Capitol Bancorp Reports Improved Core Operating Results

Mar 04, 2011, 06:00 ET from Capitol Bancorp Ltd.

LANSING, Mich. and PHOENIX, March 4, 2011 /PRNewswire/ -- Exclusive of a one-time non-cash write-off of all remaining goodwill, a net loss of $26.8 million was incurred for the fourth quarter of 2010, an improvement of more than 50 percent from the preceding quarterly period.  Several key factors contributed to significantly improved operating results:

  • The provision for loan losses decreased 68 percent from the corresponding period of 2009 and 51 percent from the third quarter of 2010.
  • Costs associated with foreclosed properties and other real estate owned decreased 80 percent from the fourth quarter of 2009 and 62 percent from the third quarter of 2010.
  • Employee compensation and benefits expense decreased 20 percent from the fourth quarter of 2009 and of 16 percent from the third quarter of 2010.

Consolidated assets declined 31 percent to $3.5 billion at December 31, 2010 from the $5.1 billion reported at December 31, 2009, as a result of bank divestitures and balance-sheet deleveraging strategies.  Total portfolio loans approximated $2.7 billion at December 31, 2010, an approximate 15 percent decline for the year.  Deposits reflected an approximate 14 percent decline to $3 billion from $3.5 billion reported at December 31, 2009; however, the Corporation's continued focus on core funding sources resulted in an ongoing favorable improvement in deposit mix as noninterest-bearing deposits approximated 17 percent of total deposits compared to 14 percent at year-end 2009.

Capitol's Chairman and CEO Joseph D. Reid said, "We continue to focus on risk management and enhancing balance-sheet strength, while improving liquidity.  These improvements have resulted from several regional consolidations and multiple bank divestitures over the past eighteen months.  In December 2010, we announced a comprehensive capital strategy with the operating objectives of deleveraging our consolidated balance sheet, reducing nonearning assets and strategically redeploying capital to those affiliates weakened by the economic environment.  We completed the first phase of this comprehensive strategy in January 2011 with the addition of $19.5 million in capital from the exchange of some of our trust-preferred securities for previously-unissued common stock and have taken steps to implement the next steps through an increase in the authorized shares of the capital stock of the Corporation, the potential for exchange offers for our development subsidiaries and shareholders' authorization for a potential reverse stock split in the future.  The current challenges remain significant and the burdens represented by elevated levels of nonperforming assets continue to consume capital and managerial resources; however, we are encouraged that these efforts and others will support the Corporation as it continues to weather the storm and return to fundamental performance over time."

"We are cautiously encouraged by both redeployment of capital resources from divestiture efforts and preliminary signs of recent positive trends in asset quality and operating performance.  Nonperforming assets, although still elevated, reflect a second consecutive quarter of decline after six consecutive quarters of adverse growth.  The decline in the fourth quarter of 2010 (when compared to the preceding quarter) approximated 1.9 percent.  Combining the aggregate quarter-end level of non-performing assets with net charge-offs for each of the past eight quarters, also reflects a second consecutive quarterly decline, measuring an approximate 7% decrease during the fourth quarter of 2010.  We remain hopeful these trendlines may be a harbinger of continued improving fundamentals."  

"Net loan charge-offs, which also continue to be elevated, reflected another quarter of active management and resolution-oriented focus, while the full-year 2010 provision for loan losses continued to exceed net charge-offs.  The allowance for loan losses approximated 5.52 percent of portfolio loans at December 31, 2010, a significant increase from the 3.57 percent level at year-end 2009 and a significant increase during these difficult times from the 4.94 percent level at September 30, 2010," added Mr. Reid.

"Divestiture activities have resulted in the sale of 14 institutions, eliminating more than $1.2 billion of assets.  Six additional transactions are pending, with assets approximating $345 million.  Beyond the combined approximate $1.5 billion of assets involved in such divestitures, ongoing discussions continue in both the divestiture and capital-reallocation arenas to address the deterioration that has occurred in capital.  We expect to communicate additional developments as they arise, as all strategic alternatives and prospective sources of support are being actively explored," said Mr. Reid.

Quarterly Performance

Core operating results (in $1,000s) are summarized as follows for 2010:




Three Months Ended



December 31


September 30(1)


June 30


March 31










Net loss from continuing operations


$      (91,826)


$      (59,516)


$      (50,718)


$      (61,940)

Add back:









    Provision for loan losses


22,420


45,885


44,600


50,100

    Costs associated with foreclosed properties and other real estate owned


5,544


14,645


8,905


12,085

    Goodwill impairment


64,505


--


--


--










Core operating results


$            643


$         1,014


$         2,787


$            245










(1)  As restated.



