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<SEC-DOCUMENT>0000950147-01-500601.txt : 20010326
<SEC-HEADER>0000950147-01-500601.hdr.sgml : 20010326
ACCESSION NUMBER: 0000950147-01-500601
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010323
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CAPITOL BANCORP LTD
CENTRAL INDEX KEY: 0000840264
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 382761672
STATE OF INCORPORATION: MI
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 000-18461
FILM NUMBER: 1577847
BUSINESS ADDRESS:
STREET 1: ONE BUSINESS & TRADE CNTR
STREET 2: 200 WASHINGTON SQ N
CITY: LANSING
STATE: MI
ZIP: 48933
BUSINESS PHONE: 5174876555
MAIL ADDRESS:
STREET 1: ONE BUSINESS & TRADE CENTER
STREET 2: 200 WASHINGTON SQUARE NORTH
CITY: LANSING
STATE: MI
ZIP: 48933
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>e-6501.txt
<DESCRIPTION>ANNUAL REPORT FOR THE YEAR ENDED 12/31/2000
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 33-24728C
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)
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933
(Address of principal executive offices)
(517) 487-6555
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
8.50% Cumulative Trust Preferred Securities, $10 Liquidation Amount
(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers in response 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. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked price of
stock, as of a specified date within 60 days prior to the date of filing:
$68,425,968 as of February 21, 2001.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: 7,673,363 as of March
15, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
See Cross-Reference Sheet
<PAGE>
CAPITOL BANCORP LTD.
Form 10-K
Fiscal Year Ended: December 31, 2000
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM OF FORM 10-K INCORPORATION BY REFERENCE FROM:
- ----------------- --------------------------------
<S> <C>
PART I
Item 1. Business Pages 6-9, 16-21, 28-29 and 36, Financial Information
Section of Annual Report
Item 2. Properties Pages 34-35, Financial Information Section of Annual Report;
Page 11, Proxy Statement; and certain individual pages,
Marketing Section of Annual Report
PART II
Item 5. Market for Registrant's Common Equity and Related Pages 2-4, 36-38 and 43-44, Financial Information Section of
Stockholder Matters Annual Report
Item 6. Selected Financial Data Page 2, Financial Information Section of Annual Report
Item 7. Management's Discussion and Analysis of Financial Pages 5-22, Financial Information Section of Annual Report
Condition and Results of Operations
Item 7a. Quantitative and Qualitative Disclosures Pages 5 and 18-21, Financial Information Section of Annual
About Market Risk Report
Item 8. Financial Statements and Supplementary Data Pages 2 and 23-46, Financial Information Section of Annual
Report
PART III
Item 10. Directors and Executive Officers of the Registrant Pages 2-3, Proxy Statement
Item 11. Executive Compensation Pages 5-10, Proxy Statement
Item 12. Security Ownership of Certain Beneficial Owners Pages 1-4, Proxy Statement
and Management
Item 13. Certain Relationships and Related Transactions Page 11, Proxy Statement
PART IV
Item 14. Exhibits, Financial Statement Schedules and Pages 23-46, Financial Information Section of Annual Report
Reports on Form 8-K
</TABLE>
KEY:
"Annual Report" means the 2000 Annual Report of the Registrant provided to
Stockholders and the Commission pursuant to Rule 14a-3(b).
Capitol's 2000 Annual Report consists of two documents: a
Financial Information Section and a Marketing Section.
"Proxy Statement" means the Proxy Statement of the Registrant on Schedule 14A
filed pursuant to Rule 14a-101.
Note: The page number references herein are based on the paper version of the
Annual Report and Proxy Statement. Accordingly, those page number
references may differ from the electronically filed versions of those
documents.
-2-
<PAGE>
CAPITOL BANCORP LTD.
2000 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. Business.......................................................... 4
ITEM 2. Properties........................................................ 13
ITEM 3. Legal Proceedings................................................. 14
ITEM 4. Submission of Matters to a Vote of Security Holders............... 14
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................................... 15
ITEM 6. Selected Financial Data........................................... 15
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 15
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk........ 15
ITEM 8. Financial Statements and Supplementary Data....................... 16
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................... 16
PART III
ITEM 10. Directors and Executive Officers of the Registrant............... 17
ITEM 11. Executive Compensation............................................ 17
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.... 17
ITEM 13. Certain Relationships and Related Transactions.................... 17
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.......................................................... 18
-3-
<PAGE>
PART I
ITEM 1. BUSINESS.
a. General development of business:
Incorporated by reference from Pages 6-9 under the captions "The Business
of Capitol and its Banks", and "Capitol's Structure", and Pages 28-29, 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 industry segments:
Incorporated by reference from Pages 28-29, 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 6-9 under the captions "The Business
of Capitol and its Banks", and "Capitol's Structure", Pages 28-29, Financial
Information Section of Annual Report, under the caption "Note A--Nature of
Operations, Basis of Presentation and Principles of Consolidation", and Pages
18-21, Financial Information Section of Annual Report, under the caption "Trends
Affecting Operations" and Pages 16-18, Financial Information Section of Annual
Report, under the caption "Liquidity, Capital Resources and Capital Adequacy".
At December 31, 2000, Capitol and its subsidiaries employed 517 full time
equivalent employees.
In 1997, the Registrant 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 the Registrant. 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 the Registrant and certain related
services. Additional information regarding Capitol Trust I is incorporated by
reference from Page 36, Financial Information Section of Annual Report, under
the caption "Note I--Trust-Preferred Securities".
The following tables (Tables A to G, inclusive), present certain
statistical information regarding Capitol's business.
-4-
<PAGE>
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 2000, 1999 and 1998.
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------------------------
2000 1999
--------------------------------- ---------------------------------
Interest (1) Interest (1)
Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities:
U.S. Treasury and government agencies $ 73,128 $ 4,353 5.95% $ 77,947 $ 4,589 5.89%
States and political subdivisions (2) 1,605 80 4.98% 1,607 73 4.54%
Other 5,964 292 4.90% 5,118 190 3.71%
Interest-bearing deposits with banks 13,681 820 5.99% 9,295 544 5.85%
Federal funds sold 63,664 3,985 6.26% 87,002 4,272 4.91%
Loans held for resale 11,081 1,044 9.42% 17,781 1,364 7.67%
Portfolio loans (3) 1,213,192 121,737 10.03% 872,481 82,570 9.46%
---------- -------- ----- ---------- -------- -----
Total interest-earning assets/interest income 1,382,315 132,311 9.57% 1,071,231 93,602 8.74%
Allowance for loan losses (deduct) (14,866) (10,391)
Cash and due from banks 54,581 43,815
Premises and equipment, net 14,490 12,725
Other assets 36,096 26,332
---------- ----------
Total assets $1,472,616 $1,143,712
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings deposits $ 45,251 1,758 3.88% $ 42,828 1,547 3.61%
Time deposits under $100,000 328,605 21,162 6.44% 285,683 15,744 5.51%
Time deposits of $100,000 or more 367,751 21,657 5.89% 252,713 13,434 5.32%
Other interest-bearing deposits 353,956 15,679 4.43% 276,670 11,203 4.05%
Debt obligations 45,249 3,506 7.75% 29,959 2,072 6.92%
Other 639 87 13.62%
---------- -------- ----- ---------- -------- -----
Total interest-bearing liabilities/interest
expense 1,140,812 63,762 5.59% 888,492 44,087 4.96%
Capitol Trust I preferred securities 24,244 2,150 8.87% 24,274 2,150 8.86%
---------- -------- ----- ---------- -------- -----
1,165,056 65,912 5.66% 912,766 46,237 5.07%
Noninterest-bearing demand deposits 176,804 130,457
Accrued interest on deposits and other liabilities 25,512 9,483
Minority interests in consolidated subsidiaries 46,956 40,276
Stockholders' equity 58,288 50,730
---------- ----------
Total liabilities and stockholders' equity $1,472,616 $1,143,712
========== -------- ========== --------
Net interest income $ 66,399 $ 47,365
======== ========
Interest Rate Spread (4) 3.91% 3.67%
===== =====
Net Yield on Interest-Earning Assets (5) 4.80% 4.42%
===== =====
Ratio of Average Interest-Earning Assets to
Interest-Bearing Liabilities 1.19 X 1.17 X
========== ==========
Year Ended December 31
---------------------------------
1998
---------------------------------
Interest (1)
Average Income/ Average
Balance Expense Yield/Cost
------- ------- ----------
ASSETS
Investment securities:
U.S. Treasury and government agencies $ 62,247 $ 3,688 5.92%
States and political subdivisions (2) 1,609 77 4.79%
Other 2,679 111 4.14%
Interest-bearing deposits with banks 9,034 118 1.31%
Federal funds sold 93,310 5,013 5.37%
Loans held for resale 20,188 1,529 7.57%
Portfolio loans (3) 605,923 59,132 9.76%
---------- ---------- -----
Total interest-earning assets/interest income 794,990 69,668 8.76%
Allowance for loan losses (deduct) (7,371)
Cash and due from banks 30,000
Premises and equipment, net 8,836
Other assets 20,861
----------
Total assets $ 847,316
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings deposits $ 37,517 1,487 3.96%
Time deposits under $100,000 259,916 16,119 6.20%
Time deposits of $100,000 or more 165,627 9,331 5.63%
Other interest-bearing deposits 189,707 7,211 3.80%
Debt obligations 4,751 271 5.70%
Other 106
---------- ---------- -----
Total interest-bearing liabilities/interest expense 657,518 34,525 5.25%
Capitol Trust I preferred securities 24,192 2,145 8.87%
---------- ---------- -----
681,710 36,670 5.38%
Noninterest-bearing demand deposits 94,077
Accrued interest on deposits and other liabilities 7,267
Minority interests in consolidated subsidiaries 18,830
Stockholders' equity 45,432
----------
Total liabilities and stockholders' equity $ 847,316
========== ----------
Net interest income $ 32,998
==========
Interest Rate Spread (4) 3.38%
=====
Net Yield on Interest-Earning Assets (5) 4.15%
=====
Ratio of Average Interest-Earning Assets to
Interest-Bearing Liabilities 1.17 X
==========
</TABLE>
(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) Tax equivalent yield.
(3) Average balance of loans includes non-accrual loans.
(4) Interest rate spread represents the average yield on interest-earning
assets less the average cost of interest-bearing liabilities.
(5) Net yield is based on net interest income as a percentage of average total
interest-earning assets.
-5-
<PAGE>
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 during the periods
indicated (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 current 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.
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------
2000 compared to 1999 1999 compared to 1998
-------------------------------- --------------------------------
Volume Rate Net Total Volume Rate Net Total
-------- ------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest income:
Investment securities:
U.S. Treasury and government agencies $ (284) $ 48 $ (236) $ 929 $ (28) $ 901
States and political subdivisions (0) 7 7 (0) (4) (4)
Other 31 71 102 101 (22) 79
Interest-bearing deposits with banks 257 19 276 3 423 426
Federal funds sold (1,146) 859 (287) (339) (402) (741)
Loans held for resale (514) 194 (320) (182) 17 (165)
Portfolio loans 32,244 6,923 39,167 26,016 (2,578) 23,438
-------- ------- -------- -------- ------- --------
Total 30,588 8,121 38,709 26,528 (2,594) 23,934
Increase (decrease) in interest expense:
Deposits:
Savings deposits 88 123 211 210 (150) 60
Time deposits under $100,000 2,362 3,056 5,418 1,598 (1,973) (375)
Time deposits of $100,000 or more 6,122 2,101 8,223 4,903 (800) 4,103
Other interest-bearing deposits 3,130 1,346 4,476 3,305 687 3,992
Debt obligations 1,058 376 1,434 1,437 364 1,801
Other (87) (87) (106) 87 (19)
Capitol Trust I preferred securities (3) 3 0 7 (2) 5
-------- ------- -------- -------- ------- --------
Total 12,669 7,005 19,675 11,354 (1,787) 9,567
-------- ------- -------- -------- ------- --------
Increase (decrease) in net interest income $ 17,918 $ 1,116 $ 19,034 $ 15,174 $ (807) $ 14,367
======== ======= ======== ======== ======= ========
Year Ended December 31
--------------------------------
1998 compared to 1997
--------------------------------
Volume Rate Net Total
-------- ------- ---------
Increase (decrease) in interest income:
Investment securities:
U.S. Treasury and government agencies $ 350 $ (178) $ 172
States and political subdivisions 80 (17) 63
Other 30 (130) (100)
Interest-bearing deposits with banks 129 (30) 99
Federal funds sold 2,334 (126) 2,208
Loans held for resale 984 9 993
Portfolio loans 17,972 (1,288) 16,684
-------- ------- --------
Total 21,879 (1,760) 20,119
Increase (decrease) in interest expense:
Deposits:
Savings deposits (39) (18) (57)
Time deposits under $100,000 3,642 290 3,932
Time deposits of $100,000 or more 3,661 (587) 3,074
Other interest-bearing deposits 2,950 150 3,100
Debt obligations (355) (127) (482)
Other 106 106
Capitol Trust I preferred securities 2,145 2,145
-------- ------- --------
Total 12,110 (292) 11,818
-------- ------- --------
Increase (decrease) in net interest income $ 9,769 $(1,468) $ 8,301
======== ======= ========
</TABLE>
-6-
<PAGE>
INVESTMENT PORTFOLIO (TABLE C)
CAPITOL BANCORP LIMITED
The table below shows amortized cost and estimated market value of investment
securities as of year end 2000, 1999 and 1998 (in $1,000s):
<TABLE>
<CAPTION>
December 31
---------------------------------------------------------------
2000 1999 1998
------------------- ------------------- -------------------
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and government agencies $ 60,600 $ 60,435 $100,211 $ 98,860 $ 80,445 $ 80,667
States and political subdivisions 1,604 1,606 2,537 2,515 2,897 2,930
Corporate bonds 251 251 602 600
Other investments 539 539
Other securities:
Federal Reserve Bank stock 394 394 266 266 116 116
Federal Home Loan Bank stock 3,583 3,583 2,862 2,862 1,431 1,431
Corporate stock 907 907 1,003 1,003 1,003 1,003
Other investments 1,750 1,750 500 500 317 317
-------- -------- -------- -------- -------- --------
Total other securities 6,634 6,634 4,631 4,631 2,867 2,867
-------- -------- -------- -------- -------- --------
Total investments $ 69,089 $ 68,926 $108,520 $107,145 $ 86,209 $ 86,464
======== ======== ======== ======== ======== ========
</TABLE>
The table below shows the amortized cost, relative maturities and weighted
average yields of investment securities at December 31, 2000 (in $1,000s):
<TABLE>
<CAPTION>
U.S. Treasury and States and Political
Government Agencies Subdivisions Other
-------------------- -------------------- --------------------
Weighted Weighted Weighted Total
Amortized Average Amortized Average Amortized Average Amortized
Cost Yield Cost Yield Cost Yield Cost
--------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Maturity:
Due in one year or less $19,453 5.81% $ 251 6.88% $19,704
Due after one year but within
five years 36,472 5.83% $ 1,003 4.30% 37,475
Due after five years but within
ten years 2,000 6.54% 101 5.40% 2,101
Due after ten years 2,675 6.29% 500 5.00% 3,175
Without stated maturities 6,634 * 6,634
------- ------- ------- -------
Total $60,600 $ 1,604 $ 6,885 $69,089
======= ======= ======= =======
</TABLE>
* Investment securities which do not have stated maturities (corporate stock,
Federal Reserve Bank and Federal Home Loan Bank stock) do not have stated
yields or rates of return and such rates of return vary from time to time.
Following is a summary of the weighted average maturities of investment
securities (exclusive of securities without stated maturities) at December 31,
2000:
U.S. Treasury securities 1 year 5 months
U.S. Agencies 2 years 11 months
States and political subdivisions 5 years 0 months
-7-
<PAGE>
LOAN PORTFOLIO AND SUMMARY OF OTHER REAL ESTATE OWNED (TABLE D)
CAPITOL BANCORP LIMITED
Portfolio loans outstanding as of the end of each period are shown below (in
$1,000s):
<TABLE>
<CAPTION>
December 31
------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------ ------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial - real estate $ 865,382 63.83% $ 627,029 59.76% $417,296 57.62% $262,157 52.14% $180,310 50.42%
Commercial - other 308,354 22.74% 247,531 23.59% 173,055 23.89% 133,781 26.61% 103,151 28.84%
---------- ------ ---------- ------ -------- ------ -------- ------ -------- ------
Total commercial loans 1,173,736 86.57% 874,560 83.35% 590,351 81.51% 395,938 78.75% 283,461 79.26%
Real estate mortgage 113,324 8.36% 96,000 9.15% 80,808 11.16% 66,630 13.25% 53,712 15.02%
Installment 68,738 5.07% 78,644 7.50% 53,121 7.33% 40,187 7.99% 20,450 5.72%
---------- ------ ---------- ------ -------- ------ -------- ------ -------- ------
Total portfolio loans $1,355,798 100.00% $1,049,204 100.00% $724,280 100.00% $502,755 100.00% $357,623 100.00%
========== ====== ========== ====== ======== ====== ======== ====== ======== ======
</TABLE>
The table below summarizes (in $1,000s) the remaining maturity of portfolio
loans outstanding at December 31, 2000 according to scheduled repayments of
principal.
Aggregate maturities of portfolio loan Fixed Variable
balances which are due: Rate Rate Total
---------- ---------- ----------
In one year or less $ 512,540 $ 227,334 $ 739,874
After one year but within five years 485,072 98,353 583,425
After five years 18,206 9,877 28,083
Nonaccrual loans 4,416 4,416
---------- ---------- ----------
Total $1,020,234 $ 335,564 $1,355,798
========== ========== ==========
The following summarizes, in general, Capitol's various loan classifications:
Commercial - real estate
Comprised of a broad mix of business use and multi-family housing
properties, including office, retail, warehouse and light industrial uses.
A typical loan size approximates $500,000. At December 31, 2000,
approximately 25% of such properties were owner-occupied and approximately
24% of the commercial real estate total consisted of a combination of
multi-family and residential rental income properties.
Commercial - other
Includes a range of business credit products, current asset lines of credit
and equipment term loans. These products bear higher inherent economic risk
than other types of lending activities. A typical loan size approximates
$250,000, and multiple account relationships serve to reduce such risks.
Real Estate Mortgage
Includes single family residential loans held for permanent portfolio, and
home equity lines of credit. Risks are nominal, borne out by loss
experience, housing economic data and loan-to-value percentages.
Installment
Includes a broad range of consumer credit products, secured by automobiles,
boats, etc., with typical consumer credit risks.
All loans are subject to underwriting procedures commensurate with the loan
size, nature of collateral, industry trends, risks and experience factors.
Appropriate collateral is required for most loans, as is documented evidence of
debt repayment sources.
-8-
<PAGE>
TABLE D, CONTINUED
CAPITOL BANCORP LIMITED
The aggregate amount of nonperforming portfolio loans is shown below.
Nonperforming loans comprise (a) loans accounted for on a nonaccrual basis, and
(b) loans contractually past due 90 days or more as to principal and interest
payments (but not included in nonaccrual loans in (a) above) and consist
primarily of commercial real estate loans. Nonperforming portfolio loans include
all loans for which, based on the Capitol's loan rating system, management has
concerns. Loans are placed in nonaccrual status when, in management's opinion,
there is a reasonable probability of not collecting 100% of future principal and
interest payments. In addition, certain loans, although current based on
Capitol's rating criteria, are placed in nonaccrual status. Generally, loans are
placed in nonaccrual status when they become 90 days delinquent; however,
management may elect to continue the accrual of interest in certain
circumstances. When interest accruals are discontinued, interest previously
accrued (but unpaid) is reversed. If non-performing loans (including loans in
nonaccrual status) had performed in accordance with their contractual terms
during the year, additional interest income of $315,000 would have been recorded
in 2000. Interest income recognized on loans in nonaccrual status in 2000
operations approximated $205,000. At December 31, 2000, there were no material
amounts of loans which were restructured or otherwise renegotiated as a
concession to troubled borrowers.
<TABLE>
<CAPTION>
December 31
--------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonperforming loans: (in $1,000s)
Nonaccrual loans: Commercial $4,082 $2,709 $2,608 $2,570 $ 928
Real estate 163 103 199 59 107
Installment 171 100 185 59 22
------ ------ ------ ------ ------
Total nonaccrual loans 4,416 2,912 2,992 2,688 1,057
Past due loans: Commercial 1,656 834 3,963 897 1,009
Real estate 534 196 183 401 549
Installment 151 182 104 25 84
------ ------ ------ ------ ------
Total past due loans 2,341 1,212 4,250 1,323 1,642
------ ------ ------ ------ ------
Total nonperforming loans $6,757 $4,124 $7,242 $4,011 $2,699
====== ====== ====== ====== ======
Nonperforming loans as a percentage of total portfolio loans 0.50% 0.39% 1.00% 0.80% 0.75%
====== ====== ====== ====== ======
Nonperforming loans as a percentage of total assets 0.41% 0.32% 0.71% 0.58% 0.55%
====== ====== ====== ====== ======
Allowance for loan losses as a percentage of nonperforming loans 258.98% 306.47% 121.75% 155.30% 169.62%
====== ====== ====== ====== ======
The table below summarizes activity in other real estate owned (in $1,000s):
Year Ended December 31
---------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
Other real estate owned at January 1 $ 3,614 $ 541 $ 165 $ 313 $ 972
Properties acquired in restructure of loans or in lieu of foreclosure 324 3,426 612
Properties sold (717) (376) (161) (128) (520)
Payments received from borrowers or tenants, credited to carrying amount (75) (10) (47)
Other changes, net (127) 23 (10) (92)
------- ------- ------- ------- -------
Other real estate owned at December 31 $ 3,094 $ 3,614 $ 541 $ 165 $ 313
======= ======= ======= ======= =======
</TABLE>
Of the other real estate owned at December 31, 2000, one property, with a
carrying value of $2.6 million is partially guaranteed by an agency of the
federal government. Other real estate owned is valued at the lower of cost or
fair value (net of estimated selling cost) at the date of transfer/ acquisition.
Management performs a periodic analysis of estimated fair values to determine
potential impairment of other real estate owned.
-9-
<PAGE>
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 each period:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(in $1,000s)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at January 1 $ 12,639 $ 8,817 $ 6,229 $ 4,578 $ 3,687
Loans charged-off:
Commercial 2,850 1,201 1,165 551 308
Real estate 204 9 117 35
Installment 117 97 131 49 94
---------- ---------- ---------- ---------- ----------
Total charge-offs 3,171 1,298 1,305 717 437
Recoveries:
Commercial 734 391 336 288 119
Real estate 13 6 4 18 8
Installment 18 13 30 13 5
---------- ---------- ---------- ---------- ----------
Total recoveries 765 410 370 319 132
---------- ---------- ---------- ---------- ----------
Net charge-offs 2,406 888 935 398 305
Additions to allowance charged to expense 7,216 4,710 3,523 2,049 1,196
---------- ---------- ---------- ---------- ----------
Allowance for loan losses at December 31 $ 17,449 $ 12,639 $ 8,817 $ 6,229 $ 4,578
========== ========== ========== ========== ==========
Total portfolio loans outstanding at December 31 $1,355,798 $1,049,204 $ 724,280 $ 502,755 $ 357,623
========== ========== ========== ========== ==========
Ratio of allowance for loan losses to
portfolio loans outstanding 1.29% 1.20% 1.22% 1.24% 1.28%
========== ========== ========== ========== ==========
Average total portfolio loans for the year $1,213,192 $ 872,481 $ 605,923 $ 425,664 $ 318,491
========== ========== ========== ========== ==========
Ratio of net charge-offs to average
portfolio loans outstanding 0.20% 0.10% 0.15% 0.09% 0.10%
========== ========== ========== ========== ==========
</TABLE>
The allowance for loan losses has been established as a general allowance for
losses on the loan portfolio estimated at the balance sheet date. For internal
purposes, management allocates the allowance to all loan classifications. The
amounts allocated in the following table, which includes all loans which, based
on Capitol's loan rating system, management has concerns, should not be
interpreted as an indication of future charge-offs and the amounts allocated are
not intended to reflect the amount that may be available for future losses since
the allowance is a general allowance.
<TABLE>
<CAPTION>
December 31
------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(in $1,000s)
<S> <C> <C> <C> <C> <C>
Commercial $ 8,307 $ 5,965 $ 4,501 $ 2,875 $ 2,281
Real estate mortgage 147 165 127 103 67
Installment 551 385 262 185 100
Unallocated 8,444 6,124 3,927 3,066 2,130
---------- ---------- ---------- ---------- ----------
Total allowance for loan losses $ 17,449 $ 12,639 $ 8,817 $ 6,229 $ 4,578
========== ========== ========== ========== ==========
Total portfolio loans outstanding $1,355,798 $1,049,204 $ 724,280 $ 502,755 $ 357,623
========== ========== ========== ========== ==========
Ratio of allowance to portfolio loans outstanding 1.29% 1.20% 1.22% 1.24% 1.28%
========== ========== ========== ========== ==========
</TABLE>
In addition to the allowance for loan losses, certain commercial loans in
Michigan and Indiana participate in state-sponsored loan programs. Under those
programs, the governmental unit shares loss exposure on such loans by funding
reserves which are placed as deposits at the banks. Loans participating in this
program and related reserves approximated $34 million and $2 million,
respectively, at December 31, 2000. Such reserve amounts are separate and
excluded from the allowance for loan losses. The future of the Michigan program
was uncertain at December 31, 2000.
-10-
<PAGE>
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, 2000, 1999 and 1998:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------
2000 1999 1998
------------------- ------------------ ------------------
Average Average Average
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 176,804 $130,457 $ 94,077
Savings deposits 45,251 3.88% 42,828 3.61% 37,517 3.96%
Time deposits under $100,000 328,605 6.44% 285,683 5.51% 259,916 6.20%
Time deposits of $100,000 or more 367,751 5.89% 252,713 5.32% 165,627 5.63%
Other interest-bearing deposits 353,956 4.43% 276,670 4.05% 189,707 3.80%
---------- -------- --------
Total deposits $1,272,367 $988,351 $746,844
========== ======== ========
</TABLE>
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, 2000 (in $1,000s):
Three months or less $ 134,987
Three months to twelve months 205,756
Over 12 months 64,475
---------
Total $ 405,218
=========
-11-
<PAGE>
FINANCIAL RATIOS (TABLE G)
CAPITOL BANCORP LIMITED
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Net income as a percentage of:
Average stockholders' equity 13.78% 10.66% 10.19%
Average total assets 0.55% 0.47% 0.55%
Capital ratios:
Average stockholders' equity as a percentage of average total assets 3.96% 4.44% 5.36%
Average total equity (stockholders' equity and minority interests in
consolidated subsidiaries) as a percentage of average total assets 7.15% 7.96% 7.58%
Average total capital funds (stockholders' equity, minority interests in
consolidated subsidiaries and trust-preferred securities) as a percentage
of average total assets 8.79% 10.08% 10.44%
Dividend payout ratio (cash dividends per share as a percentage of net
income per share):
Basic 31.58% 42.86% 45.00%
Diluted 31.86% 43.37% 46.25%
</TABLE>
-12-
<PAGE>
ITEM 2. PROPERTIES.
Substantially all of the office locations are leased. Each of Capitol's
banks operate from a single location, except Capitol National Bank (which has
one branch location in Okemos, Michigan) and Sunrise Bank of Arizona (which had
a loan production office in San Diego, California at year-end 2000). The
addresses of each bank's main office are shown in the Marketing Section of
Annual Report, which are incorporated herein by reference, from the following
captioned pages therein:
Ann Arbor Commerce Bank Kent Commerce Bank
Arrowhead Community Bank Macomb Community Bank
Bank of Tucson Mesa Bank
Black Mountain Community Bank Muskegon Commerce Bank
Brighton Commerce Bank Oakland Commerce Bank
Camelback Community Bank Paragon Bank & Trust
Capitol National Bank Portage Commerce Bank
Desert Community Bank Red Rock Community Bank
Detroit Commerce Bank Southern Arizona Community Bank
East Valley Community Bank Sunrise Bank of Albuquerque
Elkhart Community Bank Sunrise Bank of Arizona
Goshen Community Bank Valley First Community Bank
Grand Haven Bank Yuma Community Bank
Ann Arbor Commerce Bank, in 1998, and Portage Commerce Bank, in 1997,
relocated their main offices to substantially larger leased facilities
(approximately 18,000 and 10,000 square feet, respectively) in response to asset
growth and to better serve customers.
Most of the other bank subsidiaries' facilities are generally small (i.e.,
less than 10,000 square feet), first floor offices with convenient access to
parking.
Some of the banks have drive-up customer service. The banks are typically
located in or near high traffic centers of commerce in their respective
communities. Customer service is enhanced through utilization of ATMs to process
some customer-initiated transactions and some of the banks also make available a
courier service to pick up transactions at customers' locations.
The principal offices of Capitol are located within the same building as
Capitol National Bank in Lansing, Michigan. Those headquarters include
administrative, operations, accounting, and executive staff. Data processing
centers are located in Lansing, Michigan and Tempe, Arizona.
