundation board and another appointed president of the Rotary Club of Grand Rapids — East.

Our team at Kent Commerce Bank is proud of the bank’s upcoming milestone anniversary. Ten years of service is an achievement to champion. We embrace the challenges the future holds and we are as determined as ever to grow this bank safely, soundly and profitably.

— Mark J. DeWitt, President & CEO

Adding value through customer service, teamwork and a commitment to working hard.

4050 Lake Drive SE | Grand Rapids, MI 49546

616.974.0200 | www.kentcommerce.com

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

Consultant

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

Calvin D. Meeusen, CPA, PLLC

Kelly D. Miller

Director of

Specialty Finance

Capitol Bancorp Limited

Valerie R. Overheul

President & CEO

Summit Training Source, Inc

Mary L. Ursul

Vice President

MHA Insurance Company

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 & CCO

Linda S. Crawford

Vice President

Patricia K. Julien

Vice President

Daniel E. McLean

Vice President

David H. Moored

Vice President

Ryan L. Wolthuis

Vice President

42

MACOMB COMMUNITY BANK

James R. Kaye, President & CEO

Macomb Community Bank, like so many other Michigan businesses, faces the challenge of navigating a road to the future fraught with economic speed bumps affecting progress and growth.

Year 2007 was one of statewide economic strife. Macomb Community Bank, its employees and clients constantly faced financial adversity in one form or another. Together we are working to turn these challenges into opportunities, and these opportunities into a mutually beneficial environment where all roads lead to prosperity for both Macomb Community Bank and our neighbors.

Now, more than ever, our customers are depending on us to develop products and services they will need to meet the demands of today’s business world and to prepare for the future.

At Macomb Community Bank we welcome these challenges and realize that our success relies on the success and well-being of our community. By helping our neighbors we will in turn be helping ourselves.

Macomb Community Bank is fortunate to call on the dedication of our employees and their community involvement with local charities as well as their professional experience in banking. We also have an active board of directors dedicated to numerous philanthropic endeavors and community service that keeps our name prominent in the public’s eye.

The future, though unpredictable, holds many possibilities for Macomb Community Bank. Plans are being developed for a stand alone facility that will become the focal point of a new financial center in Macomb County.

We don’t know what lies ahead as we travel this road to the future, but we do know that we now have the proper vehicles to successfully navigate our journey.

You cannot know where you are going if you do not remember where you have been. We remember.

Macomb Community Bank…where all roads lead to banking done the right way…your way.

— James R. Kaye, President & CEO

Our success relies on the success and well-being of our community.

16000 Hall Road, Suite 102 | Clinton Township, MI 48038

586.228.1600 | www.macombcommunity.com

BOARD OF DIRECTORS

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

Henry Ford - Macomb

John C. Smythe

President, Great Lakes Region

Capitol Bancorp Limited

OFFICERS

John C. Smythe

Chairman

James R. Kaye

President & CEO

Christina C. D’Alessandro

Secretary

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

43

MUSKEGON COMMERCE BANK

Robert J. McCarthy, President & CEO

Muskegon Commerce Bank’s founding principles are to be competitive, flexible and creative. We have a track record of producing customized banking solutions for consumers, businesses, municipalities and high net-worth individuals. Our founding principles have led to our success.

We celebrated the bank’s 10th anniversary in 2007. The bank’s growth has been rapid yet controlled which, considering the tumultuous economy, is a monumental accomplishment.

Amid challenges during 2007 we established a significant relationship with the Muskegon County Treasurers’ Association. After the City of Norton Shores became a customer in 2006, the Muskegon County government and other municipalities have either opened significant accounts with our bank or given us the opportunity to make a proposal for their business. Last June, we made a presentation to 29 local treasurers that led to the opening of several new accounts. We have since followed-up with additional presentations and plan to open several new accounts with the local governments in the coming years.

In addition to meeting the financial needs of the Muskegon community, we take pride in our pledge of service to the special needs of this community. We are proud supporters of the Chamber of Commerce, United Way, American Red Cross and Animal Control. Our employees are active with the Rotary Club and various civic, religious and service-based groups. We’ve been a major sponsor of the Parade of Homes, Michigan Irish Music Festival, Muskegon Summer Celebration, Muskegon Air Fair and the Miss Michigan Scholarship Pageant.

As we reflect on our bank’s first 10 years in business, we recall our humble beginnings. We began operations in a 1,500-square-foot office, moved to a 5,500-square-foot former restaurant, and built our new 12,000-square-foot building last year. Meanwhile, we grew our staff from six to 25 employees.

Muskegon Commerce Bank has always adapted well to change because we know that with change come new opportunities. Change has been an ingredient for our success. It will be a part of our destiny as well.

— Robert J. McCarthy, President & CEO

Change has been an ingredient for our success.

281 Seminole Road | Muskegon, MI 49444

231.737.4431 | www.muskegoncommerce.com

BOARD OF DIRECTORS

Philip J. Andrie

President

Andrie, Inc.

William C. Cooper

President & Owner

AMG Business Center

Mark Hoofman

President

ProFab – Production Fabricators

Edgar W. Hunt

Retired Bank President

First of America Bank

Christopher L. Kelly

Attorney at Law

Parmenter O’Toole

Donald Martines

President

Ace Acquisition Company

Robert J. McCarthy

President & CEO

Muskegon Commerce Bank

Kelly D. Miller

Director of Specialty Finance

Capitol Bancorp Limited

James Stanford Tyler

President

Tyler Sales Company, Inc.

William Vanderweele Jr.

President

Weber Lumber

OFFICERS

Christopher L. Kelly

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

44

OAKLAND COMMERCE BANK

Larry R. Nichols, President & CEO

Oakland Commerce Bank’s team of veteran bankers is pursuing new business opportunities that fully utilize the cutting-edge financial products and services that we have available for small and mid-size companies and professionals.

Business development activities were at the forefront in 2007 and will remain so going forward. For instance, we are displaying our entrepreneurial energy in courting business from area dental practices. During the fourth quarter, we sponsored a continuing education program for the Oakland County Dental Society at a public library in Farmington Hills. We devoted a team of six bank officers to this event. I spoke to the assembly of 120 dentists and presented the Oakland Commerce Bank story. While a couple of my colleagues represented the bank at an information table handing out brochures detailing the financial products and services that can benefit the dentists, other officers introduced themselves to potential customers. We are generating new business and vigorously pursuing leads from this event.

In developing new relationships, we take the time to understand a prospective customer’s business so that we can fully service the potential client’s short and long-term financial needs. We want to help our clients maximize their earning potential as we save them money with lower operating costs. We do this by customizing financial solutions for each client.

At the same time, we are becoming more active with service and business organizations to raise the bank’s brand awareness with our target audience — businesses and professionals. In June, we were a court sponsor for the popular Gus Macker 3-on-3 basketball tournament organized by the Optimist Club of West Bloomfield. In September, we joined Capitol Bancorp and four affiliate banks in sponsoring the annual Real Estate Franchise Conference organized by the Chaldean Chamber of Commerce. That same month, the bank was an exhibitor at the Farmington Hills Chamber of Commerce Business Expo.

The veteran staff at our full-service bank has much to offer clients and prospects. We are determined to deliver quality financial services while adhering to safe and sound banking practices.

— Larry R. Nichols, President & CEO

We take the time to understand a prospective customer’s business.

31731 Northwestern Highway, Suite 100 | Farmington Hills, MI 48334

248.855.0550 | www.oaklandcommerce.com

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, President

Hauswirth + Moncrief

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

President

J. L. Pallone Associates

Francine Pegues

President

Dan Teak, LLC

OFFICERS

Michael J. Devine

Chairman

Larry R. Nichols

President & CEO

Robert. J. Malek

Executive Vice President & CCO

Thomas K. Perkins

Senior Vice President

James F. Miller

Vice President & Secretary

Paula K. Boegner

Vice President

William R. Hartley

Vice President

45

OHIO COMMERCE BANK

Dell R. Duncan, President & CEO

The year 2007 will always hold a special place in the hearts of those associated with the early history of Ohio Commerce Bank.

First, it will be remembered for the special relationship built with Capitol Bancorp when we became the 50th affiliate to open and operate under the Capitol banner. Also, it will be remembered for the commitment of a most dedicated, professional staff, implementing the many new systems associated with the modern products and services offered to businesses, professionals and retail customers of the bank.

On November 2, 2007 our team and supporters celebrated the bank’s first anniversary with many reasons to be proud. Ohio Commerce Bank became the first new bank to be chartered in Cuyahoga County in the past 16 years.

Ohio Commerce Bank opened in temporary offices with a team of nine experienced bankers. In April, we moved into sparkling new offices and on May 9, 2007, hosted a formal grand opening event, which was attended by 250 guests. As we celebrated our anniversary, we were grateful for the many contributions received throughout this journey. Playing key roles were the Capitol Bancorp team, our board of directors, and most importantly, our enthusiastic staff.

Our achievements were considerable. We exceeded our noninterest deposit to total deposit ratio. A state-of-the-art Internet cash management product was made available to our customers and they responded positively by opening the highest number of new accounts in the eastern region. We received the 2007 Emerging Bank of the Year Award, from the Growth Capital Corporation, our area’s SBA 504 certified development company. And last but not least, we were featured in the business section of The Cleveland Plain Dealer on November 23, 2007.

Looking forward, Ohio Commerce Bank will continue to build on its brand and tagline, “It’s All About Attention,” focus on meeting aggressive business goals, develop and diversify the board, and maintain our commitment to excellence in all we do.

— Dell R. Duncan, President & CEO

We became the 50th affiliate to open and operate under the Capitol banner.

24400 Chagrin Boulevard, Suite 100 | Beachwood, OH 44122

216.910.0550 | www.ohiocommercebank.com

BOARD OF DIRECTORS

L. Louis Amoroso

Retired Bank Executive

Commerce Exchange Bank

John P. Andrews

President

Industrial Security Services, Inc.

Dell R. Duncan

President & CEO

Ohio Commerce Bank

Lawrence D. Katz

Owner

L. Katz Coaching & Consulting

Stuart F. Kline

President

Chase Properties, Ltd.

Mark A. Mintz, Secretary

Director & Founder

SageQuest

Cary M. Root

President

American Logistics Group, Inc.

Christopher J. Smerglia

EVP/Chief Credit Officer

Ohio Commerce Bank

John C. Smythe

President, Great Lakes Region

Capitol Bancorp Limited

Gary A. Vaccaro

Retired President & CEO

Ohio Commerce Bank

James R. Wymer

President

WXZ Development, Inc.

Gregory S. Zenczak

President

Orttech Inc.

Stephen J. Zenczak

President

Triad Investments, Inc.

OFFICERS

L. Louis Amoroso

Chairman

Gary A. Vaccaro

Vice Chairman

Mark A. Mintz

Secretary

Dell R. Duncan

President & CEO

Christopher J. Smerglia

Executive Vice President & CCO

Jamie A. Brotherton

Senior Vice President

Richard J. Miller

Vice President

46

PARAGON BANK & TRUST

Randall R. Smith, President & CEO

At Paragon Bank & Trust, we have spent a considerable amount of time and energy on business development with our board of directors and staff. Our team is focused on high-touch client service, high-profile community involvement and leveraging these activities to develop new business for the bank.

Paragon Bank & Trust maintains a high-profile in the community. We are active with the Holland Chamber of Commerce, dozens of local nonprofit organizations and the United Way of Ottawa County, which funds hundreds of local organizations that assist deserving neighbors and keep our community attractive for business.

We have reported 100 percent employee participation in the United Way campaign for the past several years, remaining active in the campaign from start to finish. We always field a team of employee volunteers for the Day of Caring at the start of the campaign. During the campaign, there are weekly events and fundraisers to maintain the campaign excitement. Then we treat our staff to a luncheon at the end of the campaign to thank them for their dedication.

Our employees are engaged in every aspect of our bank. Employee involvement, we believe, is the most effective way for them to remain committed to our shared goals. In addition to promoting and providing a high level of client service, all employees are encouraged to serve on one or more bank committees devoted to business development, marketing, client appreciation, charitable contributions and community involvement. We also have a sign committee that determines the type of timely messages that will be displayed on the electronic sign in front of the bank. Our social committee plans employee events that promote camaraderie and team building.

In the community, the bank maintains an active presence. In 2007, our employees staffed an exhibition table and handed out brochures at such events as the Business to Business Showcase, Senior Expo and the Holland Tulip Time festival.

This steady employee involvement in business and the community is our strategy for building on our past achievements and ensuring a profitable future for Paragon Bank & Trust.

— Randall R. Smith, President & CEO

Our team is focused on high-touch client service.

240 East 8th Street | Holland, MI 49423

616.394.9600 | www.paragonbank.com

Trust & Investments Division

616.394.9055

BOARD OF DIRECTORS

Robert J. Bates, MD

Physician

Western Michigan Urological

Assoc., PC

Charles A. Brower

CPA & Partner

DeLong & Brower, PC

Scott Diepenhorst

Principal

SD & Associates, Inc.

Paul Elzinga

President

Paul Elzinga

Consulting, Inc., PC

Chairman Emeritus

Elzinga & Volkers, Inc.

Michael P. Haverdink

President

Ottawa Kent Insurance

Agency, Inc.

Lee W. Hendrickson

Chief Financial Officer

Capitol Bancorp Limited

Grant M. Kasten

President

Kasten Insulation Services, Inc

Lawrence D. Kerkstra

Chairman

Kerkstra Precast, Inc.

Scott G. Kling

President

Trust Operations

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, PC

Ned B. Timmer

President

T2 Communications

Barry L. Werkman

Retired Vice

President of Finance

Hope College

ADVISORY DIRECTOR

Robert J. Trameri

Director Emeritus

Retired Chairman

Paragon Bank & Trust

OFFICERS

Richard G. Swaney

Chairman

Charles A. Brower

Vice Chairman & Secretary

Randall R. Smith

President & CEO

Scott G. Kling

President

Trust Operations

C. Steven DeLoof

Senior Vice President & CCO

M. Jane Riemersma

Vice President

Alan K. Yamaoka

Vice President

47

PORTAGE COMMERCE BANK

Dennis J. Kuhn, President & CEO

As we celebrate Portage Commerce Bank’s 20th anniversary in 2008, we thank our long-time customers, board members and employees. Ten of our 14 board members have been with the bank since the beginning.

We are proud of our achievements. The bank reached profitability after only nine months in business. Our addition to Capitol Bancorp in 1990 signaled the beginning of Capitol’s growth and transition into becoming the premiere bank development company in America.

Portage Commerce Bank has been a provider of meaningful jobs in our community. We have funded economic development and small business growth in the Portage area.

From our start, navigating the economic challenges in the late 1980s, we have grown into a respected and successful community bank. Almost 20 years later, the state’s economy has come full circle and we are positioned to handle the current economic challenges.

In 2007, for example, we expanded our business, growing loans, deposits and revenues while achieving strong asset quality measures. Much of the credit can be attributed to our veteran staff. Our officers average more than 18 years of experience in financial services. They have expanded relationships with existing customers and cultivated business with new customers.

Our relationships in the small business community continue to grow. In 2007, we nearly doubled the bank’s U.S. Small Business Administration loan volume. Our commercial lenders devote their time to tailoring solutions for clients.

Capitol Wealth Advisors is helping us develop new opportunities. The wealth management business more than doubled in 2007, necessitating the addition of a second investment representative.

We approach the future with a clear vision and firm determination to uphold the ideals upon which we were founded — to meet the financial services needs of our community through superior service.

Despite the economic fluctuations, there will always be a small business market that we are very adept at serving. It is the many growing small businesses in southwestern Michigan that provide the real financial stability for our community. As long as we stay true to our mission and build relationships, that market will stay true to us.

— Dennis J. Kuhn, President & CEO

Our officers average more than 18 years of experience in financial services.

800 East Milham Road | Portage, MI 49002

269.323.2200 | www.portagecommerce.com

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, MD

Retired

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, MD

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, PhD

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

Executive Vice President

& CCO

John M. Crandle

Senior Vice President

Cheryl M. Germain

Senior Vice President

James V. Lunarde

Senior Vice President

Kenneth R. Blough

First Vice President

Roy L. Dangel Jr.

First Vice President

James E. Higgins

First Vice President

Carol L. Ludlow

First Vice President

Susan M. Wright

First Vice President

James S. Burkett

Vice President

Steven J. Todd

Vice President

48

MIDWEST REGION

Stanley E. Ricketts, Region President

50      Bank of Belleville

51      Community Bank of Lincoln

52      Summit Bank of Kansas City

49

BANK OF BELLEVILLE

Kevin M. Pesko, President

Unique marketing and networking efforts in 2007 underscored Bank of Belleville’s successful business development. The result was a solid year of growth and an optimistic outlook for 2008. In addition to the bank adding three new board members, we added key banking professionals to our staff to increase business referrals.

We are branding the bank through our extensive community involvement. In November, the bank once again sponsored two meetings of The Alternative Board (TAB). TAB is composed of local CEOs and business owners that meet monthly to exchange business strategy ideas, advice and solutions.

Involvement with the business community is emphasized at our local Rotary clubs. We were proud last July when one of our officers became president of the St. Clair County East Rotary Club.

Shortly after the bank’s debut, we became the annual sponsor of the popular horse-drawn trolley for downtown holiday shoppers. This past holiday season marked our third year of involvement with this signature event.

Bank of Belleville earned recognition last year for its sponsorship of an electronic message sign at the region’s leading parochial high school. The sponsorship was announced at the school’s Vision & Values dinner, which many business and community leaders also attended.

Our staff stayed late in November creating a gingerbread likeness of the bank building to be displayed in a local merchant’s front window during the annual Gingerbread Walk. This tradition recalls Belleville’s heritage. In the 1850s, the city had a large population of German immigrants and many of the buildings feature gingerbread architecture.

We have seen the loan portfolio grow and diversify through the addition last year of two experienced commercial lenders and a talented mortgage lender. The addition of an investment executive with Capitol Wealth Advisors will further diversify our revenue stream while providing us with many excellent opportunities to expand our existing customer relationships and develop new ones.

The past year was a period of growth for Bank of Belleville. The future remains bright as we heighten our community presence and more fully service our customers.

— Kevin M. Pesko, President

We are branding the bank through our extensive community involvement.

720 West Main Street, Suite 100 | Belleville, IL 62220

618.233.6400 | www.bankofbelleville.com

BOARD OF DIRECTORS

Dennis E. Bielke

Retired Banker

Community Volunteer

Michael G. Guignon, MD

Michael Guignon, MD, PC

President & Physician

Gary R. Hoelscher

President

Hoelscher Engineering, PC

Edward A. Hoering III

Principal, CPA

Ganim, Meder, Childers

& Hoering, PC

Claire S. Leopold

President

Nester Realty Inc.

Carl J. Miller

President

W. A. Schickedanz Agency, Inc.

Kevin M. Pesko

President

Bank of Belleville

Pramual P. Pongpitoon

President

Medical Diagnostic

Laboratory Inc.

Wyatt Rawlings III

Owner

Wyatt Rawlings III CPA, LLC

George J. Renner III

Funeral Director

George Renner & Sons

Funeral Homes Inc.

Stanley E. Ricketts

President, Midwest Region

Capitol Bancorp Limited

James E. Shay

President

Shay Roofing, Inc.

Douglas D. Sitton

President

Sitton Consulting Group

OFFICERS

Stanley E. Ricketts

Chairman

Kevin M. Pesko

President

Ronald R. Stephens

Executive Vice President

& CCO

Jean L. Waeltz

Vice President & COO

Mary E. Blackard

Vice President

Jo Ann Bohnenstiehl

Vice President

Ramona A. Friederich

Vice President

Pamela S. Herbeck

Vice President

Jacqueline Lemmon

Vice President

50

COMMUNITY BANK OF LINCOLN

Mary C. Gerdes, President

With the launch of Community Bank of Lincoln as the first affiliate in Nebraska, we are privileged to officially link the east and west nationally as we join the Capitol Bancorp family of banks. We are positioned in the center of Capitol’s geographic footprint, in a state that enjoys a stable economy and immense potential for growth.

Lincoln is Nebraska’s capital city as well as home to the University of Nebraska. Lincoln also has an extensive medical community that we are developing as part of the foundation of our customer base.

This bank was organized with guidance provided by our local board of directors whose members have pledged that our bank will provide premier financial services to the businesses and individuals in and around Lincoln. As you can see from the names on this page and the professions represented, the directors will develop a unique approach to assisting local investors and the community at large. Many of our directors are entrepreneurs who understand the needs of business people in our market. We strive to know each of our customers so that we may provide them with relationship-based banking and offer customized, individual solutions to address their financial needs.

I am proud to say that we personally selected a team of professional bankers with years of experience in the Lincoln market. We recruited each employee because of their excellent professional background in Nebraska banking. By doing this, we have formed a team with the entrepreneurial spirit and commitment that will partner with our investors to ensure a successful community bank.

With the bank’s opening in December 2007, we are positioned to deliver our customized financial solutions with a team that is excited about our future and the possibilities to establish Community Bank of Lincoln as the premier bank in the city of Lincoln.