The foregoing analysis illustrates that core operating results have remained positive throughout 2010.  Such results, however, underscore the need to improve operating performance through increased revenues and reduced operating costs.

In the fourth quarter of 2010, consolidated net operating revenues from continuing operations decreased modestly to approximately $32.2 million from $35.6 million for the corresponding period of 2009.  Ongoing margin pressures, consistent with a low interest-rate environment, adversely impacted by elevated levels of nonperforming assets, resulted in an 8.6 percent decline in net interest income.  The net interest margin decreased to 2.94 percent for the three months ended December 31, 2010 from 3.04 percent for 2009's comparable period, and 3.01 percent on a linked-quarter basis.  Cash and cash equivalents were $565 million, or nearly 16 percent of consolidated total assets at December 31, 2010, reflecting continued focus on liquidity.  Other noninterest income totaled $7.3 million, compared to approximately $8.5 million in the comparable 2009 period, a modest 6.2 percent increase versus the $6.9 million reported on a linked-quarter basis.  However, core noninterest revenue components continue to decline, in part attributable to Capitol's deleveraging efforts.

The Corporation continues to emphasize the reduction of operating expenses.  Noninterest expenses, although reflecting notable declines in "controllable" salary costs and core operating expenses, increased year-over-year to approximately $103 million in the quarter ended December 31, 2010, primarily as a result of the aforementioned $64.5 million non-cash goodwill impairment.  Excluding goodwill impairment charges, year-over-year total operating expenses declined from $74.2 million in 2009's fourth quarter to approximately $38.5 million in 2010.  This improvement was largely driven by a significant decrease in costs associated with foreclosed properties and other real estate owned, which approximated $5.5 million in the fourth quarter of 2010, compared to $27.2 million in the corresponding 2009 period.  FDIC insurance premiums and other regulatory fees increased from $3.7 million in 2009's fourth quarter to approximately $4.2 million in the most recent three-month period.  Combined, these two expense areas measured $9.7 million in the most recent quarter, a substantial decrease from the combined approximate $31 million level during the corresponding period of 2009 and the $18.4 million recorded linked-quarter.  More importantly, on a core, controllable-expense basis, year-over-year salary costs declined significantly from $19.9 million in the 2009 period to approximately $15.9 million in 2010's fourth quarter and on a linked-quarter basis reflected a 16 percent contraction from the $19 million figure recorded for the three months ended September 30, 2010.  

The Corporation performs its annual review for potential impairment of goodwill in the fourth quarter.  Based on its assessment of goodwill, management determined it to be impaired and, accordingly, recorded a one-time non-cash impairment charge of $64.5 million to fully write-off such goodwill as of December 31, 2010.

The fourth quarter 2010 provision for loan losses decreased to $22.4 million from $69.5 million for the corresponding period of 2009.  During the fourth quarter of 2010, net loan charge-offs totaled $27.9 million, a significant decrease from 2009's corresponding level of $50.9 million and continued improvement when compared with the first three quarters ($40.9 million, $33.4 million, and $42.4 million, respectively) of 2010, as the Corporation continues to aggressively manage its nonperforming loans.  

Adverse bank performance in the Arizona, Great Lakes and Nevada regions and the continued high level of the provision for loan losses were major reasons for the core operating net loss in the 2010 period.  

As announced yesterday, Capitol's unaudited condensed consolidated financial statements for the three months and nine months ended September 30, 2010 have been revised to reflect an additional provision for loan losses of $11.7 million resulting from Michigan Commerce Bank's amended regulatory financial statements as of and for the period ended September 30, 2010 filed on February 22, 2011.  Michigan Commerce Bank is a significant subsidiary of Capitol.  Michigan Commerce Bank's amendment of its regulatory financial statements as of and for the period ended September 30, 2010 to increase its allowance for loan losses and related provision for loan losses resulted from a recently-completed joint examination of the bank by the Federal Deposit Insurance Corporation and the Office of Financial and Insurance Regulation of the State of Michigan.  Such examination commenced in September 2010.  The bank's decision to amend its interim financial statements was based on discussion with those regulatory agencies regarding expectations that certain examination findings, including a change in estimate regarding the bank's allowance for loan losses as of September 30, 2010, would require such amendment; however, the bank has not yet received the related examination report.