Sun Community Bancorp Limited's principal offices are within the same
building as Camelback Community Bank in Phoenix, Arizona.
Certain of the office locations are leased from related parties.
Incorporated by reference from Pages 34-35, Financial Information Section of
Annual Report, under the caption "Note F--Premises and Equipment" and Page 11,
Proxy Statement, third paragraph thereunder under the caption "Certain
Relationships and Related Transactions".
Management believes Capitol's and its subsidiaries' offices to be in good
and adequate condition and adequately covered by insurance.
-13-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
As of December 31, 2000, there were no material pending legal proceedings
to which Capitol or its subsidiaries is 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 2000, no matters were submitted to a vote by
security holders.
-14-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
A. Market Information:
Incorporated by reference from Page 3, Financial Information Section
of Annual Report, under the caption "Information Regarding Capitol's Common
Stock", Pages 36-38, under the caption "Note J--Common Stock and Stock
Options" and Page 4, under the caption "Shareholder Information".
B. Holders:
Incorporated by reference from first sentence of third paragraph on
Page 3, Financial Information Section of Annual Report, under the caption
"Information Regarding Capitol's Common Stock".
C. Dividends:
Incorporated by reference from Page 2, Financial Information Section
of Annual Report, under the caption "Quarterly Results of Operations" and
subcaption "Cash dividends paid per share", Pages 43-44, Financial
Information Section of Annual Report, under the caption "Note P--Dividend
Limitations of Subsidiaries and Other Capital Requirements" and the first
full paragraph commencing on Page 36, Financial Information Section of
Annual Report, under the caption "Note H--Debt Obligations".
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from Page 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, 2000, 1999, 1998,
1997 and 1996".
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Incorporated by reference from Pages 5-22, Financial Information Section of
Annual Report, under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Page 5, Financial Information
Section of Annual Report, under the caption "Forward Looking Statements".
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Incorporated by reference from Pages 18-21, Financial Information Section
of Annual Report, under the caption "Trends Affecting Operations" and Page 5,
Financial Information Section of Annual Report, under the caption "Forward
Looking Statements".
-15-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14 (under subcaption "A. Exhibits") 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 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.
-16-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference from Pages 2-3, Proxy Statement, under the
caption "Election of Directors".
Executive officers of Capitol are as follows:
Name and Year First Became
Principal Positions Age An Officer
------------------- --- ----------
Joseph D. Reid 58 1988
Chairman, President and Chief Executive Officer*
David O'Leary 70 1988
Secretary
Paul R. Ballard 51 1990
Executive Vice President**
Robert C. Carr 61 1988
Executive Vice President and Treasurer**
David J. Dutton 50 2000
Executive Vice President and Chief Information
Officer***
Cristin Reid English 32 1997
Executive Vice President*
Lee W. Hendrickson 45 1991
Executive Vice President and Chief Financial Officer*
Michael M. Moran 41 2000
Executive Vice President
David K. Powers 55 1990
Executive Vice President
William E. Rheaume 59 1998
Executive Vice President and Senior Counsel
Bruce A. Thomas 43 1998
Executive Vice President
Brian K. English 35 2001
General Counsel
Carl C. Farrar 51 1998
Senior Vice President
John C. Smythe 54 1983
Senior Vice President
Marie D. Walker 41 1990
Senior Vice President and Controller
* Also serves in similar capacity at Sun Community Bancorp Limited, Indiana
Community Bancorp Limited, Nevada Community Bancorp Limited and Sunrise
Capital Corporation (consolidated subsidiaries of Capitol).
** Also serves as an executive officer of Indiana Community Bancorp Limited (a
consolidated subsidiary of Capitol).
*** Also serves in similar capacity at Sun Community Bancorp Limited (a
consolidated subsidiary of Capitol).
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference from Pages 5-7, under the caption "Compensation
Committee Report on Executive Compensation", and Pages 8-10, Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from Page 1, Proxy Statement, under the caption
"Voting Securities and Principal Holders Thereof", Pages 2-3, Proxy Statement,
under the caption "Election of Directors" and Page 4, Proxy Statement, second
paragraph under the caption "Meetings of the Board of Directors".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference from Page 11, Proxy Statement, under the caption
"Certain Relationships and Related Transactions".
-17-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
A. Exhibits:
The following consolidated financial statements of Capitol Bancorp
Limited and subsidiaries and report of independent auditors included on
Pages 23-46 of the Financial Information Section of Annual Report of the
registrant to its stockholders for the year ended December 31, 2000, are
incorporated by reference in Item 8:
Report of Independent Auditors.
Consolidated balance sheets -- December 31, 2000 and 1999.
Consolidated statements of income -- Years ended December 31, 2000,
1999 and 1998.
Consolidated statements of changes in stockholders' equity -- Years
ended December 31, 2000, 1999 and 1998.
Consolidated statements of cash flows -- Years ended December 31,
2000, 1999 and 1998.
Notes to consolidated financial statements.
All financial statements and schedules have been incorporated by
reference from the Annual Report or are included in Management's Discussion
and Analysis of Financial Condition and Results of Operations. No schedules
are included here because they are either not required, not applicable or
the required information is contained elsewhere.
B. Reports on Form 8-K:
During the fourth quarter of 2000, one report on Form 8-K was filed by
the registrant, reporting certain executive officers' presentation made at
the U.S. Bancorp Piper Jaffray's Financial Services Conference on November
29, 2000.
-18-
<PAGE>
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 By: /s/ Lee W. Hendrickson
--------------------------- ---------------------------
Joseph D. Reid Lee W. Hendrickson
Chairman, President and Executive Vice President and Chief
Chief Executive Officer 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 as
Directors of the Corporation on March 23, 2001.
/s/ Joseph D. Reid /s/ Robert C. Carr
- ------------------------------------- -------------------------------------
Joseph D. Reid, Chairman, President, Robert C. Carr, Executive Vice
Chief Executive Officer and Director President, Treasurer and Director
/s/ David O'Leary /s/ Louis G. Allen
- ------------------------------------- -------------------------------------
David O'Leary, Secretary and Director Louis G. Allen, Director
/s/ Paul R. Ballard /s/ David L. Becker
- ------------------------------------- -------------------------------------
Paul R. Ballard, Executive David L. Becker, Director
Vice President and Director
/s/ Douglas E. Crist /s/ James C. Epolito
- ------------------------------------- -------------------------------------
Douglas E. Crist, Director James C. Epolito, Director
/s/ Gary A. Falkenberg
- ------------------------------------- -------------------------------------
Gary A. Falkenberg, Director Joel I. Ferguson, Director
/s/ Kathleen A. Gaskin
- ------------------------------------- -------------------------------------
Kathleen A. Gaskin, Director H. Nicholas Genova, Director
/s/ L. Douglas Johns /s/ Michael L. Kasten
- ------------------------------------- -------------------------------------
L. Douglas Johns, Director Michael L. Kasten, Director
/s/ Leonard Maas /s/ Lyle W. Miller
- ------------------------------------- -------------------------------------
Leonard Maas, Director Lyle W. Miller, Director
-19-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER OR
INCORPORATED BY
EXHIBIT NO. DESCRIPTION REFERENCE FROM:
- ----------- ----------- ---------------
<S> <C> <C>
3 Articles of Incorporation and Bylaws (1)
4 Instruments Defining the Rights of Security Holders:
(a) Common Stock Certificate (1)
(b) Indenture dated December 18, 1997 (14)
(c) Subordinated Debenture (14)
(d) Amended and Restated Trust Agreement dated December 18, 1997 (14)
(e) Preferred Security Certificate dated December 18, 1997 (14)
(f) Preferred Securities Guarantee Agreement of Capitol Trust I
dated December 18, 1997 (14)
(g) Agreement as to Expenses and Liabilities of Capitol Trust I (14)
(h) Capitol Bancorp Ltd. 2000 Incentive Stock Plan
10 Material Contracts:
(a) Joseph D. Reid Employment Agreement (as amended effective
January 1, 1989) (2)
(b) Profit Sharing/401(k) Plan (as amended and restated April 1, 1995) (13)
(b1) First and Second Amendments to Profit Sharing/401(k) Plan (15)
(b2) Third, Fourth and Fifth Amendments to Profit Sharing/401(k) Plan (17)
(b3) Sixth, Seventh, Eighth, and Ninth Amendments to Profit
Sharing/401(k) Plan
(c) Lease Agreement with Business & Trade Center, Ltd. (11)
(d) Employee Stock Ownership Plan (as amended and restated
February 10, 1994) (12)
(d1) Second and Third Amendments to Employee Stock Ownership Plan (15)
(d2) Fourth Amendment to Employee Stock Ownership Plan (17)
(d3) Fifth Amendment to Employee Stock Ownership Plan
(e) Employment Agreements with Robert C. Carr, John C. Smythe, and
Charles J. McDonald (2)
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
PAGE NUMBER OR
INCORPORATED BY
EXHIBIT NO. DESCRIPTION REFERENCE FROM:
- ----------- ----------- ---------------
<S> <C> <C>
10 Material Contracts--continued:
(f) Executive Supplemental Income Agreements with Robert C. Carr, Paul R. Ballard,
Richard G. Dorner, James R. Kaye, Scott G. Kling, John D. Groothuis, David K.
Powers, John C. Smythe and Charles J.McDonald (13)
(g) Amendment to Employment Agreement of Joseph D. Reid, dated October 2, 1989 (3)
(h) Consolidation Agreement between the Corporation and Portage Commerce Bank (4)
(i) Amendment to Employment Agreement of Joseph D. Reid, dated January 30, 1990 (5)
(j) Employment Agreements with Paul R. Ballard and Richard G. Dorner (6)
(k) Employment Agreement with David K. Powers (7)
(l) Definitive Exchange Agreement and Closing Memorandum between the Registrant and
United Savings Bank, FSB (8)
(m) Employment Agreement with James R. Kaye (9)
(n) Definitive Exchange Agreement between the Registrant and Financial Center (10)
Corporation
(o) Employment Agreement by and between Sun Community Bancorp Limited and Joseph D. (16)
Reid. (Exhibit 10.1 of Sun Community Bancorp Limited)
(p) Employment Agreement by and between Sun Community Bancorp Limited and John S.
Lewis. (Exhibit 10.7 of Sun Community Bancorp Limited) (16)
(q) Anti-dilution Agreement by and between Sun Community Bancorp Limited and Capitol
Bancorp Ltd. (Exhibit 10.10 of Sun Community Bancorp Limited) (16)
13 Annual Report to Security Holders
21 Subsidiaries of the Registrant
23 Consent of BDO Seidman, LLP
</TABLE>
-21-
<PAGE>
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) Amendment No. 1 to Form S-1, Reg. No. 33-31323, filed November 20, 1989.
(4) Form S-1, Reg. No. 33-31323, filed September 29, 1989.
(5) Originally filed as exhibit to Form 10-K for year ended December 31, 1989,
filed March 30, 1990; 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).
(6) 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).
(7) Form 10-K for year ended December 31, 1991, filed February 28, 1992.
(8) Form 8-K dated July 15, 1992, as amended under Form 8 on September 14,
1992.
(9) Form 10-KSB for year ended December 31, 1992, filed February 25, 1993.
(10) Form S-4, Reg. No. 33-73474, filed December 27, 1993.
(11) Form 10-KSB for year ended December 31, 1993, filed March 14, 1994.
(12) Form 10-KSB for year ended December 31, 1994, filed March 15, 1995.
(13) Form 10-KSB for the year ended December 31, 1995, filed March 14, 1996.
(14) Post Effective Amendment No.1 to Form S-3, Reg. No. 333-41215 and
333-41215-01 filed February 9, 1998.
(15) Form 10-K for year ended December 31, 1998, filed March 17, 1999.
(16) Amendment No. 2 to the Registration Statement on Form S-1 of Sun Community
Bancorp Limited (Registration No. 333-76719) dated June 15, 1999.
(17) Form 10-K for year ended December 31, 1999, filed March 27, 2000.
-22-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.H
<SEQUENCE>2
<FILENAME>ex-4h.txt
<DESCRIPTION>CAPITAL BANCORP LTD. 2000 INCENTIVE STOCK PLAN
<TEXT>
Exhibit 4(h)
CAPITOL BANCORP LTD. 2000 STOCK INCENTIVE PLAN
ARTICLE 1 PURPOSE
1.1 GENERAL. The purpose of the Capitol Bancorp Ltd. 2000 Stock Incentive
Plan (the "Plan") is to promote the success, and enhance the value, of Capitol
Bancorp Ltd. (the "Corporation") by linking the personal interests of the
directors and executives of the Corporation or a Subsidiary to those of
Corporation shareholders and by providing such individuals with an incentive for
outstanding performance in order to generate superior returns to shareholders of
the Corporation. The Plan is further intended to provide flexibility to the
Corporation in its ability to motivate, attract, and retain the services of
directors and executives of the Corporation or a Subsidiary upon whose judgment,
interest, and special effort the successful conduct of the Corporation's
operation is largely dependent.
ARTICLE 2 EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan is effective as of July 1, 2000 (the
"Effective Date").
ARTICLE 3 DEFINITIONS AND CONSTRUCTION
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Cause" (except as otherwise provided in an Option Agreement)
means if the Committee, in its reasonable and good faith discretion, determines
that the director or executive of the Corporation or a Subsidiary (i) has
developed or pursued interests substantially adverse to the Corporation or a
Subsidiary, (ii) materially breached any employment, engagement, or
confidentiality agreement, (iii) has not devoted all or substantially all of his
or her business time, effort and attention to the affairs of the Corporation or
a Subsidiary (or such lesser amount as has been agreed to by the Corporation or
a Subsidiary), (iv) is convicted of a felony involving moral turpitude, or (v)
has engaged in activities or omissions that are detrimental to the well-being of
the Corporation or a Subsidiary.
(c) "Change of Control" means any of the following:
(1) any merger of the Corporation in which the Corporation is not
the continuing or surviving entity, or pursuant to which Stock would be
converted into cash, securities or other property, other than a merger of the
Corporation into an affiliate or in which the holders of the Corporation's Stock
immediately prior to the merger have the same proportionate ownership of
beneficial interest of common stock or other voting securities of the surviving
entity immediately after the merger;
(2) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of assets or earning power
aggregating more than 50% of the assets or earning power of the Corporation and
its Subsidiaries (taken as a whole), other than pursuant to a sale-leaseback,
structured finance, or other form of financing transaction;
(3) the shareholders of the Corporation shall approve any plan or
proposal for liquidation or dissolution of the Corporation;
<PAGE>
(4) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than any current shareholder or affiliate
of the Corporation or any employee benefit plan of the Corporation or any
Subsidiary or any entity holding shares of capital stock of the Corporation for
or pursuant to the terms of any such employee benefit plan in its role as an
agent or trustee for such plan, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 50% or more of the
Corporation's outstanding Stock.
(a) "Code" means the Internal Revenue Code of 1986, as amended.
(b) "Committee" means the committee of the Board described in Article 4.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(d) "Fair Market Value" means, as of any given date, the fair market
value of Stock on a particular date determined by such methods or procedures as
may be established from time to time by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of Stock as of any date shall
be the closing price for the Stock as reported on the NASDAQ National Market
System (or on any national securities exchange on which the Stock is then
listed) for that date or, if no closing price is so reported for that date, the
closing price on the next preceding date for which a closing price was reported.
(e) "Non-Employee Director" means a member of the Board who qualifies
as a "Non-Employee Director" as defined in Rule 16b-3(b)(3) of the Exchange Act,
or any successor definition adopted by the Board.
(f) "Non-Qualified Stock Option" means an Option that is not intended
to be an incentive stock option defined in Code Section 422.
(g) "Option" means a right granted to a Participant under Article 7 of
the Plan to purchase Stock pursuant to a Non-Qualified Stock Option at a
specified price during specified time periods.
(h) "Option Agreement" means any written agreement, contract, or other
instrument or document evidencing an Option.
(i) "Participant" means a person who, as a director or executive of
the Corporation or any Subsidiary, has been granted an Option under the Plan.
(j) "Stock" means the common stock of the Corporation or the common
stock of a Subsidiary as designated by the Committee at the date of grant or
otherwise.
(k) "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
ARTICLE 4 ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Board or a Committee
appointed by, and which serves at the discretion of, the Board. If the Board
appoints a Committee, the Committee shall consist of at least two individuals,
each of whom qualifies as (i) a Non-Employee Director, and (ii) an "outside
director" under Code Section 162(m) and the regulations issued thereunder.
Reference to the Committee shall refer to the Board if the Board does not
appoint a Committee.
4.2 ACTION BY THE COMMITTEE. A majority of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at which a
quorum is present and acts approved in writing by a majority of the Committee in
lieu of a meeting shall be deemed the acts of the Committee. Each member of the
Committee is entitled to, in good faith, rely or act upon any report or other
information furnished to that member by any officer or other employee of the
Corporation or any Subsidiary, the Corporation's independent certified public
<PAGE>
accountants, or any executive compensation consultant or other professional
retained by the Corporation to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority, and discretion to:
(a) Designate Participants to receive Options;
(b) Determine the number of Options to be granted and the number of
shares of Stock to which an Option will relate;
(c) Determine the terms and conditions of any Option granted under the
Plan including but not limited to, the exercise price, grant price, or purchase
price, any restrictions or limitations on the Option, any schedule for vesting
or lapse of forfeiture restrictions or restrictions on the exercisability of an
Option, and accelerations or waivers thereof, based in each case on such
considerations as the Committee in its sole discretion determines;
(d) Amend, modify, or terminate any outstanding Option, with the
Participant's consent unless the Committee has the authority to amend, modify,
or terminate an Option without the Participant's consent under any other
provision of the Plan;
(e) Determine whether, to what extent, and under what circumstances an
Option may be settled in, or the exercise price of an Option may be paid in,
cash, Stock, or other property, or an Option may be canceled, forfeited, or
surrendered;
(f) Prescribe the form of each Option Agreement, which need not be
identical for each Participant;
(g) Decide all other matters that must be determined in connection
with an Option;
(h) Establish, adopt, or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to administer
the Plan.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any
Options granted under the Plan, any Option Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5 SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 9.1, the
aggregate number of shares of Stock reserved and available for grant under the
Plan shall be 600,000.
5.2 LAPSED OPTIONS. To the extent that an Option terminates, expires, or
lapses for any reason, any shares of Stock subject to the Option will again be
available for the grant of an Option under the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Option may
consist, in whole or in part, of authorized and unissued Stock, treasury stock
or Stock purchased on the open market.
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO OPTIONS. Notwithstanding any
provision in the Plan to the contrary, and subject to the adjustment in Section
9.1, the maximum number of shares of Stock with respect to one or more Options
that may be granted to any one Participant during the Corporation's fiscal year
shall be 10,000.
<PAGE>
ARTICLE 6 ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY.
(a) GENERAL. Persons eligible to participate in this Plan include all
directors and executives of the Corporation or a Subsidiary, as determined by
the Committee, provided that the Chairman and Chief Executive Officer of the
Corporation shall not be eligible to participate in the Plan.
(b) FOREIGN PARTICIPANTS. In order to assure the viability of Options
granted to Participants employed in foreign countries, the Committee may provide
for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements, or
alternative versions of the Plan as it may consider necessary or appropriate for
such purposes without thereby affecting the terms of the Plan as in effect for
any other purpose provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Section 5.1 of the Plan.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals,
those to whom Options shall be granted and shall determine the nature and amount
of each Option. No individual shall have any right to be granted an Option under
this Plan.
ARTICLE 7 STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to Participants
at any time prior to the termination of the Plan on the following terms and
conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be determined by the Committee and set forth in the Option
Agreement. It is the intention under the Plan that the exercise price for any
Option shall not be less than the Fair Market Value as of the date of grant
provided, however, that the Committee may, in its discretion, grant Options
(other than Options that are intended to qualify as performance-based
compensation under Code Section 162(m)) with an exercise price of less than Fair
Market Value on the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part. The
Committee shall also determine the performance or other conditions, if any, that
must be satisfied before all or part of an Option may be exercised.
(c) PAYMENT. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including, without
limitation, cash, shares of Stock (through actual tender or by attestation), or
other property (including broker-assisted "cashless exercise" arrangements), and
the methods by which shares of Stock shall be delivered or deemed to be
delivered to Participants.
ARTICLE 8 PROVISIONS APPLICABLE TO OPTIONS
8.1 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange or
buy out any previously granted Option for a payment in cash, Stock, or another
Option, based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made.
8.2 FORM OF PAYMENT FOR OPTIONS. Subject to the terms of the Plan and any
applicable law or Option Agreement, payments or transfers to be made by the
Corporation or a Subsidiary on the grant or exercise of an Option may be made in
such forms as the Committee determines at or after the time of grant, including
without limitation, cash, Stock, promissory note, or other property, or any
combination, and may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.
<PAGE>
8.3 LIMITS ON TRANSFER. No right or interest of a Participant in any Option
may be pledged, encumbered, or hypothecated to or in favor of any party other
than the Corporation or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Corporation or a Subsidiary. Except as otherwise provided by the Committee, no
Option shall be assignable or transferable by a Participant other than by will
or the laws of descent and distribution.
8.4 BENEFICIARIES. Notwithstanding Section 8.3, a Participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Option upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Option Agreement applicable to the
Participant, except to the extent the Plan and Option Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If the Participant is married, a designation of a person other
than the Participant's spouse as his beneficiary with respect to more than 50
percent of the Participant's interest in the Option shall not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.
8.5 STOCK CERTIFICATES. All Stock certificates delivered under the Plan are
subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with Federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on with the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
8.6 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control occurs,
all outstanding Options shall become fully exercisable. Upon, or in anticipation
of, such an event, the Committee may cause every Option outstanding hereunder to
terminate at a specific time in the future and shall give each Participant the
right to exercise Options during a period of time as the Committee, in its sole
and absolute discretion, shall determine.
ARTICLE 9 CHANGES IN CAPITAL STRUCTURE
9.1 GENERAL. In the event a stock dividend is declared upon the Stock, the
shares of Stock then subject to each Option (and the number of shares subject
thereto) shall be increased proportionately without any change in the aggregate
purchase price therefor. In the event the Stock shall be changed into or
exchanged for a different number or class of shares of Stock or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such share of Stock then subject to each Option the number and class of
shares of Stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each Option.
ARTICLE 10 AMENDMENT, MODIFICATION, AND TERMINATION
10.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend, or
modify the Plan provided, however, that to the extent necessary and desirable to
comply with any applicable law, regulation, or stock exchange rule, the
Corporation shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
10.2 OPTIONS PREVIOUSLY GRANTED. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Option previously
granted under the Plan, without the written consent of the Participant.
<PAGE>
ARTICLE 11 GENERAL PROVISIONS
11.1 NO RIGHTS TO OPTIONS. No Participant, director, employee, or other
person shall have any claim to be granted any Option under the Plan, and neither
the Corporation nor the Committee is obligated to treat Participants, directors,
employees, and other persons uniformly.
11.2 NO SHAREHOLDERS RIGHTS. No Option gives the Participant any of the
rights of a shareholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Option.
11.3 WITHHOLDING. The Corporation or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Corporation, an amount sufficient to satisfy Federal, state, and local
taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of this Plan.
11.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Option
Agreement shall interfere with or limit in any way the right of the Corporation
or any Subsidiary to terminate any Participant's employment or service at any
time, nor confer upon any Participant any right to continue in the employ or
service of the Corporation or any Subsidiary.
11.5 UNFUNDED STATUS OF OPTIONS. The Plan is intended to be an "unfunded"
plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Option, nothing contained in the Plan or any Option
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Corporation or any Subsidiary.
11.6 INDEMNIFICATION. To the extent allowable under applicable law, each
member of the Committee or of the Board shall be indemnified and held harmless
by the Corporation from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act under the Plan and against and from any and all amounts paid by him or
her in satisfaction of judgment in such action, suit, or proceeding against him
or her provided he or she gives the Corporation an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Corporation's Articles of Incorporation or By-Laws, as
a matter of law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
11.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Corporation or any Subsidiary.
11.8 EXPENSES. The expenses of administering the Plan shall be borne by the
Corporation and its Subsidiaries.
11.9 TITLES AND HEADINGS. The titles and headings of the Sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
11.10 FRACTIONAL SHARES. No fractional shares of Stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.
11.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on the
relevant date, obligated to file reports under Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision
<PAGE>
of the Plan or action by the Committee fails to so comply, it shall be void to
the extent permitted by law and voidable as deemed advisable by the Committee.
11.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Corporation
to make payment of Options in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of Stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Corporation may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
11.13 GOVERNING LAW. The Plan and all Option Agreements shall be construed
in accordance with and governed by the laws of the State of Michigan.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.B.3
<SEQUENCE>3
<FILENAME>ex-b3.txt
<DESCRIPTION>SIXTH THROUGH NINTH AMEND. TO PROFIT SHARING/401K
<TEXT>
Exhibit (b3) (1 of 4)
SIXTH AMENDMENT TO THE
CAPITOL BANCORP LIMITED
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Capitol Bancorp Ltd. Employee Savings and Stock Ownership Plan is hereby
amended effective January 1, 2000 adding the following participating employers
at the end of the list contained:
Name of Type of State of Date of
Employer Entity Organization Participation
-------- ------ ------------ -------------
East Valley
Community Bank Banking Corp. Arizona 01/01/2000
Nevada Community
Bancorp Limited Holding Company Nevada 01/01/2000
CAPITOL BANCORP LIMITED
Dated: February 2, 2000 By: /s/ Joseph D. Reid
---------------------------------
Joseph D. Reid
Chairman and CEO
EAST VALLEY COMMUNITY BANK
Dated: February 2, 2000 By: /s/ Rebecca M. Jackson
---------------------------------
Its: President
NEVADA COMMUNITY BANCORP LIMITED
Dated: February 7, 2000 By: /s/ Thomas C. Mangione
---------------------------------
Its: Executive Vice President
<PAGE>
Exhibit (b3) (2 of 4)
SEVENTH AMENDMENT TO THE
CAPITOL BANCORP LIMITED
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Capitol Bancorp Ltd. Employee Savings and Stock Ownership Plan is hereby
amended effective July 1, 2000 adding the following participating employers at
the end of the list contained:
Name of Type of State of Date of
Employer Entity Organization Participation
-------- ------ ------------ -------------
Red Rock
Community Bank Banking Corp. Nevada 07/01/2000
Nevada Community
Bancorp Limited Banking Corp Nevada 07/01/2000
CAPITOL BANCORP LIMITED
Dated: June 19, 2000 By: /s/ Joseph D. Reid
---------------------------------
Joseph D. Reid
Chairman and CEO
RED ROCK COMMUNITY BANK
Dated: June 19, 2000 By: /s/ Steven Mallory
---------------------------------
Its: President
DESERT COMMUNITY BANK
Dated: June 26, 2000 By: /s/ James W. Howard
---------------------------------
Its: President
<PAGE>
Exhibit (b3) (3 of 4)
EIGTH AMENDMENT TO THE
CAPITOL BANCORP LIMITED
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Capitol Bancorp Ltd. Employee Savings and Stock Ownership Plan is hereby
amended effective July 1, 2000 adding the following participating employers at
the end of the list contained:
Name of Type of State of Date of
Employer Entity Organization Participation
-------- ------ ------------ -------------
Elkhart
Community Bank Banking Corp. Indiana 07/01/2000
CAPITOL BANCORP LIMITED
Dated: June 27, 2000 By: /s/ Joseph D. Reid
---------------------------------
Joseph D. Reid
Chairman and CEO
ELKHART COMMUNITY BANK
Dated: June 22, 2000 By: /s/ Steven L. Brown
---------------------------------
Its: President
<PAGE>
Exhibit (b3) (4 of 4)
NINTH AMENDMENT TO THE
CAPITOL BANCORP LIMITED
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Capitol Bancorp Ltd. Employee Savings and Stock Ownership Plan is hereby
amended effective September 21, 2000 adding the following participating
employers at the end of the list contained:
Name of Type of State of Date of
Employer Entity Organization Participation
-------- ------ ------------ -------------
Arrowhead
Community Bank Banking Corp. Arizona 09/21/2000
CAPITOL BANCORP LIMITED
Dated: September 25, 2000 By: /s/ Joseph D. Reid
---------------------------------
Joseph D. Reid
Chairman and CEO
ARROWHEAD COMMUNITY BANK
Dated: September 25, 2000 By: /s/ Arlene Kulzer
---------------------------------
Its: President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.D.3
<SEQUENCE>4
<FILENAME>ex-d3.txt
<DESCRIPTION>FIFTH AMENDMENT TO EMPLOYEE STOCK OWNERSHIP PLAN
<TEXT>
Exhibit (d3)
FIFTH AMENDMENT TO THE
CAPITOL BANCORP LTD.