— Mary C. Gerdes, President

We are positioned in the center of Capitol’s geographic footprint, in a state that enjoys a stable economy and immense potential for growth.

3801 Union Drive, Suite 200 | Lincoln, NE 68516

402.423.2111 | www.bankoflincoln.com

BOARD OF DIRECTORS

Mary C. Gerdes

President

Community Bank of Lincoln

Kaylyn R. Jackman, OD

Optometrist

Eye Surgical Associates

Gordon V. Karels

Chair, Dept. of Finance

College of Business Administration

University of Nebraska-Lincoln

Alan C. Linderman, MD

Nebraska Internal Medicine, PC

Paula J. Metcalf

Attorney at Law

Metcalf Law

Gary L. Novotny

Owner & President

Gary Michaels’ Clothiers

Donald W. Pederson

Attorney at Law

Retired State Senator

Laura E. Pederson

Student

Steve B. Rexroth

Owner

Miracle Workers Auto Collision

Robert B. Rhodes, MD

Southwest Family Health

Stanley E. Ricketts

President, Midwest Region

Capitol Bancorp Limited

Kurtis A. Suhr

Architect

Architecture One

Mark L. Vanicek, DDS

Dentist

Mark Vanicek, DDS, PC

OFFICERS

Stanley E. Ricketts

Chairman

Kaylyn R. Jackman

Secretary

Mary C. Gerdes

President

Brian V. Wolford

Executive Vice President & CCO

Steve L. Schmidt

Executive Vice President

Patrick A. Dettmer

Vice President

Angie R. Schwartz

Vice President

51

SUMMIT BANK OF KANSAS CITY

Richard L. Viar, President

There has been extraordinary excitement and many challenges for the team at Summit Bank of Kansas City during the bank’s second full year of business.

In keeping with Capitol Bancorp’s unique business model and the latitude given to achieve our strategic objectives, we were able to enjoy several meaningful accomplishments in 2007:

● Our bank was the sixth highest volume lender in the U.S. Small Business Administration’s Region VII and one of the top SBA loan producers for Capitol Bancorp.

● The Kansas City Business Journal recognized our bank as one of the top 10 “Best Places to Work in Kansas City.”

● We hosted our first annual “Fan Appreciation Day.” The baseball-themed event highlighted wealth management, residential mortgage, Internet banking and SBA lending, attracting more than 110 guests.

● In keeping with our core value of Community Leadership, we formed strategic partnerships with a local middle school, area chambers of commerce and economic development councils to enhance business development.

● We participated in a community-wide “Support our Troops” event honoring active and retired military personnel.

As we look to future opportunities, Summit Bank of Kansas City is solidly positioned to attract deposits, make loans and provide other products and services that maximize value for all of our customers. Our board members continue to take an exceptionally strong role in strengthening the bank’s business development program, each opening doors to new relationships that would otherwise be closed.

Our staff enjoys a competitive advantage that is rare in our community and industry — the advantage that results from being fully empowered to promptly meet the credit needs of our customers. More and more, Summit Bank of Kansas City is becoming the community bank of choice in the Kansas City metroplex.

Summit Bank of Kansas City is “Where Relationship and Opportunity Meet!”

— Richard L. Viar, President

Our staff enjoys a competitive advantage that is rare in our community and industry.

1650 NE Grand, Suite 100 | Lee’s Summit, MO 64086

816.251.9000 | www.summitbankofkc.com

BOARD OF DIRECTORS

Jack A. Accurso

Chairman

American Foodservice Company

Carl L. Chinnery

Attorney at Law

Chinnery, Evans & Nail, P.C.

William W. Coates IV

President

Billy Goat Industries

Roger L. Fender, DDS

Fender Family Dentistry

Robert F. Glaser

Vice President-Business

Development

Summit Bank of Kansas City

Harlan L. Limpus

Executive Member

Winterstone Golf Course

Kurt D. Pycior

President

Froehlich Pycior Companies

Stanley E. Ricketts

President, Midwest Region

Capitol Bancorp Limited

Carson Ross

Owner

Carson Ross Consulting

Diane J. Seif

President

DVA Enterprises Inc.

Steven M. Silverstein, MD, FACS

President

Silverstein Eye Centers, PC

Richard L. Viar

President

Summit Bank of Kansas City

OFFICERS

Stanley E. Ricketts

Chairman

Richard L. Viar

President

Phillip W. McElhaney

Executive Vice President, CCO &

Secretary

Vicki L. Henderson

Senior Vice President & COO

Robert K. Dempski

Senior Vice President

Capitol Wealth Advisors

Patricia E. Case

Vice President

Robert F. Glaser

Vice President

Gregory L. Singleton

Vice President

52

NEVADA REGION

Thomas C. Mangione, Region President

54      1st Commerce Bank

55      Bank of Las Vegas

56      Black Mountain Community Bank

57      Desert Community Bank

58      Red Rock Community Bank

53

1st COMMERCE BANK

Al G. Gourrier, President

1st Commerce Bank’s staff and clients celebrated the bank’s first anniversary in October 2007. With our dedication to building long-term client relationships, we are establishing a reputation as the premier community bank in North Las Vegas. Along with the staff’s community involvement, we are personifying our motto, “1st Class Service, 1st Class Commitment.”

Through the expertise and dedication of our highly skilled staff, the bank’s products and services were expanded in 2007 to better serve our clients. Simultaneously, we diversified our staff with the addition of an investment executive and mortgage loan officer.

Client satisfaction is generating new business referrals. A prime example is Madison Grace Construction Services, a new client that was referred to the bank last year. In addition to establishing a loan relationship, we were able to help with the company’s ownership transition and improve its operations by providing products and services essential to its continued success. Now that the company is poised for growth and further success, this valued client has become a terrific referral source for the bank.

In 2007, I was honored to be recognized as one of the “40 under 40” named by In Business Las Vegas magazine and also named a “Mover and Shaker” by Vegas Young Professionals. While these honors are flattering, they have, more importantly, generated essential publicity for our young bank.

Likewise, our top officers are active in more than two dozen organizations that provide professional development as well as numerous networking opportunities. Our involvement with various community organizations puts us in touch with small and mid-size businesses that belong to our niche market.

As a committed community bank, we support local schools that are developing southern Nevada’s future leaders. We also took part in food, clothing and toy drives to help our less fortunate neighbors.

1st Commerce Bank is becoming well known in the business communities of North Las Vegas and southern Nevada. We believe our 1st class service and commitment to our community helps us reach our goal of becoming a high performing bank.

— Al G. Gourrier, President

Our involvement with various community organizations puts us in touch with small and mid-size businesses…

5135 Camino Al Norte, Suite 100 | North Las Vegas, NV 89031

702.942.2050 | www.1stcommercebank.com

BOARD OF DIRECTORS

Russell S. Bono

Realtor

Award Realty

Michael J. Devine

Attorney at Law

Al G. Gourrier

President

1st Commerce Bank

Xavier D. Peterson

President & CEO

Quality Investigations Inc.

Rian M. Ross

Owner

Southwest Commercial

Real Estate

Harry H. Shull

Owner

Celebrate Homes

Henry B. Soloway, MD

Retired Physician

John J. Zanoni

President

Zanoni & Company LLP

OFFICERS

Michael J. Devine

Chairman & Secretary

Al G. Gourrier

President

John R. Kley

Executive Vice President & CCO

Marcel M. Baker

Vice President

David G. Smith

Vice President

Biagio J. Vultaggio

Vice President

54

BANK OF LAS VEGAS

Vincent J. Ciminise, President & CEO

Staff and board members joined customers in celebrating the bank’s fifth anniversary last year. In name and deed, we aim to be the Bank of Las Vegas.

Perhaps indicative of the bank’s success during the first five years was the need for additional work space. We expanded our offices last year to make room for additional lenders and our new Capitol Wealth Advisors investment executive. This additional staffing will benefit our growth plans for 2008 and beyond.

The success of any business can be judged by its customers. Our customers tell us that we are the best bank and, as a result, they are our best source of referrals. We strive to make every customer feel like they are our only customer.

Convenience is something we know our busy business customers appreciate. In 2007, we offered more depository products that allowed our customers more ease and flexibility in transferring funds. Additionally, the bank’s online banking system saw several upgrades and enhancements last year.

Our board members are another excellent referral source. The addition last year of a board member from the title insurance industry provided the board with additional insight in the local commercial and residential real estate markets. In the second half of 2007, we also added a new residential lending team, which has several years of local market experience.

Our ability to handle several larger loan transactions last year benefited the bank from a growth standpoint, while also enhancing our credibility in the dynamic Las Vegas market as a financial institution that can facilitate these types of transactions.

Involvement with community organizations reaffirms all we do as a business. In 2007, our team was active with many organizations that help improve the quality of life for our area’s less fortunate individuals. Our leadership was evident in coordinating the breast cancer research fundraiser for the Capitol Bancorp affiliate banks in southern Nevada in October. We are also involved with the Nevada chapter of the Society for the Prevention of Cruelty to Animals.

The first five years were a rousing success. We are excited by the possibilities for the next five years when we plan to solidify our status in name and deed as the Bank of Las Vegas.

— Vincent J. Ciminise, President & CEO

Our customers tell us that we are the best bank and are our best source of referrals.

6001 South Decatur Boulevard, Suite P | Las Vegas, NV 89118

702.939.2400 | www.bankoflasvegas.com

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

Branch Manager

PrimeLending

Eleanor N. Wilcox

President

Stewart Title Company

OFFICERS

Michael J. Devine

Vice Chairman

Vincent J. Ciminise

President & CEO

Roger S. Mellies

Executive Vice President & CCO

Carol A. Clemens

Senior Vice President

Louis Gonzalez III

Senior Vice President

William C. Russell

Senior Vice President

Lynne S. Adams

Vice President

Debbie V. Clarke

Vice President

Randall S. Daugherty

Vice President

Ann Fox

Vice President

Tina M. O’Malley

Vice President

Michael Rodriguez

Vice President

55

BLACK MOUNTAIN COMMUNITY BANK

Peter M. Atkinson, President & CEO

The past year has been the most interesting and perhaps the most challenging since Black Mountain Community Bank opened seven years ago.

Las Vegas has 40,000 new rooms under construction on the Las Vegas strip alone which will create some 200,000 new jobs in the next three years. We have had more than 6,000 people move into Las Vegas on a monthly basis for almost two decades. So, in spite of some current weakness in our residential market, there is certainly no easing up in the demand for affordable housing.

This growth also creates a need for office, retail and industrial space. The commercial real estate sector is still strong, albeit more expensive. Quality banking opportunities are still plentiful but pricing as always is very competitive. Our local economy looks good for the next several years. Obtaining full banking relationships, including loans, deposits and services are the keys to a bright future — and that is our aim.

Last June I was elected chairman of the Nevada Bankers Association and re-elected to the board of the Henderson Development Association, which works with the Henderson Economic Development Division and the Chamber of Commerce. I was also appointed to the President’s Advisory Board for Nevada State College. These are opportunities both to serve and gain recognition for our bank.

We began funding two four-year memorial scholarships to Nevada State College: one in nursing named after Mike and Carolyn O’Callaghan, the former governor and parents of our director Colleen O’Callaghan-Miele, and one in teaching named for two local Little League® ball players coached by customer DJ Allen.

As the bank’s business lines diversify and grow, we are expanding our office space. Last year, we needed more room for the residential mortgage division and to handle the addition of Capitol Wealth Advisors personnel. This expansion of employees, products and services makes us more competitive than ever. These improvements position Black Mountain Community Bank for another successful year and continued growth for many years to come.

— Peter M. Atkinson, President & CEO

I was elected chairman of the Nevada Bankers Association and re-elected to the board of the Henderson Development Association.

1700 West Horizon Ridge Parkway, Suite 101 | Henderson, NV 89012

702.990.5900 | www.bmcb.com

BOARD OF DIRECTORS

Kristine E. Anaya, CPA

Anaya & Company, Ltd.

Peter M. Atkinson

President & CEO

Black Mountain Community Bank

Amador Bengochea

President

Bentar Development Inc

Michael J. Devine

Attorney at Law

Betty A. Kincaid

Investor

Michael J. Mixer

Corporate Broker

Colliers International

Colleen C. O’Callaghan-Miele

President & Owner

H.B.C. Publications

Phillip N. Ralston

Executive Vice President & CFO

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

Victor T. Caron

Senior Vice President

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

Claude D. Rosenthal

Vice President

56

DESERT COMMUNITY BANK

James W. Howard, President & CEO

The old adage, “It takes money to make money,” may have never been more true. The proliferation of banks and small business lenders is a testament to the business climate in the Las Vegas market. Our economy has been robust for many decades and we feel confident that it will remain healthy for many years to come.

Despite concerns in the housing market, there are reasons for optimism at Desert Community Bank. In 2007, our bank became a U.S. Small Business Administration Preferred Lender. This prestigious designation allows our bank to originate and authorize SBA loans immediately and meet the demand for SBA loans in our marketplace which remains relatively strong.

Also, in an effort to react more quickly to these market shifts, the bank last year created the position of marketing director. Larry Moulton, a vice president and business development veteran, has been given the job of studying the market, plotting strategy and acting proactively to combat external forces that may affect us in the short and long term. Thus far, Larry has been successful in managing our advertising, marketing and public appearances in a consistent and more productive manner. We appreciate his efforts and look forward to his continuing contributions in building the Desert Community Bank brand.

Our team celebrated Desert Community Bank’s eighth anniversary in 2007. We have faithfully served the Las Vegas community since 1999. We continue to offer a high level of personal banking and consulting services to help businesses maximize their potential and weather any economic storm that may come our way.

We stand ready to assist small businesses in Las Vegas with a full platter of financial services and decades of banking experience. We are very proud of our past business achievements and we are optimistic about the economic future of Las Vegas.

Desert Community Bank is bullish on business and the business community is just as bullish on Desert Community Bank!

— James W. Howard, President & CEO

In 2007, our bank became a U.S. Small Business Administration Preferred Lender.

3740 South Pecos-McLeod | Las Vegas, NV 89121

702.938.0500 | www.desertcommunity.com

BOARD OF DIRECTORS

Robert A. Albano

President & CEO

American Asphalt & Grading

Robert J. Andrews

Chief Operating Officer

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

Vicki Paulbick

Private Property Manager

Thomas A. Smith

President & CEO

Group Two, Inc.

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

57

RED ROCK COMMUNITY BANK

J. Randall Boesch, President & CEO

Red Rock Community Bank experienced a rock-solid year in 2007. Building on a terrific foundation we added five new officers; took on new community commitments to broaden our presence; and are growing the bank safely, soundly and profitably. We believe we are one of southern Nevada’s best kept secrets, but we aim to change that as rapidly as possible.

In addition to my arrival in 2006, the bank welcomed Steve Borgna, Lee Steinhauer, Winona Houk and Margaret Kruglov during 2007. The five of us together have more than 120 years of banking experience.

But the real success is our ability to motivate the entire staff to grow the bank in the areas of commercial banking, wealth management and residential mortgages. For the convenience of our employees and clients, we developed a one-page information sheet. If a customer wants to borrow money, our employees refer to the list of credit, loan and leasing products that are available. If a customer wants to deposit or invest money, the employees refer to the product list of deposit, checking and investment services.

Use of this reference tool is helping our team to expand existing relationships and build new ones. Our strategy is to establish a relationship with one product and build from there. Improving our product knowledge and engaging customers resulted in many new deposit, loan and investment accounts, including more than a dozen new million-dollar accounts. There is also added emphasis on obtaining business referrals from our board members.

Red Rock Community Bank is located in the heart of Summerlin, one of the largest master plan communities in the country. In order to brand the bank, we are active with more than 35 local community organizations. We are involved in the Nevada Development Authority, Latin Chamber of Commerce and Faith Lutheran School Business Advisory Council, to name a few. This aggressive publicity campaign will level out in the years to come but we will always make community contributions where they are needed the most.

Tom Mangione, now our Nevada Region president, along with our longtime employees and board members, have laid a rock-solid foundation. On that strength we are growing a high-performing Red Rock Community Bank.

— J. Randall Boesch, President & CEO

The real success is our ability to grow in the areas of commercial banking, wealth management and residential mortgages.

10000 West Charleston, Suite 100 | Las Vegas, NV 89135

702.948.7500 | www.redrockcommunity.com

BOARD OF DIRECTORS

J. Randall Boesch

President & CEO

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

The Harris Agency, LLC

Richard Hollander

President

Hollander Capital

Management, Inc.

Lori A. Marrs

Owner

Marrs Bergquist, CPAs

Fredrick P. Waid

Perth Consulting &

Services, LLC

J. Bruce Wiggins

President

Strategic Medical Management

OFFICERS

Michael J. Devine

Chairman

J. Randall Boesch

President & CEO

Steven B. Borgna

Executive Vice President & CCO

Shahzad B. Ali

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. Everitt

Vice President

Margaret Kruglov

Vice President

R. Mitch Taylor

Vice President

58

NORTHEAST REGION

John S. Lewis, Region President

60      USNY Bank

59

USNY BANK

R. Michael Briggs, President & CEO

USNY Bank debuted in July 2007 as Capitol Bancorp’s first bank established in New York state and the Northeast Region. We have banking operations in two distinct markets about 150 miles apart in upstate New York. We operate in Geneva on beautiful Seneca Lake as Bank of the Finger Lakes and in Cooperstown, home to the National Baseball Hall of Fame, as Bank of Cooperstown.

The Finger Lakes region of New York is known for majestic, glacier-formed lakes and a rapidly developing winery business. Our main focus at Bank of the Finger Lakes is to provide financing to small and mid-size businesses, agribusinesses, diversified agricultural operations, commercial real estate owners and developers, professional practices and individuals throughout the central Finger Lakes.

We have developed strong relationships with some area wineries since we have been open. Red Tail Ridge Winery is one example of these relationships. Nancy Irelan and Mike Schnelle relocated from California with plans to establish a high-quality vineyard and winery operation. They were looking for financing to help complete their vineyard development project and construct a new tasting room. Working closely with our clients, we put together a financing package that helped them complete the first phase of their long-term plans.

Cooperstown is well-known as the community where the game of baseball was invented and the Hall of Fame is located. It is also home to many other museums. Our main focus at Bank of Cooperstown is to provide locally-delivered banking solutions to businesses, tourism-related enterprises, professional practices and individuals throughout this beautiful region.

We have been fortunate to assemble an exceptional team of experienced bankers and an active board of directors. Each location has also established their own boards with members specifically from the Finger Lakes and Cooperstown markets to help us grow USNY Bank through referrals from their business contacts within these respective communities.

We are most grateful for the positive market reception and strong support we have received in 2007. We are positioned to move forward and continue our growth as we become further established in our communities.

— R. Michael Briggs, President & CEO

We are positioned to move forward and continue our growth.

73 Chestnut Street | Cooperstown, NY 13326

607.547.2210 | www.bankofcooperstown.com

389 Hamilton Street | Geneva, NY 14456

315.789.1500 | www.bankofthefingerlakes.com

BOARD OF DIRECTORS

R. Michael Briggs

President & CEO

USNY Bank

H. Taylor Fitch III

Retired

Murray P. Heaton

Partner

Heaton & Venuti, LLP

J. Michael Moffat

President

Black Ash Holding Company, Inc.

Robert F. O’Neill

Retired

Robert Ranger

Owner

RWR Funding

Joseph D. Reid

Chairman & CEO

Capitol Bancorp Limited

Bruce A. Thomas

President of Bank Operations

Capitol Bancorp Limited

OFFICERS

Joseph D. Reid

Chairman

R. Michael Briggs

President & CEO

Jeffrey E. Franklin

President

Bank of the Finger Lakes

Scott D. White

President

Bank of Cooperstown

James E. Willson

Chief Credit Officer

Michelle D. Catan

Vice President

Michael A. Fratto

Vice President

Dawn E. Maltman

Operations Officer

60

NORTHWEST REGION

Thomas S. Giovanelli, Region President

62      Bank of Bellevue

63      Bank of Everett

64      Bank of Tacoma

65      High Desert Bank

66      Issaquah Community Bank

61

BANK OF BELLEVUE

Andrew P. Barlass, President & CEO

For Bank of Bellevue, 2007 was a year for partnering with spheres of influence to generate new business opportunities and with nonprofit organizations to offer hope to local families in need.

On the business development front, the bank partnered with accountants and consultants to host seminars for business clients and prospects. One seminar for medical practitioners, held jointly with a local CPA firm, covered growth strategies and succession planning. We also hosted two seminars with a local consultant who detailed the principles for sustaining profitable growth for small businesses.

During 2007, we successfully rolled out our new remote deposit product that allows us to offer convenient deposit services to business clients, regardless of their location. This has enabled us to serve clients who need to be closer to the bank and has resulted in significant new demand deposits.

Economic indicators in our area remain strong, maintaining Bellevue’s stature as an idyllic place to live and work. Commercial development activity continues to fuel the growth of quality jobs. In the meantime, residential real estate is holding its value because of state and local growth management policies that protect our natural resources.