Results for the Year

Net operating revenues approximated $124.6 million for the year ended December 31, 2010, a 3.5 percent decrease compared to $129.1 million in 2009.  The provision for loan losses of $156.9 million for 2010 decreased from $175.2 million in 2009, and continued to exceed net charge-offs, resulting in an approximate $17.6 million increase in the allowance for loan losses while portfolio loans decreased about $464 million.  The net loss per common share for the year ended December 31, 2010 was $11.16, versus $11.28 reported for the corresponding period in 2009.  Excluding non-cash goodwill impairment charges, the net loss per common share was $7.96 for 2010 compared to $11.08 in 2009.

Noninterest expenses expanded 19 percent to $241.8 million, due to the aforementioned goodwill impairment charge in the fourth quarter of 2010.  However, excluding non-cash goodwill impairment charges, noninterest expenses of $177.3 million in 2010 reflected an approximate 11.6 percent decrease from $200.5 million in 2009.  For 2010, costs associated with foreclosed properties and other real estate owned decreased to $40.4 million from nearly $45 million reported in 2009, while FDIC insurance premiums and other regulatory fees increased from approximately $13 million in 2009 to $15.7 million in 2010.  Reflecting Capitol's continued conservative credit approach and significant increase in the allowance for loan losses, the provision for loans losses for the year exceeded net charge-offs, reflecting a 1.1x coverage ratio.

Balance Sheet

Divestiture efforts and ongoing balance-sheet deleveraging are focused on strengthening consolidated capital ratios, although the Corporation continues to be classified as "undercapitalized."  As of December 31, 2010, Capitol has a $190.3 million valuation allowance related to deferred tax assets, which may be utilized upon a return to significant core profitability.

Net loan charge-offs of 4.05 percent of average loans (annualized) for the fourth quarter of 2010 represented a decrease from the 5.68 percent in the corresponding period of 2009 and the 4.89 percent on a linked-quarter basis.  The ratio of nonperforming loans to total portfolio loans was 11.90 percent at December 31, 2010 compared to 10.46 percent reported at September 30, 2010 and 7.60 percent at December 31, 2009.  The ratio of total nonperforming assets to total assets increased to 12.03 percent at December 31, 2010 from 10.62 percent reported at September 30, 2010 and 8.17 percent at December 31, 2009 as the modest declines in aggregate nonperforming assets reported in the past two quarters were outpaced by the dramatic shrinkage in the Corporation's consolidated balance sheet.  

The continuing increase in the nonperforming assets ratio is attributable to borrower stress and delinquency, coupled with limited markets for the sale of real estate, especially in the states of Arizona, Michigan and Nevada, hindering the disposition of such assets.  While recent activity reflected some encouragement in the trend of declining level of nonperforming loans in both the Arizona Region (a $13.6 million decline, linked-quarter) and Great Lakes Region (a $13.4 million decline, linked-quarter), both regions continue to reflect materially elevated levels of nonperforming assets.  However, modest declines in nonperforming loans experienced in both Arizona and the Great Lakes Region were partially offset by continued deterioration in the Nevada Region.  The coverage ratio of the allowance for loan losses in relation to nonperforming loans approximated 46.4 percent at December 31, 2010, consistent with levels reported in recent quarters and a slight decrease from the approximate 47.2 percent reported linked-quarter.  The allowance for loan losses as a percentage of portfolio loans increased materially, from 3.57 percent at year-end 2009 to 5.52 percent at December 31, 2010.  Reflecting the Corporation's intent to maintain a conservative allowance for loan losses and balance sheet strength, the provisions for loan losses continued to exceed the heightened level of charge-off activity during 2010.  

Comprehensive Capital Strategy

In December 2010, Capitol announced a comprehensive capital strategy focused on the enhancement of the Corporation's capital levels.  Those initiatives are designed to augment Capitol's existing strategic efforts focused on affiliate divestitures, operational cost savings, balance sheet deleveraging and liquidity.  Capitol successfully completed the first of these capital initiatives, an offer to exchange outstanding trust-preferred securities for previously-unissued shares of Capitol's common stock.  On January 31, 2011, those exchanges resulted in an additional $19.5 million of equity for Capitol, the issuance of approximately 19.5 million previously-unissued shares of Capitol's common stock and the elimination of approximately $2 million of annual interest expense in future periods.  By increasing its capital through that exchange and other contemplated components of its capital strategy, Capitol expects flexibility to prospectively seek market opportunities and implement longer-term operating strategies that may be pursued at the appropriate time.  

