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Change in Accounting Principle
 6 Months Ended
Jun. 30, 2013
Change in Accounting Principle [Abstract]  
Change in Accounting Principle [Text Block]
Note C – Change in Accounting Principle

Effective January 1, 2013, the Corporation elected to change its method of accounting related to the reserve for, and payment of, delinquent real and personal property taxes on properties serving as collateral for impaired loans.  The Corporation pays delinquent property taxes on these properties to avoid lien attachment by the taxing authorities.  Previously, the Corporation recorded an accrued liability for delinquent property taxes in accordance with ASC 450-20, "Loss Contingencies," with a corresponding charge to "Costs associated with foreclosed properties and other real estate owned."  Recent regulatory guidance suggests a more preferable method of accounting for these estimated delinquent property taxes is to consider the amount of such taxes when performing impairment analyses on collateral-dependent impaired loans.  Based on its analysis, the Corporation has determined this method of accounting is preferable.  Under the newly adopted method of accounting, when a loan is deemed to be collateral-dependent and a specific impairment analysis is performed, the delinquent property taxes will be reflected in the impairment calculation similar to estimated selling costs.  The decision on whether to reserve for, or charge-off, the amount of delinquent property taxes will depend upon whether the net value of the collateral (property appraised amount, less estimated costs to sell and the amount of the delinquent property taxes) is greater or less than the loan balance.  When the delinquent property taxes are paid, the amount will be added to the loan basis and considered in current and future impairment analyses.

In accordance with ASC 250-10-45, "Accounting Changes – Change in Accounting Principle," the Corporation is reporting the change in accounting principle through retrospective application as of the beginning of 2012, the first period presented in the accompanying condensed consolidated financial statements.  This is also the period through which the Corporation has determined it is practicable to determine the most appropriate amount of the beginning adjustment.  For periods prior to 2012, management believes determining the appropriate amount is impracticable due to the availability of records, subsequent changes in loan balances and relationships and the assumptions about management's intent at the time that is now difficult to independently substantiate.  Also, management believes retrospective application of the new accounting principle to periods prior to 2012 would not produce a materially different result.
Upon retrospective application of the new accounting method, it was determined that either (1) the adjusted impaired loan analyses resulted in no additional reserves or charge-offs, or (2) an adequate amount of unallocated allowance for loan losses existed to absorb the impact of any collateral shortfall on a by-loan basis.  As a result, the net effect of adopting the new accounting method was a decrease of the retained-earnings deficit and a reduction of accrued liabilities of $4.1 million as of January 1, 2012, with no effect on the total allowance for loan losses.  As indicated in the following table, the cumulative increase to portfolio loans, decrease to the accrued liability and decrease to the retained-earnings deficit were $3.1 million, $3.5 million and $6.6 million, respectively, as of December 31, 2012.
 
 
 
 
 
 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED (DEBTOR-IN-POSSESSION)
 
Note C – Change in Accounting Principle – Continued
 
All 2012 periods have been retrospectively adjusted to reflect the change in accounting principle.  The following tables summarize the adjustments to the Corporation's unaudited condensed consolidated financial statements for each affected line item (in $1,000s, except per-share data):

 Condensed Consolidated Balance Sheet (Unaudited)

 
 
As of December 31, 2012
 
 
 
As Previously
Reported
  
Reclassification
of Discontinued
Operations(1)
  
Effect of
Change in
Accounting
Principle
  
As Adjusted
 
 
 
  
  
  
 
Portfolio loans, less allowance
for loan losses
 
$
1,143,212
  
$
(93,210
)
 
$
3,050
  
$
1,053,052
 
Total assets
  
1,618,252
       
3,050
   
1,621,302
 
Accrued interest on deposits
and other liabilities
  
9,779
   
(317
)
  
(3,518
)
  
5,944
 
Total liabilities
  
1,762,368
       
(3,518
)
  
1,758,850
 
Retained-earnings deficit
  
(430,590
)
      
6,568
   
(424,022
)
Total Capitol Bancorp Limited
stockholders' equity deficit
  
(133,869
)
      
6,568
   
(127,301
)
Total equity deficit
  
(144,116
)
      
6,568
   
(137,548
)

(1)           For comparative purposes, original balances as previously reported have also been adjusted to exclude amounts related to discontinued operations.

Condensed Consolidated Statement of Operations (Unaudited)

 
 
Three months ended June 30, 2012
 
 
 
As Previously
Reported
  
Reclassification
of Discontinued Operations(1)
  
Effect of
Change in Accounting Principle
  
As Adjusted
 
 
 
  
  
  
 
Costs associated with foreclosed
properties and other real estate owned
 
$
6,055
  
$
(928
)
 
$
(750
)
 
$
4,377
 
Total noninterest expense
  
28,024
   
(3,039
)
  
(750
)
  
24,235
 
Loss before income tax benefit
  
(10,692
)
  
1,512
   
750
   
(8,430
)
Loss from continuing operations
  
(10,693
)
  
1,512
   
750
   
(8,431
)
Net loss
  
(10,678
)
      
750
   
(9,928
)
Net loss attributable to Capitol Bancorp
Limited
  
(10,339
)
      
750
   
(9,589
)
Net loss per common share attributable
to Capitol Bancorp Limited
 
$
(0.25
)
         
$
(0.23
)