Illustrating our community commitment, the bank partnered with Hopelink, a local nonprofit organization serving families in need, for a “Creating Hope Campaign” during the holiday season. The bank was a collection point for donations of food, baby items and hygiene products. The campaign ended with a “Day of Hope” at the bank as our staff served refreshments to thank customers, board members and supporters for their generous contributions.

We are creating brand awareness through our participation in prominent community projects and business organizations. One of the many ways our team is dedicated to the betterment of our community is reflected in the high percentage of our employees who made generous contributions during the annual United Way campaign. In 2007, I was honored to represent our bank as a newly-elected member of the Bellevue Chamber of Commerce board of directors.

The past year was productive for Bank of Bellevue as it launched our transition from a de novo financial institution into a high–performing business bank.

— Andrew P. Barlass, President & CEO

We launched our transition from a de novo financial institution into a high performing business bank.

155-108th Avenue NE, Suite 100 | Bellevue, WA 98004

425.467.5900 | www.bankofbellevue.com

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

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

OFFICERS

Thomas S. Giovanelli

Chairman

Richard J. DePosit

Vice Chairman

Andrew P. Barlass

President & CEO

Rita E. Dillon

Senior Vice President

John S. Williams

Senior Vice President

Peter J. Barnes

Vice President

Patrick G. Cleary

Vice President

Sheryl D. Knowlton

Vice President

W. Scott Simmons

Vice President

62

BANK OF EVERETT

Michael R. Deller, President & CEO

Bank of Everett completed its first full year of operation in 2007. We experienced many successes and our veteran staff is embracing the opportunities as we grow our business into a high-performing bank.

We are building our customer base through our service model of community banking. Our theme at Bank of Everett is “Exceeding Your Expectations.” Our average of 22 years of experience per employee helps us build our client base and truly serve as a financial partner with our customers. The word is spreading.

“Our office manager can’t stop raving about Bank of Everett,” says James Courrier, DDS. “She loves the courier service and not having to leave the office to make deposits. Bank of Everett reflects the service standard that we have established at our dental practice. The knowledge, service, and personal touch that my bankers offer exceed our expectations, every day.”

Product and operational expertise was clearly demonstrated in 2007 as we implemented a convenient and sophisticated cash management suite of products and remote deposit capability for our business customers. The Certificate of Deposit Account Registry Service® (CDARS) which insures deposits of up to $50 million for high net worth customers and nonprofits, attracts deposits, broadens relationships and has proven to be a successful product.

Our staff’s product knowledge was recognized as employees served on task forces and strategic teams for Capitol Bancorp. At the same time, we have found that the CBC model is a very effective one, providing true community banking with sophisticated support and services.

Bank of Everett’s board of directors and staff are very involved with the community. We actively participate with organizations such as the Everett Chamber of Commerce, Providence Everett Health Clinic, Everett Rotary Club, Everett Community College Foundation and the EverTrust Foundation. Additionally, the United Way recognized our bank’s team for its generosity.

“Exceeding Your Expectations” is ringing true in Everett where the community bank of choice is becoming Bank of Everett.

— Michael R. Deller, President & CEO

The Capitol Bancorp model is a very effective one, providing true community banking with sophisticated support and services.

2722 Colby Avenue, Suite 100 | Everett, WA 98201

425.740.2888 | www.bankofeverett.com

BOARD OF DIRECTORS

Robert W. Bauer, CPA

BauerEvans, Inc., P.S.

Thomas R. Collins

Attorney at Law

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 Services

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

63

BANK OF TACOMA

Michael W. Hansch, President & CEO

Bank of Tacoma debuted at the start of 2007. Our goal is to stand tall among the financial institutions in Tacoma. Our experienced team has embraced the tagline, “Customized Banking Your Way.”

Our team members have been heavily involved in the community this past year as we began to build the Bank of Tacoma brand. Taking part in our first United Way campaign, we proudly reported 100 percent participation. Bank of Tacoma was also involved with The American Heart Walk, Tacoma Pierce County Chamber of Commerce, Tacoma Art Museum, Tacoma Goodwill Industries, Franciscan Health System, Tacoma YMCA, Downtown Tacoma Rotary Club, Emergency Food Network, Geneva Foundation, Mary Bridge Children’s Hospital and Catholic Community Services.

In 2007, I challenged our team to bring in $2 million in deposits in one week. They brought in $2.4 million by calling our investors, offering our competitive money market account and rising to the challenge with persistence and a winning attitude. We also adopted a blitz calling program where just about every team member got out of the office and called on prospects and customers on a given day and then met back at the bank to report the results and feedback. This program has been very effective in building new relationships.

In our first year, we had solid loan, deposit and fee income growth by focusing on building strong and lasting relationships with our customers. Our board members have been very helpful in referring business to the bank from their friends, colleagues and associates. At the suggestion of John Xitco, one of our board members, we recently presented all of our directors with dual-sided business cards with their name on one side and my name on the other side in order to make it easier for them to provide the bank with referrals.

We look forward to many more successful campaigns as we expand on the strong foundation we laid in 2007. We customize our expanding menu of financial services the way our customers want it — or simply put, "Customized Banking Your Way."

— Michael W. Hansch, President & CEO

In 2007, I challenged our team to bring in $2 million in deposits in one week. They brought in $2.4 million.

1015 A Street, Suite 100 | Tacoma, WA 98402

253.722.2900 | www.bankoftacoma.com

BOARD OF DIRECTORS

Fred Brown

Financial Consultant

Thomas S. Giovanelli

President, Northwest Region

Capitol Bancorp Limited

Michael W. Hansch

President & CEO

Bank of Tacoma

Theodore M. Johnson Jr.

Principal & Owner

Simon Johnson LLC

Sophia M. Korum

Executive Director

Korum for Kids Foundation

Eugene S. Lapin, MD

Cardiologist

Cardiac Study Center

John R. Long

President

Good Samaritan Hospital

John S. Wiborg

President & Co-Founder

Stellar Industrial Supply, Inc.

John M. Xitco

Partner

Associated Petroleum Products

ASADO and MASA Restaurants

OFFICERS

Thomas S. Giovanelli

Chairman

Michael W. Hansch

President & CEO

Perry R. Colombini

Senior Vice President

Ronald H. Goodwin

Senior Vice President

Steven M. Harlow

Senior Vice President

Andrea B. Hogan

Vice President

64

HIGH DESERT BANK

Larry R. Snyder, President

High Desert Bank opened its doors for business on September 26, 2007, as Capitol Bancorp’s 55th affiliate bank and the first in the state of Oregon.

Our slogan is “Local Service — Local Knowledge.” We started the bank with 160 investors and a board of directors whose members have longevity and success in the community. Our staff averages more than 16 years in banking.

The bank derives its name from the elevated arid region of central Oregon where our community is established. The panoramic Oregon Mountains give us a gorgeous backdrop to the west. Bend, a thriving city of more than 80,000 residents, is developed at the bend in the Deschutes River. It is the hub of Deschutes County, the fastest growing county in Oregon and the sixth fastest in growth in the country. Founded as a lumber town in 1905, Bend has transformed itself into a summer and winter recreational area, a great place to live, work and raise a family. It has a solid core of local and regional businesses, and the lowest unemployment rate in the state. The quality of life is enhanced further by excellent medical facilities, great weather, quality education and a relatively moderate cost of living.

Our staff members know the importance and value of community involvement. We volunteer and serve on the board of directors with the United Way, Rotary Club, Boys & Girls Club of Bend, Volunteers in Medicine, Economic Development for Central Oregon, Risk Management Associates, Habitat for Humanity, March of Dimes, Chamber of Commerce and Mountain Star Nursery.

High Desert Bank will be a vital part of this vibrant community by epitomizing the Capitol Bancorp model — seizing the plentiful opportunities to provide for the financial services needs of small and mid-size businesses and professionals. Since our debut, we have experienced solid loan and deposit growth which has provided a strong and fundamental basis to achieve our aggressive bank goals for rapid profitability.

We are looking forward to maximizing our potential in the coming years as High Desert Bank becomes an ever-expanding presence in our marketplace. We will achieve success with dedication, diligence and building relationships that last.

— Larry R. Snyder, President

Since our debut, we have experienced solid loan and deposit growth and rapid profitability.

1000 SW Disk Drive | Bend, OR 97702

541.848.4444 | www.highdesertbank.com

BOARD OF DIRECTORS

Gwil T. Evans

Owner

PV Power Inc.

Professional Air

Gary D. Fish

Owner

Deschutes Brewery Inc.

Thomas S. Giovanelli

President, Northwest Region

Capitol Bancorp Limited

Cynthia L. Kane, PhD

Vice President

Clear Choice Health Plans Inc.

John P. Lietz

President

Arrowood Development LLC

Bruce A. McLellan, MD

President

Heart Center Cardiology

Romy E. Mortensen

Vice President, Sales & Marketing

Brooks Resources Corp.

Larry R. Snyder

President

High Desert Bank

Tim D. Van Horn

Real Estate Developer

OFFICERS

Thomas S. Giovanelli

Chairman

Tim D. Van Horn

Vice Chairman

Larry R. Snyder

President

Bruce D. Stephenson

Senior Vice President

Karyn I. Simonton

Vice President

65

ISSAQUAH COMMUNITY BANK

Robert M. Ittes, President

Issaquah Community Bank opened its doors for business in July 2007 as the 53rd member of the Capitol Bancorp family. Our bank’s debut represented the culmination of efforts on the part of the bank’s board members and staff to create an enduring community bank to support the businesses in the greater Issaquah market.

It is the goal of Issaquah Community Bank to become a significant part of the fabric of our community. With that in mind, we recruited board members who are well established in the community, yet represent a diversity of business and social allegiances. Each of our board members is a valuable resource in developing new constituents for the bank and strengthening the community we serve.

Our staff personifies the bank’s motto each and every day. “Relationship banking with a personal touch” characterizes the value we place on each customer we are honored to serve. Our experienced bank professionals provide the leadership and creative resources that help to differentiate Issaquah Community Bank from other financial institutions in our marketplace. Their knowledge and expertise provide a valuable resource in marshalling the growth of the bank.

It is our goal to establish Issaquah Community Bank as a cornerstone of our community. We want the bank to be viewed as an organization that cares and a valuable resource in supporting local business. Since the bank was launched last summer, we have already been active in supporting various civic activities, including our local Chamber of Commerce’s major festival. We acknowledge the value of building these relationships, not only because they help publicize our bank and lead to new business opportunities, but also because we are fulfilling a genuine need for businesses to become involved in our community.

With the valuable resources made available to us through our affiliation with Capitol Bancorp, Issaquah Community Bank is poised to be the agent of positive influence within our community. This is an exciting opportunity which we all embrace.

— Robert M. Ittes, President

Each of our board members is a valuable resource…

1375 NW Mall Street, Suite 1 | Issaquah, WA 98027

425.395.1199 | www.issaquahcommunitybank.com

BOARD OF DIRECTORS

Brett Backues, CPA

Backues & Company LLC

William J. Baker

President

WJB Enterprises Inc.

Charles E. Burget

President

Pacific Plants, Inc.

Carl D. Cangie

President

Concept Engineering, Inc.

Thomas S. Giovanelli

President, Northwest Region

Capitol Bancorp Limited

Robert M. Ittes

President

Issaquah Community Bank

Carolyn J. Pierce-Dyer

President

Refined Design Interiors, LLC

Brett D. Smith

Owner

Mt. Si Mobile Home Park, LLC

Rosemary Warren, DDS

Dentist

Rosemary Warren, DDS

OFFICERS

Thomas S. Giovanelli

Chairman

Charles E. Burget

Vice Chairman

Robert M. Ittes

President

Carmen L. Malsbury

Senior Vice President & CCO

Charlotte U. Jacobs

Vice President

Naomi R. Kennamer

Vice President

Philip A. Milne

Vice President

John P. Snorsky

Vice President

66

SOUTHEAST REGION

Bruce D. Jones, Region President

68      Bank of Valdosta

69      Community Bank of Rowan

70      First Carolina State Bank

71      Peoples State Bank

72      Sunrise Bank of Atlanta

67

BANK OF VALDOSTA

Matthew D. Stanaland, President

Founded in June 2006, the team at Bank of Valdosta enjoyed the bank’s first full year of business in 2007. In order to handle our growing customer base, we expanded our team to 12 employees, who have more than 100 years of combined banking experience.

Over the past year, the bank has embraced the community much like the community welcomed us when we opened our doors. In 2007, we supported our local farmers and the agricultural industry at the annual Lowndes County Ham and Egg Show. Employees gave several tours of the bank to school children. Two employees are officers with the Rotary Club. We are active with the Lowndes Valdosta Chamber of Commerce, South Georgia Regional Library, Hospice, United Way, LAMP (Lowndes Associated Ministries to People), and the Homebuilders Association. We also supported Special Olympics and have helped out with local youth sports.

In 2007, we began publicizing the bank throughout Valdosta and Lowndes County with an aggressive advertising campaign on the local NBC affiliate television station. This advertising package included 60 commercials a month. The 30-second spots ran Monday through Friday during the Today Show and the local news at noon, 5 pm and 11 pm. The commercials featured bank employees and board members as we introduced our full-service community bank to the viewing public. The first commercial took place inside the bank as we highlighted our commitment to excellent customer service and our products and services. The subsequent commercials were designed as cross marketing vehicles as they showed our team members at some of our customers’ businesses. This is the type of win-win approach that we believe will make our hometown bank successful for many years.

We know the success of our bank will be determined in good part by the success of our community, so our plan is for Bank of Valdosta to grow and prosper with Valdosta and Lowndes County. The future is as bright as a sunny day in our pleasant Southern climate.

— Matthew D. Stanaland, President

In 2007, we supported our local farmers and the agricultural industry at the annual Lowndes County Ham and Egg Show.

301 Woodrow Wilson Drive | Valdosta, GA 31602

229.242.3522 | www.bankofvaldosta.com

BOARD OF DIRECTORS

William A. Culbreth

President

Culbreth, Minick & Associates, PC

Thomas W. Hobby, MD

Internal Medicine

Valdosta Medical Clinic

Bruce D. Jones

President

Southeast Region

Capitol Bancorp Limited

Patrick T. Reid

Attorney at Law

Reid & Reid

J. Daniel Schert

Attorney at Law & Partner

Langdale, Vallotton, LLP

Matthew D. Stanaland

President

Bank of Valdosta

Thomas R. Warren

Retired

Private Investor

Teddy W. Welch Sr.

Owner

Strategic Wealth Group, LLC

Sherry C. Wetherington

President

Only Options, Inc.

OFFICERS

Patrick T. Reid

Chairman

Bruce D. Jones

Vice Chairman

William A. Culbreth

Secretary

Matthew D. Stanaland

President

Penny L. Brogdon

Vice President

Beverly G. Edwards

Vice President

Lisa Harrington

Vice President

R. Jeremy Ragan

Vice President

Stephen P. Sainz

Vice President

68

COMMUNITY BANK OF ROWAN

Bruce D. Jones, President & CEO

During the past year, Community Bank of Rowan established itself as one of the premier community banks in Rowan County. Our two locations have experienced significant growth since opening in February 2006. Our goal is to continue to grow profitably and become the bank of choice in Rowan County.

As we look toward the future, we recognize that our success is dependent upon our customers. We truly believe that delivering outstanding service is critical to our continued success. We have expanded our “Customer Always First” campaign, which includes staff initiatives, as well as a customer service measurement program that provides our valued clients a way to give feedback on the services they receive. We are also continuing our employee rewards program, which recognizes outstanding customer service.

Other initiatives include an increased focus on our mortgage services. We are actively working with local real estate agents on a variety of marketing programs designed to enhance our relationship and improve the home-buying process for our customers.

We are also focusing our marketing efforts, going from start-up awareness to product marketing. New initiatives in the coming year include emphasis on commercial deposit accounts, mortgage loans and a new generation of profit-generating checking accounts.

Our community is where we live and work and our officers continue to play a vital role in area organizations. We are actively involved in various local organizations, including the Economic Development Commission, Rowan Regional Medical Center, Habitat for Humanity, Alliance for Tomorrow, Rowan Jobs Initiative and the Rowan County Chamber of Commerce. We also support numerous area groups and schools, including local Civitan Clubs, Rotary Club, several school-based initiatives and other community-based nonprofit organizations.

One exciting community initiative this year was the campaign to construct a brick-and-iron fence for Livingstone College’s Salisbury campus. We led the campaign in raising funds and gaining community support for this project.

We look forward to continued growth and becoming the high-performance bank of choice in Rowan County.

— Bruce D. Jones, President & CEO

Our community is where we live and work and our officers play a vital role in area organizations.

322 East Innes Street | Salisbury, NC 28144

704.639.0730 | www.communitybankofrowan.com

313 East Centerview Street | China Grove, NC 28023

704.857.3300 | China Grove Office

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

James L. Comadoll, MD

Orthopedic Surgeon/President

RoMedical Care PA

John W. Ellis II

Area Manager

Baxter Bio Surgery

William M. Graham

Attorney at Law

Wallace and Graham, PA

Dianne Y. Greene

Broker & Owner

Century 21 Towne & Country

Bruce D. Jones

President

Southeast Region

Capitol Bancorp Limited

Bobby Clay Lindsay Jr.

President

Summit Developers, Inc.

Patrick T. Reid

Attorney at Law

Reid & Reid

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

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

Heidi W. Whitesell

Vice President

69

FIRST CAROLINA STATE BANK

Timothy N. Taylor, President & CEO

By expanding our market and growing our loan portfolio, First Carolina State Bank reached record asset levels in 2007. In addition to our existing service area of Nash and Edgecombe counties, we opened a loan production office in Greenville and added staff familiar with the Greenville/Pitt County market.

Greenville is a growth market in eastern North Carolina. It is the home of East Carolina University and a large regional hospital and medical school that was recently approved for a dental school.

Total loans increased by more than a third in 2007 and the Greenville office contributed significantly to that growth.

Our staff continues to maintain a high level of involvement in our communities. Our employees are active with the chambers of commerce and United Way in both Rocky Mount and Tarboro. They are volunteer tutors with the Communites in Schools of the Rocky Mount Region, Inc. program and are members of local civic clubs.

In December, we became the title sponsor of the First Carolina State Bank Half Marathon Road Race. A new race for the Rocky Mount area, the half marathon attracted more than 600 runners. The activities also included a family 5K, one-mile fun run and 100-yard dash for younger children. The proceeds from the events were donated to local charities.

In 2007, we provided sales training for our associates and implemented a sales incentive program that increased product sales and referrals within the bank. We also added a Capitol Wealth Advisors investment executive to enhance the product offerings for clients and prospects in our expanded market.

Our bank’s board of directors has been very involved in the bank’s growth this year as they continue to be a great referral source for new business and personal relationships. They promote our bank in the community and are supportive of our efforts to make First Carolina the premier community bank in our markets.

In the coming year our plans include building on the strength of our experienced staff and support of our board to continue to grow our bank profitably while providing the quality of service our loyal customers deserve.

— Timothy N. Taylor, President & CEO

We implemented a sales incentive program that increased product sales and referrals.

171 North Winstead Avenue | Rocky Mount, NC 27804

252.937.2152 | www.firstcarolinastatebank.com

2100 North Main Street | Tarboro, NC 27886

252.823.8230 | Tarboro Office

323 Clifton Street, Suite 5 | Greenville, NC 27858

252.756.4073 | Greenville Office

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

Southeast Region

Capitol Bancorp Limited

W. H. Kimball

Retired

Vice President of Sales

Kenan Transport

Thomas W. King

Attorney at Law

T. W. King

David A. Parker

Retired

James E. Rabil

President

Chambliss & Rabil

Contractors, Inc.

James R. Rose Jr.

Executive Vice President

First Carolina State Bank

Charles D. Smith

President

First Carolina

Communications, Inc.

Randall C. Stewart, DPT

President & Physical Therapist

Carolina Physical Therapy

Contractors, Inc.

Timothy N. Taylor

President & CEO

First Carolina State Bank

OFFICERS

Randall C. Stewart, DPT

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

Senior Vice President

Albert E. Boone

Vice President

William D. Edgar Jr.

Vice President

John R. Johnson

Vice President

Beverley Riley

Vice President

Edward G. Taylor

Vice President

70

PEOPLES STATE BANK

Bruce D. Jones, Interim President

Peoples State Bank is a driving force in the community of Jeffersonville in Twiggs County, helping fund economic development and furnishing the financial services for area businesses and families.

The past year was filled with strong growth and continued community support for the bank. Customers and community members alike frequently comment about the beautiful new appearance of our facility, which underwent a major renovation.

The successful implementation of a new bank operations system allows our staff to offer additional products and services to our valued customers. We have grown customer participation in Internet banking, cash management products, home equity lines of credit and mortgage lending. While our bank now has the state-of-the-art products and services available at many modern financial institutions, we retain the personalized customer service that people in Twiggs County appreciate from their hometown bank.