EMPLOYEE STOCK OWNERSHIP PLAN
The Capitol Bancorp Ltd. Employee Stock Ownership Plan is hereby amended
effective January 1, 2000 by adding the following participating employer at the
end of the list therein contained:
Name of Type of State of Date of
Employer Entity Organization Participation
-------- ------ ------------ -------------
Elkhart Community Bank Banking Corp. Indiana Jan. 1, 2000
CAPITOL BANCORP LIMITED
Dated: July 1, 2000 By: /s/ Joseph D. Reid
----------------------------
Joseph D. Reid
Chairman and CEO
ELKHART COMMUNITY BANK
Dated: July 1, 2000 By: /s/ Steven L. Brown
----------------------------
Steven L. Brown
President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>ex13.txt
<DESCRIPTION>ANNUAL REPORT TO SECURITY HOLDERS
<TEXT>
Exhibit 13
Unlocking the Potential
Capitol Bancorp Limited
Indiana Community Bancorp Limited
Nevada Community Bancorp Limited
Sun Community Bancorp Limited Annual Report
Sunrise Capital Corporation 2000
<PAGE>
[PHOTO OF JOSEPH D. REID]
Joseph D. Reid
Chairman, President and CEO
To Our Shareholders
Capitol Bancorp Limited
200 Washington Square, North
Lansing, Michigan 48933
(517) 487-6555
www.capitolbancorp.com
Our Organization
Within the past 36 months, Capitol Bancorp Limited has added 16 community banks
to its affiliated group which now numbers 27 banks and 5 bank development
companies. During this period we have expanded operations from two states to six
states, adding Indiana, New Mexico, Nevada, and California, to our original
operating base in Michigan and Arizona.
Our aggressive development strategy has driven an average annual growth rate
which has exceeded 25% during this period. Most noteworthy, it is organic, not
acquired. Startup banks require a period of time to mature; that is, to produce
a reasonable return on the capital invested. The development costs, which are
considerable, are absorbed at the outset of each new bank. This suggests why we
have featured the word "potential" on the cover of this year's report.
potential adj. 1. capable of being but not yet in existence. -n. 1. the
inherent ability or capacity for growth, development or coming into being.
Typically, it takes about 36 months to realize a reasonable earnings stream from
a startup bank. Realization of potential, therefore, is not instantaneous. It
requires a measure of patience and a lot of effort. Currently, about two-thirds
of our affiliated banks are within this age group. Therefore, it is not
unreasonable to postulate a significantly enhanced earnings stream from our
affiliated group as these banks move toward maturity. Current performance trends
are encouraging.
OPERATING PERFORMANCE
Capitol Bancorp Limited
The year 2000 generated four consecutive quarters of record earnings at Capitol
Bancorp Limited, as our focus on delivering consistent, steadily-improving core
operating results began to emerge. The consolidated growth to more than $1.6
billion in assets has enabled the Corporation to more easily absorb typical
development-related costs at its newer banks. We continue to be positioned to
produce operating results in line with investors' expectations. This past year's
performance reflects this operating dynamic with five new bank affiliates.
Nevertheless, Capitol Bancorp's record earnings in each quarter resulted in full
year earnings of $1.13 per share, 31% higher than the comparable operating
per-share figure posted in 1999.
Loan and asset growth reached 29% and 25%, respectively, for the year, even as
we made the conscious decision to limit balance sheet expansion in light of the
softening economy. Net operating revenue growth, typically a reliable indicator
of future earnings, expanded by roughly 39% in 2000.
Sun Community Bancorp Limited
Much in the same way that Capitol reported record earnings for each quarter of
2000, Phoenix-based Sun Community Bancorp Limited, our southwest development
holding company, delivered four consecutive quarters of positive and improving
<PAGE>
earnings. At the close of 2000, total footings were nearing $527 million and
earnings had moved from a 1999 loss of $1.6 million to net income of $800,000
despite a significant concentration of startup banks within the Sun Community
organization.
Nevada Community Bancorp Limited
At Nevada Community Bancorp Limited, the year started with two banks and
approximately $34 million in consolidated assets. By year-end a third startup
bank had been added, contributing to year-end consolidated assets of $106
million. Most notable was the emergence of an early stage affiliate, Red Rock
Community Bank, which posted a profit after only four months of operation.
Sunrise Capital Corporation
Sunrise Capital Corporation serves as our small business lending "SBA"
specialist. When 1999 came to a close, only Sunrise Bank of Arizona was in
operation, opening in late 1998. Reporting only $31 million in total assets at
this Arizona affiliate, Sunrise Capital Corporation initiated efforts to develop
two similarly patterned small business lending banks in Albuquerque, New Mexico,
and San Diego, California. The Corporation finished the year with consolidated
assets increasing nearly threefold, to approximately $85 million.
Indiana Community Bancorp Limited
Focusing on expansion in northern Indiana, Elkhart Community Bank was opened in
1999 and by year-end 2000 had grown to roughly $33 million in total assets.
While still very much in its infancy from a developmental perspective, our
Indiana initiative was augmented in late 2000 with the opening of Goshen
Community Bank.
FOOTNOTES FOR THE YEAR 2000
Beginning the new year with the Y2K bug that failed to bite, the banking
industry breathed a collective sigh of relief when January 1, 2000 became "just
another day" for the sector. Much like most of the competition in the banking
[TIMELINE OF BANK OPENINGS FROM 1982-1991]
<PAGE>
community, our organization's operating activities continued uninterrupted as
the new year began, validating our confidence in the operating integrity of our
computer systems while comforting the internal review teams that had worked
meticulously to assure our technological preparedness entering 2000.
As Internet-related mania has served to whipsaw the NASDAQ in both directions
the past few years, the appeal of a logical application of a sound "bricks and
mortar" operation is returning. However, to lose sight of the potential value of
the Internet to the banking industry would be shortsighted. We are embracing the
opportunity to utilize the Internet as an online link to a myriad of products,
services and information for our customers. At the same time we are continuing
to emphasize what has distinguished us in our markets for years: individualized
high-quality service for our customers. We believe that a cohesive "marriage" of
the two approaches, an effective "bricks and clicks" with a sound community
orientation, will best serve our existing and future customers.
Over the past thirteen months we have opened six community banks, beginning with
Sunrise Bank of Albuquerque, opened in Albuquerque, New Mexico. Under the
leadership of Fred Bernson, this SBA bank has emerged as a significant addition
to the fabric of downtown Albuquerque. Its specialized strategy has brought with
it early-stage profitability.
In Henderson, Nevada, we opened Black Mountain Community Bank, with Pete
Atkinson as its president. The bank has exceeded our projections and is poised
to contribute to the profitability of our collective enterprise during the
course of this year.
In northern Indiana, we added Goshen Community Bank. With Goshen native Doug
Johnston at the helm, the bank was able to exercise the rare opportunity of
acquiring an existing bank facility thereby ensuring its recognition and
involvement within the Goshen community.
[TIMELINE OF BANK OPENINGS FROM 1992-2001]
<PAGE>
In Arizona, on the west side of the valley commonly recognized as Greater
Phoenix, Arlene Kulzer opened Arrowhead Community Bank in Glendale. This bank
occupies a new facility which is directly adjacent to the Arrowhead Shopping
Mall and is recognized as the first community bank opened in the Glendale,
Arizona market in more than a decade.
Yuma Community Bank opened in Yuma, Arizona, under the inexhaustible energies of
Katherine Brandon. The Bank successfully completed an aggressive organizational
effort even in the face of a competing organizational effort from another group
which had started several months before the Yuma effort began. The early success
of Yuma Community Bank's organizational effort suggests the potential success
that our bank should enjoy as a thriving member of the Yuma community.
In the second week of January 2001 we opened our first bank in California,
Sunrise Bank of San Diego. Jan Kassebaum's strategy for this bank is consistent
with the Sunrise Capital model relying heavily upon Small Business
Administration (SBA) lending. The Bank is located in the LaJolla market.
Another footnote to the past year must be set aside for the Bank of Tucson.
Chartered in 1996, Bank of Tucson, under the leadership of Michael Hannley, has
quickly become the standard bearer for all of our banks. Producing enviable
profitability levels that measure in at roughly 2% of assets and better than 27%
return on equity, the Bank has achieved performance objectives which are
currently unsurpassed by any institution within our affiliated group.
LOOKING FORWARD
In an age when many banking organizations are cost-cutting their way to earnings
growth, we take pride in our ability to demonstrate solid organic growth within
our system, coupled with a compelling earnings prognosis built upon the
development of community-oriented financial institutions. It is our expectation
that as both the market and the banking sector winds through the inevitable
economic and valuation cycles, investors will again return to those names that
are poised to deliver consistent, solid earnings expansion fueled by top-line
revenue growth. We are working diligently to position this organization among
those entities, and we believe that our 2000 earnings performance is a precursor
of things to come. With your continued support we are confident that we will be
successful. Together we can truly "unlock the potential" of your investment.
/s/ Joseph D. Reid
Joseph D. Reid
Chairman, President and CEO
<PAGE>
[PHOTO OF RICHARD G. DORNER]
Ann Arbor Commerce Bank
2950 State Street South
Ann Arbor, MI 48104
(734) 887-3100
www.annarborcommerce.com
"The more we do, the more we can do."
--William Hazlitt 1778-1830
Ann Arbor Commerce Bank opened in October of 1990 with six employees. Today we
have grown to six departments with over fifty-five employees who serve the
financial needs of thousands of customers.
Each staff member and department enhances the other. Our Trust and Investment,
Mortgage and Private Banking Departments provide additional value to our
Business, Personal and Deposit Services areas. Customers who enter our doors for
a particular product quickly realize Ann Arbor Commerce Bank can provide many
additional services to meet their current and future financial needs. Our team
works together to build customer relationships with a shared vision encompassing
service, safety, soundness and shareholder value.
We are active in the community, sharing our resources of time, energy and money.
We are in the Bank lobby, responding to the needs and wishes of our customers.
As we give, we also receive. "The more we do... the more we can [and will] do."
/s/ Richard G. Dorner
Richard G. Dorner
President and CEO
potential...
progress...
profitability....
BOARD OF DIRECTORS
Mary Lincoln Campbell
Principal
Enterprise Development Fund
Robert C. Carr
Executive Vice President and Treasurer
Capitol Bancorp Limited
Richard G. Dorner
President and Chief Executive Officer
Ann Arbor Commerce Bank
James A. Fajen
Attorney at Law
Fajen & Miller, P.L.L.C.
James W. Finn
Chairman and Chief Executive Officer
Finn's - JM&J Insurance Agency, Inc.
H. Nicholas Genova
Chairman and Chief Executive Officer
Washtenaw News Co., Inc.
Richard M. Greene
Consultant, Mortgage Banking
Richard Greene Point Training
Marilyn D. Katz-Pek
General Managing Partner
Biotechnology Business Consultants, L.L.C.
James C. Keen, Sr.
Chief Executive Officer
Cliff Keen Athletic
David W. Lutton
President
Charles Reinhart Company Realtors
Fritz Seyferth
Director of Operations and Partner
Innovative Leather Technologies, L.L.C.
Carl Van Appledorn, M.D.
Vice President
Urological Surgery Associates, P.C.
Warren E. Wright
Chairman and Partner
Renosol Corporation
OFFICERS
James A. Fajen
Chairman of the Board
Warren E. Wright
Secretary
Richard G. Dorner
President and Chief Executive Officer
Clifford G. Sheldon
Executive Vice President
Brian F. Picknell
Senior Vice President
Mary J. Hays
Vice President
Rick H. James
Vice President
Louise A. Morse
Vice President and Cashier
John Nixon III
Vice President
Trust and Investment Services
Richard G. Tice
Vice President
John J. Wilkins
Vice President
<PAGE>
[PHOTO OF ARLENE KULZER]
Arrowhead Community Bank
17235 N. 75th Ave., Suite B100
Glendale, AZ 85308
(623) 776-0800
www.arrowheadcommunitybank.com
Arrowhead Community Bank, operating in the Phoenix West Valley and Western
Maricopa County, is uniquely positioned for growth in 2001. Rapid, controlled
growth is transforming the area into one of the most dynamic, progressive
regions of the country. These changes encompass a broad spectrum of business
climate and quality of life factors:
* Increasing market size and improved accessibility,
* A diversified economic base,
* Numerous educational opportunities accompanied by cultural and recreational
amenities,
* Attractive, affordable housing; and,
* Prime commercial and industrial properties.
Arrowhead, the only true community bank in the West Valley, has formed a series
of strategic alliances that enable it to meet the varying financial needs of
both consumer and commercial clients. Staff and Board members are community
leaders-promoting the Bank and civic pride through participation in area
organizations.
In addition to the traditional banking services offered online, Arrowhead
Community Bank provides consumers with the ability to apply for loans and
receive approval within a matter of minutes. Commercial loan clients utilize the
web site to review product offerings and to initiate the business loan
application process.
Arrowhead Community Bank is committed to providing relationship banking at the
clients' convenience.
/s/ Arlene Kulzer
Arlene Kulzer
President
BOARD OF DIRECTORS
W. Patrick Daggett
Certified Public Accountant
Daggett & Daggett, LLP
Michael J. Devine
Attorney at Law
Thomas E. Gyder
President/General Manager
Wilhelm Automotive Service Center
Glenn M. Hickman
President
Hickman's Egg Ranch
Richard J. Hilde
Owner, President and
Chief Executive Officer
Elkhart Pattern Works, Inc.
Michael J. Kasten
Managing Partner
Kasten Investments, L.L.C.
Arlene Kulzer
President
Arrowhead Community Bank
Dennis E. Landauer, CPA
Managing Director
American Express Tax & Business Services
James J. McCue
Sales Representative
Sherwin Industries
Elaine P. Maimon, Ph.D.
Chief Executive Officer
Arizona State University West
Terrance C. Mead
Attorney at Law/Owner
Mead & Associates
John C. Ogden
President and Chief Executive Officer
Suncor Development Company
Carol A. Poore
Director of Communication
New West Energy
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
Richard A. Shelton
Executive Director
Symphony of the West Valley
OFFICERS
Joseph D. Reid
Chairman and Chief Executive Officer
Michael L. Kasten
Vice Chairman
Arlene Kulzer
President
Gerald L. Weitner
Executive Vice President and
Chief Credit Officer
Ursula L. Jackson
Vice President
Deborah M. Charlesworth
Vice President
Barry S. Edwards
Vice President
<PAGE>
[PHOTO OF MICHAEL F. HANNLEY]
Bank of Tucson
4400 E. Broadway
Tucson, AZ 85711
(520) 321-4500
www.bankoftucson.com
Five years ago our vision was to bring community banking and true customer
service back to Tucson after years of dislocation and frustration caused by "big
bank" mergers and acquisitions. No one could have foreseen the heartwarming
reception we have received nor the successes we have enjoyed.
Bank of Tucson has become a substantial resource for small businesses and
individuals throughout the city. Partnerships are at the core of the philosophy
that guides our Bank in the continuing development of all community sectors:
non-profit, cultural, academic and business.
As we begin a new century, we rededicate ourselves to the shared vision that is
our hallmark-treating you as a client, a partner and a friend. When it comes to
providing you with financial expertise and very personal service, Bank of Tucson
will be there.
/s/ Michael F. Hannley
Michael F. Hannley
President and CEO
BOARD OF DIRECTORS
Bruce I. Ash
Vice President
Paul Ash Management, L.L.C.
Slivy Edmonds Cotton
Chairman and Chief Executive Officer
Perpetua, Inc.
Michael J. Devine
Attorney at Law
Brian K. English
General Counsel
Capitol Bancorp Limited
William A. Estes, Jr.
President
TEM Corp.
Richard N. Flynn
President
Flynn & Associates
Michael F. Hannley
President and Chief Executive Officer
Bank of Tucson
Michael J. Harris
Associate Broker
Long Realty Company
Richard F. Imwalle
President
University of Arizona Foundation
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Burton J. Kinerk
Attorney at Law
Kinerk, Beal, Schmidt & Dyer, P.C.
Humberto S. Lopez
President
HSL Properties, Inc.
Lyn M. Papanikolas
Community Volunteer
OFFICERS
Richard F. Imwalle
Chairman of the Board
Michael J. Devine
Vice Chairman
Richard N. Flynn
Secretary
Michael F. Hannley
President and Chief Executive Officer
C. David Foust
Executive Vice President and
Chief Credit Officer
Barbara A. Sadler
Senior Vice President
Sandi L. Smithe
Senior Vice President
Charlene F. Schumaker
Vice President
<PAGE>
[PHOTO OF PETER M. ATKINSON]
Black Mountain Community Bank
1700 West Horizon Ridge Parkway, Suite 101
Henderson, NV 89012
(702) 990-5900
www.blackmountaincommunitybank.com
In a brief nine months we have experienced great success and have become
Henderson's premier bank. Our growth has been extraordinary and people are
taking notice. The competition is justifiably looking over their shoulders. With
a seasoned staff and a supportive Board, our growth is being achieved with
quality customers who have been in Las Vegas for years.
Our neighborhood community, Sun City McDonald Ranch, is providing us with new
customers daily. It is our intention to be the bank of Sun City. We have made
great inroads into the medical community and our reputation as professional and
knowledgeable real estate lenders in the local area is being recognized as well.
Our goal is to provide the highest level of customer satisfaction in Nevada.
When we are successful in that pursuit, we will achieve our objective and
profits will follow. We will not grow for growth's sake, but instead we will
develop wisely without sacrificing our level of customer service nor our credit
quality.
Our banking culture touches the requisite disciplines of the past while we keep
our eyes focused on the opportunities of the future.
Banking the way you remember-with VISION.
/s/ Peter M. Atkinson
Peter M. Atkinson
President
BOARD OF DIRECTORS
Peter M. Atkinson
President
Black Mountain Community Bank
Frendy F. DeJong
Player Development Executive
Rio Hotel & Casino
Michael J. Devine
Attorney at Law
David F. Howard
Partner/Owner
Ovist & Howard, CPA's
Betty A. Kincaid
President
Southwest Exchange Corp.
Charles L. Lasky
President
Lasky, Fifarek & Hogan, PC
Claire MacDonald
Vice President
MacDonald Properties
Thomas C. Mangione
President and Chief Operating Officer
Nevada Community Bancorp Limited
Michael J. Mixer
Corporate Broker
Colliers International
Mary C. O'Callaghan-Miele
Vice President/Circulation Manager
H.B.C. Publications
Phillip N. Ralston
Vice President of Finance
American Nevada Corporation
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
Christopher G. Samson
President/Owner
FN Investments, Inc.
OFFICERS
Joseph D. Reid
Chairman of the Board
Michael J. Devine
Vice Chairman
Thomas C. Mangione
Chief Executive Officer
Peter M. Atkinson
President
David S. Rennick
Executive Vice President and
Chief Credit Officer
Cherie L. Ballard
Vice President
Kathy M. Lucero
Vice President
RaMon McBride
Vice President
Randal E. Rathke
Vice President
Shari A. Smith
Vice President
<PAGE>
[PHOTO OF GARY T. NICKERSON, SR.]
Brighton Commerce Bank
8700 North Second Street
Brighton, MI 48116
(810) 220-1199
www.brightoncommerce.com
As the only "local" bank in Brighton, we have attracted a significant number of
relationships including municipalities, professionals and locally-owned and
managed businesses that expect and appreciate personalized service by
experienced personnel.
This is the foundation of our business philosophy that has been carefully
nurtured in our four years of existence. Focus is placed on expedited responses
to loan and other requests because decisions are made locally by our
knowledgeable staff with our local Board of Directors.
As a benefit to our customers, we share with the other Capitol Bancorp family of
banks the operating economies and technological sophistication of centralized
data processing and accounting. For this reason, although we are a "local"
community bank, we can provide more services, including Internet banking, trust
and investment services.
We are experts in a number of areas including, but not limited to, construction
financing, business lending, residential mortgage lending and home equity
financing. At the same time we can entertain much larger loan requests than a
typical bank of our size and dimensions because of our affiliation with Capitol
Bancorp.
We take pride in operating as a "local" community bank with money center bank
capability.
/s/ Gary T. Nickerson, Sr.
Gary T. Nickerson, Sr.
President and CEO
BOARD OF DIRECTORS
Robert C. Carr
Executive Vice President and Treasurer Capitol Bancorp Limited
John C. Codere
President
Brighton Block & Concrete, Inc.
Michael B. Corrigan
President
Corrigan Oil Co., Inc.
Scott C. Griffith
President
ERA Griffith Realty
William LaMarra
President and Chief Executive Officer
Excelda Manufacturing
Mark A. Latterman
President
Latterman & Associates, P.C.
Piet W. Lindhout
Chief Executive Officer
Lindhout Associates Architects
Gary T. Nickerson, Sr.
President and Chief Executive Officer
Brighton Commerce Bank
Candice G. Randolph
Senior Vice President and Cashier
Brighton Commerce Bank
Mitchell J. Stanley
President
Mickey Stanley Associates
James A. Winchel
President
Colt Park Insurance Agency, Inc.
OFFICERS
Robert C. Carr
Chairman of the Board
Michael B. Corrigan
Vice Chairman
Gary T. Nickerson, Sr.
President and Chief Executive Officer
Candice G. Randolph
Senior Vice President,
Cashier and Secretary
Joseph M. Petrucci
Senior Vice President
William R. Anderson
Vice President
<PAGE>
[PHOTO OF BARBARA J. RALSTON]
Camelback Community Bank
2777 E. Camelback Rd., Suite 100
Phoenix, AZ 85016
(602) 224-5800
www.camelbackbank.com
Metropolitan Phoenix is known as the "Valley of the Sun." This reflects both the
quality of life and the "hot" economic environment we enjoy. Camelback Community
Bank is one of the fastest growing community banks in the Phoenix area. This is
the culmination of a focused strategy, hard work, opportunities created by
disruption in the large banks and substantial growth in both the number and
profitability of small-to-medium sized businesses.
There is no shortage of competition. As others recognize the same market
opportunities, a number of new community banks have sprung up in the Camelback
corridor. We are confident that the base of customers we have attracted over the
past three years will provide a solid foundation for our continued growth and
profitability. Our committed Board of Directors will assist us in retaining
these relationships.
Our greatest strength is our employees and their ability to provide innovative
solutions to meet our customers' needs. They are the cornerstone to our
continued growth and achievement.
/s/ Barbara J. Ralston
Barbara J. Ralston
President
BOARD OF DIRECTORS
Shirley A. Agnos
President
Arizona Town Hall
Michael J. Devine
Attorney at Law
Winfield L. Holden III
Publisher
The Arizona Highways
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Gregory M. Kruzel
Attorney at Law
Braun, Becker, Kruzel, PC
John S. Lewis
Vice Chairman
Sun Community Bancorp Limited
Tammy A. Linn
Consultant
Susan C. Mulligan
Certified Public Accountant
Miller Wagner Business
Services, Inc.
Earl A. Petznik
President and Chief Executive Officer
Northside Hay Company
William J. Post
Chief Executive Officer
Arizona Public Service Co.
Barbara J. Ralston
President
Camelback Community Bank
Dan A. Robledo
President and Chief Executive Officer
Lawyer's Title of Arizona, Inc.
Jacqueline J. Steiner
Community Volunteer
OFFICERS
Dan A. Robledo
Chairman of the Board
Michael L. Kasten
Vice Chairman
Joseph D. Reid
Chief Executive Officer
Barbara J. Ralston
President
John Robert Boosman
Executive Vice President
and Chief Credit Officer
Betty L. Cornish
Vice President
Timothy M. Himstreet
Vice President
Sondra K. Koskela
Vice President
Patrick B. Westman
Vice President
<PAGE>
[PHOTO OF JOHN C. SMYTHE]
Capitol National Bank
200 Washington Square North
Lansing, MI 48933
(517) 484-5080
www.capitolnational.com
The hallmark of Capitol National Bank, since opening in 1982, has been our
commitment to relationship banking. We deliver an unmatched level of highly
personalized banking in the greater Lansing market with a focus on providing
individually tailored financial services to businesses, professionals and
entrepreneurs. As the trend of mergers and acquisitions continues creating
fewer, but larger, impersonal financial institutions, Capitol National will
continue to see opportunities to increase our customer base. Since we enjoy the
distinction of being locally owned and managed, those opportunities translate
into associated profitability.
The directors and staff of Capitol National Bank participate in a broad range of
community service, donating time, talent and financial resources. We believe
that good corporate citizenship further enhances our opportunities for stronger,
long-lasting business relationships with our existing and prospective customers
in addition to benefiting our community.
I look forward to the future knowing that our employees' strong work ethic,
cooperative spirit, and dedication to our community will result in continued
success as both a well-run and well-respected bank.
/s/ John C. Smythe
John C. Smythe
President and CEO
BOARD OF DIRECTORS
Robert C. Carr
Executive Vice President and Treasurer Capitol Bancorp Limited
Nan Elizabeth Casey
Attorney at Law
Casey & Boog, P.C.
Charles J. Clark
President
Clark Construction Company
Brian K. English
General Counsel
Capitol Bancorp Limited
David E. Ferguson
President
Ferguson Development, LLC
Patrick F. Hayes
President
F. D. Hayes Electric
Richard A. Henderson
President
Henderson & Associates, P.C.
J. Christopher Holman
Publisher
Greater Lansing Business Monthly
L. Douglas Johns, Jr.
Vice President
Mid-Michigan Investment Co.
Kevin A. Kelly
Managing Director
Michigan State Medical Society
Mark A. Latterman
President
Latterman & Associates, P.C.
Charles J. McDonald
Executive Vice President
Capitol National Bank
John O'Leary
Co-President
O'Leary Paint Company
Patricia A. Reynolds
President
Capital Region Community Foundation
John C. Smythe
President and Chief Executive Officer
Capitol National Bank
OFFICERS
Robert C. Carr
Chairman of the Board
Mark A. Latterman
Vice Chairman
Patrick F. Hayes
Secretary
John C. Smythe
President and Chief Executive Officer
Charles J. McDonald
Executive Vice President
John R. Farquhar
Vice President
David E. Feldpausch
Vice President
Lori M. Garcia
Vice President
<PAGE>
[PHOTO OF JAMES W. HOWARD]
Desert Community Bank
3740 S. Pecos - McLeod
Las Vegas, NV 89121
(702) 938-0500
www.desertcommunity.com
Desert Community Bank continues to experience phenomenal growth in customer
relationships, adding to our loan portfolio, and swelling our customer base to
over 1,000 relationships. Continuing to prudently focus on commercial loans,
including construction and real estate, we have been successful while helping
many new and growing businesses succeed. We have provided significant funding
for businesses operating within low-to-moderate income areas in our community,
helping to redevelop and stabilize older neighborhoods, as well as provide
capital for new developments in high growth areas.
As an affiliate of Nevada Community Bancorp, we have the flexibility to be small
in terms of personal service to each client, but large enough to meet the needs
of most small businesses through loan participations with our affiliate banks.
Through this proven, but unique, method of banking, Desert Community Bank has
exceeded what it had hoped to achieve in its first 16 months of operation. We
are continuing to develop and realize our potential. Keep watching. You'll be
impressed.
/s/ James W. Howard
James W. Howard
President
BOARD OF DIRECTORS
Robert J. Andrews
Chief Operating Officer
New-Com, Inc.
Michael J. Devine
Attorney at Law
Rose M. K. Dominguez
President
Discovery Travel
Tom R. Grimmett
Owner
Grimmett & Company
Garry L. Hayes
President
Law Office of Garry L. Hayes
James W. Howard
President
Desert Community Bank
Charles L. Lasky
President
Lasky, Fifarek & Hogan, P.C.
Thomas C. Mangione
President and Chief Operating Officer
Nevada Community Bancorp Limited
Gregory J. McKinley
Vice President
Cragin & Pike, Inc.
Leland D. Pace
Managing Partner
Stewart, Archibald & Barney, L.L.P.
Greg J. Paulk
President
M.M.C., Inc.
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
Joseph D. Soderberg, M.D.
Physician
Summit Anesthesiology
Stephen D. Stiver
President
Stiver Car Care
OFFICERS
Joseph D. Reid
Chairman of the Board
Michael J. Devine
Vice Chairman
Charles L. Lasky
Secretary
Thomas C. Mangione
Chief Executive Officer
James W. Howard
President
Don F. Bigger
Executive Vice President and
Chief Credit Officer
Kent L. Harding
Senior Vice President
Rodney K. Chaney
Senior Vice President
Al G. Gourrier II
Vice President
Cheryl A. Fricker
Vice President
Eileen S. Hagler
Vice President
<PAGE>
[PHOTO OF LINDA A. WATTERS]
Detroit Commerce Bank
645 Griswold, Suite 70
Detroit, MI 48226
(313) 967-9700
www.detroitcommerce.com
The Detroit Commerce Bank theme, "Small Bank, Big Service," is shared by our
employees and affiliated banks within the Capitol Bancorp system. This directly
benefits our customers by unleashing the myriad of banking possibilities and
opportunities in the Metropolitan Detroit area.
The launch of our new Internet banking site, www.detroitcommerce.com,
demonstrates the commitment to deliver competitive products at a competitive
price. Industry experts throughout our network of affiliated banks enable
Detroit Commerce Bank to provide each customer a window into the new economy. To
meet the needs of the Detroit community, the Detroit Commerce Bank staff
regularly participates in projects and conducts informative seminars designed to
give individuals access to our unique brand of service. Our dedicated
professionals clearly understand the value of teamwork and its impact on the
profitability of the Bank.