Our focus remains on our most important asset: our customers. To show our appreciation for their continued support, and to raise awareness of the bank in Twiggs County, we launched a monthly customer appreciation day. This ranged from preparing refreshments for customers and holding drawings for boxes of chocolate and Easter baskets, to delivering a fruit and chocolate basket to residents of a local senior care facility.

We also welcomed a new officer to our team, B. Kay Howell, who became the bank’s executive vice president and chief operating officer. Kay brings 21 years of banking experience, which includes her previous position as a regional retail manager at another bank prior to joining our team.

We continue to serve our wonderful community by supporting several local organizations, including the Twiggs County Booster Club, the Twiggs County Department of Children’s Services and Twiggs Academy. Our officers are dedicated to being involved in community affairs. For example, Mae Starley, a senior officer, was appointed to the Twiggs County Economic Development Board.

Growth, customer satisfaction and teamwork will be our focus as we tackle future challenges. We will continue to serve the local community while expanding our reach into the adjoining counties that make up our market area.

With hard work and community support, the staff of Peoples State Bank anticipates a bright future.

— Bruce D. Jones, Interim President

The year was filled with strong growth and community support.

207 Main Street | Jeffersonville, GA 31044

478.945.3262 | www.psbjeffersonville.com

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

Southeast Region

Capitol Bancorp Limited

Patrick T. Reid

Attorney at Law

Reid & Reid

Matthew D. Stanaland

President

Bank of Valdosta

Bobby G. Wetherington

Partner

Wetherington Farms, LP

OFFICERS

Bruce D. Jones

Chairman & Interim President

B. Kay Howell

Executive Vice President & COO

Brenda Best-Youmans

Senior Vice President

Mae C. Starley

Vice President

71

SUNRISE BANK OF ATLANTA

Charles H. Green, President

As Sunrise Bank of Atlanta’s first full year of operation, 2007 will be remembered as a time when we gained momentum and took advantage of several business and marketing opportunities.

SPOTLIGHT ON THE ARTS

As the volunteer chairman of the Fulton County Arts Council, our region’s largest arts funding organization, I know that Atlanta’s nonprofit enterprises are viable small businesses with specialized banking needs. Because of this, more than 25 nonprofit organizations have accounts at our bank representing significant deposits and loans.

Our slogan — The Art of Banking — is a registered trademark, communicating our personalized approach to community banking as well as the value we place on the arts. The term is incorporated in all of our marketing efforts and we continue to host art exhibits showcasing local artists and their latest creations.

FOCUS ON INTERNATIONALS

Through involvement in many international chambers of commerce, we have penetrated another niche market – becoming the bank of choice for many international executives moving to Atlanta. By building strong relationships with these executives we can make their transitions smooth by fulfilling all of their banking needs.

As our regional governments make business with China a priority, we are helping several Chinese executives acclimate to Atlanta. Last year, Fulton County initiated an impressive business and cultural exchange with Chengdu, China. Hundreds of people visited Sunrise Bank when we hosted a reception honoring the Chinese delegation.

STAFF KEEPS GETTING STRONGER

Several savvy banking professionals joined Sunrise in 2007. Adding international citizens to our staff with multiple language skills opened valuable introductions to Atlanta’s burgeoning international communities. The results are a diversified base of deposits and loans that are growing the bank. We also added a seasoned wealth advisor to our bank as part of Capitol Wealth Advisors. Wealth management is another specialty that enhances our ability to provide personalized service and custom financial solutions.

As one of only 16 Georgia banks certified to offer the SBA’s new Patriot Express loans for veterans, we hosted two free seminars as another way to reach out to prospective customers in our community.

— Charles H. Green, President

The bank of choice for many international executives.

600 West Peachtree Street NW, Suite 300 | Atlanta, GA 30308

404.249.6500 | www.sunrisebankofatlanta.com

BOARD OF DIRECTORS

Kim E. Anderson

Director

Boardwalk Consulting LLC

Lawrence E. Cooper MD

Principal

Bentley Investments, Inc.

Herbert M. Dangerfield

President & Owner

Carey Executive Limousine

Peter G. Davis

President & CEO

Vesdia Corporation

Karen Burkhart Dick

Executive Vice President

Ackerman & Co.

Randal A. Enterkin

President & CEO

PrecisionJet, LLC

Charles H. Green

President

Sunrise Bank of Atlanta

Angela Hsu

Senior Corporate Attorney

Duke Realty Corporation

Bruce D. Jones

President

Southeast Region

Capitol Bancorp Limited

Bari R. Love

Principal

Jackson Spalding

Communications

M. Kasim Reed

Partner

Holland & Knight LLP

Patrick T. Reid

Attorney at Law

Reid and Reid

R. Kirk Rich

President

Rich Real Estate Services, Inc.

Grace M. Lopez-Williams

President

Grace Williams CPA, PC

OFFICERS

Patrick T. Reid

Chairman

Bruce D. Jones

Vice Chairman

Charles H. Green

President

June F. Kossow

Senior Vice President & CCO

Tareasa P. Sexton

First Vice President &

Senior Loan Officer

Melanie L. Brown

First Vice President

Rick S. Darlington

Vice President & Mortgage

Lending Manager

Lori J. Roberts

Vice President

Miroslava Torres-Young

Vice President

72

TEXAS REGION

Clinton D. Dunn, Region President

74      Bank of Fort Bend

75      Bank of Las Colinas

73

BANK OF FORT BEND

R. Bruce Mercer, President

I am gratified and honored that Bank of Fort Bend, located near Houston, is now a part of the Capitol Bancorp family and the first affiliate bank in Texas. We are very excited about this business model which we believe combines the best advantages of local, community bank customer service with the product and technological support that is similar to those offered at the larger regional and national banks operating in our Fort Bend County market.

We have been very fortunate to have built a veteran, experienced staff of friendly faces. These individuals are well known in our community and have a loyal following of business and consumer customers who are also joining us. Our staff members are actively involved in our community as volunteers for churches, youth sports organizations and as directors on the boards of local nonprofits.

Fort Bend County has been one of the fastest growing marketplaces in the U.S. in recent years. Fort Bend’s population growth from 1990 to 2000 was an astounding 57 percent compared to the national average of 13 percent. Household income in 2000 for the area was also very strong, averaging $77,861 compared to $50,248 nationally.

We found an opportune location on one of the main entryways to the 900-acre Sugar Land Business Park, which is home to approximately 100 distribution, light manufacturing and service companies. We are the only banking facility in the business park so we offer convenience plus personalized community bank service with customized financial solutions that can be as sophisticated or as simple as our customers need.

Our contacts in this market and the advantages in our business model have allowed us to attract a first-class, highly visible and active board of directors. They have all expressed a strong desire to help us grow in this marketplace through their personal businesses, with a continued stream of referrals and by acting as “cheerleaders” for our bank whenever possible.

We are truly blessed with this opportunity and we are tremendously excited about our future. We look forward to working with folks from our previous relationships and with the new friends we are meeting!

— R. Bruce Mercer, President

I am gratified and honored that Bank of Fort Bend is the first Capitol Bancorp bank in Texas.

12946 Dairy Ashford Road, Suite 100 | Sugar Land, TX 77478

281.276.1800 | www.bankoffortbend.com

BOARD OF DIRECTORS

Ronald W. Bickers

President

Southwest Calibration

Service, Inc.

Robert P. Brooks

Owner

Robert P. Brooks Investments

Clinton D. Dunn

President, Texas Region

Capitol Bancorp Limited

George V. Head

Vice President

Stratos Global Corporation

Douglas A. Heath

Executive Director

Butler Waddell Interests

Rajni Jain, CPA

Partner

Jain & Jain, P.C.

Mark I. Kaufman

Investor

R. Bruce Mercer

President

Bank of Fort Bend

Rajesh Naran

President

ALS/ e-Lab Analytical, Inc.

John M. Null, CPA

Managing Partner

Null-Lairson, P.C.

Mehran Rafizadeh

Dealer Principal

Republic Harley-Davidson/

Buell Inc.

Mark A. Simmons

Managing Director

The Avalon Group

William J. Swinbank

President

The Sprint Companies

OFFICERS

Clinton D. Dunn

Chairman

R. Bruce Mercer

President

James Q. Dearing

Executive Vice President

Sandi S. Otero

Executive Vice President & CCO

Gil R. Edmundson

Senior Vice President

Claudia S. Riggins

Senior Vice President

Jean C. Goff

Vice President & COO

Amy C. Marsters

Vice President

J. Keith Miller

Vice President

74

BANK OF LAS COLINAS

Gerold L. Hooker, President

Bank of Las Colinas opened for business in December 2007 as Capitol Bancorp Limited’s 60th affiliate bank. Our goal is to establish meaningful and long-lasting relationships with our clients, who we believe are our most valuable assets.

Our staff of 11 veteran bankers understand that true relationship banking is growing increasingly rare. As a result, Bank of Las Colinas was founded on the principle that most commercial and consumer customers want a skillful and insightful banker with the ability to assist with all facets of their financial needs in a timely manner.

In addition to our team of experienced banking professionals, we have also assembled an excellent board of directors which consists of customers and business leaders. Their referrals, contacts and experience are key to achieving our growth objectives and crucial to our marketing strategy. With their assistance, Bank of Las Colinas is poised to become a high-performance bank for businesses, professionals and consumers in our vibrant community.

From the early organizational stage through the capitalization process and the bank’s opening, our previous customers and the residents of our community have enthusiastically welcomed our new bank. This was evident during the stock subscription process when the demand exceeded the amount of stock available.

Our bank is located in the Las Colinas district of Irving, situated in close proximity to Dallas and Dallas/Fort Worth International Airport. Since the conception of Las Colinas in 1972, the area has become home to many corporate headquarters, luxury hotels and upscale residential communities. In addition to being one of the first master-planned communities in the United States, Las Colinas is also one of the largest mixed-use developments in the Southwest. This blend of commercial and consumer activity is a perfect match for our business model, which seeks to provide a superior alternative to the common banking experience.

Our team of bankers and directors are approaching 2008 with enthusiasm. We intend to deliver exceptional customer service to our existing customer base and to many new friends.

— Gerold L. Hooker, President

Las Colinas is also one of the largest mixed-use developments in the Southwest…a perfect match for our business model.

300 East John Carpenter Freeway, Suite 100 | Irving, TX 75062

214.574.4900 | www.bankoflascolinas.com

BOARD OF DIRECTORS

Gary L. Cain

President & CEO

Cain Foods Industries, Inc.

Clinton D. Dunn

President, Texas Region

Capitol Bancorp Limited

Gerold L. Hooker

President

Bank of Las Colinas

Nicholas F. Leber, DDS

All Seasons Dental Associates

Paul L. Moore

Chairman of the Board

Southwestern Wholesale Co., Inc.

Robert B. Neely

President & CEO

TCP Realty Services

Kelly G. Saxton

President

Saxton Pierce Restaurant Corporation

John D. Settle Jr.

Founder

SettlePou Attorneys & Counselors

Darrell W. Wilson

President

The Slalom Shop Boats & Yachts

OFFICERS

Clinton D. Dunn

Chairman

Gerold L. Hooker

President

Brad D. Tidwell

Executive Vice President & CCO

D. Wes Griffin

Senior Vice President & COO

Cody D. Edge

Vice President

Ginny E. Guerra

Vice President

Ann N. Glockzin

Vice President

75

NATIONAL AFFILIATES

  77      Amera Mortgage Corporation

  78      Capitol Wealth

76

AMERA MORTGAGE CORPORATION

Mark A. Janssen, CEO

For Amera Mortgage, 2007 was a period of expansion to meet the demands of a growing number of affiliate banks and one of change in adapting to the evolving landscape of the residential mortgage industry. Amera held two multi-state sales conferences for Capitol Bancorp, which brought mortgage originators together to address the needs of the national sales force. These were forums where mortgage loan officers could establish relationships, network and allow Amera’s management to discuss plans for future technology enhancements to aid in the origination of mortgage loans.

In the West, the sales meeting focused on bringing fresh ideas to the table. We shared best practices to spread the success experienced in markets throughout the expanding footprint of Capitol Bancorp. Mortgage lenders shared business plans and successful strategies while Capitol’s marketing department presented a variety of marketing tools created in conjunction with Amera and individual banks that are now available for use by mortgage lenders nationally.

In the East, additional focus was placed on sales success in the mortgage business. In particular, we looked at methods for setting and achieving sales and income goals through the utilization of specific sales and marketing strategies. Additionally, Amera focused on the changing mortgage landscape and the tools it is providing through its client service and product placement groups to ensure that Capitol Bancorp’s affiliate banks can continue to provide a wide array of mortgage products and services to their clients.

From a technology standpoint, we have begun a process to consolidate mortgage origination technology under a single umbrella while expanding our automated pricing and guideline engine. The pricing engine serves as a single point of reference for all investor products offered by Amera. We will also be evaluating a front-end origination tool that will complete this migration and further streamline the origination process.

As we move forward, we have positioned Amera Mortgage to meet the needs of a growing number of affiliate bank clients as well as the clients served by our retail originators. We vow to adapt responsibly to changes in our industry.

— Mark A. Janssen, CEO

2007 was a period of expansion to meet the demands of a growing number of affiliate banks…

1050 Corporate Office Drive, Suite 200 | Milford, MI 48381

248.685.1700 | www.ameramortgage.com

BOARD OF DIRECTORS

Susan L. Bowen

Executive Vice President

Amera Mortgage Corporation

Melinda F. Cain

Executive Vice President

Amera Mortgage Corporation

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

77

CAPITOL WEALTH

Robert R. Hogan, President & CEO

At Capitol Wealth, we provide our customers wealth advisory solutions through a trusted advisor at many of our Capitol Bancorp banks. Besides growing noninterest income for the Corporation, our efforts are directed at assisting customers in preparing today, so they can be financially secure tomorrow.

Throughout 2007, I have had the opportunity to visit most of our affiliate banks, receiving a warm welcome and enthusiastic support from both bank presidents and their boards of directors. These personal visits have provided tremendous feedback that has enabled us to improve our customer service. Furthermore, board members have provided many introductions to qualified candidates who have joined our team as the wealth advisor expert, providing positive financial results to the customers of our local banks as well as the Corporation overall.

With that said, I am proud to report that we more than doubled our business in 2007. Here are our other achievements:

● Launched an acquisition strategy, purchasing an investment advisory firm and a commercial insurance agency, which added substantial assets under management with a healthy boost to our projected revenue;

● Grew total assets under management considerably;

● Added 15 new bank wealth programs, bringing the total number of financial advisors on our platform to 40;

● Deployed tools to our advisors assisting them in delivering financial planning advice to our customers; and,

● Implemented a branding strategy (“Prepare Today, Secure Tomorrow”) that can be found in our brochures, web site and electronic kiosks.

In 2008, we will continue to accelerate our growth, broaden our financial network, and improve our services to our clients through the following, multi-faceted plan:

● Expanding our acquisition pipeline;

● Obtaining a national trust charter; and,

● Recruiting additional talented financial advisors.

Finally, I would like to thank our employees for their contribution, our customers for their confidence and each of our bank presidents and their board members for their support. We look forward to serving your needs and exceeding your expectations.

— Robert R. Hogan, President & CEO

We provide our customers wealth advisory solutions.

9300 Harris Corners Parkway, Suite 410 | Charlotte, NC 28269

704.599.1055 | www.capitolwealth.com

BOARD OF DIRECTORS

Jay J. Butler

Retired Bank Executive

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

Reid and Reid

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

78

                  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-29
Consolidation Policy	F-30
New Accounting Standards	F-30
Risk Factors Affecting Capitol and its Banks	F-30
Management's Report on Internal Control Over Financial Reporting	F-31
Report of Independent Registered Public Accounting Firm on Internal      Control Over Financial Reporting	F-32
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	F-34
Consolidated Balance Sheets	F-35
Consolidated Statements of Income	F-36
Consolidated Statements of Changes in Stockholders' Equity	F-37
Consolidated Statements of Cash Flows	F-38
Notes to Consolidated Financial Statements	F-39

F - 1

Selected Consolidated Financial Data

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

	As of and for the Year Ended December 31
	2007(1)		2006(2)		2005(3)		2004(4)		2003(5)
For the year:
Interest income	$	330,439	$	279,353	$	224,439	$	179,089	$	164,416
Interest expense		147,162		105,586		67,579		47,496		49,490
Net interest income		183,277		173,767		156,860		131,593		114,926
Provision for loan losses		25,340		12,156		10,960		12,708		9,861
Noninterest income		24,381		21,532		21,048		19,252		20,087
Noninterest expense		176,160		137,804		117,289		97,787		86,952
Net income		21,937		42,391		35,925		26,716		23,380
Net income per share:
Basic		1.29		2.69		2.42		1.88		1.86
Diluted		1.27		2.57		2.34		1.79		1.77
Cash dividends paid per share		1.00		.95		.72		.65		.51
At end of year:
Total assets	$	4,901,763	$	4,065,816	$	3,475,721	$	3,091,418	$	2,737,062
Total earning assets		4,527,006		3,743,041		3,204,646		2,885,545		2,521,375
Portfolio loans		4,314,701		3,488,678		2,991,189		2,692,904		2,247,440
Deposits		3,844,745		3,258,485		2,785,259		2,510,072		2,288,664
Notes payable and short-term borrowings		320,384		191,154		175,729		172,534		92,774
Subordinated debentures		156,130		101,035		100,940		100,845		90,816
Minority interests in consolidated subsidiaries		156,198		126,512		83,838		39,520		30,946
Stockholders' equity		389,145		361,879		301,866		252,159		218,897

			Quarterly Results of Operations (unaudited)
	Total for the Year		Fourth Quarter			Third Quarter		Second Quarter		First Quarter
Year ended December 31, 2007:(1)
Interest income	$	330,439	$	86,310		$	85,036	$	81,254	$	77,839
Interest expense		147,162		39,924			38,368		35,712		33,158
Net interest income		183,277		46,386			46,668		45,542		44,681
Provision for loan losses		25,340		9,528			7,890		3,990		3,932
Net income		21,937		3,394			5,974		6,298		6,271
Net income per share:(7)
Basic		1.29		.20			.35		.37		.38
Diluted		1.27		.20			.35		.37		.36
Cash dividends paid per share		1.00		.25			.25		.25		.25
Year ended December 31, 2006:(2)
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:(7)
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

(1)	Includes Bank of Tacoma, effective January 2007 (located in Tacoma, Washington), Sunrise Community Bank, effective February 2007 (located in Palm Desert, California), Larimer Bank of Commerce, effective May 2007 (located in Fort Collins, Colorado), Issaquah Community Bank (located in Issaquah, Washington) and USNY Bank (located in Geneva, New York), both effective July 2007, High Desert Bank, effective September 2007 (located in Bend, Oregon), Loveland Bank of Commerce, effective October 2007 (located in Loveland, Colorado), Bank of Feather River, effective November 2007 (located in Yuba City, California) and Community Bank of Lincoln (located in Lincoln, Nebraska), Bank of Fort Bend (located in Sugar Land, Texas) and Bank of Las Colinas (located in Irving, Texas), each effective December 2007.
(2)	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.
(3)	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).
(4)	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.
(5)	Includes Bank of Escondido (located in Escondido, California), effective October 2003.
(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.
(7)	Each period’s computation of net income per share is performed independently and, accordingly, net income per share for the year (basic and diluted) may not equal the sum of the amounts shown for the quarterly periods.

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:

	2007				2006
	Low		High		Low		High
Quarter Ended:
March 31	$	36.81	$	47.06	$	36.74	$	47.22
June 30		27.06		37.60		37.84		47.16
September 30		20.00		27.86		36.89		46.00
December 31		18.15		27.24		44.12		47.49

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, 2002 and that subsequent cash dividends were reinvested.

	Period Ended
Index	12/31/02	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07
CBC	100.00	125.08	158.81	172.55	217.72	98.54
R-2000	100.00	147.25	174.24	182.18	215.64	212.26
SNL	100.00	135.99	167.83	164.97	190.90	139.06

F - 3

INFORMATION REGARDING CAPITOL'S COMMON STOCK--Continued

During 2007, Capitol paid quarterly cash dividends of $0.25 per share.  In 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.  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, 2008, there were 6,998 beneficial holders of Capitol's common stock, based on information supplied to Capitol from its stock transfer agent and other sources.

At February 25, 2008, 17,319,178 shares of common stock were outstanding.  Capitol's stock transfer agent is Computershare Trust Company, N.A., 250 Royall Street, Canton, MA 02021 (telephone 800/884-4225).  The web site for Computershare Trust Company, N.A. is http://www.computershare.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 Capitol Bancorp Direct prospectus, informational brochure and enrollment materials, contact Computershare Trust Company, 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 the 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 (SEC) 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.  Further, Capitol filed certifications by its CEO and CFO with the SEC in accordance with the Sarbanes-Oxley Act of 2002 as exhibits to Capitol’s Form 10-K for the year ended December 31, 2007.

AVAILABILITY OF FORM 10-K AND CERTAIN OTHER REPORTS

A copy of Capitol's 2007 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 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 2008 Annual Meeting of Shareholders will be held on Wednesday, April 23, 2008 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

Computershare Trust Company, N.A.

250 Royall Street

Canton, MA 02021

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.  Capitol Bancorp Direct’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 Capitol Bancorp Direct is voluntary and shareholders and prospective investors are eligible.  Purchases under Capitol Bancorp Direct are not currently subject to any brokerage fees or commissions.  For further information regarding Capitol Bancorp Direct or a copy of Capitol Bancorp Direct’s prospectus, informational brochure and enrollment materials, contact Computershare Trust Company, N.A. at 800/884-4225 or Capitol at 517/487-6555.

F - 5

SHAREHOLDER INFORMATION--Continued

TRUST-PREFERRED SECURITIES TRADING INFORMATION

Preferred securities of Capitol Trust I (a subsidiary of Capitol) trade on the 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 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.

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 60 banks operating in 17 states as of December 31, 2007.  Capitol previously announced plans to expand to 100 banks within the next five years.

Capitol's de novo bank model is intended to create a scalable, low overhead structure which is focused on delivering return-on-equity results, while empowering its individual banks with operating autonomy in all areas which impact the customer relationship.  Capitol's centralized '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.

2007 was another significant year of expansion:

· The addition of 11 new banks, the largest number in any year in Capitol’s history, bringing the affiliation network total to 60 financial institutions at year-end 2007.  

· Total assets surpassing $4.9 billion at year end, marking a growth rate of 20.6% for the year.

Earnings decreased from $42.4 million ($2.57 per diluted share) in 2006 to $21.9 million ($1.27 per diluted share) in 2007, primarily due to weakened bank earnings performance in the Great Lakes Region.

F - 7

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 has recognized from its beginning that its banking focus always has been, and always will be, a people business.  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 bank's goals and objectives as it navigates toward future profitability.  When a de novo bank achieves certain developmental milestones (age, cumulative profitability, return on equity or other measures), Capitol may offer 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, at a multiple of the bank's then current book value (typically 150%).  The exchange offer (which is not a contractual obligation of Capitol) is generally subject to

F - 8

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 2007, Capitol completed one share-exchange transaction; two share-exchange transactions were completed in 2006.

Monitoring and Managing Capitol's Investments in Community Banks

The concept of bank development is not limited to starting and nurturing new banks.  At Capitol, it also means nurturing middle-stage and mature bank affiliates to help them maximize their potential.  Capitol monitors and manages its investments in community banks working through regional presidents, supported by Capitol’s bank financial analysis group.  Capitol's bank financial analysis group assists the banks in the development of detailed budgets, assisting with asset/liability management strategies, monitoring progress on the banks' business plans and reviewing monthly operating results for each bank.  Capitol's regional presidents also assist in the identification of new 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.

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 regions are summarized below as of and for the years ended December 31, 2007 and 2006 (in $1,000s):

	Total Assets				Total Revenues(3)
	2007		2006		2007		2006
Arizona Region:
Arrowhead Community Bank	$	89,060	$	79,152	$	8,161	$	8,076
Asian Bank of Arizona(2)		25,017		20,248		1,760		781
Bank of Tucson		187,468		187,683		16,000		15,358
Camelback Community Bank		84,671		83,003		6,780		6,355
Mesa Bank		217,861		201,776		19,685		19,000
Southern Arizona Community Bank		85,158		85,912		6,872		6,629
Sunrise Bank of Albuquerque		71,726		59,798		6,168		4,796
Sunrise Bank of Arizona		116,245		119,785		9,336		10,347
Valley First Community Bank		77,306		72,333		5,544		5,629
Yuma Community Bank		78,489		74,477		6,078		6,049
Arizona Region Total		1,033,001		984,167		86,384		83,020
California Region:
Bank of Escondido		89,557		82,412		5,914		5,115
Bank of Feather River(1)		17,283				171
Bank of San Francisco		68,902		28,122		3,250		1,649
Bank of Santa Barbara		58,738		42,559		4,282		2,138
Napa Community Bank		131,457		99,009		9,483		7,212
Point Loma Community Bank		56,428		43,715		4,161		3,185
Sunrise Bank of San Diego		81,905		71,170		7,092		5,800
Sunrise Community Bank(1)		21,113				1,099
California Region Total		525,383		366,987		35,452		25,099
Colorado Region:
Fort Collins Commerce Bank		61,083		54,410		4,696		3,641
Larimer Bank of Commerce(1)		51,906				2,199
Loveland Bank of Commerce(1)		15,941				234
Colorado Region Total		128,930		54,410		7,129		3,641
Great Lakes Region:
Ann Arbor Commerce Bank		362,429		310,407		25,800		23,598
Bank of Auburn Hills		44,767		31,559		3,298		1,849
Bank of Maumee(2)		35,576		9,915		1,552		133
Bank of Michigan		69,909		51,287		4,945		3,073
Brighton Commerce Bank		108,664		103,909		8,308		7,889
Capitol National Bank		228,556		256,741		17,794		17,531
Detroit Commerce Bank		113,243		106,233		9,083		8,634
Elkhart Community Bank		89,064		86,883		6,876		6,476
Evansville Commerce Bank(2)		50,819		20,772		2,789		591
Goshen Community Bank		93,173		80,137		6,128		5,216
Grand Haven Bank		130,492		129,033		9,575		9,702
Kent Commerce Bank		87,060		86,916		6,545		6,800
Macomb Community Bank		93,045		101,353		6,666		7,713
Muskegon Commerce Bank		98,975		95,551		7,117		7,494
Oakland Commerce Bank		109,370		134,437		9,288		9,660
Ohio Commerce Bank(2)		35,690		14,466		1,533		199
Paragon Bank & Trust		103,711		98,804		7,034		7,816
Portage Commerce Bank		189,944		179,413		15,479		14,813
Great Lakes Region Total		2,044,487		1,897,816		149,810		139,187
Midwest Region:
Bank of Belleville		50,485		24,948		2,389		1,188
Community Bank of Lincoln(1)		12,960				65
Summit Bank of Kansas City		50,142		19,529		3,452		841
Midwest Region Total		113,587		44,477		5,906		2,029

F - 10

Summary of total assets and revenues – continued:

	Total Assets				Total Revenues(3)
	2007		2006		2007		2006
Nevada Region:
1st Commerce Bank(2)	$	32,091	$	14,829	$	1,762	$	202
Bank of Las Vegas		72,768		67,478		5,966		5,331
Black Mountain Community Bank		147,433		138,961		12,282		10,984
Desert Community Bank		101,840		93,914		8,216		7,464
Red Rock Community Bank		120,750		108,362		9,319		8,515
Nevada Region Total		474,882		423,544		37,545		32,496
Northeast Region:
USNY Bank(1)		17,171				438
Northwest Region:
Bank of Bellevue		45,122		33,155		3,152		2,061
Bank of Everett(2)		28,946		20,061		1,907		489
Bank of Tacoma(1)		24,325				1,304
High Desert Bank(1)		11,501				221
Issaquah Community Bank(1)		13,696				330
Northwest Region Total		123,590		53,216		6,914		2,550
Southeast Region:
Bank of Valdosta(2)		43,842		21,626		2,574		561
Community Bank of Rowan(2)		117,495		45,503		6,195		1,870
First Carolina State Bank		115,243		93,819		7,556		6,341
Peoples State Bank		26,159		32,714		2,226		2,629
Sunrise Bank of Atlanta(2)		48,664		16,990		3,922		912
Southeast Region Total		351,403		210,652		22,473		12,313
Texas Region:
Bank of Ford Bend(1)		9,551				27
Bank of Las Colinas(1)		11,383				37
Texas Region Total		20,934				64
Other, net(4)		68,395		30,547		2,705		550
Consolidated Totals	$	4,901,763	$	4,065,816	$	354,820	$	300,885

(1)	Became a Capitol affiliate in 2007 and is included for periods after addition to the Capitol banking network.
(2)	Became a Capitol affiliate in 2006 and is included for periods after addition to the Capitol banking network.
(3)	Total revenues is the sum of interest income and noninterest income.
(4)	Includes corporate and other nonbank entities.

[The remainder of this page is intentionally left blank]

F - 11

Capitol's Results of Operations

Net income for 2007 approximated $21.9 million, a 48% decrease from the $42.4 million earned in 2006.  Net income for 2005 was $35.9 million.  Diluted earnings per share for 2007 was $1.27 compared to $2.57 in 2006 and $2.34 in 2005.

The table below summarizes, for Capitol's banks individually and regionally, 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
	2007			2006			2005			2007			2006			2005			2007			2006			2005
Arizona Region:
Arrowhead Community Bank	$	762		$	1,293		$	1,255			9.24	%		15.68	%		17.47	%		0.89	%		1.49	%		1.56	%
Asian Bank of Arizona(2)		(507	)		(567	)
Bank of Tucson		4,527			4,656			3,732			26.48	%		29.93	%		27.61	%		2.52	%		2.62	%		2.12	%
Camelback Community Bank		992			1,119			1,167			11.14	%		13.64	%		13.90	%		1.13	%		1.36	%		1.42	%
Mesa Bank		3,983			4,509			3,121			21.46	%		25.51	%		22.53	%		1.89	%		2.32	%		1.93	%
Southern Arizona Community Bank		1,082			1,189			1,290			12.04	%		13.51	%		14.74	%		1.22	%		1.39	%		1.46	%
Sunrise Bank of Albuquerque		601			494			929			8.95	%		7.50	%		13.58	%		0.86	%		0.86	%		1.36	%
Sunrise Bank of Arizona		409			1,372			2,215			3.51	%		10.82	%		18.12	%		0.35	%		1.17	%		1.82	%
Valley First Community Bank		327			716			604			4.10	%		9.67	%		9.06	%		0.46	%		0.97	%		0.86	%
Yuma Community Bank		936			1,199			992			12.09	%		16.95	%		14.88	%		1.28	%		1.70	%		1.66	%
Arizona Region Total		13,112			15,980			15,305
California Region:
Bank of Escondido		505			787			452			3.54	%		7.70	%		4.78	%		0.58	%		1.04	%		0.72	%
Bank of Feather River(1)		(576	)
Bank of San Francisco(3)		(397	)		(484	)		(726	)
Bank of Santa Barbara(3)		(191	)		(630	)		(514	)
Napa Community Bank		1,542			1,572			965			11.73	%		13.65	%		9.47	%		1.29	%		1.86	%		1.27	%
Point Loma Community Bank		168			196			(467	)		2.37	%		2.84	%					0.31	%		0.48	%
Sunrise Bank of San Diego		432			885			1,095			4.06	%		8.18	%		10.18	%		0.50	%		1.27	%		1.69	%
Sunrise Community Bank(1)		(998	)
California Region Total		485			2,326			805
Colorado Region:
Fort Collins Commerce Bank(3)		588			170			(396	)		6.81	%		2.10	%					1.07	%		0.42	%
Larimer Bank of Commerce(1)		(586	)
Loveland Bank of Commerce(1)		(426	)
Colorado Region Total		(424	)		170			(396	)
Great Lakes Region:
Ann Arbor Commerce Bank		3,635			3,739			4,007			13.56	%		14.19	%		14.80	%		1.08	%		1.21	%		1.22	%
Bank of Auburn Hills(3)		(335	)		(332	)		(437	)
Bank of Maumee(2)		(1,063	)		(619	)
Bank of Michigan(3)		(136	)		(343	)		(1,017	)
Brighton Commerce Bank		621			845			1,097			6.63	%		8.93	%		11.86	%		0.58	%		0.80	%		1.02	%
Capitol National Bank		1,977			2,879			3,510			10.45	%		14.97	%		18.62	%		0.84	%		1.20	%		1.46	%
Detroit Commerce Bank		241			942			633			2.57	%		11.23	%		9.15	%		0.22	%		0.99	%		0.80	%
Elkhart Community Bank		766			948			726			8.67	%		11.18	%		9.21	%		0.90	%		1.16	%		0.97	%
Evansville Commerce Bank(2)		(689	)		(851	)
Goshen Community Bank		431			383			47			5.72	%		5.58	%		0.71	%		0.54	%		0.55	%		0.08	%
Grand Haven Bank		483			1,284			999			4.43	%		11.75	%		9.75	%		0.37	%		1.01	%		0.82	%
Kent Commerce Bank		(161	)		365			678						4.72	%		8.14	%					0.44	%		0.79	%
Macomb Community Bank		(1,118	)		58			442						0.66	%		5.03	%					0.06	%		0.47	%
Muskegon Commerce Bank		(1,145	)		158			1,184						1.87	%		12.52	%					0.16	%		1.23	%
Oakland Commerce Bank		(461	)		1,143			1,835						11.50	%		17.75	%					0.94	%		1.46	%
Ohio Commerce Bank(2)		(770	)		(383	)
Paragon Bank & Trust		(187	)		858			819						7.71	%		7.18	%					0.85	%		0.74	%
Portage Commerce Bank		2,252			2,706			2,940			13.82	%		16.72	%		18.31	%		1.21	%		1.51	%		1.56	%
Great Lakes Region Total		4,341			13,780			17,463

F - 12

Net income and the related rates of return on average equity and assets – continued:

	Net Income									Return on Average Equity									Return on Average Assets
	2007			2006			2005			2007			2006			2005			2007			2006			2005
Midwest Region
Bank of Belleville(3)	$	(572	)	$	(548	)	$	(405	)
Community Bank of Lincoln(1)		(500	)
Summit Bank of Kansas City(3)		(404	)		(593	)		(319	)
Midwest Region Total		(1,476	)		(1,141	)		(724	)
Nevada Region:
1st Commerce Bank(2)		(578	)		(432	)
Bank of Las Vegas		608			707			670			6.77	%		7.24	%		9.70	%		0.83	%		1.09	%		1.16	%
Black Mountain Community Bank		2,612			2,556			2,204			18.40	%		20.40	%		20.95	%		1.81	%		1.96	%		1.84	%
Desert Community Bank		1,296			1,302			1,061			13.54	%		15.29	%		13.65	%		1.35	%		1.51	%		1.42	%
Red Rock Community Bank		1,652			2,162			1,856			12.34	%		17.38	%		15.32	%		1.44	%		2.09	%		1.73	%
Nevada Region Total		5,590			6,295			5,791
Northeast Region:
USNY Bank(1)		(908	)
Northwest Region:
Bank of Bellevue(3)		(154	)		(384	)		(551	)
Bank of Everett(2)		(636	)		(733	)
Bank of Tacoma(1)		(1,067	)
High Desert Bank(1)		(514	)
Issaquah Community Bank(1)		(574	)
Northwest Region Total		(2,945	)		(1,117	)		(551	)
Southeast Region:
Bank of Valdosta(2)		(423	)		(822	)
Community Bank of Rowan(2)		(183	)		(1,095	)
First Carolina State Bank		539			637			478			4.52	%		5.59	%		4.42	%		0.53	%		0.75	%		0.64	%
Peoples State Bank(3)		254			282			77			5.14	%		6.57	%		2.90	%		0.93	%		0.55	%		0.36	%
Sunrise Bank of Atlanta(2)		(338	)		(820	)
Southeast Region Total		(151	)		(1,818	)		555
Texas Region:
Bank of Fort Bend(1)		(461	)
Bank of Las Colinas(1)		(658	)
Texas Region Total		(1,119	)
Other, net		5,432			7,916			(2,323	)
Consolidated totals	$	21,937		$	42,391		$	35,925			5.72	%		12.94	%		13.34	%		0.49	%		1.12	%		1.08	%

(1)	Became a Capitol affiliate in 2007 and is included for periods after addition to the Capitol banking network.
(2)	Became a Capitol affiliate in 2006 and is included for periods after addition to the Capitol banking network.
(3)	Became a Capitol affiliate in 2005 and is included for periods after addition to the Capitol banking network.

The preceding table presents net income (or loss) of each bank without regard to Capitol’s direct or indirect ownership percentage.  Young de novo banks are expected to incur operating losses in their early periods of operations and, due to Capitol’s ownership percentage, individual start-up losses at banks typically do not have a material effect on consolidated earnings.

Earnings at mature wholly-owned banks have a more significant and direct impact on consolidated earnings.  The preceding table indicates a significant decrease in combined net income of banks within the Great Lakes Region.  Dominating the Great Lakes Region are Capitol’s eleven mature, wholly-owned banks located in Michigan.  Total earnings of this group of banks amounted to $6.1 million in 2007, compared to $15 million in 2006 and $18.1 million in 2005.  The material decrease in earnings in this group of banks is attributable

F - 13

to loan losses stemming from a sustained difficult economic environment, significant increases in nonearning assets and elevated collection costs.  These are the largest items adversely impacting Capitol’s 2007 consolidated earnings results, followed by compression in margins and related net interest income.

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 $183.3 million in 2007, a 5% increase over the $173.8 million reported in 2006, compared to an 11% increase in 2006 versus 19% in 2005.  The 2007 increase in net interest income is substantially less than the growth rate in loans, other earning assets and deposits due to a challenging interest rate environment which reduced the spread between interest earned on loans and rates paid on deposits.  In 2006 and 2005, double-digit asset growth generally correlated with somewhat similar double-digit growth in net interest income, although margin compression reduced the growth rate of net interest income in the second half of 2006.  The modest 2007 increase in net interest income is due to the compression in margins caused by lower rates earned on loans and elevated levels of nonperforming loans coupled with the slower repricing of rates paid on deposits.

Combined with noninterest income, total consolidated net operating revenues approximated $207.7 million in 2007, $195.3 million in 2006 and $177.9 million in 2005.  Noninterest income for these periods was $24.4 million, $21.5 million and $21 million, respectively.  Noninterest income increased 13% in 2007.

Service charges, which approximated $4.8 million in 2007, increased 9% from the 2006 level of $4.3 million ($4.1 million in 2005).  Revenue from trust and wealth management activities increased more than 54% in 2007 and 61% in 2006, following the late-2005 launch of Capitol Wealth, Inc., 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 are located at a majority of Capitol's banks to work in tandem with their traditional banking colleagues to expand the availability of financial services to the banks' clientele, while increasing noninterest revenues.

In 2007, 2006 and 2005, revenue from mortgage loans originated for sale amounted to $4.5 million, $5.4 million and $6.1 million, respectively.  Loan origination volume decreased in 2006 and 2005 and increased slightly in 2007.  Increased interest rates on mortgage loans in 2006 and 2007 substantially reduced origination volume from refinancings.  Further, reduction in home sales volume in many communities has also negatively impacted origination volume.  Other noninterest income increased 20% in 2007 and 5% in 2006.  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.

F - 14

The provision for loan losses approximated $25.3 million, $12.2 million and $11 million in 2007, 2006 and 2005, respectively.  The very significant increase in the provision for loan losses in 2007 is primarily associated with loan losses incurred in the Great Lakes Region’s mature wholly-owned Michigan banks and related elevated levels of nonperforming loans.  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.

Noninterest expense totaled $176.2 million, $137.8 million and $117.3 million in 2007, 2006 and 2005, respectively.  In total, these expenses increased 27.8% in 2007, 17.5% in 2006 and 19.9% in 2005.  Increases in the components of noninterest expense in 2007 were primarily associated with added staffing and other costs associated with growing young banks and adding new banks (eleven in 2007 and nine in each of 2006 and 2005).  The more significant elements of other noninterest expense consisted of the following (in $1,000s):

	2007		2006		2005
Advertising	$	3,315	$	2,921	$	2,266
Travel, lodging and meals		3,080		2,322		1,623
Paper, printing and supplies		2,870		2,409		2,135
Directors’ fees		2,819		2,196		1,577
FDIC insurance premiums and other     regulatory fees		2,723		879		837
Professional fees		2,468		2,547		2,124
Bank services (ATMs, telephone     banking and Internet banking)		2,115		1,564		1,229
Loan and collection expense		1,952		1,116		1,059
Taxes other than income taxes		1,786		1,372		1,401
Communications		1,728		1,380		1,229
Postage		1,113		1,009		864
Courier service		997		872		803
Costs associated with foreclosed     properties and other real estate owned		989		417		8
Dues and memberships		928		810		592
Contracted labor		496		549		370
Insurance expense		473		398		386
Other		8,951		4,880		7,324
Total	$	38,803	$	27,641	$	25,827

Capitol’s effective tax rate was 45.9% in 2007, 34.1% in 2006 and 38.7% in 2005.  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 higher effective tax rate in 2007 resulted primarily from lower taxable income while nondeductible items were relatively consistent with prior years.

Capitol’s Financial Position

Consolidated total assets increased significantly in 2007 to $4.9 billion from $4.1 billion at the end of 2006 and $3.5 billion at the beginning of 2006.

F - 15

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 $701.5 million or 14.3% of total assets) and liquidity (cash and cash equivalents of $352.4 million or 7.2% of total assets) at December 31, 2007.  Both of those key elements are discussed in the next section, Liquidity, Capital Resources and Capital Adequacy.

When considering 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.