The Bank continues to foster a symbiotic relationship with the city. Later this
year, in connection with Detroit 300 Celebration, a program of activities
throughout the year commemorating Detroit's 300th birthday, the City will
dedicate a new public park. This new park, designed to bring more pedestrian
traffic into the city, will be located just steps away from Detroit Commerce
Bank. It should provide exciting marketing opportunities for us to showcase our
full array of products, especially our new Penobscot Building Checking Account!
/s/ Linda A. Watters
Linda A. Watters
President and CEO
BOARD OF DIRECTORS
Ralph J. Burrell
President
Symcon
Vivian Carpenter, Ph. D.
President
Atwater Entertainment Associates
Robert C. Carr
Executive Vice President and Treasurer Capitol Bancorp Limited
Donald M. Davis, Jr.
Vice President, Human Resources
Health Alliance Plan
Douglas H. Graham
Chairman and Chief Executive Officer
Detroit Technology Ventures, L.L.C.
John R. Hirzel
Certified Public Accountant
Hirzel, Jackson & Swaine, P.C.
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
Martha K. Richardson
President
Services Marketing Specialists, Inc.
Benjamin L. Schwegman
President
Schwegman and Associates, Inc.
James F. Stapleton
President
B & R Consultants
Linda A. Watters
President and Chief Executive Officer
Detroit Commerce Bank
OFFICERS
Joseph D. Reid
Chairman of the Board
Robert C. Carr
Secretary
Linda A. Watters
President and Chief Executive Officer
Valora L. Jackson
Vice President
<PAGE>
[PHOTO OF REBECCA M. JACKSON]
East Valley Community Bank
1940 N. Alma School Road
Chandler, Arizona 85224
(480) 726-6500
www.eastvalleybank.com
East Valley Community Bank's dedication to community sets us apart from the
competition. Our senior management team, with over 150 years combined experience
in all phases of commercial banking, knows that geographic location alone does
not make us part of a community. People bank with people, not large
corporations.
A community is like a family, and our commitment to service has made us a part
of the Chandler, Arizona family, along with its surrounding communities, the
second fastest growing city in America.
We have continued our active involvement in the local Chambers of Commerce, Boys
and Girls Clubs, the YMCA, National Association of Women Business Owners and
Chandler Leadership. We are now the proud sponsor of the annual James R.
Snedigar Award, awarded to a local citizen for outstanding community service in
memory of Chandler's first police officer killed in the line of duty. Our team
has partnered with a local youth group, I.C.A.N. (Improving Chandler Area
Neighborhoods), and will be mentoring, tutoring and coaching interested young
men and women about the world of finance.
Our family is growing by leaps and bounds, and we will be rising to meet its
needs.
/s/ Rebecca M. Jackson
Rebecca M. Jackson
President
BOARD OF DIRECTORS
Michael J. Devine
Attorney at Law
Todd Dickerson, DDS
Dentist
David L. Heuermann
President
Axis Mortgage & Investments, L.L.C.
Rebecca M. Jackson
President
East Valley Community Bank
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Martha S. Martin
Chairman
SpectrumAstro, Inc.
Darra L. Rayndon
Principal and President
Rayndon & Longfellow, P.C.
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
James C. Stratton
President and Chief Executive Officer
Boys and Girls Clubs of Scottsdale
Joseph A. Tameron
CPA and Partner
Skinner, Tameron & Company, L.L.P.
Stephen D. Todd
Executive Vice President
Sun Community Bancorp Limited
OFFICERS
Joseph D. Reid
Chairman and Chief Executive Officer
Michael J. Devine
Vice Chairman
Rebecca M. Jackson
President
J. Dennis Kennedy
Executive Vice President
and Chief Credit Officer
Christina I. McCallum
Senior Vice President
James Patrick Blaine
Vice President
William J. Wohlenhaus
Vice President
<PAGE>
[PHOTO OF STEVEN L. BROWN]
Elkhart Community Bank
303 South Third Street
Elkhart, IN 46516
(219) 295-9600
www.elkhartbank.com
Elkhart Community Bank is poised to become the bank of choice for small
businesses in Elkhart, Indiana. Our downtown location provides easy
accessibility, further enhanced by our recently-implemented courier service.
This form of delivery makes us the most convenient bank in town for our business
clients who no longer have to leave their offices to make their daily deposits.
We also have Internet and telephone banking capabilities, in addition to
drive-through and ATM access. However, what separates us from the other banks in
town is the quality and accessibility of our people. We have two outstanding
commercial lenders, a mortgage lender and a talented staff of service
representatives, each of whom are experts at finding unique solutions to our
clients' individual banking needs. We pride ourselves on becoming trusted
advisors to our clients and putting the "relationship" back into banking.
The 21st century will see many changes in banking, and our small-bank-style
customer service combined with our large-bank-style sophistication, positions us
to be very competitive.
/s/ Steven L. Brown
Steven L. Brown
President
BOARD OF DIRECTORS
Paul R. Ballard
Executive Vice President
Capitol Bancorp Limited
Nancy B. Banks
Local Philanthropist
R. Steven Bennett
President
Voyager Products, Inc.
Kenneth W. Brink
Treasurer
Hart Housing Group, Inc.
Steven L. Brown
President
Elkhart Community Bank
Robert C. Carr
Executive Vice President and Treasurer Capitol Bancorp Limited
Andrew W. Frech
Chairman and Chief Executive Officer
Ancon Construction Co., Inc.
Curtis T. Hill, Jr.
Attorney at Law
Elkhart County Prosecuting
Attorney's Office
Richard J. Jensen
Vice President
Elkhart General Hospital
Richard L. Max, Sr.
President and General Manager
Heart City Enterprises House of Herbs
Myrl D. Nofziger
President
Hoogenboom Nofziger
Brian J. Smith
CPA and President
The Heritage Group
OFFICERS
Robert C. Carr
Chairman of the Board
and Chief Executive Officer
Steven L. Brown
President
Lori A. Faltynski
Vice President
Vince J. VonDerVellen
Vice President
Jeff F. Kloska
Loan Officer
<PAGE>
[PHOTO OF DOUGLAS A. JOHNSTON]
Goshen Community Bank
511 W. Lincoln Avenue
P.O. Box 827
Goshen, IN 46527
(219) 533-2006
www.goshenbank.com
On September 29, 2000, Goshen Community Bank opened with great anticipation from
the local community and our shareholders. We devised a formula for success that
includes an excellent location, a talented staff with over 100 years of banking
experience, and a redesigned and refurbished building. Customers walk into a
lobby that is professional yet comfortable, and where coffee and homemade candy
(from my family's local candy store) are available.
The Bank's plan is to be profitable within 12 months of opening our doors. We
will accomplish profitability by drawing from the experience of our staff and
the executive support available at Capitol Bancorp. We will also rely on
directors, shareholders and customers for referrals, and will endeavor to
provide the best service of any bank in town. Focusing on the needs of our
community will also contribute to our success. We will strive to be involved
with events that further the advancement of the Goshen community.
/s/ Douglas A. Johnston
Douglas A. Johnston
President
BOARD OF DIRECTORS
Robert C. Carr
Executive Vice President and Treasurer Capitol Bancorp Limited
David L. Cripe, O.D.
Senior Partner
Drs. Lantz, Cripe & Stephens
Carol M. Ebersole
Vice President of Corporate Development
Goshen Health System
Stephen L. Fidler
President
Kuert Concrete, Inc.
Christopher J. Graff
President and Chairman
Marque, Inc.
Richard A. Hetler, Jr.
VP and General Manager
Indiana Wood Products, Inc.
Gregory A. Hoogenboom
President
Hoogenboom Masonry, Inc.
Douglas A. Johnston
President
Goshen Community Bank
Larry W. Newswanger
Self-employed
Matthew J. Pletcher
Partner
Whitcraft and Pletcher, LLP
Fred M. Ramser
Self-employed
Dennis L. Sorg
President
Sorg Dodge, Inc.
Douglas A. Stanley
Dentist and Owner
Douglas A. Stanley, DDS
OFFICERS
Robert C. Carr
Chairman and Chief Executive Officer
Douglas A. Johnston
President
Connie O. Horvath
Vice President
Leah L. Stevens
Vice President
<PAGE>
[PHOTO OF JOHN D. GROOTHUIS]
Grand Haven Bank
333 Washington
Grand Haven, MI 49417
(616) 846-1930
www.grandhavenbank.com
The future promises to be an exciting one for Grand Haven Bank. With a
successful foundation in place as the community bank in the Tri-Cities, recent
mergers and acquisitions have created compelling prospects for significant
growth. Our level of personalized service and local decision-making has served
to make us an appealing source for financial solutions and an attractive banking
alternative.
Construction of our new facility has provided a tremendous opportunity to
support our growth in the future. With the addition of a trust and investment
officer and expanded lending staff, Grand Haven Bank will offer new and enhanced
services. Extended business hours, online banking and drive-up access will be
available to better serve our customers.
The combination of hands-on service and improved amenities provides us with an
advantage in continuing to meet the developing needs of our community. We look
forward to building upon our success in the coming year.
/s/ John D. Groothuis
John D. Groothuis
President and CEO
BOARD OF DIRECTORS
Paul R. Ballard
Executive Vice President
Capitol Bancorp Limited
Stanley L. Boelkins
Owner and Appraiser
Boelkins & Associates
Peter E. Bolline
Owner
Wood Specialties Co.
Brad J. Fortenbacher
President
Tri-Cast, Inc.
John D. Groothuis
President and Chief Executive Officer
Grand Haven Bank
Mark A. Kleist
Attorney at Law and Treasurer
Scholten and Fant, P.C.
Steven L. Maas
Vice President
Gillisse Construction Company
Calvin D. Meeusen
Certified Public Accountant
Arnold W. Redeker, Jr.
Partner and Vice President
Redeker Ford, Inc.
John P. Van Eenenaam
Attorney at Law
Scholten and Fant, P.C.
Gerald A. Witherell
President
Oakes Agency, Inc.
OFFICERS
John P. Van Eenenaam
Chairman of the Board
Paul R. Ballard
Vice Chairman
Arnold W. Redeker, Jr.
Secretary
John D. Groothuis
President and Chief Executive Officer
Sherry J. Patterson
Vice President
<PAGE>
[PHOTO OF DAVID E. VEEN]
Kent Commerce Bank
4050 Lake Drive, SE
Grand Rapids, MI 49546
(616) 974-0200
www.kentcommerce.com
Kent Commerce Bank is fortunate to be located in one of the most vibrant and
fastest growing economic centers in the Midwest. Southwest Michigan has
experienced tremendous expansion during our Bank's three years in operation, and
we have enjoyed the benefits of this growth through construction loans for
commercial buildings and new homes, plat developments and loans to local
businesses for new equipment and working capital. The Bank's location in
suburban southeast Grand Rapids puts us in the thick of the action in terms of
residential and industrial development.
Our Bank will be presented with continued opportunities for future growth.
Several large, long-standing, local banks are in the process of completing
mergers with regional mega-banks that will effectively move their management and
critical decision-making responsibilities out of Michigan. Many disenfranchised
customers of those banks will seek out the customer-focused, locally-managed
community bank of Kent Commerce. We are poised to meet these customers' needs
and we are excited about the possibilities.
/s/ David E. Veen
David E. Veen
President and CEO
BOARD OF DIRECTORS
James M. Badaluco
Vice President
S.J. Wisinski & Company
Paul R. Ballard
Executive Vice President
Capitol Bancorp Limited
Michael L. Braughton
Vice President and Chief Financial Officer
Davenport Educational System, Inc.
Paul S. Buiten
President
Buiten, Tamblin, Steensma
& Associates, Inc.
Julius Duthler
Chief Executive Officer
Duthler Ford Sales, Inc.
Kevin J. Einfeld
President
BDR, Inc.
Grant J. Gruel
Attorney at Law and Partner
Gruel, Mills, Nims & Pylman
Gary D. Hensch
Certified Public Accountant
Harold A. Marks
Partner
Prangley Marks L.L.P.
Dale R. Medema
President
Medema's Carpet & Interiors, Inc.
Calvin D. Meeusen
Certified Public Accountant
John H. Pleune
President
Pleune Service Company, Inc.
Mary L. Ursul
Vice President
Michigan Lawyers Mutual Insurance Co.
David E. Veen
President and Chief Executive Officer
Kent Commerce Bank
Michael C. Walton
Attorney At Law
Rhoades, McKee, Boer, Goodrich & Titta
OFFICERS
Michael C. Walton
Chairman of the Board
David E. Veen
President and Chief Executive Officer
Michael P. Boelens
Vice President
John J. Coder
Vice President
M. Martine Kaluske
Vice President and Cashier
<PAGE>
[PHOTO OF STEPHEN C. TARCZY]
Macomb Community Bank
16000 Hall Road, Suite 102
Clinton Twp., MI 48038
(810) 228-1600
www.macombcommunity.com
In only a few short years, Macomb Community Bank has earned the trust of the
community by being a preferred provider of quality, cost-effective banking
products, and unparalleled customer service. Whether it be from hearing a
friendly, familiar voice asking "How may I help you?", or the offering of
technologically sophisticated systems for Internet banking transactions, Macomb
Community Bank's diversity of choice is available to the community.
Our unique affiliation with Capitol Bancorp presents advantages which shape
superior operational efficiencies and influence the quality of performance
demanded by an educated banking public.
What was once a latent dream has evolved into a remarkable success story.
Although still recognized as small in stature, Macomb Community Bank's spirited
style of fairness is complemented by the continued economic good fortune evident
throughout our growing community. As proud fourth generation citizens of Macomb
County, banking with a personal interest is our heritage. That human touch will
never be compromised; that is our pledge. Building on the merits of the past
with the promise of the future, that is our vision.
/s/ Stephen C. Tarczy
Stephen C. Tarczy
President and CEO
BOARD OF DIRECTORS
Eugene J. Agnone, Jr., M.D.
Medical Oncologist
Gerald J. Carnago
CPA, Attorney
Carnago & Associates, P.C.
Robert C. Carr
Executive Vice President and Treasurer Capitol Bancorp Limited
Christina D'Alessandro
Vice President
Villa Custom Homes, Inc.
Ronald G. Forster
Treasurer
Arkay Manufacturing, Inc.
David F. Keown
Building Official
Washington Township
Sam A. Locricchio
Executive Vice President
Macomb Community Bank
Delia Rendon-Martin
Co-Owner
Martin Enterprises
Vito Munaco
Owner and Operator
WEMCO
James A. Patrona
President and Owner
Universal Press & Machinery, Inc.
Stephen C. Tarczy
President and Chief Executive Officer
Macomb Community Bank
OFFICERS
Robert C. Carr
Chairman of the Board
Ronald G. Forster
Vice Chairman
Stephen C. Tarczy
President and Chief Executive Officer
Sam A. Locricchio
Executive Vice President
Robert S. Anderson
Vice President
Jan K. Alcini
Assistant Vice President and Secretary
<PAGE>
[PHOTO OF NEIL R. BARNA]
Mesa Bank
63 East Main Street, Suite 100
Mesa, AZ 85201
(480) 649-5100
www.mesabankers.com
Preparation creates opportunity.
How many times has a successful endeavor reflected such a simple formula? In
1998, Mesa Bank brought together a seasoned management team; a strong
community-oriented board of directors and a city in need of a local bank. The
result was an institution motivated by the spirit and vitality of its community.
Banking with the human touch is the theme at Mesa Bank. We are responding to the
needs of the community with business loans and residential and commercial
construction financing, in addition to home equity credit lines, home
improvement loans and consumer loans. Through strategic alliances, we are
providing a network of products and services ranging from equipment leasing to
trust and investment strategies.
The opportunity to serve our community continues to evolve. Mesa Bank is
prepared for, and eagerly awaits, the challenges of the future.
/s/ Neil R. Barna
Neil R. Barna
President
BOARD OF DIRECTORS
Neil R. Barna
President
Mesa Bank
Michael J. Devine
Attorney at Law
Debra L. Duvall, Ed. D.
Superintendent
Mesa Public Schools
Brian K. English
General Counsel
Capitol Bancorp Limited
Robert R. Evans, Sr.
Partner
Evans Management Company
Stewart A. Hogue
President
Commercial Lithographers, Inc.
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Philip S. Kellis
Partner
Dobson Ranch Inn
John S. Lewis
Vice Chairman
Sun Community Bancorp Limited
Ruth Nesbitt
Mesa Community Volunteer
Wayne Pomeroy
Owner
Pomeroy's Men's Stores
James A. Schmidt
Executive Director-Tax Services
Nelson Lambson & Co., P.L.C.
Daniel P. Skinner
Owner and Manager
LeBaron and Carroll LSI, Inc.
Terry D. Turk
President
Sun American Mortgage Co.
OFFICERS
Robert R. Evans, Sr.
Chairman of the Board
Michael L. Kasten
Vice Chairman
Joseph D. Reid
Chief Executive Officer
Neil R. Barna
President
David D. Fortune
Executive Vice President
and Chief Credit Officer
Daniel R. Laux
Vice President
<PAGE>
[PHOTO OF ROBERT J. MCCARTHY]
Muskegon Commerce Bank
255 Seminole Road
Muskegon, MI 49444
(231) 737-4431
www.muskegoncommerce.com
With little fanfare or advertising, Muskegon Commerce Bank has been able to
attract in excess of 5,000 accounts to our bank. We have accomplished this in
our first three years through a stable staff of employees who know our
customers. These talented individuals, along with our core group of directors,
have helped grow the Bank.
One of our Bank's niches is in the residential mortgage area. Of the dozens of
mortgage originators in the Muskegon area, we have consistently been one of the
top three in volume since our inception. We frequently outperform larger lending
institutions with our fast, friendly service and knowledge of construction
lending. We are well positioned to take advantage of both the strong economy and
growing housing market in Muskegon.
Our size gives us the ability to cater our combination of products and services
to the local business owners and home buyers who expect personal attention. Our
affiliation with the Capitol Bancorp family of banks allows us to offer the kind
of technological innovations that will keep us competitive in the future.
/s/ Robert J. McCarthy
Robert J. McCarthy
President and CEO
BOARD OF DIRECTORS
Dr. Rick E. Amidon
President
Baker College of Muskegon
Philip J. Andrie
President
Andrie, Inc.
Paul R. Ballard
Executive Vice President
Capitol Bancorp Limited
William C. Cooper
President
Omni Fitness Club
Thomas F. DeVoursney
President
Shape Corp.
Edgar Hunt
Retired President and CEO
First of America Bank-Muskegon
Christopher L. Kelly
Attorney at Law
Parmenter O'Toole
Daniel Kuznar
Owner
Quality Tool & Stamping Co., Inc.
Robert J. McCarthy
President and Chief Executive Officer
Muskegon Commerce Bank
Chris Ann McGuigan
President and Chief Executive Officer
Community Foundation for
Muskegon County
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
James Stanford Tyler
President
Tyler Sales Co., Inc.
OFFICERS
Joseph D. Reid
Chairman of the Board
Robert J. McCarthy
President and Chief Executive Officer
David W. Seppala
Senior Vice President
Bruce A. May
Vice President
<PAGE>
[PHOTO OF JAMES R. KAYE]
Oakland Commerce Bank
31731 Northwestern Hwy.
Farmington Hills, MI 48334
(248) 855-0550
www.oaklandcommerce.com
Oakland Commerce Bank has continuously worked at providing the best delivery
system possible for its products and services. Our affiliation with Capitol
Bancorp is a union that merges our commitment to provide the best service
possible with leading-edge technological and managerial support. We pride
ourselves in listening to our customers and being flexible while working toward
filling their deposit and account needs or designing customized loan products.
Banking mergers involving the larger banks in our marketplace have created voids
in the delivery of financial services to many small and medium-sized businesses.
Oakland Commerce Bank's entry into Internet banking has been well received by
our customers. As a result, we have received loan requests via this medium.
Internet services are key to establishing not only additional market awareness,
but penetration into an expanding pool of possible customers.
/s/ James R. Kaye
James R. Kaye
President and CEO
BOARD OF DIRECTORS
Mark A. Aiello
Attorney at Law
Foley & Lardner
Donald A. Bosco
President
Donald A. Bosco Building, Inc.
Robert C. Carr
Executive Vice President and Treasurer Capitol Bancorp Limited
Mark B. Churella
President and Chief Executive Officer
FDI Group
Leon S. Cohan
Counsel to the Firm
Barris, Scott, Denn & Driker
Michael J. Devine
Attorney at Law
Jeffrey L. Hauswirth
CPA, CVA, and Principal
Jenkins, Magnus, Volk & Carroll, P.C.
James R. Kaye
President and Chief Executive Officer
Oakland Commerce Bank
Ihor J. Kuczer
Senior Vice President
Oakland Commerce Bank
David F. Lau, J.D. CLU
Chartered Financial Consultant and Owner
Lau & Lau Associates, L.L.C.
Jeffrey M. Leib
Attorney at Law and President
Leib, Leib & Kramer, P.C.
Akram Namou
Certified Public Accountant
Julius L. Pallone
President
J.L. Pallone Associates
Francine Pegues
Regional Sales Director
Blue Cross Blue Shield of Michigan
OFFICERS
Michael J. Devine
Chairman of the Board
James R. Kaye
President and Chief Executive Officer
Ihor J. Kuczer
Senior Vice President and Secretary
Nicolet B. Cassidy-Natsis
Vice President
Thomas K. Perkins
Vice President
<PAGE>
[PHOTO OF SCOTT G. KLING]
Paragon Bank & Trust
301 Hoover Boulevard
Holland, MI 49423
(616) 394-9600
www.paragonbank.com
Banking consolidation in the Holland market has created opportunities for us to
cultivate prospective clients who value the personal involvement that Paragon
Bank & Trust has to offer. In our ten years of operation, Paragon Bank & Trust
has demonstrated its commitment to excellence. We pride ourselves on service,
responsiveness and being a place where decisions are made by the people who you,
the client, meet. For Paragon Bank & Trust, this community bank philosophy will
carry us to new heights of growth and profitability in the future.
During the past year Paragon Trust and Investment Services continued to expand
its ability to service the investment needs of clients throughout all the
Capitol Bancorp affiliate banks. The Trust and Investment Services area
continues to focus on meeting the needs of individual bank clients by offering
allied financial service products in a highly-competitive and rapidly-changing
financial services marketplace.
/s/ Scott G. Kling
Scott G. Kling
President and CEO
BOARD OF DIRECTORS
Paul R. Ballard
Executive Vice President
Capitol Bancorp Limited
Robert J. Bates
Physician
Western Michigan Urological
Associates, P.C.
Charles A. Brower
CPA and Partner
DeLong & Brower, P.C.
Jack L. DeWitt
President
Request Foods, Inc.
Scott Diepenhorst
Principal
SD & Associates, Inc.
Paul Elzinga
Co-Chairman and Director of
Business Development
Elzinga & Volkers, Inc.
John D. Groothuis
President and Chief Executive Officer
Grand Haven Bank
Eric J. Hoogstra
Senior Vice President
Paragon Bank & Trust
Susan K. Hutchinson
Owner
Hutchinson's Stores for Children
Lawrence D. Kerkstra
President and Chief Executive Officer
Kerkstra Precast, Inc.
Scott G. Kling
President and Chief Executive Officer
Paragon Bank & Trust
Leonard Maas
President
Gillisse Construction Company
Mitchell W. Padnos
Executive Vice President
Louis Padnos Iron & Metal Company
Richard H. Ruch
Director Emeritus
Richard G. Swaney
Attorney at Law
Swaney & Thomas, P.C.
Robert J. Tramieri
Chairman Emeritus
Paragon Bank & Trust
OFFICERS
Richard G. Swaney
Chairman of the Board
Robert J. Bates
Vice Chairman
Scott G. Kling
President and Chief Executive Officer
Eric J. Hoogstra
Senior Vice President
Trust and Investment Services
Randall R. Smith
Senior Vice President
Jane Riemersma
Vice President
Dean R. Weerstra
Vice President
Trust and Investment Services
<PAGE>
[PHOTO OF DENNIS J. KUHN]
Portage Commerce Bank
800 East Milham Road
Portage, MI 49002
(616) 323-2200
www.portagecommerce.com
In 1988, a small group of local business people and a few dedicated banking
professionals embarked on a journey to establish Portage Commerce Bank in the
shadow of the bigger, impersonal banks operating in our community. With great
enthusiasm and a belief that customers prefer to do business the old-fashioned
way with bankers who are genuinely interested in their success, this vision is
realized daily as it has been since our beginning.
We continue to enjoy the benefits of our "old-fashioned" approach, as well as
new opportunities to expand our satisfied customer base as the consolidation in
our industry continues. At the same time, our ability to offer customers the
latest products and services, such as our new Internet banking capability, has
been made possible through our affiliation with the Capitol Bancorp family of
banks.
We will continue to strive to exceed our customers' expectations while
maintaining and building the personal relationships that have made us
successful.
/s/ Dennis J. Kuhn
Dennis J. Kuhn
President
BOARD OF DIRECTORS
Paul R. Ballard
Executive Vice President
Capitol Bancorp Limited
David L. Becker
Director
Becker Insurance Agency, P.C.
Thomas R. Berglund, M.D.
Physician
Portage Physicians
John M. Brink
Certified Public Accountant
Brink, Key & Chludzinski, P.C.
Patricia E. Dolan
Community Volunteer
Alan A. Halpern, M.D.
Physician
Michigan Orthopedic
Surgery & Rehab, Inc.
Robert L. Johnson
Retired Secretary and Treasurer
Medallion Properties, Inc.
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Dennis J. Kuhn
President
Portage Commerce Bank
Paul M. Lane, Ph.D.
Professor of Marketing
Seidman School of Business
Grand Valley State University
William J. Longjohn
Retired Vice President
Midwest Business Exchange
John W. Martens
Certified Public Accountant
OFFICERS
Michael L. Kasten
Chairman of the Board
William J. Longjohn
Vice Chairman and Secretary
Paul R. Ballard
Chief Executive Officer
Dennis J. Kuhn
President
Allan T. Reiff
Senior Vice President
Gary T. Adams
Vice President
Kenneth R. Blough
Vice President
Roy L. Dangel, Jr.
Vice President
Kimberlee M. Ferris
Vice President
Cheryl M. Germain
Vice President and Cashier
James V. Lunarde
Vice President
Mark K. MacLellan
Vice President
<PAGE>
[PHOTO OF STEVEN E. MALLORY]
Red Rock Community Bank
10000 W. Charleston, Suite 100
Las Vegas, NV 89135
(702) 948-7500
www.redrockcommunity.com
Red Rock Community Bank has in one short year become a bank to be recognized in
Southern Nevada. Our growth has exceeded expectations and we attained operating
profitability in record time.
Our success to date is a combination of many things, but first and foremost it
is largely attributable to the exceptional team we have assembled. The talent of
our employees is recognized throughout our valley by customers, prospects and
the competition. Our Board not only has been a phenomenal source of referrals,
but also some of our very best customers.
After one year we now proudly serve many of the best businesses and
entrepreneurs in Southern Nevada. This strong customer base will enable us to
grow beyond our early predictions.
Our commitment to customer satisfaction is second to none. The year 2000 was an
exceptional year. Wait till you see what Red Rock will accomplish in the future.
/s/ Steven E. Mallory
Steven E. Mallory
President
BOARD OF DIRECTORS
Judith A. Banks
Vice President
Talbot of Nevada
Eric L. Colvin
Secretary and Treasurer
Marnell Corrao Associates, Inc.
Michael J. Devine
Attorney at Law
Molly K. Hamrick
Vice President and CFO
Coldwell Banker Premier Realty
Phillip G. Hardy, Jr.
Vice President and Project Manager
Hardy Painting and Drywall
James Harris
Vice President
Harris Insurance Services
Kathryn D. Justyn
Chief Executive Officer
Summerlin Hospital Medical Center
Keith W. Langlands
CPA and Partner
O'Bannon Wallace Langlands
& Neuman, L.L.P.
Charles L. Lasky
President
Lasky, Fifarek & Hogan, P.C.
Steven E. Mallory
President
Red Rock Community Bank
Thomas C. Mangione
President and Chief Operating Officer
Nevada Community Bancorp Limited
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
J. Christopher Stuhmer
President
Christopher Homes
Frederick P. Waid
Principal
SBG Group, L.L.C.
OFFICERS
Joseph D. Reid
Chairman of the Board
Michael J. Devine
Vice Chairman
Charles L. Lasky
Secretary
Thomas C. Mangione
Chief Executive Officer
Steven E. Mallory
President
James S. Wojewodka
Executive Vice President
and Chief Credit Officer
Mary E. Davis
Senior Vice President
Susan E. Daleiden
Vice President
Theresa L. Hartke
Vice President
Joseph E. Johnson
Vice President
Brent Kamerath
Vice President
<PAGE>
[PHOTO OF JOHN P. LEWIS]
Southern Arizona Community Bank
6400 N. Oracle Rd
Tucson, AZ 85704
(520) 219-5000
www.southernarizonabank.com
At Southern Arizona Community Bank, teamwork is the fuel that helps ordinary
people attain extraordinary results. Success through teamwork demands commitment
to the cause, trust in co-workers, and a collective mindset that puts our
customers first. Fostering this spirit is a priority at Southern Arizona
Community Bank.
The challenge is to build cohesiveness and interdependence among staff members.
It's not only how well each person does their job, it's how well they work
together.
Service is the lifeblood of any organization. Everything flows from it and is
nourished by it. Customer service is not a department...it's an attitude. We at
Southern Arizona Community Bank know that change can pull customers in many
directions. It is our responsibility to educate and guide, thereby gaining their
trust and loyalty.
The capacity for innovation and the ability to prudently implement it, is an
essential quality for success in the new millennium. By expanding our services
and promoting positive change, we learn more about who we are and where we can
go. Southern Arizona Community Bank will set the pace.
/s/ John P. Lewis
John P. Lewis
President
BOARD OF DIRECTORS
William R. Assenmacher
President
T. A. Caid Industries, Inc.
Jody A. Comstock
Physician and Owner
Skin Spectrum
Thomas F. Cordell
Multi Media Specialist
University of Arizona, ECAT
Michael J. Devine
Attorney at Law
Robert A. Elliott
President and Owner
Robert A. Elliott, Inc.
Brian K. English
General Counsel
Capitol Bancorp Limited
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Yoram Levy
Project Manager
Diamond Ventures, Inc.
John P. Lewis
President
Southern Arizona Community Bank
John S. Lewis
Vice Chairman
Sun Community Bancorp Limited
Jim Livengood
Director of Athletics
University of Arizona
James A. Mather
Certified Public Accountant
and Attorney at Law
Louise M. Thomas
President
Events Made Special
Paul A. Zucarelli
Owner/Prinicpal
Gordon, Zucarelli and Handley Insurance
OFFICERS
Paul A. Zucarelli
Chairman of the Board
Michael L. Kasten
Vice Chairman
Joseph D. Reid
Chief Executive Officer
John P. Lewis
President
Michael J. Trueba
Executive Vice President
and Chief Credit Officer
Jean M. Griffin-Getek
Vice President
Teresa R. Gomez
Vice President
Mindy C. Webb
Vice President
<PAGE>
[PHOTO OF FREDERICK D. BERNSON]
Sunrise Bank of Albuquerque
225 Gold SW
Albuquerque, NM 87102
(505) 244-8000
www.sunrisebankofalbuquerque.com
Sunrise Bank of Albuquerque is a dynamic, fast growing and relationship-oriented
financial services institution that has positioned itself to continue to make
inroads into the changing New Mexico banking environment. We opened our doors in
April, 2000 as the second bank in the Sunrise Capital group that specializes in
government guaranteed Small Business Administration (SBA) and real estate loans.
Our customers, including small-to-medium size businesses and business
professionals, have come to realize that our commitment to servicing their
banking needs is our daily mission. Internet banking, e-commerce and additional
online capabilities, enable us to compete with regional banks on a system basis
while we continue to outperform our large competitors in every component of
customer service.
We chose a downtown location that allows us to serve the entire Albuquerque
market. The focus and commitment of both our directors and energetic staff,
through their activities within the community and their efforts on behalf of the
Bank, are driving our continued growth. They are, and will continue to be, the
key to our success.
/s/ Frederick D. Bernson
Frederick D. Bernson
President
BOARD OF DIRECTORS
Frederick D. Bernson
President
Sunrise Bank of Albuquerque
Turner W. Branch
Attorney at Law
Branch Law Firm
David J. Daniel
Executive Vice President
Sunrise Bank of Albuquerque
Helen Elliott
Certified Public Accountant
Helen Elliott & Associates, PC
E. Gary Fichtner
President
Esthetic Dental Arts, Inc.
Donald E. Fry, M.D.
University of New Mexico
School of Medicine
William D. Hinz, II
President
Sunrise Bank of Arizona
John R. Lewinger
Chief Executive Officer
Grubb & Ellis/Lewinger Hamilton
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
Randy E. Whitehead
President
New Mexico Coffee Co.
OFFICERS
Joseph D. Reid
Chairman and Chief Executive Officer
Frederick D. Bernson
President
David J. Daniel
Executive Vice President and
Chief Credit Officer
Conni L. Jones
Vice President and Operations Manager
<PAGE>
[PHOTO OF WILLIAM D. HINZ, II]
Sunrise Bank of Arizona
4350 East Camelback Road, Suite 100A
Phoenix, AZ 85018
(602) 956-6250
www.sunrisebankofarizona.com
The year 2000 saw Sunrise Bank of Arizona recognized as the Valley leader in
small business lending. Arizona Business Magazine named Sunrise, "Best Bank" and
"Best SBA Lender" in its annual ranking of Arizona's finest businesses. The
Southwestern Business Financing Corporation named Sunrise, "2000 Bank Of The
Year" and named our executive vice president, Ward Hickey, "2000 Banker of The
Year". Finally, Business Development Finance Corporation also named our chief
credit officer, Doug Reynolds, "2000 Banker of The Year".
These honors are directly attributable to the dedicated efforts of servicing our
customers. It is our customers, working with our professional staff, that are
the foundation for what promises to be another very exciting year for Sunrise.
Sunrise Bank of Arizona has also benefited from a close relationship with our
other affiliates. Referrals have increased dramatically as our affiliates have
recognized the advantage of utilizing Sunrise's SBA expertise as an added
service for their customers.
The tremendous momentum created by these awards and our close relationship with
our customers and affiliate banks makes it exciting to contemplate what lies in
store for Sunrise Bank of Arizona in the decades to come.
/s/ William D. Hinz, II
William D. Hinz, II
President
BOARD OF DIRECTORS
Sandra A. Abalos
President
Abalos and Associates, P.C.
Michael R. Allen
President
Sureway Properties
Michael J. Devine
Attorney at Law
Brian K. English
General Counsel
Capitol Bancorp Limited
Howard J. Hickey, III
Executive Vice President
Sunrise Bank of Arizona
William D. Hinz, II
President
Sunrise Bank of Arizona
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Kevin B. Kinerk
Executive Vice President
Sunrise Bank of Arizona
G. D. "Rab" Paquette
President
Zap Messenger, Inc.
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
Mark Stieg, D.D.S.
Orthodontist
Mark Stieg, P.C.
James R. Wentworth
Principal
Wentworth, Webb & Postal, L.L.C.
OFFICERS
Joseph D. Reid
Chairman and Chief Executive Officer
Michael J. Devine
Vice Chairman
William D. Hinz, II
President
Howard J. Hickey, III
Executive Vice President
Kevin B. Kinerk
Executive Vice President
Douglas N. Reynolds
Vice President and Chief Credit Officer
Tyrone D. Couch
Vice President
Marian B. Creel
Vice President
James A. Sellick
Vice President
Leonard C. Zazula
Vice President
<PAGE>
[PHOTO OF GARY W. HICKEL]
Valley First Community Bank
7501 East McCormick Parkway
North Court, Suite 105N
Scottsdale, AZ 85258-3495
(480) 596-0883
www.valleyfirstbank.com
The old adage notes that the whole is greater than the sum of its individual
parts. This accurately describes our Sun Community family of banks, solidly
anchored in Scottsdale by Valley First. Entering our fourth full year of
operation, we are positioned to leverage our growing recognition as an emerging
community-minded institution. Valley First received an "Outstanding" rating
recognizing the Bank's results in serving the credit needs of its community. The
partnership with our sister banks affords us the opportunity to take a broader,
technologically-sophisticated approach to serving the banking needs of our
targeted markets. Through the efficiencies gained with common systems, and the
ability to participate in lending and deposit gathering activities, our Bank's
profitability is increased.
The metro Scottsdale area is a dynamic, rapidly growing market drawing many
entrepreneurs and small business owners to the Airpark and ancillary office
complexes. Valley First Community Bank is ready, willing, and able to continue
its leadership in the community banking market. We look forward to 2001 and
beyond.
/s/ Gary W. Hickel
Gary W. Hickel
President
BOARD OF DIRECTORS
W. Craig Berger
President
W. Craig Berger Financial Services, Ltd.
Marilyn D. Cummings
Realtor
Russ Lyon Realty Company
Michael J. Devine
Attorney at Law
W. Randy Fitzpatrick
Certified Public Accountant
Fitzpatrick, Hopkins, Kelly and
Leonhard, P.L.C.
Gary W. Hickel
President
Valley First Community Bank
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
John S. Lewis
Vice Chairman
Sun Community Bancorp Limited
Donald J. Mahoney
Managing Director
Trammell Crow Company
Gordon D. Murphy
Chairman
Esperanca, Inc.
Harry Rosenzweig, Jr.
Co-Owner
Harry's Fine Jewelry
Patricia B. Ternes
Certified Financial Planner
Dain Rauscher Incorporated
OFFICERS
Gordon D. Murphy
Chairman of the Board
Michael J. Devine
Vice Chairman
Joseph D. Reid
Chief Executive Officer
Harry Rosenzweig, Jr.
Secretary
Gary W. Hickel
President
Roger K. Totten
Executive Vice President
and Chief Credit Officer
Jeffrey S. Birkelo
Vice President
Jeffrey L. Le Bar
Vice President
Lance K. Wise
Vice President
<PAGE>
[PHOTO OF KATHERINE M. BRANDON]
Yuma Community Bank
454 W. Catalina Dr.
Yuma, AZ 85364
(520) 782-7000
www.yumabank.com
Yuma Community Bank opened its doors for business on December 15, 2000. Raising
our capital took only nine weeks, reaffirming our belief that the community
wanted, and needed, a community bank.
Our staff of eight, collectively, has over 127 years of banking experience, all
in Yuma. They bring to our customers a wealth of banking knowledge and, more
importantly, the freedom and flexibility to service the customers in a way that
was often missing at the "big banks." We empower our staff with the authority to
be responsive to the needs of our customers. No "cookie-cutter" approach here.
Our directors embrace and support our philosophy of traditional community
banking values.
We anticipate a productive first year of tremendous growth, while establishing
relationships with customers who want a bank that responds to their needs. As a
full service bank, our seasoned bankers are ready to unleash their collective
creativity through personalized services, local decision-making and a desire to
be the best.
/s/ Katherine M. Brandon
Katherine M. Brandon
President
BOARD OF DIRECTORS
Bruce I. Ash
Vice President
Paul Ash Management, LLC
Steven M. Binkley, Jr.
SW Division Manager
Arizona Public Service Co.
Katherine M. Brandon
President
Yuma Community Bank
Raymond R. Corona
Optometrist and President
Corona Optique
Juli Jessen
Chief Operating Officer
Gowan Company
Ram R. Krishna, M.D.
Physician and President
Ram R. Krishna, P.C.
John T. Osterman
President
Osterman Financial Group
Joseph D. Reid
Chairman, President and CEO
Capitol Bancorp Limited
Sun Community Bancorp Limited
David Sellers
President
Sellers Petroleum Products, Inc.
Caryl L. Stanley
Partner
Costen-Stanley Co.
John R. Sternitzke
President
Sternco Engineers, Inc.
Pamela K. Walsma
Attorney at Law
Westover, Shadle, Carter & Walsma, PLC
Ronald S. Watson
Broker/Owner
ERA Matt Fischer Realtor
OFFICERS
Joseph D. Reid
Chairman and Chief Executive Officer
Katherine M. Brandon
President
Ronald S. Watson
Secretary
George E. Whitmer
Executive Vice President
and Chief Credit Officer
Kari M. Reily
Vice President
Theresa N. Wine
Vice President
<PAGE>
CAPITOL BANCORP LIMITED
BOARD OF DIRECTORS
Louis G. Allen
Private Banker, Retired
Paul R. Ballard
Executive Vice President, Capitol Bancorp Limited
David L. Becker
Director, Becker Insurance Agency, P.C.
Robert C. Carr
Executive Vice President and Treasurer, Capitol Bancorp Limited
Douglas E. Crist
President, Developers of SW Florida, Inc.
James C. Epolito
President and Chief Executive Officer, The Accident Fund Company
Gary A. Falkenberg, D.O.
Physician
Joel I. Ferguson
Chairman, Ferguson Development, L.L.C.
Kathleen A. Gaskin
Associate Broker and State Appraiser
Tomie Raines, Inc. Realtors
H. Nicholas Genova
Chairman and Chief Executive Officer, Washtenaw News Co., Inc.
Lewis D. Johns
President, Mid-Michigan Investment Company
Michael L. Kasten
Managing Partner, Kasten Investments, L.L.C.
Leonard Maas
President, Gillisse Construction Company
Lyle W. Miller
President, Servco, Inc.
David O'Leary
Chairman, O'Leary Paint Company
Joseph D. Reid
Chairman, President and Chief Executive Officer
Capitol Bancorp Limited
Sun Community Bancorp Limited
OFFICERS
Joseph D. Reid
Chairman, President and Chief Executive Officer
David O'Leary
Secretary
Paul R. Ballard
Executive Vice President
Robert C. Carr
Executive Vice President and Treasurer
David J. Dutton
Executive Vice President and Chief Information Officer
Cristin Reid English
Executive Vice President
Lee W. Hendrickson
Executive Vice President and Chief Financial Officer
Michael M. Moran
Executive Vice President
David K. Powers
Executive Vice President
William E. Rheaume
Executive Vice President and Senior Counsel
Bruce A. Thomas
Executive Vice President
Brian K. English
General Counsel
Carl C. Farrar
Senior Vice President
John C. Smythe
Senior Vice President
Marie D. Walker
Senior Vice President and Controller
Marc A. Deur
Vice President
Janet L. Hardin
Vice President
Stephanie A. Maat
Vice President
Charles J. McDonald
Vice President
Linda D. Pavona
Vice President
Joseph D. Reid III
Associate Counsel
SUN COMMUNITY BANCORP LIMITED
BOARD OF DIRECTORS
Michael J. Devine
Attorney at Law
Richard N. Flynn
President, Flynn & Associates
Michael F. Hannley
President, Bank of Tucson
Richard Imwalle
President, University of Arizona Foundation
Michael L. Kasten
Managing Partner, Kasten Investments, L.L.C.
John S. Lewis
Vice Chairman, Sun Community Bancorp Limited
Humberto S. Lopez
President, HSL Properties, Inc.
Kathryn L. Munro
Chairman and Chief Executive Officer, Bridge West, LLC
Joseph D. Reid
Chairman, President and Chief Executive Officer
Capitol Bancorp Limited
Sun Community Bancorp Limited
Ronald K. Sable
Chief Executive Officer, Concord Solutions, L.L.C.
OFFICERS
Joseph D. Reid
Chairman, President and Chief Executive Officer
Michael L. Kasten
Vice Chairman
John S. Lewis
Vice Chairman
Richard N. Flynn
Secretary
James F. Crawford
Executive Vice President
David J. Dutton
Executive Vice President and Chief Information Officer
Cristin Reid English
Executive Vice President
Michael F. Hannley
Executive Vice President
Lee W. Hendrickson
Executive Vice President and Chief Financial Officer
Gerry J. Smith
Executive Vice President
Stephen D. Todd
Executive Vice President
Brian K. English
General Counsel
Patricia L. Stone
Senior Vice President
Leonard C. Zazula
Senior Vice President
Katherine P. Bowden
Vice President and Regional Controller
Paige E. Mulhollan
Vice President and Corporate Controller
Greg E. Patten
Vice President
Darryl Tenenbaum
Vice President
<PAGE>
NEVADA COMMUNITY BANCORP LIMITED
BOARD OF DIRECTORS
Glenn C. Christenson
EVP, CFO and CAO
Station Casinos, Inc.
Michael J. Devine
Attorney at Law
Cristin Reid English
Executive Vice President
Capitol Bancorp Limited
Joel I. Ferguson
Chairman
Ferguson Development, L.L.C.
Michael F. Hannley
President and Chief Executive Officer
Bank of Tucson
Mark A. James
Attorney at Law/State Senator
James, Driggs, Walch, Santoro,
Kearney, Johnson & Thompson
Lewis D. Johns
President
Mid-Michigan Investment Company
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Larry W. Kifer
Chairman and Chief Executive Officer
Algiers Hotel
Humberto S. Lopez
President
HSL Properties, Inc.
Thomas C. Mangione
President and Chief Operating Officer
Nevada Community Bancorp Limited
Joseph D. Reid
Chairman, President and Chief Executive Officer
Capitol Bancorp Limited
Sun Community Bancorp Limited
Edward D. Smith
President
Smith-Christensen Enterprises
OFFICERS
Joseph D. Reid
Chairman and Chief Executive Officer
Michael J. Devine
Vice Chairman
Michael F. Hannley
Secretary
Thomas C. Mangione
President and Chief Operating Officer
Lee W. Hendrickson
Executive Vice President and
Chief Financial Officer
Cristin Reid English
Executive Vice President
Nancy H. Hunter
Vice President
SUNRISE CAPITAL CORPORATION
BOARD OF DIRECTORS
Steven K. Black
President, California Region
Sunrise Capital Corporation
Michael J. Devine
Attorney at Law
Cristin Reid English
Executive Vice President
Capitol Bancorp Limited
William D. Hinz, II
President
Sunrise Bank of Arizona
Michael L. Kasten
Managing Partner
Kasten Investments, L.L.C.
Joseph D. Reid
Chairman, President and Chief Executive Officer
Capitol Bancorp Limited
Sun Community Bancorp Limited
Douglas N. Reynolds
Chief Credit Officer
Sunrise Bank of Arizona
OFFICERS
Joseph D. Reid
Chairman, President and Chief Executive Officer
Steven K. Black
President, California Region
Lee W. Hendrickson
Executive Vice President and
Chief Financial Officer
William D. Hinz, II
Executive Vice President
and Chief Operating Officer
Cristin Reid English
Executive Vice President
Leonard C. Zazula
Executive Vice President
INDIANA COMMUNITY BANCORP LIMITED
BOARD OF DIRECTORS
Paul R. Ballard
Executive Vice President
Capitol Bancorp Limited
Robert C. Carr
Executive Vice President and Treasurer
Capitol Bancorp Limited
J. Christopher Chocola
Chairman of the Board
CTB, Inc.
Myrl D. Nofziger
President
Hoogenboom Nofziger
Joseph D. Reid
Chairman, President and Chief Executive Officer
Capitol Bancorp Limited
Sun Community Bancorp Limited
Larry Schrock
President
Deutsch Kase Haus, Inc.
OFFICERS
Joseph D. Reid
Chairman and Chief Executive Officer
Robert C. Carr
President
Paul R. Ballard
Executive Vice President
and Chief Operating Officer
Lee W. Hendrickson
Executive Vice President and
Chief Financial Officer
Cristin Reid English
Executive Vice President
<PAGE>
[LOGO] CAPITOL BANCORP LIMITED
Financial Information Section
of
2000 Annual Report to Shareholders
One Business & Trade Center
200 Washington Square North
Lansing, MI 48933
(517) 487-6555
<PAGE>
TABLE OF CONTENTS
Selected Consolidated Financial Data...........................................2
Information Regarding Capitol's Common Stock...................................3
Availability of Form 10-K and Certain Other Reports............................3
Other Corporate and Shareholder Information....................................4
Responsibility For Financial Statements........................................5
Cautionary Statement Regarding Forward-Looking Statements......................5
Management's Discussion and Analysis of Financial Condition
and Results of Operations:
The Business of Capitol and Its Banks......................................6
Capitol's Structure........................................................7
Recent Developments........................................................9
Banking Technology at Capitol.............................................10
2000 Financial Overview...................................................10
Changes in Consolidated Financial Position................................10
Consolidated Results of Operations........................................14
Liquidity, Capital Resources and Capital Adequacy.........................16
Trends Affecting Operations...............................................18
New Accounting Standards..................................................22
Report of Independent Auditors................................................23
Consolidated Financial Statements:
Consolidated Balance Sheets...............................................24
Consolidated Statements of Income.........................................25
Consolidated Statements of Changes in Stockholders' Equity................26
Consolidated Statements of Cash Flows.....................................27
Notes to Consolidated Financial Statements................................28
1
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in $1,000s, except per share data)
<TABLE>
<CAPTION>
As of and for the Year Ended December 31
------------------------------------------------------------------
2000(1) 1999(2) 1998(3) 1997(4) 1996(5)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year:
Interest income $ 132,311 $ 93,602 $ 69,668 $ 49,549 $ 36,479
Interest expense 65,912 46,237 36,670 24,852 17,800
Net interest income 66,399 47,365 32,998 24,697 18,679
Provision for loan losses 7,216 4,710 3,523 2,049 1,196
Noninterest income 6,137 4,714 3,558 2,157 1,705
Noninterest expense 52,846 40,257 26,325 16,721 12,307
Income before cumulative effect of change
in accounting principle 8,035 5,606(6) 4,628 5,557 4,636
Net income 8,035 5,409 4,628 5,557 4,636
Net income per share:
Basic 1.14 .84 .74 .91 .85
Diluted 1.13 .83 .72 .88 .82
Cash dividends paid per share .36 .36 .33 .30 .25
At end of year:
Total assets $1,630,076 $1,305,987 $1,024,444 $ 690,556 $ 492,263
Total earning assets 1,517,350 1,227,976 953,315 641,561 455,502
Portfolio loans 1,355,798 1,049,204 724,280 502,755 357,623
Deposits 1,400,899 1,112,793 890,890 604,407 436,166
Debt obligations 58,150 47,400 23,600 6,500
Trust-preferred securities 24,327 24,291 24,255 24,126
Minority interests in consolidated subsidiaries 62,575 54,593 27,576 11,020 4,731
Stockholders' equity 70,404 54,668 49,292 45,032 40,159
Quarterly Results of Operations
----------------------------------------------------
First Second Third Fourth Total for
Quarter Quarter Quarter Quarter the Year
---------- ---------- ---------- ---------- ----------
Year ended December 31, 2000:(1)
Interest income $ 28,789 $ 32,041 $ 34,651 $ 36,830 $ 132,311
Interest expense 14,024 15,684 17,461 18,743 65,912
Net interest income 14,765 16,357 17,190 18,087 66,399
Provision for loan losses 1,362 2,004 1,630 2,220 7,216
Income before income taxes 2,615 2,925 3,229 3,555 12,324
Net income 1,718 1,930 2,080 2,307 8,035
Net income per share:
Basic .25 .27 .29 .32 1.14
Diluted .25 .27 .29 .32 1.13
Cash dividends paid per share .09 .09 .09 .09 .36
Year ended December 31, 1999:(2)
Interest income $ 20,491 $ 21,918 $ 24,561 $ 26,632 $ 93,602
Interest expense 10,601 10,850 11,800 12,986 46,237
Net interest income 9,890 11,068 12,761 13,646 47,365
Provision for loan losses 809 901 1,221 1,779 4,710
Income before income taxes and cumulative
effect of change in accounting principle 2,104 2,433 2,091 2,191 8,819
Income before cumulative effect of change
in accounting principle 1,339(6) 1,503 1,336 1,428 5,606
Net income 1,142 1,503 1,336 1,428 5,409
Net income per share:
Basic .18 .24 .21 .21 .84
Diluted .18 .23 .21 .21 .83
Cash dividends paid per share .09 .09 .09 .09 .36
</TABLE>
(1) Includes Black Mountain Community Bank effective March 2000 (located in
Henderson, Nevada and majority-owned by Nevada Community Bancorp Limited),
Sunrise Bank of Albuquerque effective April 6, 2000 (located in
Albuquerque, New Mexico and majority-owned by Sunrise Capital Corporation),
Arrowhead Community Bank effective September 2000 (located in Glendale,
Arizona and majority-owned by Sun Community Bancorp Limited), Goshen
Community Bank effective September 2000 (located in Goshen, Indiana and
majority-owned by Indiana Community Bancorp Limited) and Yuma Community
Bank effective December 2000 (located in Yuma, Arizona and majority-owned
by Sun Community Bancorp Limited).
(2) Includes East Valley Community Bank effective June 1999 (located in
Chandler, Arizona and majority-owned by Sun Community Bancorp Limited);
Desert Community Bank (August 1999) and Red Rock Community Bank (November
1999), both located in Las Vegas, Nevada and majority-owned by Nevada
Community Bancorp Limited (formed in 1999 and majority-owned by Sun); and
Elkhart Community Bank effective September 1999 (located in Elkhart,
Indiana) and majority-owned by Indiana Community Bancorp Limited (formed in
1999 and majority-owned by Capitol).
(3) Includes Kent Commerce Bank effective January 1998 and Detroit Commerce
Bank effective December 1998, both located in Michigan and majority-owned
by Capitol and, in Arizona, Camelback Community Bank (effective May 1998),
Southern Arizona Community Bank (effective August 1998), Mesa Bank
(effective October 1998) and Sunrise Bank of Arizona (effective December
1998), majority-owned DE NOVO bank subsidiaries of Sun Community Bancorp
Limited.
(4) Includes Brighton Commerce Bank, effective January 1997, and Muskegon
Commerce Bank, effective December 1997, which are majority-owned by
Capitol, respectively. Also includes Valley First Community Bank, effective
June 1997.
(5) Includes Bank of Tucson and Macomb Community Bank, effective June 1996 and
September 1996, respectively.
(6) Implementation of a new accounting standard which required the write-off of
previously capitalized start-up costs resulted in a one-time charge of
$197,000 (net of income tax effect) or $.03 per share effective January 1,
1999.
2
<PAGE>
INFORMATION REGARDING CAPITOL'S COMMON STOCK
Capitol's common stock is traded on the National Market Tier of The Nasdaq Stock
Market(SM) under the symbol "CBCL". Market quotations regarding the range of
high and low sales prices of Capitol's common stock, which reflect inter-dealer
prices without retail mark-up, mark-down or commissions, were as follows:
2000 1999
----------------- -----------------
Low High Low High
------- ------- ------- -------
Quarter Ended:
March 31 $ 8.063 $16.938 $18.000 $21.750
June 30 10.750 13.875 16.875 20.000
September 30 9.625 12.375 10.875 18.625
December 31 8.750 13.375 9.625 14.625
During 2000 and 1999, Capitol paid quarterly cash dividends of $0.09 per share.
In early 2001, Capitol announced an increase in its quarterly cash dividend to
$0.10 per share.
As of February 15, 2001, there were 4,003 beneficial holders of Capitol's common
stock, based on information supplied to Capitol from its stock transfer agent
and other sources. At that date, 7,673,363 shares of common stock were
outstanding. Capitol's stock transfer agent is UMB Bank, n.a., 928 Grand Ave.,
P.O. Box 410064, Kansas City, Missouri 64141-0064 (telephone (800) 884-4225).
Capitol has a Shareholder Investment Program which offers a variety of
convenient features including dividend reinvestment, certain fee-free
transactions, certificate safekeeping and other benefits. For a copy of the
program prospectus, informational brochure and enrollment materials, contact UMB
Bank, n.a. at (800) 884-4225 or Capitol at (517) 487-6555.
In addition to Capitol's common stock, trust-preferred securities of Capitol
Trust I (a subsidiary of Capitol) are also traded on the National Market Tier of
The Nasdaq Stock Market(SM) under the symbol "CBCLP". 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 callable after 2002 and may be
extended to 2036 if certain conditions are met.
AVAILABILITY OF FORM 10-K AND CERTAIN OTHER REPORTS
A copy of Capitol's 2000 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, One Business & Trade
Center, 200 Washington Square North, Lansing, Michigan 48933.
Form 10-K, and certain other periodic reports, are filed with the Securities and
Exchange Commission (SEC). The SEC maintains an internet web site that contains
reports, proxy and information statements and other information regarding
companies which file electronically (which includes Capitol). The SEC's web site
address is http:\\www.sec.gov. Capitol's filings with the SEC can also be
accessed through Capitol's web site, http:\\www.capitolbancorp.com.
3
<PAGE>
OTHER CORPORATE INFORMATION
CORPORATE OFFICE
One Business and Trade Center
200 Washington Square North
Lansing, Michigan 48933
(517) 487-6555
www.capitolbancorp.com
INDEPENDENT AUDITORS
BDO Seidman, LLP, Grand Rapids, Michigan
SHAREHOLDER INFORMATION
ANNUAL MEETING
Capitol's Annual Meeting will be held on Thursday, May 3, 2001 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 National Market Tier of the Nasdaq Stock
Market(SM) under the trading symbol CBCL.
The following brokerage firms make a market in the common stock of Capitol:
Robert W. Baird & Co., Inc. - Milwaukee, Wisconsin
First Union Securities - Richmond, Virginia
Keefe, Bruyette & Woods, Inc. - New York, New York
NDB Capital Markets - New York, New York
Raymond James & Associates, Inc. - St. Petersburg, Florida
Spear Leeds & Kellogg - New York, New York
Stifel Nicolaus & Company, Inc. - St. Louis, Missouri
U.S. Bancorp Piper Jaffray - Minneapolis, Minnesota
COMMON STOCK TRANSFER AGENT
UMB Bank, n.a.