Net portfolio loans (total portfolio loans after subtracting the allowance for loan losses) approximated $4.3 billion at December 31, 2007 and $3.4 billion at December 31, 2006.  These amounts approximated 87% of total consolidated assets at December 31, 2007 and 85% at December 31, 2006.  Loan growth in 2007 approximated $826 million ($497.5 million in 2006).  On a consolidated basis, portfolio loan growth at banks less than three years of age as of year-end 2007 approximated 66% 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.

F - 16

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 may be 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.

At December 31, 2007, the consolidated allowance for loan losses approximated $58.1 million or 1.35% of total portfolio loans outstanding, compared with $45.4 million or 1.30% at December 31, 2006.  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 $72.6 million and $34.3 million at December 31, 2007 and 2006, and approximated 1.68% and 0.98% of portfolio loans and 1.48% and 0.84% of total assets, respectively.  Of the nonperforming loans at December 31, 2007, about 86% were real-estate secured.  At December 31, 2007, the coverage ratio of the allowance for loan losses to nonperforming loans (i.e., the allowance as a percentage of nonperforming loans) was 80%, compared to 132.5% at the beginning of the year.

At December 31, 2007, about 71% of Capitol’s total nonperforming loans were Michigan-based (including nonperforming loans held at the parent level) where nonperforming loans increased $20 million or 63% in 2007.  In concert with elevated levels of nonperforming loans at Michigan banks, their combined allowance ratio of about 1.58% and 1.48% of portfolio loans at year-end 2007 and 2006, respectively, has been maintained at a higher level than the consolidated ratio, and some banks have allowance ratios exceeding 2%.  Although the majority of nonperforming loans at December 31, 2007 were Michigan-based, it should be noted that other regions (Arizona and California, for example) experienced increases in this category in 2007.  Increases in other regions’ nonperforming loans were expected due to softened economic conditions and the historically low levels of such loans in prior periods.

Due to a combination of commercial real estate collateral and a weak economic climate, 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, 2007.

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 grades 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.

F - 17

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, 2007, potential problem loans (which include nonperforming loans) approximated $219 million or about 5% 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.

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 there is no one ‘right’ way.  Management’s experience is that its estimation techniques have accurately determined historical losses.

Capitol had 60 separately chartered banks at year-end 2007.  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 by 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.

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
	2007		2006		2007		2006		2007		2006		2007			2006
Arizona Region:
Arrowhead Community Bank	$	81,836	$	71,252	$	818	$	720	$	361	$	855		1.00	%		1.01	%
Asian Bank of Arizona(2)		21,514		14,499		405		200		314				1.88	%		1.38	%
Bank of Tucson		168,427		160,009		1,385		1,472		752		199		0.82	%		0.92	%
Camelback Community Bank		79,869		78,922		800		733		451		46		1.00	%		0.93	%
Mesa Bank		202,511		189,863		1,760		1,794		3,699				0.87	%		0.94	%
Southern Arizona Community Bank		78,467		77,845		792		775		600		16		1.01	%		1.00	%
Sunrise Bank of Albuquerque		67,192		53,027		866		778		183				1.29	%		1.47	%
Sunrise Bank of Arizona		112,211		112,720		1,125		1,126		4,250		246		1.00	%		1.00	%
Valley First Community Bank		71,689		66,256		653		611						0.91	%		0.92	%
Yuma Community Bank		66,092		58,577		525		500		600				0.79	%		0.85	%
Arizona Region Total		949,808		882,970		9,129		8,709		11,210		1,362		0.96	%		0.99	%
California Region:
Bank of Escondido		54,707		37,398		560		370		311		19		1.02	%		0.99	%
Bank of Feather River(1)		13,345				187								1.40	%
Bank of San Francisco		44,989		26,415		695		375		392				1.54	%		1.42	%
Bank of Santa Barbara		52,340		40,198		741		533						1.42	%		1.33	%
Napa Community Bank		100,253		78,467		1,069		1,020		1,459				1.07	%		1.30	%
Point Loma Community Bank		49,607		38,018		695		510						1.40	%		1.34	%
Sunrise Bank of San Diego		74,526		65,250		908		540		2,386				1.22	%		0.83	%
Sunrise Community Bank(1)		17,624				255								1.45	%
California Region Total		407,391		285,746		5,110		3,348		4,548		19		1.25	%		1.17	%
Colorado Region:
Fort Collins Commerce Bank		59,388		52,147		889		695						1.50	%		1.33	%
Larimer Bank of Commerce(1)		50,927				765								1.50	%
Loveland Bank of Commerce(1)		15,253				229								1.50	%
Colorado Region Total		125,568		52,147		1,883		695						1.50	%		1.33	%
Great Lakes Region:
Ann Arbor Commerce Bank		332,624		288,408		4,504		4,393		5,161		4,441		1.35	%		1.52	%
Bank of Auburn Hills		36,586		26,432		820		410		1,293		629		2.24	%		1.55	%
Bank of Maumee(2)		32,102		3,327		482		50						1.50	%		1.50	%
Bank of Michigan		63,448		44,630		952		669		370				1.50	%		1.50	%
Brighton Commerce Bank		99,627		94,987		1,018		995		18		522		1.02	%		1.05	%
Capitol National Bank		206,449		196,074		3,421		2,833		3,449		3,365		1.66	%		1.44	%
Detroit Commerce Bank		108,992		103,153		1,355		1,335		3,948		1,328		1.24	%		1.29	%
Elkhart Community Bank		83,754		77,515		1,282		1,010		2,677		676		1.53	%		1.30	%
Evansville Commerce Bank(2)		48,113		14,711		720		232		80				1.50	%		1.58	%
Goshen Community Bank		70,799		63,653		874		862		491		233		1.23	%		1.35	%
Grand Haven Bank		122,208		120,025		2,644		2,643		6,970		2,682		2.16	%		2.20	%
Kent Commerce Bank		83,357		83,065		1,527		1,237		2,456		2,256		1.83	%		1.49	%
Macomb Community Bank		87,670		87,737		2,283		1,670		11,846		3,738		2.60	%		1.90	%
Muskegon Commerce Bank		90,031		81,799		1,762		1,231		2,362		3,906		1.96	%		1.50	%
Oakland Commerce Bank		99,770		114,876		1,816		1,636		3,803		2,862		1.82	%		1.42	%
Ohio Commerce Bank(2)		29,110		739		437		11						1.50	%		1.49	%
Paragon Bank & Trust		91,481		82,259		1,431		1,298		2,220		2,132		1.56	%		1.58	%
Portage Commerce Bank		179,219		167,005		1,812		1,729		1,127		1,380		1.01	%		1.04	%
Great Lakes Region Total		1,865,340		1,650,395		29,140		24,244		48,271		30,150		1.56	%		1.47	%
Midwest Region:
Bank of Belleville		46,951		17,410		700		260						1.49	%		1.49	%
Community Bank of Lincoln(1)		10,501				168								1.60	%
Summit Bank of Kansas City		45,165		15,645		641		235						1.42	%		1.50	%
Midwest Region Total		102,617		33,055		1,509		495						1.47	%		1.50	%

F - 19

Summary of loan information – continued:

	Total Portfolio Loans				Allowance for Loan Losses				Nonperforming Loans				Allowance as a % of Total Portfolio Loans
	2007		2006		2007		2006		2007		2006		2007			2006
Nevada Region:
1st Commerce Bank(2)	$	27,030	$	9,588	$	393	$	125						1.45	%		1.30	%
Bank of Las Vegas		61,662		62,818		751		705						1.22	%		1.12	%
Black Mountain Community Bank		137,308		127,844		1,415		1,529	$	659				1.03	%		1.20	%
Desert Community Bank		90,050		83,284		837		830		356	$	137		0.93	%		1.00	%
Red Rock Community Bank		106,559		100,010		977		1,084		64		151		0.92	%		1.08	%
Nevada Region Total		422,609		383,544		4,373		4,273		1,079		288		1.03	%		1.11	%
Northeast Region:
USNY Bank(1)		12,421				187								1.51	%
Northwest Region:
Bank of Bellevue		37,364		28,037		665		370		222				1.78	%		1.32	%
Bank of Everett(2)		24,170		8,269		418		122						1.73	%		1.48	%
Bank of Tacoma(1)		19,639				285								1.45	%
High Desert Bank(1)		9,080				126								1.39	%
Issaquah Community Bank(1)		6,598				93								1.41	%
Northwest Region Total		96,851		36,306		1,587		492		222				1.64	%		1.36	%
Southeast Region:
Bank of Valdosta(2)		41,629		18,870		619		283						1.49	%		1.50	%
Community Bank of Rowan(2)		96,271		36,534		1,444		534						1.50	%		1.46	%
First Carolina State Bank		94,047		73,884		1,157		800		829		150		1.23	%		1.08	%
Peoples State Bank		13,609		15,154		247		263		86				1.81	%		1.74	%
Sunrise Bank of Atlanta(2)		45,024		14,553		760		215						1.69	%		1.48	%
Southeast Region Total		290,580		158,995		4,227		2,095		915		150		1.45	%		1.32	%
Texas Region:
Bank of Fort Bend(1)		3,140				46								1.47	%
Bank of Las Colinas(1)		9,830				144								1.46	%
Texas Region Total		12,970				190								1.46	%
Other, net		28,546		5,520		789		1,063		6,385		2,305		2.76	%		19.26	%
Consolidated totals	$	4,314,701	$	3,488,678	$	58,124	$	45,414	$	72,630	$	34,274		1.35	%		1.30	%

(1)	Became a Capitol affiliate in 2007 and is included for periods after addition to the Capitol banking network.
(2)	Became a Capitol affiliate in 2006 and is included for periods after addition to the Capitol banking network.

There are several other asset categories.  Loans held for sale ($16.4 million and $34.6 million at December 31, 2007 and 2006, respectively) are home mortgages which are sold into the secondary market generally within 30-60 days of closing (discussed in more detail in the following section of this narrative).  There is also a modest amount of investment securities on the balance sheet ($39.6 million and $40.7 million at December 31, 2007 and 2006, respectively).  Goodwill and other intangibles increased to $72.7 million at year-end 2007, an increase of $10.5 million primarily resulting from a share-exchange transaction; accounting for goodwill is described in the Critical Accounting Policies section of this narrative.  All other asset categories are individually less than $85 million at December 31, 2007 and 2006.

The primary source of funding of loans is deposits, which is discussed in the next section of this narrative.

F - 20

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 $382.9 million at year-end 2007, or about 7.8% of total assets.  This compares to $402.4 million or about 9.9% of total assets at year-end 2006.  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 a third of the investment securities portfolio is classified as available for sale, although the banks generally have not sold investments to meet liquidity needs.  During 2007 and 2006, there were no significant sales of investment securities available for sale ($1.8 million in 2005).  Sales of investment securities available for sale are typically made to facilitate changes in risk-management strategies.

Loans held for sale, as previously mentioned, approximated $16.4 million at December 31, 2007, compared to $34.6 million at year-end 2006.  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.  In 2007, reports of turmoil relating to subprime mortgage activity dominated the media; Capitol’s banks’ mortgage lending activity is an extension of its relationship-based operating model.  Mortgage loan origination volume in 2007 increased slightly, to approximately $500 million compared to $483.9 million in 2006 and $634.4 million in 2005.  The increase in volume was primarily due to lower interest rates in the second half of 2007 versus the higher rates in 2005 and 2006 after record low interest rates, which generated 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.

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 17% of total deposits at year-end 2007 (about 20% at year-end 2006).  The decrease in this ratio is significant inasmuch as a lower percentage of noninterest-bearing deposits has the effect of increasing a bank’s funding costs and, accordingly, reducing net interest income.

In recent periods, many banks within the industry have experienced 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 requires competitive pricing, resulting in tight net interest margins, especially during periods of relatively low interest rates.  As interest rates have recently decreased, customers are more attracted to aggressively-priced time deposits, and

F - 21

growth in noninterest-bearing balances is very difficult to achieve.  The banks do not generally rely on brokered deposits as a key funding source (approximately $533 million at year-end 2007 or 13.9% of interest-bearing deposits compared to 13.6% in 2006); 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 2007, a total of approximately $299 million ($184 million at year-end 2006) was borrowed under those facilities and additional borrowing availability approximated $490 million.  Some of the banks also have smaller lines of credit with their correspondent banks.  Borrowings under those 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 2007 and 2006, 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	$	2,023,628	$	2,023,628
Time deposits		1,821,117		1,524,347	$	241,596	$	53,604	$	1,570
Debt obligations		320,384		176,234		128,700		15,344		106
Rent commitments under      noncancelable leases		56,238		9,098		15,935		13,447		17,758
Trust-preferred securities		158,300								158,300
Total	$	4,379,667	$	3,733,307	$	386,231	$	82,395	$	177,734

(1)   Excludes interest.

Loan commitments of Capitol's banks (stand-by letters of credit and unfunded loans) generally expire within one year.  Other than the items set forth above, 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 $156.2 million at year-end 2007, a net increase of $29.7 million from the $126.5 million level at year-end 2006.  The net increase in minority interests in 2007 resulted from Capitol's formation of new banks and bank-development subsidiaries.

F - 22

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 bank-development entity) is owned by Capitol.  All of the nonvoting common stock, ranging from $12.7 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-VII.  CDBL-I became wholly-owned via a share-exchange with Capitol effective November 30, 2006.  CDBL-II became wholly-owned via a share exchange with Capitol completed in February 2007 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, in the future, it is likely that share exchange transactions may occur, as a strategy to gain full ownership of some majority-owned affiliates, 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.  For example, in April 2005, Capitol acquired Peoples State Bank located in Jeffersonville, Georgia, which subsequently enabled Capitol to form and/or acquire banks in that state.

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 $389.1 million at year-end 2007, an increase of $27.3 million for the year.  The 2007 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 $22.47 at year-end 2007, compared with $21.73 at year-end 2006.  Cash dividends per share of $1.00 were paid in 2007, compared to $0.95 in 2006 and $0.72 in 2005.  In early 2008, 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.

F - 23

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 $158 million of capital through issuance of trust-preferred securities, including $55 million in March 2007.  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.  Future availability of trust-preferred securities as a near-term capital resource diminished in late 2007 as U.S. capital markets became unstable, which precludes this as a capital resource until capital market conditions improve.

Total capitalization at year-end 2007 amounted to $701.5 million, or 14.3% of total assets.  This compares to $589.4 million, or 14.5% at year-end 2006.

At December 31, 2007, Capitol and its bank-development subsidiaries had $27.7 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 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 have previously benefitted from lower FDIC deposit insurance costs and less restrictive limitations on some banking activities which are attributable to that classification.  Increases in FDIC insurance premiums experienced by Capitol’s banks in 2007 were attributable to general increases in FDIC assessments, not due to their capital classification.

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 2007.

F - 24

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.

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 the "gap" at December 31, 2007 (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	$	22,541		$	3,091		$	198		$	1,094		$	26,924
Federal funds sold		129,365												129,365
Loans held for sale		16,419												16,419
Investment securities		20,271			777			6,645			11,904			39,597
Portfolio loans		1,698,824			488,514			1,878,942			248,421			4,314,701
Nonearning assets														374,757
Total assets	$	1,887,420		$	492,382		$	1,885,785		$	261,419		$	4,901,763
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Time deposits under $100,000	$	275,273		$	363,048		$	114,697		$	894		$	753,912
Time deposits $100,000 and over		407,957			478,069			180,503			676			1,067,205
All other interest-bearing deposits		926,304			177,348			240,157			8,131			1,351,940
Total interest-bearing deposits		1,609,534			1,018,465			535,357			9,701			3,173,057
Notes payable and short-term borrowings		90,535			85,699			144,044			106			320,384
Trust preferred securities		68,000						35,000			55,300			158,300
Noninterest-bearing liabilities														704,679
Minority interests in consolidated subsidiaries														156,198
Stockholders' equity														389,145
Total liabilities and stockholders' equity	$	1,768,069		$	1,104,164		$	714,401		$	65,107		$	4,901,763
Interest rate sensitive period gap	$	119,351		$	(611,782	)	$	1,171,384		$	196,312
Interest rate sensitive cumulative gap	$	119,351		$	(492,431	)	$	678,953		$	875,265
Period rate sensitive assets/period rate sensitive liabilities		1.07			0.45			2.64			4.02
Cumulative rate sensitive assets/cumulative rate sensitive liabilities		1.07			0.83			1.19			1.24
Cumulative gap to total assets		2.43	%		(10.05	)%		13.85	%		17.86	%

F - 25

The table on the preceding page indicates that, in the immediate short-term, Capitol is slightly “asset sensitive” (i.e., interest-rate sensitive assets exceed interest-rate sensitive liabilities) and, accordingly, if interest rates increase it would favorably impact net interest income.  Early 2008 reality, however, was a falling rate environment with unprecedented large rate cuts made by the Federal Reserve in January.  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 100 and 200 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	$	358,877	$	383,200	$	407,570	$	334,553	$	310,505
Interest expense		189,394		213,826		238,258		164,295		139,195
Net interest income	$	169,483	$	169,374	$	169,312	$	170,258	$	171,310

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

F - 26

radically changed interest-rate environment and how management would revise its asset and liability management priorities in concert with rate changes.

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 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.

As mentioned previously, the Federal Reserve took unprecedented action in January 2008 to reduce market interest rates by a total of 125 basis points.  Because of Capitol’s consolidated asset-sensitive gap position such action is expected to have an adverse impact on net interest margin (and profitability) as interest rates on loans reprice quickly while rates paid on deposits will reprice over an extended period of time.  At the time this narrative was written, there appeared to be consensus within the financial media that the Federal Reserve may reduce interest rates by another 100 basis points by mid-2008.  If that occurs, Capitol’s net interest margins could become further compressed.  It is impossible to speculate further on the timing, size and direction of future interest rate changes.

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 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 a continuing adverse impact on the communities in which the banks are located.  At the time this narrative was written, stresses of the domestic economic and global instability 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.

Capitol continues to expand geographically to minimize or avoid a concentration of assets in a particular region.  The Great Lakes Region comprised 41.7% of consolidated assets at December 31, 2007, compared to 46.7% at December 31, 2006, and is disproportionate to other denominated regions of Capitol.  Future asset growth and bank development is expected to emphasize other regions, improving the balance of Capitol’s geographic presence and to reduce the exposure to adverse economic conditions of any particular region.

F - 27

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.

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 been maintained at a stable and modest level for the last several years, until mid-2007 ($362,000 in 2006 and $375,000 in 2005).  FDIC deposit insurance premium levels became a much more significant expense in 2007 ($2.0 million) and will increase in future periods as a result of the FDIC imposing 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.

F - 28

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 rule-making releases on how financial institutions are to determine the amount of their allowance for loan losses.  Some of this guidance is 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 financial institution 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, 2007, Capitol's allowance for loan losses approximated 1.35% 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 $430,000 impact on both the allowance for loan losses and income before income taxes.

Accounting for Goodwill and Other Intangibles.  At December 31, 2007, Capitol had $72.7 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 result of share-exchange transactions when Capitol has issued its shares of common stock at a 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, 2007.

F - 29

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.  However, after giving effect to the minority interest in net income or losses of consolidated subsidiaries, Capitol's net income 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 2007, in addition to some which have later effective dates.  Those are listed and discussed in Note B of the consolidated financial statements, beginning on page F-46.

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 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  

· The 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.

F - 30

Management's Report on

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, 2007, 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, 2007, 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 Capitol's internal control over financial reporting.

      Joseph D. Reid Chairman and CEO   Lansing, Michigan March 10, 2008       Lee W. Hendrickson Chief Financial Officer

F - 31

    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 Capitol Bancorp Ltd. and subsidiaries’ internal control over financial reporting as of December 31, 2007, 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, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.  Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audit also included 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.

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.

F - 32

In our opinion, Capitol Bancorp Ltd. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, 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 of Capitol Bancorp Ltd. and subsidiaries as of December 31, 2007 and 2006, 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, 2007, and our report dated March 10, 2008 expressed an unqualified opinion thereon.

 

 

Grand Rapids, Michigan

March 10, 2008

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 the accompanying consolidated balance sheets of Capitol Bancorp Ltd. and subsidiaries as of December 31, 2007 and 2006, 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, 2007.  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, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, 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), Capitol Bancorp Ltd. and subsidiaries’ internal control over financial reporting as of December 31, 2007, 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 10, 2008 expressed an unqualified opinion thereon.

 

Grand Rapids, Michigan

March 10, 2008

F - 34

Consolidated Balance Sheets

	-December 31-
	2007			2006
	(in $1,000s)
ASSETS
Cash and due from banks	$	196,083		$	169,753
Money market and interest-bearing deposits		26,924			37,204
Federal funds sold		129,365			141,913
Cash and cash equivalents		352,372			348,870
Loans held for sale		16,419			34,593
Investment securities—Note C:
Available for sale, carried at market value		14,119			18,904
Held for long-term investment, carried at amortized cost which approximates market value		25,478			21,749
Total investment securities		39,597			40,653
Portfolio loans, less allowance for loan losses of $58,124 in 2007 and $45,414 in 2006—Note D		4,256,577			3,443,264
Premises and equipment—Note F		60,031			54,295
Accrued interest income		19,417			17,524
Goodwill and other intangibles—Notes B and R		72,722			62,215
Other assets		84,628			64,402
TOTAL ASSETS	$	4,901,763		$	4,065,816
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing	$	671,688		$	651,253
Interest-bearing—Note G		3,173,057			2,607,232
Total deposits		3,844,745			3,258,485
Debt obligations:
Notes payable and short-term borrowings—Note H		320,384			191,154
Subordinated debentures—Note I		156,130			101,035
Total debt obligations		476,514			292,189
Accrued interest on deposits and other liabilities		35,161			26,751
Total liabilities		4,356,420			3,577,425
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES—Note A		156,198			126,512
STOCKHOLDERS' EQUITY—Notes B, J and P
Common stock, no par value, 50,000,000 shares authorized; issued and outstanding:  2007 – 17,316,568 shares  2006 – 16,656,481 shares		272,208			249,244
Retained earnings		117,520			112,779
Undistributed common stock held by employee-benefit trust		(586	)
Market value adjustment (net of tax effect) for investment securities available for sale (accumulated other comprehensive income/loss)		3			(144	)
Total stockholders' equity		389,145			361,879
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,901,763		$	4,065,816

See notes to consolidated financial statements.

F - 35

Consolidated Statements of Income

	-Year Ended December 31-
		2007			2006		2005
		(in $1,000s except per share data)
Interest income:
Portfolio loans (including fees)		$	314,800		$	264,701	$	214,882
Loans held for sale			2,133			2,740		2,627
Taxable investment securities			773			956		1,008
Federal funds sold			10,687			8,703		4,734
Other			2,046			2,253		1,188
Total interest income			330,439			279,353		224,439
Interest expense:
Deposits			124,160			88,629		53,213
Debt obligations and other			23,002			16,957		14,366
Total interest expense			147,162			105,586		67,579
Net interest income			183,277			173,767		156,860
Provision for loan losses—Note D			25,340			12,156		10,960
Net interest income after provision for loan losses			157,937			161,611		145,900
Noninterest income:
Service charges on deposit accounts			4,787			4,318		4,120
Trust and wealth-management revenue			5,149			3,336		2,069
Fees from origination of non-portfolio residential mortgage loans			4,482			5,439		6,146
Gains on sale of government-guaranteed loans			2,733			2,434		2,980
Realized gains (losses) on sales of investment securities available for sale			(2	)				8
Other			7,232			6,005		5,725
Total noninterest income			24,381			21,532		21,048
Noninterest expense:
Salaries and employee benefits			106,563			85,196		72,387
Occupancy			15,079			12,116		9,735
Equipment rent, depreciation and maintenance			10,022			8,389		6,369
Preopening and start-up costs of de novo banks and bank-development subsidiaries			5,693			4,462		2,971
Other			38,803			27,641		25,827
Total noninterest expense			176,160			137,804		117,289
Income before income taxes and minority interest			6,158			45,339		49,659
Income taxes—Note L			2,824			15,463		19,232
Income before minority interest			3,334			29,876		30,427
Minority interest in net losses of consolidated subsidiaries			18,603			12,515		5,498
NET INCOME		$	21,937		$	42,391	$	35,925
NET INCOME PER SHARE—Note M:
Basic		$	1.29		$	2.69	$	2.42
Diluted		$	1.27		$	2.57	$	2.34

See notes to consolidated financial statements.

F - 36

Consolidated Statements of Changes in Stockholders' Equity (in $1,000s, except share and per-share data)

	Common Stock			Retained Earnings			Undistributed Common Stock Held by Employee- Benefit Trust			Accumulated Other Comprehensive Income (Loss)			Total
Balances at January 1, 2005	$	191,719		$	60,476					$	(36	)	$	252,159
Issuance of 610,383 shares of common stock to acquire minority interest 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
Issuance of 371,314 shares of common stock to acquire minority interest in subsidiary		15,927												15,927
Issuance of 222,295 shares of common stock upon exercise of stock options, net of common stock surrendered to facilitate exercise		2,836												2,836
Recognition of compensation expense relating to restricted common stock ($1,562) and stock options		1,972												1,972
Issuance of 41,972 unvested shares of restricted common stock, net of related unearned employee compensation and 2,000 forfeited shares		--												--
Tax benefit from share-based payments		1,688												1,688
Issuance of 24,506 shares to ESOP		1,132												1,132
Acquisition of 85,543 shares for employee benefit trust							$	(2,482	)					(2,482	)
Transfer of 64,430 shares to ESOP and distribution of 435 shares to employees upon anniversary of employment		(591	)					1,896						1,305
Cash dividends paid ($1.00 per share)					(17,196	)								(17,196	)
Components of comprehensive income:
Net income for 2007					21,937									21,937
Market value adjustment for investment securities available for sale (net of income tax effect)											147			147
Comprehensive income for 2007														22,084
BALANCES AT DECEMBER 31, 2007	$	272,208		$	117,520		$	(586	)	$	3		$	389,145

See notes to consolidated financial statements.

F - 37

Consolidated Statements of Cash Flows

	-Year Ended December 31-
	2007			2006			2005
	(in $1,000s)
OPERATING ACTIVITIES
Net income	$	21,937		$	42,391		$	35,925
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		25,340			12,156			10,960
Depreciation of premises and equipment		8,980			7,219			5,661
Amortization of intangibles		315			585			577
Net amortization (accretion) of investment security premiums (discounts)		11			(8	)		63
Loss (gain) on sales of premises and equipment		(57	)		18			157
Minority interest in net losses of consolidated subsidiaries		(18,603	)		(12,515	)		(5,498	)
Share-based compensation expense		1,972			1,689			1,242
Deferred federal income tax credit		(10,397	)		(5,493	)		(5,263	)
Originations and purchases of loans held for sale		(499,787	)		(483,850	)		(634,362	)
Proceeds from sales of loans held for sale		517,961			470,895			655,867
Increase in accrued interest income and other assets		(11,292	)		(17,504	)		(15,815	)
Increase (decrease) in accrued interest expense on deposits and other liabilities		8,410			(1,338	)		11,801
NET CASH PROVIDED BY OPERATING ACTIVITIES		44,790			14,245			61,315
INVESTING ACTIVITIES
Cash and cash equivalents of acquired subsidiary								3,557
Proceeds from sales of investment securities available for sale		301						1,756
Proceeds from calls, prepayments and maturities of investment securities		11,303			14,266			11,249
Purchases of investment securities		(10,629	)		(9,347	)		(14,667	)
Net increase in portfolio loans		(838,653	)		(504,790	)		(306,258	)
Proceeds from sales of premises and equipment		407			708			93
Purchases of premises and equipment		(15,066	)		(20,611	)		(14,879	)
NET CASH USED BY INVESTING ACTIVITIES		(852,337	)		(519,774	)		(319,149	)
FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings accounts		185,376			134,250			85,385
Net increase in certificates of deposit		400,884			338,976			189,802
Net borrowings from debt obligations		129,230			15,425			3,195
Net proceeds from issuance of subordinated debentures		55,000
Resources provided by minority interests		55,713			68,751			62,794
Net proceeds from issuance of common stock		2,836			3,573			2,510
Tax benefit from share-based payments		1,688			2,481
Acquisition of shares for employee benefit trust		(2,482	)
Cash dividends paid		(17,196	)		(15,165	)		(10,848	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		811,049			548,291			332,838
INCREASE IN CASH AND CASH EQUIVALENTS		3,502			42,762			75,004
Cash and cash equivalents at beginning of year		348,870			306,108			231,104
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	352,372		$	348,870		$	306,108

See notes to consolidated financial statements.

F - 38

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 consist of the following:

Affiliate	Location	Percentage Owned at December 31, 2007	Year Formed or Acquired
Arizona Region:
Arrowhead Community Bank	Glendale, Arizona	100%	2000
Asian Bank of Arizona	Phoenix, Arizona	(1)	2006
Bank of Tucson	Tucson, Arizona	100%	1996
Camelback Community Bank	Phoenix, Arizona	100%	1998
Mesa Bank	Mesa, Arizona	100%	1998
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 Feather River	Yuba City, California	(1)	2007
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
Sunrise Community Bank	Palm Desert, California	(1)	2007
Colorado Region:
Fort Collins Commerce Bank	Fort Collins, Colorado	51%	2005
Larimer Bank of Commerce	Fort Collins, Colorado	51%	2007
Loveland Bank of Commerce	Loveland, Colorado	51%	2007
Great Lakes Region:
Ann Arbor Commerce Bank	Ann Arbor, Michigan	100%	1990
Bank of Auburn Hills	Auburn Hills, Michigan	51%	2005
Bank of Maumee	Maumee, Ohio	(1)	2006
Bank of Michigan	Farmington Hills, Michigan	51%	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

(1)  Majority-owned by a bank development subsidiary in which Capitol holds a controlling interest.

F - 39

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, 2007	Year Formed or Acquired
Midwest Region:
Bank of Belleville	Belleville, Illinois	51%	2005
Community Bank of Lincoln	Lincoln, Nebraska	(1)	2007
Summit Bank of Kansas City	Lee’s Summit, Missouri	(1)	2005
Nevada Region:
1st Commerce Bank	North Las Vegas, Nevada	(1)	2006
Bank of Las Vegas	Las Vegas, Nevada	100%	2002
Black Mountain Community Bank	Henderson, Nevada	100%	2000
Desert Community Bank	Las Vegas, Nevada	100%	1999
Red Rock Community Bank	Las Vegas, Nevada	100%	1999
Northeast Region:
USNY Bank	Geneva, New York	(1)	2007
Northwest Region:
Bank of Bellevue	Bellevue, Washington	51%	2005
Bank of Everett	Everett, Washington	(1)	2006
Bank of Tacoma	Tacoma, Washington	(1)	2007
High Desert Bank	Bend, Oregon	(1)	2007
Issaquah Community Bank	Issaquah, Washington	(1)	2007
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
Texas Region:
Bank of Fort Bend	Sugar Land, Texas	(1)	2007
Bank of Las Colinas	Irving, Texas	(1)	2007

(1)  Majority-owned by a bank development subsidiary in which Capitol holds a controlling interest.

[The remainder of this page intentionally left blank]

F - 40

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 investment of $1 million for each bank-development entity) is owned by Capitol.  All of the nonvoting common stock, ranging from $12.7 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-VII.  CDBL-I and CDBL-II became wholly-owned by Capitol effective November 30, 2006 and February 9, 2007, respectively (see Note R), and were merged with and into Capitol effective December 31, 2007.

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 (historically, often 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 primarily 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.  The majority of Capitol’s banks are state-chartered institutions and, commencing in 2007, some have been chartered as federal savings banks.  In addition to 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 - 41

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 financial institution 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 2005, 2006 and 2007 are included in the consolidated financial statements for periods after joining the consolidated group.  Certain 2006 and 2005 amounts have been reclassified to conform to the 2007 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.

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).

F - 42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

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 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.

F - 43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

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 $13.9 million and $8.1 million of net deferred costs as of December 31, 2007 and 2006, respectively).

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, 2007) are charged against earnings, when determined.  Other intangibles, which generally consist of acquired customer lists and core deposit intangibles, are amortized over varying periods of 7 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, 2007 and 2006, approximated $16.4 million and $9.5 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 estimated 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

F - 44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

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 stock options after January 1, 2006 is recognized ratably over the vesting period of the award based on the fair value of the option, computed using the Black-Scholes valuation model.  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.

Stock price volatility used in the valuation model is 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.

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 were as follows for the year ended December 31, 2005:

Fair value assumptions:
Risk-free interest rate		4.2	%
Dividend yield		2.0	%
Stock price volatility		.30
Expected option life	6.8 years
Aggregate estimated fair value of options granted (in thousands)	$	9,373
Net income (in thousands):
As reported		35,925
Pro forma		29,833
Net income per share:
Basic:
As reported		2.42
Pro forma		2.01
Diluted:
As reported		2.34
Pro forma	$	1.94

F - 45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

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.

Net Income Per Share:  Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding.  Diluted net income per share is based on the weighted-average number of common shares outstanding, plus common share equivalents calculated for stock options and restricted common stock outstanding using the treasury stock method.

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:  In March 2006, the Financial Accounting Standards Board (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.  The standard's adoption effective January 1, 2007 did not have a material effect on Capitol's consolidated financial statements.

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,

F - 46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

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.  FIN 48 did not have a material effect on Capitol's consolidated financial statements upon implementation effective January 1, 2007.

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 and expands related financial statement disclosures.  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.  The effect of these new standards’ adoption is not expected to be material.  Statement No. 157 does not require any new fair value measurements and was initially effective for the Corporation beginning January 1, 2008.  In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2.  FSP FAS 157-2 defers the effective date of SFAS No. 157 until January 1, 2009 for nonfinancial assets and nonfinancial liabilities except those items recognized or disclosed at fair value on an annual or more frequently recurring basis.  Management has not completed its review of the new guidance; however, the effect of the Statement’s implementation is not expected to be material to the Corporation’s results of operations or financial position.

In June 2007, the FASB ratified an Emerging Issues Task Force (EITF) consensus regarding Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards, which becomes effective for Capitol January 1, 2008.  Management expects the effect of this new guidance upon implementation will not be material to Capitol’s consolidated financial statements.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations, to further enhance the accounting and financial reporting related to business combinations.  Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, (3) requires that acquisition-related and restructuring costs to be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009.  The effects of the Corporation’s adoption of Statement No. 141(R) will depend upon the extent and magnitude of acquisitions after December 31, 2008.

F - 47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent’s equity, (2) the amount of consolidated net income attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.  Statement No. 160 applies to fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, and early adoption is prohibited.  Management has not completed its review of this new guidance.

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;  

· FASB FSP to require recalculation of leveraged leases if the timing of tax benefits affect cash flows; and  

· EITF Issue No. 06-4 which addresses accounting for deferred compensation and post retirement benefits of endorsement split-dollar life insurance.

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.

F - 48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE C—INVESTMENT SECURITIES

Investment securities consisted of the following at December 31 (in $1,000s):

	2007				2006
	Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
Available for sale:
United States treasury securities	$	499	$	499
United States government agency securities		8,991		9,025	$	13,403	$	13,285
Mortgage backed securities		3,402		3,368		4,089		3,991
Municipals		1,222		1,227		1,630		1,628
		14,114		14,119		19,122		18,904
Held for long-term investment:
Federal Reserve Bank stock		563		563		864		864
Federal Home Loan Bank stock		18,765		18,765		14,148		14,148
Corporate		4,204		4,204		4,419		4,419
Other		1,946		1,946		2,318		2,318
		25,478		25,478		21,749		21,749
	$	39,592	$	39,597	$	40,871	$	40,653

At December 31, 2007, 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.

Gross unrealized gains and losses on investment securities available for sale were as follows at December 31 (in $1,000s):

	2007				2006
	Gains		Losses		Gains		Losses
United States government agency securities	$	38	$	4	$	--	$	118
Mortgage backed securities		23		57		13		111
Municipals		14		9		11		13
	$	75	$	70	$	24	$	242

[The remainder of this page intentionally left blank]

F - 49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE C—INVESTMENT SECURITIES—Continued

The age of gross unrealized losses and carrying value (at estimated market value) of securities available for sale are summarized below (in $1,000s):

	2007				2006
	Unrealized Loss		Carrying Value		Unrealized Loss		Carrying Value
One year or less:
United States government agency securities	$	--	$	--	$	7	$	3,488
Mortgage backed securities		--		--		--		--
Municipals		--		--		--		--
	$	--	$	--	$	7	$	3,488
In excess of one year:
United States government agency securities	$	4	$	1,552	$	111	$	9,297
Mortgage backed securities		57		2,823		111		3,444
Municipals		9		235		13		231
		70		4,610		235		12,972
	$	70	$	4,610	$	242	$	16,460

Management does not believe any individual unrealized loss as of December 31, 2007 represents an other-than-temporary loss (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.

Scheduled maturities of investment securities held as of December 31, 2007 were as follows (in $1,000s):

	Amortized Cost		Estimated Market Value
Due in one year or less	$	2,220	$	2,218
After one year, through five years		6,145		6,175
After five years, through ten years		2,974		2,975
After ten years		2,775		2,751
Securities held for long-term investment, without standard maturities		25,478		25,478
	$	39,592	$	39,597

F - 50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE D—LOANS

Portfolio loans consisted of the following at December 31 (in $1,000s):

	2007			2006
Loans secured by real estate:
Commercial	$	1,917,113		$	1,602,743
Residential (including multi-family)		698,960			529,357
Construction, land development and other land		852,595			705,255
Total loans secured by real estate		3,468,668			2,837,355
Commercial and other business-purpose loans		768,473			602,294
Consumer		48,041			39,957
Other		29,519			9,072
Total portfolio loans		4,314,701			3,488,678
Less allowance for loan losses		(58,124	)		(45,414	)
Net portfolio loans	$	4,256,577		$	3,443,264

Loans serviced for the benefit of others, which are not recorded on the consolidated balance sheet, approximated $90 million and $92 million at December 31, 2007 and 2006, respectively.

Transactions in the allowance for loan losses are summarized below (in $1,000s):

	2007			2006			2005
Balance at January 1	$	45,414		$	40,559		$	37,572
Provision charged to operations		25,340			12,156			10,960
Net charge-offs:
Loans charged off (deduction)		(14,219	)		(8,699	)		(9,643	)
Recoveries		1,589			1,398			1,670
Net charge-offs		(12,630	)		(7,301	)		(7,973	)
Balance at December 31	$	58,124		$	45,414		$	40,559

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.

[The remainder of this page intentionally left blank]

F - 51

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
	2007		2006
Nonaccrual loans:
Loans secured by real estate:
Commercial	$	19,016	$	8,771
Residential (including multi-family)		13,381		6,808
Construction, land development and other land		29,756		8,583
Total loans secured by real estate		62,153		24,162
Commercial and other business-purpose loans		5,782		5,349
Consumer		66		215
Other		84		--
Total nonaccrual loans		68,085		29,726
Past due (>90 days) loans:
Loans secured by real estate:
Commercial		113		1,380
Residential (including multi-family)		1,116		526
Construction, land development and other land		2,531		1,116
Total loans secured by real estate		3,760		3,022
Commercial and other business-purpose loans		714		1,375
Consumer		66		151
Other		5		--
Total past due loans		4,545		4,548
Total nonperforming loans	$	72,630	$	34,274

If nonperforming loans had performed in accordance with their contractual terms during the year, additional interest income of $4.8 million, $2.3 million and $1.9 million would have been recorded in 2007, 2006 and 2005, respectively.  Interest income recognized on loans in nonaccrual status in 2007, 2006 and 2005 operations approximated $1,876,000, $888,000 and $845,000, respectively.  At December 31, 2007, there were no material amounts of loans which were restructured or otherwise renegotiated as a concession to troubled borrowers.

F - 52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE D—LOANS—Continued

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, 2007					December 31, 2006
	Amount		Percentage of Total Portfolio Loans			Amount		Percentage of Total Portfolio Loans
Loans secured by real estate:
Commercial	$	21,918		0.51	%	$	17,886		0.51	%
Residential (including multi-family)		10,235		0.24			7,234		0.21
Construction, land development and              other land		11,278		0.26			8,471		0.24
Total loans secured by real estate		43,431		1.01			33,591		0.96
Commercial and other business-purpose  loans		13,727		0.32			11,112		0.32
Consumer		667		0.01			558		0.02
Other		299		0.01			153		0.00
Total allowance for loan losses	$	58,124		1.35	%	$	45,414		1.30	%

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, 2007 and 2006, total loans to these persons were $184 million and $131 million, respectively.  During 2007, $146 million of new loans were made to these persons and repayments totaled $93 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 $210 million and $171 million at December 31, 2007 and 2006, respectively, are accepted based upon the banks' normal terms as to interest rate, term and deposit insurance.

F - 53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE F—PREMISES AND EQUIPMENT

Major classes of premises and equipment consisted of the following at December 31 (in $1,000s):

	2007			2006
Land, buildings and improvements	$	20,064		$	19,891
Leasehold improvements		25,257			19,483
Equipment, furniture and software		52,639			45,734
		97,960			85,108
Less accumulated depreciation		(37,929	)		(30,813	)
	$	60,031		$	54,295

Capitol and certain subsidiaries rent office space under operating leases.  Rent expense (net of sublease income) under these lease agreements approximated $9.2 million, $7.6 million and $6.2 million in 2007, 2006 and 2005, respectively (including rent expense approximating $1.6 million, $1.5 million and $1.7 million, respectively, under leases with related parties).

At December 31, 2007, 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):

2008	$	9,098
2009		8,486
2010		7,449
2011		7,164
2012		6,283
2013 and thereafter		17,758
	$	56,238

NOTE G—DEPOSITS

The aggregate amount of time deposits of $100,000 or more approximated $1.1 billion and $960 million as of December 31, 2007 and 2006, respectively.