928 Grand Avenue
P.O. Box 410064
Kansas City, Missouri 64141-0064
(800) 884-4225
SHAREHOLDER INVESTMENT PLAN
Capitol offers an easy and affordable way to invest in Capitol's common stock
through the Shareholder Investment program. The program's benefits include
reinvestment of dividends in additional common stock, direct deposit of
dividends, ability to purchase as little as $50 in common stock as frequently as
once a month, and the option to make transfers or gifts of Capitol's common
stock to another person. Participation in the program is voluntary and all
shareholders are eligible. Purchases under the program are not currently subject
to any brokerage fees or commissions. For further information regarding
Capitol's Shareholder Investment Program or a copy of its prospectus,
informational brochure and enrollment materials, contact UMB Bank, n.a. at (800)
884-4225 or Capitol at (517) 487-6555.
TRUST-PREFERRED SECURITIES TRADING INFORMATION
Preferred securities of Capitol Trust I (a subsidiary of Capitol) trade on the
Nasdaq Stock Market(SM) under the trading symbol "CBCLP".
TRUST-PREFERRED SECURITIES TRUSTEE
Bank One Investment Management Group - Chicago, Illinois
4
<PAGE>
RESPONSIBILITY FOR FINANCIAL STATEMENTS
Capitol's management is responsible for the preparation of the consolidated
financial statements and all other information appearing in this annual report.
The financial statements have been prepared in accordance with generally
accepted accounting principles.
Capitol's management is also responsible for establishing and maintaining the
internal control structure of Capitol, its banks and its bank development
subsidiaries. The general objectives of the internal control structure are to
provide management with reasonable assurance that assets are safeguarded against
loss from unauthorized use or disposition, and that transactions are executed in
accordance with generally accepted accounting principles. In fulfilling this
objective, management has various control procedures in place which include, but
are not limited to, review and approval of transactions, a code of ethical
conduct for employees, internal auditing and an annual audit of Capitol's
consolidated financial statements performed by a qualified independent audit
firm. Management believes the internal control structure of Capitol to be
adequate and that there are no material weaknesses in internal control.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this annual report that are not historical
facts are forward-looking statements. Those forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act of 1995, are subject
to known and unknown risks, uncertainties and other factors which may cause the
actual future results, performance or achievements of Capitol and/or its
subsidiaries and other operating units to differ materially from those
contemplated in such forward-looking statements. The words "intend", "expect",
"project", "estimate", "predict", "anticipate", "should", "will", "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. 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.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Most of this section discusses items of importance regarding Capitol's financial
statements which appear elsewhere in this report. In order to obtain a full
understanding of this discussion, it is important to read it with those
financial statements. However, before discussing the financial statements and
related highlights, an introductory section includes some important background
information about the business of Capitol and its banks, Capitol's structure and
recent developments.
THE BUSINESS OF CAPITOL AND ITS BANKS
Capitol defines itself as a BANK DEVELOPMENT COMPANY. In the highly regulated
business of banking, it is viewed by governmental agencies as a bank holding
company. Capitol views bank DEVELOPMENT as a much more dynamic activity than the
regulatory label for bank holding companies.
Bank development at Capitol is the business of mentoring, monitoring and
managing its investments in community banks. Bank development is also the
activity of adding new banks through start-up, or DE NOVO, formation or through
other affiliation efforts, such as acquiring existing banks.
The banks have similar characteristics:
* Each bank has an on-site president and management team, as local
decision makers.
* Each bank has a local board of directors which has actual authority
over the bank.
* Each bank generally operates from only one office location.
* Each bank can fully meet customers' needs anywhere, anytime through
bankers-on-call, courier services, telephone banking and other
delivery methods.
* Each bank has access to an efficient back-room processing facility and
leading-edge technology through shared financial and operating
resources.
Capitol's banks seek the profitable customer relationships which are often
displaced through mergers, mass marketing and megabanks with an impersonal
approach to handling customers. The banks are focused on commercial banking
activities, emphasizing business customers, although they also offer a complete
array of financial products and services.
Each bank has a separate charter. A bank charter is similar to articles of
incorporation and enables each bank to exist as a distinct legal entity. Most of
these banks are state-chartered, which means they are organized under a
particular state's banking laws. All of the banks are FDIC-insured, and some are
members of the Federal Reserve System. Banks are highly regulated by state and
federal agencies. Because each bank has its own charter, each bank is examined
by both state and federal agencies as a separate and distinct legal entity for
safety, soundness and compliance with banking laws and regulations.
At December 31, 2000, Capitol consisted of 26 community banks, operating in 6
states.
6
<PAGE>
Capitol's bank development philosophy is one of "SHARED VISION", which
encompasses a commitment to community banking emphasizing local leadership and
investment, with the shared resources of efficient management. Capitol provides
these shared resources to its banks, including common data processing systems,
centralized item processing, loan review, internal audit, credit administration,
accounting and risk management.
CAPITOL'S STRUCTURE
The organizational structure of Capitol is very complex. It is a mixture of
banks which Capitol owns directly and others which are owned indirectly through
subsidiary bank development companies. Additionally, Capitol's direct and
indirect ownership percentages of these entities differ.
To simplify the overall organizational structure, Capitol's bank development
activity may be viewed on these levels:
Capitol Bancorp Limited
(Bank Development Company)
|
+-----------+------------+
| |
Great Lakes Region Southwestern Region
Bank Development Bank Development
Great Lakes regional bank development currently consists of activity in the
states of Michigan and Indiana. Capitol's 11 Michigan banks range in age from
two years to 18 years. Their size varies from $30 million in assets to $242
million. These banks are all located in dynamic markets across the lower
peninsula of Michigan in a band about 180 miles wide and 75 miles north and
south from that line, in Michigan's most populous and active economic region. Of
these banks, 9 were begun as start-up operations and 2 were added via
acquisitions:
<TABLE>
<S> <C> <C> <C>
Michigan Bank Development
|
East Michigan Banks -------------------+----------------- West Michigan Banks
+ +
| |
Capitol National Bank | Macomb Community Bank Portage Commerce Bank | Muskegon Commerce Bank
(Lansing -- 1982) --+-- (Clinton Township -- 1996) (Portage -- 1988) --+-- (Muskegon -- 1997)
100% owned | 100% owned 100% owned | 100% owned
| |
Ann Arbor Commerce Bank | Brighton Commerce Bank Paragon Bank & Trust | Kent Commerce Bank
(Ann Arbor -- 1990) --+-- (Brighton -- 1997) (Holland -- 1994) --+-- (Grand Rapids -- 1998)
100% owned | 100% owned 100% owned | 100% owned
| |
Oakland Commerce Bank | Detroit Commerce Bank Grand Haven Bank |
(Farmington Hills -- 1992) --+-- (Detroit -- 1998) (Grand Haven -- 1995) --+--
100% owned 93% owned 100% owned
</TABLE>
Indiana Community Bancorp is 52% owned by Capitol and was formed in 1999 to
focus on developing banks in Indiana. Its first bank, Elkhart Community Bank, is
51% owned by that bank development company and opened in September 1999. Its
second bank, Goshen Community Bank, opened in September 2000 and is 51% owned by
Indiana Community Bancorp. Total assets of Indiana Community Bancorp were about
$33 million at year-end 2000 ($12 million at year-end 1999).
Sun Community Bancorp has become a particularly significant part of Capitol's
overall bank development strategy. Headquartered in Phoenix, Arizona, it is a
public company which is carrying out all of its current bank development
activities in the southwestern region of the United States.
7
<PAGE>
At year-end 2000, its consolidated assets were $527 million ($300 million at
year-end 1999). It is also comprised of a combination of directly-owned banks
and bank development subsidiaries:
<TABLE>
<S> <C> <C>
Sun Community Bancorp Limited
(Southwestern Region Bank Development)
Approx. 50% owned by Capitol Bancorp
|
+------------------------------+----------------------------------+
| | |
Arizona bank development Nevada bank development through Sunrise Capital Corporation, multi-
through 8 majority- Nevada Community Bancorp state bank development emphasizing
owned community banks Limited and its 3 majority- specialized lending (SBA) through 2
owned community banks majority-owned community banks
</TABLE>
The current group of banks comprising bank development in Arizona follows:
Arizona Bank Development
(direct subsidiaries of
Sun Community Bancorp Limited)
+
|
Bank of Tucson | Valley First
(Tucson -- 1996) --+-- Community Bank
100% ownership by Sun | (Scottsdale -- 1997)
| 100% ownership by Sun
|
Mesa Bank | Camelback
(Mesa -- 1998) --+-- Community Bank
53% ownership by Sun | (Phoenix -- 1998)
| 55% ownership by Sun
|
Southern Arizona | East Valley
Community Bank --+-- Community Bank
(Tucson -- 1998) | (Chandler -- 1999)
51% ownership by Sun | 85% ownership by Sun
|
Arrowhead | Yuma
Community Bank --+-- Community Bank
(Glendale -- 2000) (Yuma -- 2000)
51% ownership by Sun 51% ownership by Sun
All of these banks are very young. The most mature bank of the group, Bank of
Tucson, completed its 48th month of operation in June 2000. The youngest bank,
Yuma Community Bank, opened in December 2000. These banks range in size from
about $5 million in assets to $98 million at year-end 2000. Five of the banks
are located in or near greater Phoenix and two are located in Tucson.
Bank development activities in Nevada are carried out through Nevada Community
Bancorp Limited, which is 54% owned by Sun, and was formed in 1999:
Nevada Community Bancorp Limited
54% owned by Sun
|
+-----------------------------+---------------------------+
| | |
Black Mountain Desert Community Bank Red Rock Community Bank
Community Bank (Las Vegas -- 1999) (Las Vegas -- 1999)
(Henderson -- 2000) 51% ownership by NCBL 51% ownership by NCBL
51% ownership by NCBL
8
<PAGE>
Both of the Las Vegas banks opened in the second half of 1999 and the third bank
opened in March 2000. Nevada's consolidated total assets approximated $106
million at year-end 2000 ($34 million at year-end 1999).
Sunrise Capital Corporation was formed in 1999 and is approximately 60% owned by
Sun at year-end 2000. It is focused on developing banks in several states with a
slightly different emphasis on commercial lending than the other bank affiliates
of Capitol and Sun. Its banks are focused on offering loan products structured
through and partially guaranteed by the SBA, or U.S. Small Business
Administration, in addition to the full array of typical bank products and
services:
Sunrise Capital Corporation
SBA Bank Development
(Approx. 60% owned by Sun)
|
+-----------------+----------------+
| |
Sunrise Bank of Arizona Sunrise Bank of Albuquerque
Phoenix, Arizona Albuquerque, New Mexico
(1998) (2000)
100% ownership by SCC 87% ownership by SCC
In 2000, a loan production office of Sunrise Bank of Arizona was established in
San Diego, California. It subsequently evolved into Sunrise Bank of San Diego,
which opened in early January 2001.
All of the banks and subsidiary bank development companies are combined, or
consolidated, for financial reporting purposes because Capitol has ownership
control of them either directly or indirectly. Current accounting rules require
consolidated reporting when one entity has majority voting control of another.
The reporting entity is the parent organization and entities which are
majority-owned by the parent are subsidiaries. In the circumstances of Capitol,
this parent and subsidiary relationship applies also to second and third tier
subsidiaries which have consolidated subsidiaries of their own.
The accounting rules in this area are also complex and further complicate
gaining an understanding of the consolidated financial statements. For example,
consolidated balance sheets include all of the combined entities' assets and
liabilities, with an adjustment for the percentage of ownership of the minority
shareholders. On the other hand, consolidated net income includes all of the
combined entities, but only to the extent of the parent's ownership percentage.
RECENT DEVELOPMENTS
Because of the number of banks and bank development companies added in 2000,
1999 and 1998, comparing financial results for those and prior periods is
difficult.
In 2000, a total of five new banks were added to the consolidated group. In
1999, four new banks were added. In 1998, there were six new banks added to the
group. As mentioned above, one new bank was added in early January 2001.
Management expects that at least two applications for permission to form new
banks will be filed in 2001.
9
<PAGE>
In early 2000, Capitol announced augmenting its bank development activities to
include a more focused and proactive acquisition strategy whereby it may add
banks in two ways in the future--through startup or acquisition. As of year-end
2000 and early 2001, no acquisitions of existing entities were pending. Future
acquisition possibilities--if any--will depend upon market opportunities and
economic conditions, among other things.
BANKING TECHNOLOGY AT CAPITOL
The use of high technology banking systems is key to the delivery of accurate
and timely customer service. Capitol currently operates two data processing
sites, located in Lansing, Michigan and Tempe, Arizona. The Lansing site handles
item processing for the banks located in the Great Lakes region, while the Tempe
data center processes all activity for the banks located in the Southwest. Both
sites use mainframe computers and software which are nearly identical. While
physically separate, both sites function under common management and leadership.
Implementation of Internet-based banking capabilities was accomplished in 2000.
2000 FINANCIAL OVERVIEW
Capitol completed 2000 with total assets exceeding $1.6 billion, an increase of
25% over year-end 1999's level of $1.3 billion.
Net Income for 2000 exceeded $8.0 million, nearly 50% more than 1999's operating
earnings of $5.4 million.
CHANGES IN CONSOLIDATED FINANCIAL POSITION
Total assets have grown significantly from $1 billion at the end of 1998, to
over $1.6 billion at year-end 2000. This rapid asset growth is the result of
adding new banks and the ongoing growth and evolution of Capitol's more mature
banks.
Total Assets
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
492 691 1,024 1,306 1,630
At year-end 2000, total assets of the five banks formed in 2000 approximated $67
million. The banks formed in 1999 reported total assets of $138 million at the
end of 2000, an increase of $83 million during the year. Total assets of the six
banks which became two years old in 2000 grew 49% during the past year to $266
million. The three banks formed in 1997 continued strong asset growth of 19% in
2000, achieving total assets of $177 million. The most mature group of banks,
those formed before 1997, reported total assets of $971 million at year-end
2000, an increase of about 7% for the year.
10
<PAGE>
The total assets of each bank, the consolidated totals and ownership percentages
are summarized below as of year-end 2000 and 1999 (in $1,000s):
<TABLE>
<CAPTION>
Percentage Ownership By Total Assets
----------------------------- -----------------------
Capitol 2nd Tier 3rd Tier 2000 1999
------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Ann Arbor Commerce Bank 100% $ 242,180 $ 214,955
Brighton Commerce Bank 100% 62,431 55,400
Capitol National Bank 100% 148,385 133,179
Detroit Commerce Bank 93% 30,269 28,160
Grand Haven Bank 100% 76,644 72,915
Kent Commerce Bank 100% 45,288 38,865
Macomb Community Bank 100% 100,597 99,214
Muskegon Commerce Bank 100% 61,867 47,405
Oakland Commerce Bank 100% 97,099 93,065
Paragon Bank & Trust 100% 79,504 87,259
Portage Commerce Bank 100% 128,802 123,398
Indiana Community Bancorp Limited (ICBL): 52%
Elkhart Community Bank 51% 24,259 10,798
Goshen Community Bank 51% 8,402
---------- ----------
Consolidated ICBL 33,231 11,869
Sun Community Bancorp Limited (SCBL): 50%
Arrowhead Community Bank 51% 8,091
Bank of Tucson 100% 98,285 82,113
Camelback Community Bank 55% 49,364 30,254
East Valley Community Bank 85% 34,392 10,757
Mesa Bank 53% 36,529 24,738
Southern Arizona Community Bank 51% 40,156 25,778
Valley First Community Bank 100% 53,081 45,678
Yuma Community Bank 51% 5,064
Nevada Community Bancorp Limited NCBL): 54%
Black Mountain Community Bank 51% 26,060
Desert Community Bank 51% 35,511 17,839
Red Rock Community Bank 51% 44,193 15,596
---------- ----------
Consolidated NCBL 106,155 33,720
Sunrise Capital Corporation (SCC): 60%
Sunrise Bank of Albuquerque 87% 19,762
Sunrise Bank of Arizona 100% 63,930 30,615
---------- ----------
Consolidated SCC 84,908 30,615
---------- ----------
Consolidated SCBL 526,833 300,390
Other, net 9,930 18,006
---------- ----------
Consolidated totals $1,630,076 $1,305,987
========== ==========
</TABLE>
Most of the consolidated assets consist of loans. Portfolio loans approximated
$1.4 billion at year-end 2000, or about 83% of total consolidated assets, an
increase from the 80% at year-end 1999.
Total Loans
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
358 503 724 1,049 1,356
The banks emphasize commercial loans, consistent with their focus on serving
small to mid-sized business customers. The majority of commercial loans are
secured by real estate. Commercial loans comprise $1.2 billion or 87% of total
portfolio loans at year-end 2000, an increase in the 83% ratio at the end of
1999. Loan growth in 2000 was significant--$307 million,
11
<PAGE>
or a growth rate of 29%, for the year. The pace of loan growth in 2000 was less
than the 45% growth rate experienced in 1999 due to the maturity of the larger
banks within the consolidated group.
Asset quality has remained strong in this record period of economic stability
and expansion. Nonperforming loans, which consist of loans more than 90 days
past due and loans on nonaccrual status, approximated $6.8 million at year-end
2000, compared to $4.1 million at the end of 1999. The increase in 2000 was
mainly due to a small number of commercial loans becoming past due or loans on
nonaccrual status. Foreclosed real estate, which approximated $3.1 million at
December 31, 2000 ($3.6 million in 1999), is classified as a component of other
assets and consists primarily of one property which has a substantial guarantee
from a federal agency. Although the aggregate amount of nonperforming assets
increased, the ratio of nonperforming assets to total loans and total assets
remained about the same in 2000 compared to 1999.
The banks maintain an allowance for loan losses to absorb estimated losses in
the loan portfolio at the balance sheet date. At December 31, 2000, the
allowance for loan losses approximated $17.4 million or 1.29% of portfolio
loans, compared to $12.6 million or 1.20% at the end of 1999. The following
table summarizes portfolio loans, the allowance for loan losses and its ratio,
and nonperforming loans (in $1,000s):
<TABLE>
<CAPTION>
Allowance as
a % of Total
Allowance for Nonperforming Portfolio
Total Portfolio Loans Loan Losses Loans Loans
----------------------- ------------------- ------------------ ----------------
2000 1999 2000 1999 2000 1999 2000 1999
---------- ---------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ann Arbor Commerce Bank $ 208,114 $ 186,022 $ 2,810 $ 2,511 $ 799 $ 492 1.35% 1.35%
Brighton Commerce Bank 53,886 46,673 602 467 1.12% 1.00%
Capitol National Bank 130,384 120,097 1,757 1,581 805 769 1.35% 1.32%
Detroit Commerce Bank 21,081 20,694 245 209 1 1.16% 1.01%
Grand Haven Bank 67,419 61,498 861 802 474 257 1.28% 1.30%
Kent Commerce Bank 40,346 36,429 444 365 73 1.10% 1.00%
Macomb Community Bank 86,886 69,570 964 696 9 1.11% 1.00%
Muskegon Commerce Bank 55,431 41,848 617 419 125 13 1.11% 1.00%
Oakland Commerce Bank 79,598 77,192 971 880 515 1,504 1.22% 1.14%
Paragon Bank & Trust 64,820 69,752 807 804 507 64 1.24% 1.15%
Portage Commerce Bank 112,674 107,792 1,496 1,386 1,651 982 1.33% 1.29%
Indiana Community Bancorp Limited (ICBL):
Elkhart Community Bank 17,968 4,042 270 48 1.50% 1.19%
Goshen Community Bank 2,383 36 1.51%
---------- ---------- ------- ------- ------- -------
Consolidated ICBL 20,352 4,042 306 48 -0- -0-
Sun Community Bancorp Limited (SCBL):
Arrowhead Community Bank 4,724 71 1.50%
Bank of Tucson 75,359 59,088 1,023 725 1.36% 1.23%
Camelback Community Bank 37,822 22,731 483 228 1.28% 1.00%
East Valley Community Bank 25,937 4,335 357 44 1.38% 1.01%
Mesa Bank 28,930 18,884 374 189 27 1.29% 1.00%
Southern Arizona Community Bank 36,135 20,610 434 207 1.20% 1.00%
Valley First Community Bank 42,759 36,334 663 418 306 34 1.55% 1.15%
Yuma Community Bank 800 13 1.62%
Nevada Community Bancorp Limited (NCBL):
Black Mountain Community Bank 17,052 257 241 1.41%
Desert Community Bank 29,426 11,438 441 154 1,089 1.50% 1.35%
Red Rock Community Bank 38,666 7,861 586 156 1.52% 1.98%
---------- ---------- ------- ------- ------- -------
Consolidated NCBL 85,143 19,299 1,284 310 1,330 -0-
Sunrise Capital Corporation (SCC):
Sunrise Bank of Albuquerque 16,259 238 1.46%
Sunrise Bank of Arizona 59,465 24,952 650 250 35 1.09% 1.00%
---------- ---------- ------- ------- ------- -------
Consolidated SCC 75,833 24,952 888 250 144 -0-
---------- ---------- ------- ------- ------- -------
Consolidated SCBL 422,344 206,232 5,440 2,371 1,807 -0-
Other, net 1,474 1,362 (21) 100 109
---------- ---------- ------- ------- ------- ------- ------ ------
Consolidated totals $1,355,798 $1,049,204 $17,449 $12,639 $ 6,757 $ 4,124 1.29% 1.20%
========== ========== ======= ======= ======= ======= ====== ======
</TABLE>
12
<PAGE>
The allowance for loan losses is maintained at a level believed adequate by
management. It is analyzed quarterly by each bank. The adequacy of the allowance
is based on evaluation of the loan portfolio (including volume, amount and
composition, potential impairment of individual loans and concentration of
credit), past loss experience, current economic conditions, loan commitments
outstanding, regulatory requirements and other factors.
In 2000, standard-setting bodies, regulatory agencies and the SEC (Securities
and Exchange Commission) have, on an industry-wide basis, separately issued
proposals on how the allowance for loan losses should be estimated in the
future. Some of these proposals conflict with each other and it is difficult to
predict how such proposals, however finalized, will impact the financial
institution industry, individual banks and bank holding companies. Estimation of
requirements for the allowance for loan losses is an inherently subjective
process which involves significant judgement by management of many variables
potentially impacting borrowers' ability to repay loans and the estimated values
of underlying loan collateral.
The allowance ratio decreased in 1998 and 1999, mainly due to the addition of
new banks to the consolidated group. New banks, as a condition of charter
approval, are required to maintain an allowance ratio of not less than 1% for
their first three years of operations. Because they are new banks with new and
unseasoned loans and no prior loss history, 1% is often used as a starting point
for the allowance, particularly in the earliest years of operation. As some of
the younger banks now have more seasoned loan portfolios and the 1% regulatory
requirement represents only an absolute minimum, loan loss allowance ratios were
increased in 2000 based on management's estimates of loss potential within the
loan portfolios at the balance-sheet date.
In addition to the recorded allowance, some Michigan and Indiana banks have
loans which are enrolled in state-sponsored programs which provide supplemental
loss protection through earmarked deposits kept at the participating banks by
the applicable state agency. Loans in this program totaled $34 million at both
year-end 2000 and 1999 and the amount of the loss reserves available for those
loans approximated $1.6 million in 2000 and $2 million in 1999.
In late 2000, the state agency administering the Michigan program announced its
plans to terminate the program. In early 2001, the future of the program
appeared uncertain. In the event that the program is terminated, loans
previously enrolled in the program and related reserves would continue until the
underlying loans are repaid, but no new loans would be enrolled in the program.
While this program has been important to Capitol's Michigan banks, termination
of the program is not expected to have a material adverse affect on those banks'
lending activities in the future. The termination of the program, if it occurs,
will adversely affect the future availability of credit for those borrowers who
otherwise would have been eligible for enrollment in the program.
13
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
Revenue growth has been significant. In 2000, total revenues exceeded $138.4
million, a 41% increase over the 1999 revenue level of $98.3 million. The
primary revenue source is interest income from loans. Net interest income is the
difference between total interest income and interest expense on deposits and
borrowings. The following graphs summarize growth in total revenue (which
includes noninterest income revenues like some fees and service charges) and net
interest income:
Total Revenues
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
38.2 51.7 73.2 98.3 138.4
Net Interest Income
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
18.7 24.7 33.0 47.4 66.4
Most of the 2000 revenues, $88 million or about 63%, came from the most mature
banks--those formed prior to 1997. That group experienced revenue growth of 18%
in 2000 and about 16% in 1999. Banks formed in 1998 and 1997 reported 2000
revenues of $36 million or slightly more than 25% of the consolidated total.
Rates of 2000 revenue growth for banks started in 1997 were 40% and, for the
ones started in 1998, approximately 86%. The youngest banks, those formed in
2000 and 1999, generated 2000 revenues totaling $12 million or about 8% of total
consolidated revenues.
Growth in the categories of interest income and interest expense as well as
noninterest income and noninterest expense, is the result of the addition of new
banks during the periods presented and the ongoing growth of Capitol's more
mature banks. Growth in interest expense is mainly due to higher levels of
interest-bearing funds which fund growth at each of the banks, coupled with
recent increases in interest rates.
The largest component of noninterest expense is salaries and employee benefits,
which has increased significantly due to the larger number of banks and bank
development subsidiaries.
14
<PAGE>
The following table summarizes net income for each of the banks, and on a
consolidated basis, and the related rates of return on average assets and
equity, where applicable (in $1,000s):
<TABLE>
<CAPTION>
Net Income Return on Average Equity Return on Average Assets
----------------------------- ----------------------- ------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
------- ------- ------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ann Arbor Commerce Bank $ 3,508 $ 2,730 $ 2,125 21.43% 19.15% 19.13% 1.55% 1.35% 1.32%
Brighton Commerce Bank 534 455 (48) 10.22% 10.33% 0.90% 0.91%
Capitol National Bank 2,319 2,162 2,012 22.08% 21.76% 21.62% 1.63% 1.66% 1.69%
Detroit Commerce Bank 10 (341) (21) 0.37% 0.03%
Grand Haven Bank 1,084 955 615 19.20% 18.99% 14.19% 1.46% 1.34% 1.11%
Kent Commerce Bank 130 (61) (415) 3.21% 0.30%
Macomb Community Bank 1,212 712 323 14.41% 10.25% 7.16% 1.14% 0.83% 0.56%
Muskegon Commerce Bank 689 189 (191) 15.14% 5.97% 1.23% 0.49%
Oakland Commerce Bank 1,027 1,010 866 13.78% 14.58% 13.77% 1.08% 1.03% 0.90%
Paragon Bank & Trust 431 352 678 6.72% 5.47% 11.35% 0.50% 0.42% 0.82%
Portage Commerce Bank 1,552 1,775 1,393 16.76% 21.40% 20.38% 1.21% 1.54% 1.34%
Indiana Community Bancorp Limited (ICBL):
Elkhart Community Bank (229) (223)
Goshen Community Bank (216)
------- ------- -------
Consolidated ICBL (299) (131) -0-
Sun Community Bancorp Limited (SCBL):
Arrowhead Community Bank (419)
Bank of Tucson 2,149 1,086 776 27.69% 16.63% 12.73% 2.33% 1.48% 1.25%
Camelback Community Bank 297 (520) (370) 8.22% 0.74%
East Valley Community Bank (532) (673)
Mesa Bank 268 (207) (118) 6.77% 0.85%
Southern Arizona Community Bank 169 (546) (252) 4.44% 0.47%
Valley First Community Bank 88 36 (81) 1.82% 0.87% 0.18% 0.10%
Yuma Community Bank (176)
Nevada Community Bancorp Limited (NCBL):
Black Mountain Community Bank (468)
Desert Community Bank (180) (358)
Red Rock Community Bank 190 (269) 2.45% 0.62%
------- ------- -------
Consolidated NCBL (483) (469) -0-
Sunrise Capital Corporation (SCC):
Sunrise Bank of Albuquerque (386)
Sunrise Bank of Arizona 206 (634) (26) 4.64% 0.43%
------- ------- -------
Consolidated SCC (243) (634) (26)
------- ------- -------
Consolidated SCBL 807 (1,593) 57
Other, net (5,222) (2,221) (2,638)
------- ------- ------- ----- ----- ----- ----- ----- -----
Consolidated totals $ 8,035 $ 5,409 $ 4,628 13.78% 10.66% 10.19% 0.55% 0.47% 0.55%
======= ======= ======= ===== ===== ===== ===== ===== =====
</TABLE>
Provisions for loan losses also increased significantly during recent years,
commensurate with the growth in both the number of banks and loans, in addition
to higher levels of loan charge-offs.
During 1999, a new accounting standard required the write-off of previously
capitalized start-up costs, which is discussed in a later section of this
narrative. It is reflected as a cumulative effect of a change in accounting
principle in the consolidated statement of income, and amounted to $.03 per
share.
Net Income
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
4.6 5.6 4.6 5.4 8.0
15
<PAGE>
LIQUIDITY, CAPITAL RESOURCES AND CAPITAL ADEQUACY
Liquidity for financial institutions consists of cash and cash equivalents,
marketable investment securities and loans held for resale. These categories
totaled $226 million at year-end 2000, or about 14% of total assets. This
compares to $216 million or 17% of total assets at year-end 1999.
Liquidity varies significantly daily, based on customer activity. The change in
the liquidity ratio is the result of more assets being deployed into loans,
consistent with the strategy of maximizing interest income. Rates of interest
income on liquid assets are typically less than rates the banks achieve from
commercial loans.