At December 31, 2007, the scheduled maturities of time deposits were as follows (in $1,000s):

2008	$	1,524,347
2009		183,633
2010		57,963
2011		34,858
2012		18,746
2013 and thereafter		1,570
	$	1,821,117

Interest paid approximates amounts charged to operations on an accrual basis for the periods presented.

F - 54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE H—NOTES PAYABLE AND SHORT-TERM BORROWINGS

Notes payable and short-term borrowings consisted of the following at December 31 (in $1,000s):

	2007		2006
Borrowings from Federal Home Loan Banks	$	298,744	$	183,598
Federal funds purchased		20,850		6,997
Repurchase agreements		790		559
	$	320,384	$	191,154

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, 2007).  At December 31, 2007, unused lines of credit under these facilities approximated $490 million.  Assets pledged to secure these credit facilities approximated $579 million at December 31, 2007.

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 (7% at December 31, 2007), payable monthly, and a quarterly facility fee on the unused portion.  There were no amounts drawn on the line of credit at December 31, 2007 or 2006.  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.

For the periods presented, interest paid on debt obligations approximated amounts charged to expense.

At December 31, 2007, scheduled debt maturities of notes payable and short-term borrowings were as follows (in $1,000s):

2008	$	176,234
2009		80,950
2010		47,750
2011		10,844
2012		4,500
2013 and thereafter		106
	$	320,384

In addition to the foregoing, Capitol has guaranteed some obligations of its subsidiaries (see Note O).

F - 55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE I—SUBORDINATED DEBT

Subordinated debt relates to trust-preferred securities issued by Capitol which are summarized as follows:

	Interest Rate at December 31, 2007	Scheduled Maturity	Aggregate Liquidation Amount (in $1,000s)	Net Carrying Amount at December 31
				(in $1,000s)
				2007	2006
Capitol Trust I	8.50% fixed	2027	$           25,300	$           24,579	$           24,543
Capitol Trust II	10.25% fixed	2031	10,000	9,763	9,753
Capitol Statutory Trust III	8.54% variable	2031	15,000	14,645	14,630
Capitol Trust IV	7.91% variable	2032	3,000	2,918	2,914
Capitol Trust VI	8.54% variable	2033	10,000	9,748	9,738
Capitol Trust VII	7.78% fixed	2033	10,000	9,871	9,866
Capitol Statutory Trust VIII	7.94% variable	2033	20,000	19,663	19,650
Capitol Trust IX	7.69% fixed	2034	10,000	9,943	9,941
Capitol Trust X	6.55% fixed	2037	35,000	35,000
Capitol Trust XI	6.64% variable	2037	20,000	20,000
			$         158,300	$         156,130	$         101,035

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.

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 $1.6 million in 2007, $1.7 million in 2006 and $1.2 million in 2005.  Tax benefits associated with such compensation expense approximated $436,000 in 2007, $351,000 in 2006 and $229,000 in 2005.  Future compensation expense related to unvested restricted common stock as of December 31, 2007 approximates $3.7 million (based on grants through December 31, 2007), to be recorded ratably over a period of approximately 3.5 years, based on the weighted-average remaining vesting period at that date.

F - 56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE J—RESTRICTED COMMON STOCK AND STOCK OPTIONS—Continued

Restricted share activity is summarized below:

	2007					2006					2005
	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		224,416		$	27.72		200,631		$	21.76		258,978		$	21.91
Granted		43,972			21.55		80,750			38.69		--			--
Vested		(58,966	)		22.28		(56,965	)		22.27		(58,347	)		22.43
Forfeited		(2,000	)		44.56		--			--		--			--
Unvested at December 31		207,422		$	27.80		224,416		$	27.72		200,631		$	21.76

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, 2005		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
Granted in 2007		168,720			22.46			46.20		25.09
Exercised in 2007		(277,149	)		10.81	to		33.01		16.98
Cancelled or expired in 2007		(1,580	)
Outstanding at December 31, 2007		2,460,082		$	13.50	to	$	46.20	$	27.85

The aggregate intrinsic value of exercised options approximated $4.7 million, $8.3 million and $12.7 million in 2007, 2006 and 2005, respectively.

Stock options with an aggregate fair value of $1,102,000 were granted in 2007.  Fair value was computed using the Black-Scholes valuation model.  Fair value assumptions included a risk-free interest rate of 4.6%, stock price volatility of .37, dividend yield of 4.5% and an expected option life of 7 years.  Compensation expense related to such stock options

F - 57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE J—RESTRICTED COMMON STOCK AND STOCK OPTIONS—Continued

approximated $410,000 in 2007 and associated tax benefits approximated $144,000.  Future compensation expense relating to stock options as of December 31, 2007 approximates $692,000 (based on grants subject to FASB Statement 123(R) through December 31, 2007) and will be recorded ratably over a period of 2.6 years, based on the weighted-average remaining vesting period at that date.

As of December 31, 2007, substantially all outstanding stock options were vested, currently exercisable and had a weighted average remaining contractual life of 3.4 years (excluding certain stock options granted in 2007 which are not vested and are not currently exercisable).  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		7,587	$	12.12	0.07 years	$	60,696
$	15.00 to 19.99		232,688		16.59	2.10 years		821,389
$	20.00 to 24.99		570,198		21.78	3.33 years		0
$	25.00 to 29.99		586,987		27.09	2.64 years		0
$	30.00 to 34.99		695,115		32.10	3.69 years		0
$	35.00 or more		367,507		37.92	4.92 years		0
			2,460,082				$	882,085

Cash received upon exercise of stock options approximated $3.7 million, $5.1 million and $4.2 million and tax benefits realized approximated $1.3 million, $2.1 million and $1.8 million in 2007, 2006 and 2005, respectively.

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, 2007, 2006 and 2005 were $2.2 million, $1.5 million and $1.1 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 2007, 2006 and 2005 approximated $1,324,000, $1,134,000 and $949,000, respectively.  As of December 31, 2007, the ESOP held approximately 350,000 shares of Capitol's common stock which have been allocated to participants' accounts; there were no unallocated shares as of that date.

F - 58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE L—INCOME TAXES

Income taxes include the following components (in $1,000s):

	2007			2006			2005
Federal:
Currently payable	$	13,003		$	21,367		$	22,326
Deferred (credit)		(10,397	)		(5,493	)		(5,263	)
		2,606			15,874			17,063
State income taxes (credit)		218			(411	)		2,169
	$	2,824		$	15,463		$	19,232

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 $1.5 million in 2007 ($1.2 million in 2006 and $1.3 million in 2005), and is excluded from income tax expense (included as a component of other noninterest expense).

Federal income taxes paid in 2007, 2006 and 2005 approximated $10.1 million, $20.9 million and $19.3 million, respectively.  State income taxes approximating $735,000 were paid in 2007, $928,000 was received in refunds for a net refund of $193,000 ($1.8 million was paid in 2006 and $1.9 million in 2005).  Federal income taxes payable at December 31, 2007 and 2006 were reduced by tax benefits approximating $1.9 million and $2.1 million, respectively, arising from the exercise of stock options.

Differences between income tax expense recorded and amounts computed using the statutory tax rate are reconciled below (in $1,000s):

	2007			2006			2005
Federal income tax computed at statutory
rate of 35%	$	2,155		$	15,869		$	17,381
State income taxes (credit)		218			(411	)		2,169
Federal tax effect of:
Amortization of intangibles		54			205			202
State income taxes		(76	)		144			(759	)
Other		473			(344	)		239
	$	2,824		$	15,463		$	19,232

[The remainder of this page intentionally left blank]

F - 59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE L—INCOME TAXES—Continued

Net deferred income tax assets, which are a component of other assets, consisted of the following at December 31 (in $1,000s):

	2007			2006
Allowance for loan losses	$	20,134		$	15,099
Net operating losses of subsidiaries		14,247			8,202
Deferred compensation		2,890			2,635
Depreciation		(2,843	)		(2,136	)
Start-up costs for de novo banks		4,463			2,730
Market value adjustment for investment securities available for sale		14			74
Other, net		(3,593	)		(1,629	)
	$	35,312		$	24,975

Certain subsidiaries (generally less than 80%-owned entities) 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, 2007, expire at the following dates and amounts (in $1,000s):

2024	$	526
2025		5,977
2026		13,177
2027		21,027
	$	40,707

In conjunction with implementation of FIN 48 effective January 1, 2007 (see Note B), management concluded that there were no significant uncertain tax positions requiring recognition in the consolidated financial statements.  The evaluation was performed for the tax years ended 2003, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions and was updated as of December 31, 2007.

The Internal Revenue Service commenced and completed an examination of the Corporation’s consolidated federal income tax return for the year ended December 31, 2005 during 2007.  No significant adjustments to taxable income or taxes due arose from that examination.

Capitol may from time to time be assessed interest or penalties associated with tax liabilities by major tax jurisdictions, although any such assessments are estimated to be minimal and immaterial.  To the extent Capitol has received an assessment for interest and/or penalties, it has been classified in the consolidated statements of income as a component of other noninterest expense.

F - 60

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):

	2007		2006		2005
Numerator—net income	$	21,937	$	42,391	$	35,925
Denominator:
Weighted average number of shares outstanding, excluding unvested restricted shares (denominator for basic earnings per share)		16,967		15,772		14,867
Effect of dilutive securities:
Unvested restricted shares		70		86		86
Stock options		179		623		412
Potential dilution		249		709		498
Denominator for diluted earnings per share—weighted average number of shares and potential dilution		17,216		16,481		15,365
Number of antidilutive stock options excluded from diluted earnings per share computation		1,063		--		1,085

Additional disclosures regarding restricted shares and stock options are set forth in Note J.

[The remainder of this page intentionally left blank]

F - 61

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):

	2007						2006
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	352,372		$	352,372		$	348,870		$	348,870
Loans held for sale		16,419			16,419			34,593			34,593
Investment securities:
Available for sale		14,119			14,119			18,904			18,904
Held for long-term investment		25,478			25,478			21,749			21,749
		39,597			39,597			40,653			40,653
Portfolio loans:
Loans secured by real estate:
Commercial		1,917,113			1,923,373			1,602,743			1,598,643
Residential (including multi-family)		698,960			699,216			529,357			527,563
Construction, land development and other land		852,595			854,965			705,255			702,873
Total loans secured by real estate		3,468,668			3,477,554			2,837,355			2,829,079
Commercial and other business-purpose             loans		768,473			774,043			602,294			598,684
Consumer		48,041			48,983			39,957			38,116
Other		29,519			30,421			9,072			8,978
Total portfolio loans		4,314,701			4,331,001			3,488,678			3,474,857
Less allowance for loan losses		(58,124	)		(58,124	)		(45,414	)		(45,414
Net portfolio loans		4,256,577			4,272,877			3,443,264			3,429,443
Financial Liabilities:
Deposits:
Noninterest-bearing		671,688			671,688			651,253			651,253
Interest-bearing:
Demand accounts		1,351,940			1,351,939			1,186,999			1,187,320
Time certificates of less than $100,000		753,912			753,817			460,203			461,145
Time certificates of $100,000 or more		1,067,205			1,069,111			960,030			961,649
Total interest-bearing		3,173,057			3,174,867			2,607,232			2,610,114
Total deposits		3,844,745			3,846,555			3,258,485			3,261,367
Notes payable and short-term borrowings		320,384			320,038			191,154			191,713
Subordinated debentures		156,130			158,300			101,035			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 - 62

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 ($28.8 million and $32.3 million outstanding at December 31, 2007 and 2006, respectively).  Other loan commitments outstanding consist of unused lines of credit and approved, but unfunded, specific loan commitments ($1 billion and $794 million at December 31, 2007 and 2006, 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, 2007 and 2006 was $6.3 million and $6.7 million, respectively.

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 ($20 million at December 31, 2007).

Capitol has guaranteed up to $2.5 million of secured borrowings by Amera Mortgage Corporation, a less than 50%-owned affiliate.

[The remainder of this page intentionally left blank]

F - 63

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, 2007, 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, 2007, that Capitol and its banks meet all capital adequacy requirements to which the entities are subject.

F - 64

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
		2007				2006
Tier 1 capital to average adjusted total assets:
Minimum required amount	≥	$	188,551		≥	$	155,110
Actual amount		$	628,747			$	527,355
Ratio			13.34	%			13.60	%
Tier 1 capital to risk-weighted assets:
Minimum required amount(1)	≥	$	177,353		≥	$	145,475
Actual amount		$	628,747			$	527,355
Ratio			14.18	%			14.50	%
Combined Tier 1 and Tier 2 capital to risk- weighted assets:
Minimum required amount(2)	≥	$	354,706		≥	$	290,949
Amount required to meet 'Well-Capitalized' category(3)	≥	$	443,382		≥	$	363,687
Actual amount		$	684,204			$	572,816
Ratio			15.43	%			15.75	%

(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.

[The remainder of this page intentionally left blank]

F - 65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE Q—PARENT COMPANY FINANCIAL INFORMATION

Condensed Balance Sheets

	-December 31-
	2007		2006
	(in $1,000s)
Assets
Cash on deposit principally with subsidiary banks	$	2,460	$	3,314
Money market funds on deposit principally with subsidiary banks		7,347		4,113
Time deposits principally with subsidiary banks		9,377		10,406
Cash and cash equivalents		19,184		17,833
Investment securities		3,321		4,048
Loans, net		28,242		11,314
Investments in and advances to subsidiaries		474,436		418,239
Investment in and advances to Amera Mortgage Corporation		482		482
Equipment, software and furniture, net		10,320		9,332
Other assets		23,960		13,206
Total assets	$	559,945	$	474,454
Liabilities and Stockholders' Equity
Accounts payable, accrued expenses and other liabilities	$	9,770	$	8,342
Subordinated debentures		161,030		104,233
Total liabilities		170,800		112,575
Stockholders' equity		389,145		361,879
Total liabilities and stockholders' equity	$	559,945	$	474,454

Condensed Statements of Income

	-Year Ended December 31-
	2007			2006			2005
	(in $1,000s)
Income:
Dividends from subsidiaries	$	32,750		$	30,475		$	34,350
Intercompany fees		24,854			23,039			19,458
Interest		610			199			816
Other		2,021			943			1,413
Total income		60,235			54,656			56,037
Expenses:
Interest		12,174			8,896			7,976
Salaries and employee benefits		11,756			10,482			13,325
Occupancy		2,049			1,584			1,249
Amortization, equipment rent and depreciation		3,499			2,146			1,839
Other		8,800			1,606			3,153
Total expenses		38,278			24,714			27,542
Income before equity in undistributed net earnings (losses) of consolidated subsidiaries and income tax credit		21,957			29,942			28,495
Equity in undistributed net earnings (losses) of consolidated subsidiaries		(4,469	)		11,773			6,171
Income before income tax credit		17,488			41,715			34,666
Income tax credit		(4,449	)		(676	)		(1,259	)
Net income	$	21,937		$	42,391		$	35,925

F - 66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE Q—PARENT COMPANY FINANCIAL INFORMATION—Continued

Condensed Statements of Cash Flows

	-Year Ended December 31-
	2007			2006			2005
	(in $1,000s)
OPERATING ACTIVITIES
Net income	$	21,937		$	42,391		$	35,925
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Equity in undistributed net earnings (losses) of subsidiaries		4,469			(11,773	)		(6,171	)
Depreciation and amortization of intangibles		2,189			1,459			1,245
Loss on sale of equipment and furniture					3			3
Decrease (increase) in amounts due from subsidiaries and other assets		(31,716	)		23,388			7,938
Increase (decrease) in accounts payable, accrued expenses and other liabilities		1,428			(3,214	)		1,772
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES		(1,693	)		52,254			40,712
INVESTING ACTIVITIES
Net cash investments in subsidiaries		(16,830	)		(36,193	)		(31,723	)
Net payments from Amera Mortgage Corporation								315
Purchases of investment securities					(2,000	)		(673	)
Net increase in loans		(16,928	)		(8,449	)		(1,635	)
Proceeds from sales of equipment and furniture		126						4
Purchases of equipment and furniture		(3,170	)		(5,098	)		(4,034	)
NET CASH USED BY INVESTING ACTIVITIES		(36,802	)		(51,740	)		(37,746	)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock		2,836			3,573			2,510
Net proceeds from issuance of subordinated debentures		55,000
Tax benefit from share-based payments		1,688			2,481
Acquisition of shares for employee benefit trust		(2,482	)
Cash dividends paid		(17,196	)		(15,165	)		(10,848	)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES		39,846			(9,111	)		(8,338	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,351			(8,597	)		(5,372	)
Cash and cash equivalents at beginning of year		17,833			26,430			31,802
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	19,184		$	17,833		$	26,430

F - 67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Bancorp Limited

NOTE R—ACQUISITION OF MINORITY INTERESTS

During February of 2007, a share-exchange transaction was completed, whereby approximately 371,000 shares of Capitol common stock were exchanged for minority interests in Capitol Development Bancorp Limited II.

Had these acquisitions occurred at the beginning of 2006, unaudited pro forma consolidated net income would have approximated $21.7 million in 2007 and $41.4 million in 2006 and diluted earnings per share would have been $1.24 in 2007 and $2.46 in 2006.

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.

[The remainder of this page intentionally left blank]

F - 68

EX-21

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT

Capitol Bancorp Ltd.

December 31, 2007

Page 1 of 3

Name of Subsidiary	State or Other Jurisdiction of Incorporation
Consolidated Subsidiaries:
Ann Arbor Commerce Bank	Michigan
Arrowhead Community Bank	Arizona
Bank of Auburn Hills (51% owned)	Michigan
Bank of Belleville (51% owned)	Illinois
Bank of Bellevue (51% owned)	Washington
Bank of Escondido	California
Bank of Las Vegas	Nevada
Bank of Michigan (51% owned)	Michigan
Bank of San Francisco (51% owned)	California
Bank of Tucson	Arizona
Black Mountain Community Bank	Nevada
Brighton Commerce Bank	Michigan
Camelback Community Bank	Arizona
Capitol National Bank	United States (national bank)
Desert Community Bank	Nevada
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
Mesa Bank	Arizona
Muskegon Commerce Bank	Michigan
Napa Community Bank (87% owned)	California
Oakland Commerce Bank	Michigan
Paragon Bank & Trust	Michigan
Capitol Wealth Insurance Agency, Inc. (100% owned)	Michigan
BAIA Acquisition Company, LLC (100% owned)	Michigan
Peoples State Bank	Georgia
Point Loma Community Bank (51% owned)	California
Portage Commerce Bank	Michigan
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

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT

Capitol Bancorp Ltd.

December 31, 2007

Page 2 of 3

Name of Subsidiary	State or Other Jurisdiction of Incorporation
Consolidated Subsidiaries—continued:
Capitol Trust VII	Delaware
Capitol Statutory Trust VIII	Connecticut
Capitol Trust IX	Delaware
Capitol Trust X	Delaware
Capitol Trust XI	Delaware
Capitol Bancorp Colorado Ltd. (100% owned)	Michigan
Fort Collins Commerce Bank (51% owned)	Colorado
Capitol Bancorp Colorado Ltd. II (100% owned)	Michigan
Larimer Bank of Commerce (51% owned)	Colorado
Loveland Bank of Commerce (51% owned)	Colorado
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
Clemson Holding, LLC (100% owned by Capitol Wealth, Inc.)	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 Feather River (51% owned by CDBL-V)	California
Bank of Maumee (51% owned by CDBL-V)	United States (federal savings bank)
Ohio Commerce Bank (51% owned by CDBL-V)	United States (federal savings bank)
Capitol Development Bancorp Limited VI (6% owned)	Michigan
Bank of Tacoma (51% owned by CDBL-VI)	Washington
Sunrise Community Bank (51% owned by CDBL-VI)	California
Issaquah Community Bank (51% owned by CDBL-VI)	Washington
USNY Bank (51% owned by CDBL-VI)	New York
High Desert Bank (55% owned by CDBL-VI)	United States (federal savings bank)
Bank of Fort Bend (51% owned by CDBL-VI)	United States (federal savings bank)
Bank of Las Colinas (51% owned by CDBL-VI)	United States (federal savings bank)
Capitol Development Bancorp Limited VII (7% owned)	Michigan
Community Bank of Lincoln (51% owned by CDBL-VII)	United States (federal savings bank)
Capitol Bean Counter, LLC	Michigan

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT

Capitol Bancorp Ltd.

December 31, 2007

Page 3 of 3

Name of Subsidiary	State or Other Jurisdiction of Incorporation
Consolidated Subsidiaries—continued:
Capitol Capital, LLC	Michigan
Capitol Bancorp Leasing, Inc.	Michigan
Unconsolidated Subsidiary:
Amera Mortgage Corporation, Inc. (less than 50% owned by equity method investee)	Michigan
Inactive Subsidiaries:
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. 333-144180, 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 10, 2008, relating to the consolidated financial statements and the effectiveness of Capitol Bancorp Ltd.'s internal control over financial reporting, which appear on pages F-32 – F-34 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, 2007.

/s/ BDO Seidman, LLP

March 10, 2008

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 10, 2008       /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 10, 2008       /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, 2007 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 10, 2008       /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, 2007 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 10, 2008       /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.