Most of the investment securities portfolio is classified as available for sale,
although the banks generally have not sold investments to meet liquidity needs.
Also, to the extent warranted, the banks may sell loans from time to time.
The primary source of funds for the banks is deposits. The banks emphasize
interest-bearing time deposits as part of their funding strategy. The banks also
seek noninterest-bearing deposits, or checking accounts, which reduce the banks'
cost of funds. Noninterest-bearing deposits were about 15% of total deposits at
year-end 2000 and increased $62 million, or 42%, during the year.
Total Deposits
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
436 604 891 1,113 1,401
In recent periods, banks in general have experienced some competitive challenges
in obtaining additional deposits to fuel growth. Capitol's banks have had
similar experiences in their individual markets. As depositors have wider access
to the Internet and other real-time interest rate monitoring resources, deposit
pricing has become more competitive. Deposit growth is achievable, but at a
higher price, shrinking net interest margins. The banks utilize deposit brokers
from time to time, but do not rely on brokered deposits as a key funding source.
To supplement their funding sources, some of the banks have obtained lines of
credit from the Federal Home Loan Bank system. At year-end 2000, a total of $40
million ($16 million at year-end 1999) was borrowed under those facilities and
additional borrowing availability approximated $19 million. Some of the banks
also have smaller lines of credit with their correspondent banks. Borrowings
under these facilities are generally at short-term market rates of interest and,
although the repayment dates can be extended, are generally outstanding for
brief periods of time.
16
<PAGE>
Capitol has lines of credit aggregating $35 million from an unaffiliated bank.
At year-end 2000, a total of $18.2 million ($29.9 million at year-end 1999) was
borrowed under this facility. Borrowings under this credit facility were reduced
in 2000 through use of idle corporate funds within the consolidated group.
A significant source of capital has been investments provided by minority
shareholders in the subsidiaries which are consolidated for financial reporting
purposes. Total minority interests in consolidated subsidiaries amounted to
$62.6 million at year-end 2000, an increase of $8 million from the $54.6 million
level at year-end 1999. These minority interests approximated $27.6 million at
the end of 1998. The increases in these periods are the result of Capitol's
strategy of starting new banks and bank development companies with less than
100% ownership by Capitol. The 1999 increase also includes the impact of Sun's
initial public offering of common stock.
Three of the majority-owned banks became 100% owned in 2000. When these banks
neared their 36th month of operation, Capitol offered the minority owners an
opportunity to exchange their bank shares for shares of Capitol. The exchange
ratio was based on 150% of the banks' adjusted book value. Brighton Commerce
Bank's share exchange transaction was completed effective January 31, 2000.
Share exchange transactions for Kent Commerce Bank and Muskegon Commerce Bank
were completed effective December 31, 2000. As a result of the share exchanges,
the minority owners of those three banks became shareholders of Capitol. About
626,000 new shares of Capitol's common stock were issued in these transactions.
While it is likely that similar share exchange transactions, as a
harvest-strategy to gain full ownership of some bank subsidiaries, may occur in
the future, any such transactions depend upon whether Capitol (or one of its
subsidiary bank holding companies) offers such an exchange and whether minority
shareholders vote in favor of it on a transaction-by-transaction basis.
As mentioned previously, Capitol announced expansion of its bank development
strategy in 2000 to include a more specific consideration of acquisition
opportunities. Future acquisitions, if any, are likely to be structured as share
exchange transactions, using Capitol's common stock.
Total stockholders' equity approximated $70.4 million at year-end 2000, an
increase of $15.7 million for the year. The 2000 increase in stockholders'
equity includes earnings (less dividends paid) and proceeds from the issuance of
common stock. The book value per share of common stock was $9.18 at year-end
2000, compared with $8.08 at year-end 1999. Cash dividends of $.36 were paid in
both 2000 and 1999, compared to $.33 in 1998. Future payment of dividends is
subject to approval by Capitol's board of directors and management's assessment
of the consolidated organization's capital adequacy. In early 2001, Capitol
announced an increase in its quarterly cash dividend to $.10 per share.
Capitol's capital structure consists of these primary elements:
* Trust preferred securities,
* Minority interests in consolidated subsidiaries, and
* Stockholders' equity.
17
<PAGE>
Total Capitalization
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
44.9 80.2 101.1 133.6 157.3
Total capitalization at year-end 2000 amounted to $157.3 million or 9.7% of
total assets. This compares to $133.6 million or 10.2% at year-end 1999.
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 benefit from
lower FDIC deposit insurance costs and less restrictive limitations on some
banking activities.
New banks, as a condition of regulatory charter approval, are required to
maintain higher ratios of capital adequacy. Generally, they are required to keep
a ratio of capital-to-total-assets of not less than 8% during their first three
years of operation.
In the opinion of management, all of the affiliated banks met the criteria to be
classified as WELL CAPITALIZED at year-end 2000.
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 on 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
18
<PAGE>
difference between interest rate-sensitive assets and interest rate-sensitive
liabilities is characterized as a "gap" which is quantified by the distribution
of rate-sensitive amounts within various time periods in which they reprice or
mature. The following table summarizes the consolidated financial position in
relation to "gap" at December 31, 2000 (in $1,000s):
<TABLE>
<CAPTION>
Interest Rate Sensitivity
-----------------------------------------------------
0 to 3 4 to 12 1 to 5 Over 5
Months Months Years Years Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 54,277 $ 54,277
Interest-bearing bank deposits 17,027 17,027
Investment securities 3,000 $ 16,597 $ 38,486 $ 10,843 68,926
Portfolio loans:
Commercial 567,520 121,682 469,568 14,966 1,173,736
Real estate mortgage 40,604 9,703 58,877 4,140 113,324
Installment 6,303 16,188 45,321 926 68,738
Loans held for resale 21,322 21,322
Non-earning assets 112,726
---------- ---------- ---------- ---------- ----------
Total assets $ 710,053 $ 164,170 $ 612,252 $ 30,875 $1,630,076
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Time deposits over $100,000 $ 134,987 $ 205,756 $ 64,475 $ 405,218
Time deposits under $100,000 67,927 201,307 88,666 $ 110 358,010
All other interest-bearing deposits 337,534 89,032 2,082 428,648
---------- ---------- ---------- ---------- ----------
Total interest-bearing deposits 540,448 496,095 155,223 110 1,191,876
Debt obligations 8,150 2,000 17,000 31,000 58,150
Noninterest-bearing liabilities 222,744
Capitol Trust I preferred securities 24,327 24,327
Minority interests in consolidated subsidiaries 62,575
Stockholders' equity 70,404
---------- ---------- ---------- ---------- ----------
Total liabilities and stockholders' equity $ 548,598 $ 498,095 $ 172,223 $ 55,437 $1,630,076
========== ========== ========== ========== ==========
Interest rate sensitive period gap $ 161,455 $ (333,925) $ 440,029 $ (24,562)
========== ========== ========== ==========
Interest rate sensitive cumulative gap $ 161,455 $ (172,470) $ 267,559 $ 242,997
========== ========== ========== ==========
Period rate sensitive assets/period rate
sensitive liabilities 1.29 0.33 3.55 0.56
Cumulative rate sensitive assets/cumulative
rate sensitive liabilities 1.29 0.84 1.22 1.19
Cumulative gap to total assets 9.90% (10.58)% 16.41% 14.91%
</TABLE>
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 customer behavior.
19
<PAGE>
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.
The banks have not engaged in speculative positions, for example, through the
use of derivatives, in anticipation of interest rate movements. In periods of
relatively lower interest rates, the banks emphasize variable rate loans and
time deposits to the extent possible in a competitive environment; however,
competitive influences often result in making fixed rate loans, although the
banks seek to limit the duration of such loans. Similarly, low interest rates
generally make competition more intense for deposits, since loan demand will
typically increase during periods of lower rates and, accordingly, result in
higher interest costs on deposits as competitors bid-up rates, adversely
impacting interest margins. Future interest rates and the impact on earnings are
difficult to predict. In addition to interest rate risk relating to
interest-bearing assets and liabilities, changes in interest rates also can
impact future transaction volume of loans and deposits at the banks. For
activities which are influenced by levels of interest rates for transaction
volume (for example, origination of residential mortgage loans), pricing margins
and demand can become impacted significantly by changes in interest rates.
As a means of monitoring and managing exposure to interest rate risk, management
uses a computerized simulation model which is intended to estimate pro forma
effects of changes in interest rates. Using the simulation model, the following
table illustrates, on a consolidated basis, changes which would occur in annual
levels of interest income, interest expense and net interest income (in $1,000s)
assuming both one hundred and two hundred basis point ("bp") parallel increases
and decreases in interest rates:
<TABLE>
<CAPTION>
Pro Forma Pro Forma Effect of Pro Forma Effect of
Assuming No Interest Rate Increases Interest Rate Decreases
Change in ----------------------- -----------------------
Interest Rates +100 bp +200 bp -100 bp -200 bp
-------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest income $135,609 $140,951 $146,293 $130,240 $124,871
Interest expense 72,960 80,060 87,159 65,861 58,761
-------- -------- -------- -------- --------
Net interest income $ 62,649 $ 60,891 $ 59,134 $ 64,379 $ 66,110
======== ======== ======== ======== ========
</TABLE>
The pro forma analysis above is intended to quantify theoretical changes in
interest income based on stated assumptions. The pro forma analysis excludes the
effect of numerous other variables such as borrowers' ability to repay loans,
the ability of banks to obtain deposits in a radically changed interest-rate
environment and how management would revise its asset and liability management
priorities in concert with rate changes.
In January 2001, the Open Market Committee of the Federal Reserve Board
decreased interbank interest rates on two separate dates, for a total decrease
of 100 basis points. While the pro forma analysis above is intended to estimate
the impact of an immediate 100 and 200 basis point change in rates, actual
results will be different. Those results will differ (and may be materially
different) because a sudden rate change in market rates does not result in an
instantaneous parallel shift in rates on loans and deposits at banks. Further,
any financial model intended to estimate the impact of interest rate changes
will not necessarily incorporate other variables, including management's efforts
to manage its asset and liability interest rate sensitivity, nor customer
behavior.
20
<PAGE>
General economic conditions also have a significant impact on both the results
of operations and the financial condition of financial institutions. Economic
conditions nationally and in the banks' local markets have remained relatively
stable and positive. 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 and the availability of funds for
customers to make deposits. Throughout 2000, 1999 and 1998, the U.S. economy
continued to prosper in what has developed into the longest peacetime economic
expansion in history. With worldwide economic conditions currently unstable, the
continued duration of the current economic expansion period in the United States
is questionable.
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, coupled with the closure of branch
locations by larger institutions and the conversion of customer relationships
into perceived `commodities' by the larger banks, many customer relationships
have been displaced, generating opportunities for development by Capitol's
banks. For many retail 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 banking relationship, Capitol's banks fill
that need through their focus on single-location banks with full, local
decision-making authority. As the banks focus on service delivery and keeping
their 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
operations. Recently-formed start-up banks will detract from consolidated
earnings performance and additional start-up banks formed in 2001 and beyond
will similarly negatively impact short-term profitability. On a consolidated
basis, such operating losses reduce net income by the pro rata share of
Capitol's ownership percentage in those banks. When those banks become
profitable, their operating results will contribute to consolidated earnings to
the extent of Capitol's ownership percentage.
Commercial banks continue to be subject to significant regulatory requirements
which impact current and future operations. In addition to the extent of
regulatory interaction with financial institutions, extensive rules and
regulations governing lending activities, deposit gathering and capital adequacy
(to name a few), translate into a significant cost burden of financial
institution regulation. Such costs include the significant amount of management
time and expense which is incurred in maintaining compliance and developing
systems for compliance with those rules and regulations as well as the cost of
examinations, audits and other compliance activities. The future of financial
institution regulation, and its costs, is uncertain and difficult to predict.
Premiums for FDIC insurance have historically been a significant cost of doing
business as financial institutions, but in recent years, deposit insurance
premiums have been maintained at a stable and modest level. Future deposit
insurance premium levels are difficult to predict inasmuch as deposit insurance
premiums will be determined based on general economic conditions, the relative
health of the banking and financial institution industry and other unpredictable
factors. It is reasonable to expect that deposit insurance premiums may increase
at some point in the future.
21
<PAGE>
NEW ACCOUNTING STANDARDS
No significant new accounting standards became applicable to Capitol during
2000.
FASB Statement No. 133, "Accounting For Derivative Instruments and Hedging
Activities" requires all derivatives to be recognized in financial statements
and to be measured at fair value. Gains and losses resulting from changes in
fair value would be included in income, or other comprehensive income, depending
on whether the instrument qualifies for hedge accounting and the type of hedging
instrument involved. This new accounting standard, as amended in June 1999, will
become effective in 2001 and, because Capitol and its banks have not typically
entered into derivative contracts either to hedge existing risks or for
speculative purposes, will not have a material effect on Capitol's consolidated
financial statements.
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
requires start-up costs and organizational costs to be charged to expense when
incurred. The initial application of the statement required a cumulative effect
adjustment for those companies that had previously capitalized start-up and
organizational costs and became effective in 1999. Implementation of this new
standard has been reflected as a cumulative effect of an accounting change as of
January 1, 1999, resulting in a one-time charge of $.03 per share in the
consolidated statement of income.
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 financial statements in future periods.
22
<PAGE>
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, 2000 and 1999, 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, 2000. 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 auditing standards generally accepted
in the United States of America. 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. An audit also includes 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, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States of America.
In accordance with a new accounting standard, as more fully described in Note B
to the consolidated financial statements, the Corporation changed its method of
accounting for start-up and organization costs effective January 1, 1999.
/s/ BDO Seidman, LLP
Grand Rapids, Michigan
January 29, 2001
23
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- December 31 -
--------------------------------
2000 1999
----------- -----------
(in $1,000s)
<S> <C> <C>
ASSETS
Cash and due from banks $ 71,480 $ 41,757
Interest-bearing deposits with banks 17,027 12,025
Federal funds sold 54,277 50,524
----------- -----------
Cash and cash equivalents 142,784 104,306
Loans held for resale 21,322 9,078
Investment securities--Note C:
Available for sale 62,292 102,514
Held for long-term investment (at amortized cost which
approximates market value) 6,634 4,631
----------- -----------
Total investment securities 68,926 107,145
Portfolio loans, less allowance for loan losses of $17,449 in 2000
and $12,639 in 1999--Note D 1,338,349 1,036,565
Premises and equipment--Note F 14,651 14,396
Accrued interest income 9,778 7,206
Excess of cost over net assets of acquired subsidiaries 6,348 3,652
Other assets 27,918 23,639
----------- -----------
TOTAL ASSETS $ 1,630,076 $ 1,305,987
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 209,023 $ 147,036
Interest-bearing--Note G 1,191,876 965,757
----------- -----------
Total deposits 1,400,899 1,112,793
Debt obligations--Note H 58,150 47,400
Accrued interest on deposits and other liabilities 13,721 12,242
----------- -----------
Total liabilities 1,472,770 1,172,435
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE CORPORATION'S
SUBORDINATED DEBENTURES--Note I 24,327 24,291
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES--Note A 62,575 54,593
STOCKHOLDERS' EQUITY--Notes H, J and P:
Common stock, no par value,
25,000,000 shares authorized; issued and outstanding:
2000--7,673,363 shares
1999--6,769,521 shares 65,939 56,648
Retained earnings 6,569 1,068
Market value adjustment (net of tax effect) for investment securities
available for sale (accumulated other comprehensive income) (108) (907)
----------- -----------
72,400 56,809
Less note receivable from exercise of stock options and unallocated
ESOP shares--Notes J and K (1,996) (2,141)
----------- -----------
Total stockholders' equity 70,404 54,668
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,630,076 $ 1,305,987
=========== ===========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- Year Ended December 31 -
-----------------------------------
2000 1999 1998
--------- --------- ---------
(in $1,000s, except per share data)
<S> <C> <C> <C>
Interest income:
Portfolio loans (including fees) $ 121,737 $ 82,570 $ 59,132
Loans held for resale 1,044 1,364 1,529
Taxable investment securities 4,353 4,589 3,765
Federal funds sold 3,985 4,272 5,013
Interest-bearing deposits with banks and other 900 617 118
Dividends on investment securities 292 190 111
--------- --------- ---------
Total interest income 132,311 93,602 69,668
Interest expense:
Demand deposits 15,679 11,203 7,211
Savings deposits 1,758 1,547 1,487
Time deposits 42,819 29,178 25,450
Debt obligations 5,656 4,214 2,486
Other 95 36
--------- --------- ---------
Total interest expense 65,912 46,237 36,670
--------- --------- ---------
Net interest income 66,399 47,365 32,998
Provision for loan losses--Note D 7,216 4,710 3,523
--------- --------- ---------
Net interest income after provision for loan losses 59,183 42,655 29,475
Noninterest income:
Service charges on deposit accounts 2,070 1,574 1,202
Trust fee income 1,077 760 472
Fees from origination of non-portfolio residential mortgage loans 1,543 1,373 1,383
Realized gain on sale of investment securities available for sale 103 15 2
Other 1,344 992 499
--------- --------- ---------
Total noninterest income 6,137 4,714 3,558
Noninterest expense:
Salaries and employee benefits 28,995 21,212 13,376
Occupancy 4,681 3,561 2,373
Equipment rent, depreciation and maintenance 4,113 3,988 3,030
Deposit insurance premiums 239 152 121
Other 14,818 11,344 7,425
--------- --------- ---------
Total noninterest expense 52,846 40,257 26,325
--------- --------- ---------
Income before minority interest, federal income taxes and cumulative
effect of change in accounting principle 12,474 7,112 6,708
Federal income taxes--Note L 4,289 3,213 2,584
--------- --------- ---------
Income before minority interest and cumulative effect of change in
accounting principle 8,185 3,899 4,124
Minority interest in net losses (income) of consolidated subsidiaries (150) 1,707 504
--------- --------- ---------
Income before cumulative effect of change in accounting principle 8,035 5,606 4,628
Cumulative effect of change in accounting principle--Note B (197) --
--------- --------- ---------
NET INCOME $ 8,035 $ 5,409 $ 4,628
========= ========= =========
NET INCOME PER SHARE--Note M
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN $1,000S)
<TABLE>
<CAPTION>
Note
Receivable
from Exercise
of Stock
Accumulated Options and
Other Unallocated
Common Retained Comprehensive ESOP
Stock Earnings Income Shares Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1998 $ 50,312 $ (4,553) $ 143 $ (870) $ 45,032
Issuance of 73,852 shares of common stock
upon exercise of stock options 816 816
Issuance of 33,205 shares of common stock to
acquire minority interest in bank subsidiary 745 745
Allocation of shares to ESOP participants' accounts 145 145
Cash dividends paid ($.33 per share) (2,094) (2,094)
Cash in lieu of fractional shares upon issuance of
stock split (5) (5)
Components of comprehensive income:
Net income for 1998 4,628 4,628
Market value adjustment for investment
securities available for sale (net of tax effect) 25 25
--------
Total comprehensive income for 1998 4,653
-------- -------- -------- -------- --------
BALANCES AT DECEMBER 31, 1998 51,868 (2,019) 168 (725) 49,292
Issuance of 199,865 shares of common stock
upon exercise of stock options 1,786 (1,561) 225
Issuance of 224,770 shares of common stock to
acquire minority interest in bank subsidiary 2,994 2,994
Allocation of shares to ESOP participants' accounts 145 145
Cash dividends paid ($.36 per share) (2,322) (2,322)
Components of comprehensive income:
Net income for 1999 5,409 5,409
Market value adjustment for investment
securities available for sale (net of tax effect) (1,075) (1,075)
--------
Total comprehensive income for 1999 4,334
-------- -------- -------- -------- --------
BALANCES AT DECEMBER 31, 1999 56,648 1,068 (907) (2,141) 54,668
Issuance of 10,734 shares of common stock upon
exercise of stock options 83 83
Issuance of 626,325 shares of common stock to
acquire minority interests in bank subsidiaries 6,278 6,278
Proceeds from issuance of 266,783 shares of
common stock and 53,352 warrants 2,930 2,930
Allocation of shares to ESOP participants' accounts 145 145
Cash dividends paid ($.36 per share) (2,534) (2,534)
Components of comprehensive income:
Net income for 2000 8,035 8,035
Market value adjustment for investment
securities available for sale (net of tax effect) 799 799
--------
Total comprehensive income for 2000 8,834
-------- -------- -------- -------- --------
BALANCES AT DECEMBER 31, 2000 $ 65,939 $ 6,569 $ (108) $ (1,996) $ 70,404
======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- Year Ended December 31 -
-----------------------------------
2000 1999 1998
--------- --------- ---------
(in $1,000s)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,035 $ 5,409 $ 4,628
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 7,216 4,710 3,523
Depreciation of premises and equipment 3,178 2,913 2,025
Amortization of goodwill and other intangibles 561 318 225
Net accretion of investment security discounts (104) (107) (174)
Loss (gain) on sale of premises and equipment 11 (25) 51
Minority interest in net losses of consolidated subsidiaries 150 (1,707) (504)
Deferred income taxes (1,312) (2,070) (1,657)
Cumulative effect of change in accounting principle 197
Originations and purchases of loans held for resale (251,157) (306,292) (361,769)
Proceeds from sales of loans held for resale 238,913 334,003 336,406
Increase in accrued interest income and other assets (9,178) (8,950) (2,314)
Increase in accrued interest on deposits and other liabilities 1,479 3,411 2,860
--------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (2,208) 31,810 (16,700)
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 3,156 3,000 1,005
Proceeds from maturities of investment securities available for sale 71,882 82,020 64,266
Purchases of investment securities available for sale (35,503) (107,224) (87,049)
Net increase in portfolio loans (309,000) (325,812) (222,460)
Proceeds from sales of premises and equipment 22 665 38
Purchases of premises and equipment (3,466) (6,303) (6,181)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (272,909) (353,654) (250,381)
FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts
and savings accounts 125,178 119,437 137,953
Net increase in certificates of deposit 162,928 102,466 148,530
Net proceeds from debt obligations 10,750 23,800 23,600
Resources provided by minority interests 14,262 31,718 16,556
Net proceeds from issuance of common stock and warrants 3,011 6 816
Cash dividends paid and payments in lieu of
fractional shares (2,534) (2,322) (2,099)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 313,595 275,105 325,356
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 38,478 (46,739) 58,275
Cash and cash equivalents at beginning of year 104,306 151,045 92,770
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 142,784 $ 104,306 $ 151,045
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE A--NATURE OF OPERATIONS, BASIS OF PRESENTATION AND PRINCIPLES OF
CONSOLIDATION
Capitol Bancorp Ltd. (Capitol or the "Corporation") is a multibank holding
company. Consolidated subsidiaries consist of the following:
<TABLE>
<CAPTION>
Percentage
Owned at
December 31, Year Formed or
Affiliate Location 2000 Acquired
--------- -------- ---- --------
<S> <C> <C> <C>
Ann Arbor Commerce Bank Ann Arbor, Michigan 100% 1990
Brighton Commerce Bank Brighton, Michigan 100% 1997
Capitol National Bank Lansing, Michigan 100% 1982
Detroit Commerce Bank Detroit, Michigan 93% 1998
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
Paragon Bank & Trust Holland, Michigan 100% 1994
Portage Commerce Bank Portage, Michigan 100% 1988
Indiana Community Bancorp Limited: 52% 1999
Elkhart Community Bank Elkhart, Indiana 1999
Goshen Community Bank Goshen, Indiana 2000
Sun Community Bancorp Limited: 50% 1997
Arrowhead Community Bank Glendale, Arizona 2000
Bank of Tucson Tucson, Arizona 1996
Camelback Community Bank Phoenix, Arizona 1998
East Valley Community Bank Chandler, Arizona 1999
Mesa Bank Mesa, Arizona 1998
Southern Arizona Community Bank Tucson, Arizona 1998
Valley First Community Bank Scottsdale, Arizona 1997
Yuma Community Bank Yuma, Arizona 2000
Nevada Community Bancorp Limited: 1999
Black Mountain Community Bank Henderson, Nevada 2000
Desert Community Bank Las Vegas, Nevada 1999
Red Rock Community Bank Las Vegas, Nevada 1999
Sunrise Capital Corporation: 1999
Sunrise Bank of Albuquerque Albuquerque, New Mexico 2000
Sunrise Bank of Arizona Phoenix, Arizona 1998
</TABLE>
Consolidated subsidiaries of Sun are majority-owned by Sun (ranging from 51% to
100%). Sun is the majority owner of Nevada Community Bancorp and Sunrise Capital
Corporation which each have majority-owned bank subsidiaries. Sun became a
public company in 1999 through an initial public offering of common stock
approximating $25 million, of which Capitol invested $13 million.
Brighton Commerce Bank, Kent Commerce Bank and Muskegon Commerce Bank,
previously majority-owned subsidiaries, became wholly-owned by the Corporation
in 2000 through share exchange transactions with their respective minority
shareholders.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE A--NATURE OF OPERATIONS, BASIS OF PRESENTATION AND PRINCIPLES OF
CONSOLIDATION--CONTINUED
Capitol and its subsidiaries are engaged in a single business activity--banking.
The bank affiliates provide a full range of banking services to individuals,
businesses and other customers located in their respective communities. Each of
the banks generally operate from a single location and focus their activities on
meeting the various credit and other banking needs of entrepreneurs,
professionals and other high net worth individuals. A variety of deposit
products are offered, including checking, savings, money market, individual
retirement accounts and certificates of deposit. In addition, trust and
investment services are offered through Paragon Bank & Trust. The principal
markets for the banks' financial services are the communities in which they are
located and the areas immediately surrounding those communities. In addition to
commercial banking units, mortgage banking activities are offered through Amera
Mortgage Corporation, a 49% owned affiliate, and Sun Community Mortgage Company,
a wholly-owned subsidiary of Bank of Tucson.
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 and services. Further, each of the
banks and the Corporation are subject to substantially similar laws and
regulations unique to the banking industry. Accordingly, the Corporation's
consolidated financial statements reflect the presentation of segment
information on an aggregated basis.
The consolidated financial statements include the accounts of the Corporation
and its majority-owned subsidiaries, after elimination of intercompany accounts
and transactions, and after giving effect to applicable minority interests.
Banks formed during 1998, 1999 and 2000 are included in the consolidated
financial statements for periods after joining the consolidated group. Certain
1999 and 1998 amounts have been reclassified to conform to the 2000
presentation.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES: The preparation of consolidated financial statements in conformity
with generally accepted accounting principles 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 could differ from those estimates.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on hand,
amounts due from banks (interest-bearing and noninterest-bearing) and federal
funds sold. Generally, federal funds transactions are entered into for a one-day
period.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
LOANS HELD FOR RESALE: Loans held for resale represent residential real estate
mortgage loans held for sale into the secondary market. Loans held for resale
are stated at the aggregate lower of cost or market.
INVESTMENT SECURITIES: Investment securities available for sale (generally most
debt securities investments of Capitol's banks) are carried at market value with
unrealized gains and losses reported as a separate component of stockholders'
equity, net of tax effect (accumulated other comprehensive income). All other
investment securities are classified as held for long-term investment and are
carried at amortized cost which approximates market value (see Note C).
Investments are classified at the date of purchase based on management's
analysis of liquidity and other factors. The adjusted cost of the specific
securities sold is used to compute realized gains or losses. Premiums and
discounts are recognized in interest income using the interest method over the
period to maturity.
LOANS, CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES: Portfolio loans are carried at
their principal balance based on management's intent and ability to hold such
loans for the foreseeable future until maturity or repayment.
Credit risk arises from making loans and loan commitments in the ordinary course
of business. Substantially all portfolio loans are made to borrowers in the
banks' geographic areas. Consistent with the banks' emphasis on business
lending, there are concentrations of credit in loans secured by commercial real
estate, 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 in the portfolio at the balance sheet
date. Management's determination of the adequacy of the allowance is 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.
INTEREST AND FEES ON LOANS: Interest income on loans is recognized based upon
the principal balance of loans outstanding. Fees from origination of portfolio
loans approximate related costs incurred.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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 is computed principally by the straight-line method based upon
estimated useful lives of the respective assets. Leasehold improvements are
generally depreciated over the respective lease term.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED SUBSIDIARIES: Goodwill is amortized
on a straight-line basis over various periods not to exceed 15 years. Management
periodically reviews long-lived assets, including associated goodwill, for
potential impairment based upon projected undiscounted net cash flows, when
applicable, and the related amortization periods.
OTHER REAL ESTATE: Other real estate (included as a component of other assets
and which, at December 31, 2000 and 1999 approximated $3,094,000 and $3,614,000,
respectively) comprises properties acquired through a foreclosure proceeding or
acceptance of a deed in lieu of foreclosure. These properties held for sale are
carried at the lower of cost or estimated fair value (net of estimated selling
cost) at the date acquired and are periodically reviewed for subsequent
impairment.
STOCK-BASED COMPENSATION: No stock-based compensation expense is recorded upon
granting of stock options because such stock options are accounted for under the
provisions of Accounting Principles Board (APB) Opinion 25 and are granted at an
exercise price equal to the market price of common stock at grant date. Pro
forma disclosure of alternative accounting recognition is made in Note J.
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 fee income is 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 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.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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.
COSTS OF START-UP ACTIVITIES: In 1998, the American Institute of CPAs issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
requires start-up costs and organizational costs to be charged to expense when
incurred. In the circumstances of Capitol and its banks, this new accounting
standard applies to previously capitalized preopening and other start-up costs
of its bank subsidiaries which, net of amortization, approximated $1,149,000 at
December 31, 1998 and were classified as a component of other assets in the
consolidated balance sheet. Implementation of this standard is reflected as a
cumulative effect of an accounting change at January 1, 1999 (net of impact of
minority interests and income tax effect).
NOTE C--INVESTMENT SECURITIES
Investment securities consisted of the following at December 31 (in $1,000s):
<TABLE>
<CAPTION>
2000 1999
------------------------ ------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Available for sale:
United States Treasury securities $ 5,086 $ 5,101 $ 17,845 $ 17,787
United States government agency securities 55,514 55,334 82,366 81,073
States and political subdivisions 1,604 1,606 2,537 2,515
Other 251 251 1,141 1,139
-------- -------- -------- --------
62,455 62,292 103,889 102,514
Held for long-term investment:
Federal Reserve Bank stock 394 394 266 266
Federal Home Loan Bank stock 3,583 3,583 2,862 2,862
Corporate stock 907 907 1,003 1,003
Other 1,750 1,750 500 500
-------- -------- -------- --------
6,634 6,634 4,631 4,631
-------- -------- -------- --------
$ 69,089 $ 68,926 $108,520 $107,145
======== ======== ======== ========
</TABLE>
At December 31, 2000, securities with a market value approximating $19.2 million
were pledged to secure public and trust deposits and for other purposes as
required by law.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE C--INVESTMENT SECURITIES--CONTINUED
Gross unrealized gains and losses on investment securities available for sale
were as follows at December 31 (in $1,000s):
2000 1999
--------------- ---------------
Gains Losses Gains Losses
------ ------ ------ ------
United States Treasury securities $ 21 $ 6 $ 3 $ 60
United States government agency
securities 40 220 13 1,306
States and political subdivisions 2 14 39
------ ------ ------ ------
$ 63 $ 226 $ 30 $1,405
====== ====== ====== ======
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, 2000 were
as follows (in $1,000s):
Estimated
Amortized Market
Cost Value
------- -------
Due in one year or less $19,706 $19,684
After one year, through five years 37,473 37,377
After five years, through ten years 2,101 2,078
After ten years 3,175 3,153
Securities held for long-term investment,
without stated maturities 6,634 6,634
------- -------
$69,089 $68,926
======= =======
NOTE D--LOANS
Portfolio loans consisted of the following at December 31 (in $1,000s):
2000 1999
----------- -----------
Commercial $ 1,173,736 $ 874,560
Real estate mortgage 113,324 96,000
Installment 68,738 78,644
----------- -----------
Total portfolio loans 1,355,798 1,049,204
Less allowance for loan losses (17,449) (12,639)
----------- -----------
Net portfolio loans $ 1,338,349 $ 1,036,565
=========== ===========
Transactions in the allowance for loan losses are summarized below (in $1,000s):
2000 1999 1998
-------- -------- --------
Balance at January 1 $ 12,639 $ 8,817 $ 6,229
Provision charged to operations 7,216 4,710 3,523
Loans charged off (deduction) (3,171) (1,298) (1,305)
Recoveries 765 410 $ 370
-------- -------- --------
Balance at December 31 $ 17,449 $ 12,639 8,817
======== ======== ========
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE D--LOANS--CONTINUED
Certain commercial loans in Michigan and Indiana are enrolled in state-sponsored
loan programs. Under those programs, the governmental unit shares loss exposure
on such loans by funding reserves, which are placed as deposits at the banks.
Loans participating in these programs and related reserves approximated
$33,513,000 and $1,609,000, respectively, at December 31, 2000 ($34,254,000 and
$1,966,000, respectively, at December 31, 1999). Such reserve amounts are
separate and excluded from the allowance for loan losses. The Michigan agency
announced, in late 2000, its plans to terminate the loan program in 2001. If the
Michigan program is terminated, loans previously enrolled in the program and
related reserves will continue until those loans are repaid.
At December 31, 2000 and 1999, 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) were not
material.
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, 2000
and 1999, total loans to these persons were $66.1 million and $65.1 million,
respectively. During 2000, $52.4 million of new loans were made to these persons
and repayments totaled $51.4 million. Such loans are made at the banking
subsidiaries' normal credit terms.
Such officers and directors of Capitol (and their associates, family and/or
affiliates) are also depositors of the banking subsidiaries. Such deposits are
similarly made at the banks' normal terms as to interest rate, term and deposit
insurance.
NOTE F--PREMISES AND EQUIPMENT
Major classes of premises and equipment consisted of the following at December
31 (in $1,000s):
2000 1999
-------- --------
Land, buildings and improvements $ 3,965 $ 3,269
Leasehold improvements 5,962 5,458
Equipment and furniture 13,649 12,618
-------- --------
23,576 21,345
Less accumulated depreciation (8,925) (6,949)
-------- --------
$ 14,651 $ 14,396
======== ========
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE F--PREMISES AND EQUIPMENT--CONTINUED
Capitol and certain subsidiaries rent office space under operating leases. Rent
expense (net of sublease income) under these lease agreements approximated
$3,064,000, $2,402,000 and $1,577,000 (including rent expense of $1,034,000,
$900,000 and $893,000 under leases with related parties) in 2000, 1999, and
1998, respectively. Future minimum rental payments under operating leases that
have initial or remaining noncancelable lease terms in excess of one year as of
December 31, 2000 aggregate $25 million, due as follows: approximately $3.5
million in 2001 and 2002, $3.4 million in 2003, $3.2 million in 2004, $3.1
million in 2005 and $8.1 million thereafter.
NOTE G--DEPOSITS
The aggregate amount of time deposits of $100,000 or more approximated $405.2
million and $310.1 million as of December 31, 2000 and 1999, respectively.
At December 31, 2000, the scheduled maturities of such time deposits were as
follows (in $1,000s):
2001 $ 340,743
2002 39,931
2003 7,849
2004 6,750
2005 and thereafter 9,945
---------
$ 405,218
=========
Interest paid approximates amounts charged to operations on an accrual basis for
the periods presented.
NOTE H--DEBT OBLIGATIONS
Debt obligations consisted of the following at December 31 (in $1,000s):
2000 1999
------- -------
Short-term borrowings from Federal
Home Loan Bank $40,000 $16,000
Notes payable to unaffiliated bank 18,150 29,900
Federal funds purchased 1,500
------- -------
$58,150 $47,400
======= =======
Short-term borrowings from a Federal Home Loan Bank (FHLB) represent advances
secured by certain portfolio residential real estate mortgage loans and other
eligible collateral, which approximated $40 million at December 31, 2000. Such
advances become due at varying dates and bear interest at market short-term
rates (approximately 6.04% at December 31, 2000). At December 31, 2000, unused
lines of credit under these facilities approximated $18.8 million.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE H--DEBT OBLIGATIONS--CONTINUED
Notes payable to unaffiliated bank represents borrowings under lines of credit.
Up to $35 million can be borrowed pursuant to a one-year revolving credit
agreement which bears interest at a rate slightly less than prime rate
(effectively a weighted average rate of 9% at December 31, 2000), payable
monthly. 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. Interest paid under this credit
facility approximated $1,475,000 in 2000, $1,506,000 in 1999 and $5,000 in 1998.
NOTE I--TRUST-PREFERRED SECURITIES
In 1997, Capitol and a subsidiary (Capitol Trust I) completed a public offering
of trust-preferred securities. Under the terms of the offering, Capitol Trust I
(of which Capitol owns 100% of the common interests of the Trust) issued
2,530,000 shares of preferred securities, $10 liquidation amount per preferred
security. Gross proceeds from the offering aggregated $25.3 million. Upon
receipt of the proceeds of the offering, Capitol Trust I purchased subordinated
debentures of Capitol of like amount, which bear interest at 8.5% payable
quarterly and which mature in 2027 (which may be extended to 2036 if certain
conditions are met) and are callable after 2002. The liquidation amount of the
trust-preferred securities is guaranteed by Capitol.
Interest paid to the Trust by Capitol (which is recorded as interest expense in
its consolidated financial statements) is distributed by the Trust 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.
Because Capitol Trust I is a subsidiary (due to Capitol's ownership of the
common interests of the Trust), Capitol Trust I is consolidated for financial
reporting purposes. The amount of outstanding trust-preferred securities (net of
issuance costs which are being amortized over the life of the securities) is
classified between liabilities and equity in Capitol's consolidated balance
sheet. Under current regulatory guidelines, such trust-preferred securities are
included as capital for purposes of meeting certain ratio requirements.
NOTE J--COMMON STOCK AND STOCK OPTIONS
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,
expire seven years after grant, and are currently exercisable.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE J--COMMON STOCK AND STOCK OPTIONS--CONTINUED
Under the terms of an employment agreement with a certain director and executive
officer of Capitol, options granted thereunder shall be increased when the
Corporation issues additional shares so that such options granted equal 15% of
outstanding shares prior to exercise. In 1999, Capitol negotiated a reduction of
the executive officer's benefit from 15% to 10%. In exchange for the reduced
benefit to the executive officer, Capitol agreed to a one-time exercise of
previously granted stock options with an aggregate exercise price of $1.6
million funded by a note receivable of $1.9 million from the executive officer.
The note bears interest at a fixed rate over its ten-year term. As part of the
terms of this agreement, the executive officer's compensation will be increased
in an amount equal to the interest due on the note receivable. Under certain
circumstances, such as death of the executive officer, the note will be
forgiven. The death benefit is covered by company-owned life insurance.
Stock option activity is summarized as follows:
Number Weighted
of Stock Average
Options Exercise Exercise
Outstanding Price Range Price
----------- -------------------- ------
Outstanding at January 1, 1998 671,856 $ 4.92 to $25.10 $11.63
Granted in 1998 18,710 17.23 to 24.38 20.94
Exercised in 1998 (73,852) 4.92 to 13.25 6.80
Expired/other in 1998 1,000
--------- -------------------- ------
Outstanding at December 31, 1998 617,714 4.92 to 25.10 12.48
Granted in 1999 74,113 12.63 to 13.48 13.07
Exercised in 1999 (199,865) 4.92 to 8.75 7.80
--------- -------------------- ------
Outstanding at December 31, 1999 491,962 4.92 to 25.10 14.51
Granted in 2000 722,934 9.88 to 12.50 10.86
Exercised in 2000 (10,734) 4.92 to 7.72 6.48
--------- -------------------- ------
Outstanding at December 31, 2000 1,204,162 $ 4.92 to $25.10 $12.39
As of December 31, 2000, stock options outstanding had a weighted average
remaining contractual life of 5.4 years. As of that date, stock options with an
exercise price of $15.00 or less had a weighted average exercise price of $11.05
and a weighted average remaining contractual life of 5.5 years; stock options
with an exercise price of more than $15.00 had a weighted average exercise price
of $24.53 and a weighted average remaining contractual life of 4 years.
Of the stock options granted in 2000, 563,435 vest over a three-year period; the
remainder are fully vested and currently exercisable. All such stock options
expire seven years after the date granted.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE J--COMMON STOCK AND STOCK OPTIONS--CONTINUED
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", establishes a fair value method of accounting for stock options
whereby compensation expense is recognized based on the computed fair value of
the options on the grant date. However, as permitted by Statement No. 123,
Capitol accounts for its stock options under APB 25 and, therefore, does not
recognize compensation expense. By electing this alternative, certain pro forma
disclosures of the expense recognition provisions of Statement No. 123 are
required, which are as follows:
2000 1999 1998
------- ------- -------
Fair value assumptions:
Risk-free interest rate 7.0% 6.5% 5.0%
Dividend yield 3.0% 2.0% 1.5%
Stock price volatility .83 .53 .41
Expected option life 7 years 7 years 7 years
Aggregate estimated fair value of
options granted (in thousands) $ 4,932 $ 764 $ 162
Pro forma net income (in thousands) $ 6,471 $ 4,905 $ 4,521
Pro forma net income per diluted share $ .91 $ .76 $ .70
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. Contributions to the Plan, which are an employer
match (50%, subject to certain limitations) for employee contributions, charged
to expense for the years ended December 31, 2000, 1999 and 1998 were $475,000,
$310,000 and $182,000, respectively.
Capitol also has a defined contribution employee stock ownership plan (ESOP)
which covers substantially all employees of Capitol and certain subsidiaries.
Certain common stock purchases by the ESOP were financed by long-term debt. ESOP
contributions charged to expense in 2000, 1999 and 1998 approximated $180,000,
$217,000 and $256,000 (including ESOP note payable interest of $49,000, $62,000
and $74,000), respectively. Shares of common stock held by the ESOP which have
not yet been allocated to participants' accounts are shown as a reduction of
stockholders' equity. As of December 31, 2000, the ESOP held 180,000 shares of
Capitol's common stock which have been allocated to participants' accounts and
37,500 shares of common stock with an approximate fair value of $356,000 which
have not yet been allocated to participants' accounts.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE L--INCOME TAXES
Federal income taxes consist of the following components (in $1,000s):
2000 1999 1998
------- ------- -------
Current $ 5,601 $ 4,813 $ 4,241
Deferred credit (1,312) (2,070) (1,657)
------- ------- -------
$ 4,289 $ 2,743 $ 2,584
======= ======= =======
Federal income tax expense in 1999 shown above is net of the $470,000 federal
income tax benefit relating to the cumulative effect of the change in accounting
principle. Federal income taxes paid in 2000, 1999 and 1998 approximated $5.1
million, $5.1 million and $3.0 million, respectively.
Differences between federal income tax expense recorded and amounts computed
using the statutory tax rate are reconciled below (in $1,000s):
2000 1999 1998
------- ------- -------
Federal income tax computed at
statutory rate of 34% $ 4,190 $ 2,998 $ 2,452
Tax effect of:
Cumulative effect of change in
accounting principle (470)
Amortization of goodwill 180 117 77
Other (81) 98 55
------- ------- -------
$ 4,289 $ 2,743 $ 2,584
======= ======= =======
Net deferred income tax assets consisted of the following at December 31 (in
$1,000s):
2000 1999
------ ------
Allowance for loan losses $5,056 $3,970
Portion of subsidiaries' operating losses
applicable to minority interests 823 874
Deferred compensation 658 585
Market value adjustment for investment
securities available for sale 56 468
Other, net 1,564 1,360
------ ------
$8,157 $7,257
====== ======
Certain consolidated subsidiaries have net operating loss carryforwards which
may reduce income taxes payable in future periods. Such carryforwards
approximate $4.7 million at December 31, 2000, have been recognized for
financial reporting purposes and expire at varying dates through 2020.
39
<PAGE>
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, except per share amounts):
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Numerator:
Income before cumulative effect of accounting change $8,035 $5,606 $4,628
====== ====== ======
Net income $8,035 $5,409 $4,628
====== ====== ======
Denominator:
Weighted average number of shares outstanding
(denominator for basic earnings per share) 7,065 6,455 6,284
Effect of dilutive securities:
Warrants 2
Stock options 45 35 141
------ ------ ------
Potential dilution 47 35 141
------ ------ ------
Denominator for diluted earnings per share--weighted
average number of shares and potential dilution 7,112 6,490 6,425
====== ====== ======
Basic earnings per share:
Income before cumulative effect
of accounting change $ 1.14 $ 0.87 $ 0.74
====== ====== ======
Net income $ 1.14 $ 0.84 $ 0.74
====== ====== ======
Diluted earnings per share:
Income before cumulative effect
of accounting change $ 1.13 $ 0.86 $ 0.72
====== ====== ======
Net income $ 1.13 $ 0.83 $ 0.72
====== ====== ======
</TABLE>
Additional disclosures regarding stock options are set forth in Note J.
40
<PAGE>
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):
<TABLE>
<CAPTION>
2000 1999
-------------------------- --------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 142,784 $ 142,784 $ 104,306 $ 104,306
Loans held for resale 21,322 21,322 9,078 9,078
Investment securities:
Available for sale 62,292 62,292 102,514 102,514
Held for long-term investment 6,634 6,634 4,631 4,631
----------- ----------- ----------- -----------
68,926 68,926 107,145 107,145
Portfolio loans:
Fixed rate 1,020,234 1,021,378 629,087 628,366
Variable rate 335,564 336,499 420,117 419,764
----------- ----------- ----------- -----------
Total portfolio loans 1,355,798 1,357,877 1,049,204 1,048,130
Less allowance for loan losses (17,449) (17,449) (12,639) (12,639)
----------- ----------- ----------- -----------
Net portfolio loans 1,338,349 1,340,428 1,036,565 1,035,491
Financial Liabilities:
Deposits:
Noninterest-bearing deposits 209,023 209,023 147,036 147,036
Interest-bearing deposits:
Demand accounts 428,648 430,126 366,475 366,703
Time certificates of deposit less
than $100,000 358,010 358,175 289,209 289,049
Time certificates of deposit of
$100,000 or more 405,218 405,753 310,073 309,892
----------- ----------- ----------- -----------
Total interest-bearing deposits 1,191,876 1,194,054 965,757 965,644
----------- ----------- ----------- -----------
Total deposits 1,400,899 1,403,077 1,112,793 1,112,680
Debt obligations 58,150 57,342 47,400 47,460
Trust-preferred securities 24,327 25,300 24,291 25,300
</TABLE>
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.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE O--COMMITMENTS AND 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 ($12.0 million and $11.6 million outstanding at
December 31, 2000 and 1999, respectively). Other loan commitments outstanding
consist of unused lines of credit and approved, but unfunded, specific loan
commitments ($283.8 million and $219.4 million at December 31, 2000 and 1999,
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. Such loan commitments are also included in management's evaluation
of the adequacy of the allowance for loan losses.
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,
2000 and 1999 were $5.1 million and $1.4 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 ($30.8 million at December 31, 2000).
42
<PAGE>
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 judgements 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 assets ratio of not less than 8% and an
allowance for loan losses of not less than 1% for the first three years of
operations.
As of December 31, 2000, 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, 2000, that Capitol and the banks meet
all capital adequacy requirements to which the entities are subject.
43
<PAGE>
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
the individually significant subsidiaries (assets of $130 million or more) and
consolidated regulatory capital position as of December 31, 2000 and 1999:
<TABLE>
<CAPTION>
Sun
Ann Arbor Capitol Community
Commerce National Bancorp
Bank Bank Limited Consolidated
---- ---- ------- ------------
<S> <C> <C> <C> <C>
DECEMBER 31, 2000
Total capital to total assets:
Minimum required amount >=$ 9,687 >=$ 5,935 >=$ 21,073 >=$ 65,203
Actual amount $ 17,428 $ 11,120 $ 52,694 $ 70,404
Ratio 7.20% 7.49% 10.00% 4.32%
Tier 1 capital to risk-weighted assets:
Minimum required amount(1) >=$ 7,789 >=$ 4,975 >=$ 17,719 >=$ 54,508
Actual amount $ 17,453 $ 11,130 $ 78,566 $ 151,036
Ratio 8.96% 8.95% 17.74% 11.10%
Combined Tier 1 and Tier 2 capital to
risk-weighted assets:
Minimum required amount(2) >=$ 15,577 >=$ 9,950 >=$ 35,439 >=$ 109,016
Amount required to meet
"Well-Capitalized" category(3) $ 19,471 $ 12,438 $ 44,299 $ 136,271
Actual amount $ 19,892 $ 12,687 $ 84,006 $ 168,051
Ratio 10.22% 10.20% 18.96% 12.35%
DECEMBER 31, 1999
Total capital to total assets:
Minimum required amount >=$ 8,598 >=$ 5,327 >=$ 12,016 >=$ 52,239
Actual amount $ 15,455 $ 9,940 $ 50,003 $ 56,809
Ratio 7.19% 7.46% 16.65% 4.35%
Tier 1 capital to risk-weighted assets:
Minimum required amount(1) >=$ 6,940 >=$ 4,490 >=$ 11,089 >=$ 48,560
Actual amount $ 15,596 $ 10,011 $ 71,263 $ 130,744
Ratio 8.99% 8.92% 25.71% 10.78%
Combined Tier 1 and Tier 2 capital to
risk-weighted assets:
Minimum required amount(2) >=$ 13,879 >=$ 8,980 >=$ 22,178 >=$ 97,120
Amount required to meet
"Well-Capitalized" category(3) $ 17,349 $ 11,226 $ 27,723 $ 121,400
Actual amount $ 17,699 $ 11,416 $ 73,634 $ 141,040
Ratio 10.24% 10.17% 26.56% 11.62%
</TABLE>
- ----------
(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.
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE Q--PARENT COMPANY FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
- December 31 -
-------------------
2000 1999
-------- --------
(in $1,000s)
Assets
Cash on deposit with subsidiary banks $ 213 $ 55
Money market funds on deposit with subsidiary banks 320 173
Investment securities held for long-term investment 603 830
Investments in subsidiaries 115,466 102,021
Notes receivable 1,363 1,363
Investment in and advances to Amera Mortgage Corporation 1,246 2,343
Equipment and furniture, net 624 575
Excess of cost over net assets of acquired subsidiaries 2,202 2,587
Other assets 3,650 2,657
-------- --------
Total assets $125,687 $112,604
======== ========
Liabilities and Stockholders' Equity
Accounts payable, accrued expenses and other liabilities $ 3,124 $ 2,963
Debt obligations payable to affiliates 8,900
Debt obligations payable to unaffiliated entities 18,150 29,900
Subordinated debentures 25,109 25,073
-------- --------
Total liabilities 55,283 57,936
Stockholders' equity 70,404 54,668
-------- --------
Total liabilities and stockholders' equity $125,687 $112,604
======== ========
CONDENSED STATEMENTS OF INCOME
- Year Ended December 31 -
--------------------------------
2000 1999 1998
-------- -------- --------
(in $1,000s)
Income:
Dividends from subsidiaries $ 7,018 $ 5,650 $ 2,600
Intercompany fees 6,362 5,424 4,232
Interest 182 290 394
Other 139 34 (162)
-------- -------- --------
Total income 13,701 11,398 7,064
Expenses:
Interest 4,568 3,770 2,311
Salaries and employee benefits 4,154 3,310 2,524
Occupancy 333 260 202
Amortization, equipment rent and
depreciation 1,212 1,520 1,889
Other 2,942 1,295 1,606
-------- -------- --------
Total expenses 13,209 10,155 8,532
-------- -------- --------
492 1,243 (1,468)
Equity in undistributed net earnings of
consolidated subsidiaries 5,232 2,880 4,810
Federal income taxes (credit) (2,311) (1,286) (1,286)
-------- -------- --------
Net income $ 8,035 $ 5,409 $ 4,628
======== ======== ========
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE Q--PARENT COMPANY FINANCIAL INFORMATION--CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- Year Ended December 31 -
------------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
(in $1,000s)
OPERATING ACTIVITIES
Net income $ 8,035 $ 5,409 $ 4,628
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in undistributed net earnings of subsidiaries (5,232) (2,880) (4,810)
Equity in net loss from Amera Mortgage Corporation 1,277 593 189
Depreciation and amortization 622 535 140
Decrease in amounts due from subsidiaries and other assets 6,182 2,157 28
Increase (decrease) in accounts payable, accrued expenses and
other liabilities 161 (29) 1,046
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,045 5,785 1,221
INVESTING ACTIVITIES
Net cash investments in subsidiaries (8,107) (23,397) (21,410)
Net payments from (advances to) Amera Mortgage Corporation (180) 101 (314)
Purchases of investment securities (181) (316)
Proceeds from sales and maturities of securities 215
Proceeds from sales of equipment and furniture 5 114 6
Purchases of equipment and furniture (300) (183) (716)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (8,367) (23,546) (22,750)
FINANCING ACTIVITIES
Net borrowings (payments) on debt obligations (2,850) 20,300 9,600
Net proceeds from issuance of common stock 3,011 6 816
Cash dividends paid and payments in lieu of fractional shares (2,534) (2,322) (2,099)
-------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (2,373) 17,984 8,317
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 305 223 (13,212)
Cash and cash equivalents at beginning of year 228 5 13,217
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 533 $ 228 $ 5
======== ======== ========
</TABLE>
NOTE R--NEW BANK OPENED IN JANUARY 2001
Sunrise Bank of San Diego commenced operations in early January 2001 as a
majority-owned subsidiary of Sunrise Capital Corporation.
46
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>ex-21.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
EXHIBIT 21 -- SUBSIDIARIES OF THE REGISTRANT
CAPITOL BANCORP LTD.
DECEMBER 31, 2000
PAGE 1 OF 2
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ------------------ ----------------
CONSOLIDATED SUBSIDIARIES:
Ann Arbor Commerce Bank Michigan
Brighton Commerce Bank Michigan
Capitol National Bank United States
(national bank)
Detroit Commerce Bank (93% owned) Michigan
Grand Haven Bank Michigan
Kent Commerce Bank Michigan
Macomb Community Bank Michigan
Muskegon Commerce Bank Michigan
Oakland Commerce Bank Michigan
Paragon Bank & Trust Michigan
Portage Commerce Bank Michigan
Indiana Community Bancorp Limited (52% owned): Indiana
Elkhart Community Bank
(51% owned by Indiana Community Bancorp Limited) Indiana
Goshen Community Bank
(51% owned by Indiana Community Bancorp Limited) Indiana
Sun Community Bancorp Limited (approximately 50% owned): Arizona
Bank of Tucson
(100% owned by Sun Community Bancorp Limited) Arizona
Valley First Community Bank
(100% owned by Sun Community Bancorp Limited) Arizona
Camelback Community Bank
(55% owned by Sun Community Bancorp Limited) Arizona
East Valley Community Bank
(85% owned by Sun Community Bancorp Limited) Arizona
Southern Arizona Community Bank
(51% owned by Sun Community Bancorp Limited) Arizona
Mesa Bank
(53% owned by Sun Community Bancorp Limited) Arizona
Nevada Community Bancorp Limited
(54% owned by Sun Community Bancorp Limited): Nevada
Black Mountain Community Bank
(51% owned by Nevada Community Bancorp Limited) Nevada
Desert Community Bank
(51% owned by Nevada Community Bancorp Limited) Nevada
Red Rock Community Bank
(51% owned by Nevada Community Bancorp Limited) Nevada
Sunrise Capital Corporation
(approximately 60% owned by Sun Community Bancorp Limited): New Mexico
Sunrise Bank of Arizona
(100% owned by Sunrise Capital Corporation) Arizona
Sunrise Bank of Albuquerque
(87% owned by Sunrise Capital Corporation) New Mexico
<PAGE>
EXHIBIT 21 -- SUBSIDIARIES OF THE REGISTRANT - continued:
CAPITOL BANCORP LTD.
DECEMBER 31, 2000
PAGE 2 OF 2
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ------------------ ----------------
CONSOLIDATED SUBSIDIARIES - CONTINUED:
Capitol Trust I Delaware
UNCONSOLIDATED SUBSIDIARY:
Amera Mortgage Corporation, Inc. Michigan
(49% owned equity method investee)
INACTIVE SUBSIDIARIES:
MOI, Inc. Michigan
(wholly-owned subsidiary of
Oakland Commerce Bank)
Financial Center Corporation Michigan
C.B. Services, Inc. Michigan
The following summarizes regulatory agencies of the registrant and its
subsidiaries:
The Corporation's state-chartered banks located in Michigan are regulated by the
Financial Institutions Bureau of the Michigan Department of Commerce. Capitol
National Bank, as a national bank, is regulated by the Office of the Comptroller
of the Currency. Bank subsidiaries located in the states Arizona, Nevada, New
Mexico and Indiana are state-chartered and are regulated by banking agencies of
each of those states. Each of the banking subsidiaries which are not members of
the Federal Reserve System, as federally-insured depository institutions, are
also regulated by the Federal Deposit Insurance Corporation. Elkhart Community
Bank and Goshen Community Bank are members of the Federal Reserve System and,
accordingly, are regulated by the Federal Reserve Board. As a bank holding
company, Capitol Bancorp Ltd. is regulated by the Federal Reserve Board, which
also regulates its nonbanking subsidiaries. Sun Community Bancorp Limited,
Nevada Community Bancorp Limited, Sunrise Capital Corporation and Indiana
Community Bancorp Limited are also regulated by the Federal Reserve Board. In
addition to the bank regulatory agencies, the registrant and its subsidiaries
are subject to regulation by other state and federal agencies.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>ex-23.txt
<DESCRIPTION>CONSENT OF BDO SEIDMAN, LLP
<TEXT>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Capitol Bancorp Ltd.
Lansing, Michigan
We hereby consent to the incorporation by reference and use of our report dated
January 29, 2001, which appears on page 23 of Capitol Bancorp Ltd.'s Annual
Report to shareholders (Financial Information Section) for the year ended
December 31, 2000, in that corporation's previously filed Form S-3 Registration
Statement No. 33-71774 for its Shareholder Investment Program.
BDO SEIDMAN, LLP
/s/ BDO Seidman, LLP
March 23, 2001
Grand Rapids, Michigan
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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