Affiliate Bank Divestitures and Regional Bank Consolidations

Capitol previously announced plans to sell its controlling interests in several affiliate banks.  In December, Capitol completed the sale of its interest in its Arizona-based affiliate Southern Arizona Community Bank and, in January 2011, Capitol completed the sale of another Arizona-based affiliate, Bank of Tucson's main office.  These transactions consisted of approximately $270 million of assets and reallocated nearly $25 million of capital for reinvestment in bank affiliates.  Capitol also announced, in late 2010 and early 2011, agreements to sell its interests in California-based Bank of Feather River, North Carolina-based Community Bank of Rowan and Oregon-based High Desert Bank.  Those transactions, in addition to three other pending transactions involving affiliates in Indiana, Nevada and Texas, reflect six divestitures awaiting regulatory approvals (and other contingencies) and represent $345 million of assets and the opportunity to reallocate nearly $18 million of capital to other banks within the Capitol Bancorp network.  The six pending divestitures are anticipated to be completed in 2011.  

During 2010, regional charter consolidations were completed in California, Georgia, Indiana, Michigan, Nevada and Washington, following 2009 charter consolidations in Arizona and Michigan.  To date, the regional consolidation effort has resulted in the consolidation of 27 charters into seven geographically-concentrated banks.

Mr. Reid further stated, "These bank divestitures and regional consolidations address several key strategic initiatives of deleveraging our consolidated balance sheet and enabling the reallocation of equity capital to other affiliates still challenged by current economic conditions."

About Capitol Bancorp Limited

Capitol Bancorp Limited (OTCQB: CBCR) is a community banking company, with a national network of separately chartered banks with operations in 14 states.  Founded in 1988, the Corporation has executive offices in Lansing, Michigan, and Phoenix, Arizona.  

CAPITOL BANCORP LIMITED

SUMMARY OF SELECTED FINANCIAL DATA

(in thousands, except share and per share data)
















Three Months Ended




Year Ended




December 31




December 31




2010(1)


2009




2010(1)


2009









Condensed consolidated results of operations:











Interest income

$      38,625


$      46,712




$    163,691


$    197,785


Interest expense

13,803


19,546




63,582


91,112



Net interest income

24,822


27,166




100,109


106,673


Provision for loan losses

22,420


69,504




156,868


175,234


Noninterest income

7,329


8,472




24,447


22,451


Noninterest expense

102,991


76,166




241,811


203,960


Loss from continuing operations before income    











taxes

(93,260)


(110,032)




(274,123)


(250,070)


Income (loss) from discontinued operations

565


2,417




12,449


(1,222)














Net loss attributable to Capitol Bancorp Limited

$    (84,164)


$     (75,502)




$  (225,215)


$  (195,169)














Net loss attributable to Capitol Bancorp Limited        











per common share  

$        (3.95)


$         (4.34)




$      (11.16)


$      (11.28)


Book value (deficit) per common share at end of period

(3.10)


9.19




(3.10)


9.19


Common stock closing price at end of period

$          0.52


$          1.96




$          0.52


$          1.96


Common shares outstanding at end of period

21,615,000


17,546,000




21,615,000


17,546,000


Number of common shares used to compute net loss    











per share

21,305,000


17,401,000




20,186,000


17,302,000






























4th Quarter


3rd Quarter


2nd Quarter


1st Quarter


4th Quarter




2010(1)


2010(2)


2010


2010


2009

Condensed summary of consolidated financial position:











Total assets

$ 3,540,214


$ 4,225,863


$  4,748,695


$ 5,064,936


$ 5,131,940


Portfolio loans(3)

2,671,712


2,821,144


2,967,709


3,093,207


3,135,298


Deposits(3)

3,028,684


3,311,116


3,474,118


3,608,420


3,518,825


Capitol Bancorp Limited stockholders' equity

(61,854)


35,967


88,297


117,167


161,335


Total capital

$    128,905


$    233,509


$     304,104


$    342,858


$    401,047













Key performance ratios:











Net interest margin

2.94%


3.01%


2.88%


3.03%


3.04%


Efficiency ratio

320.34%


135.55%


127.03%


126.75%


179.40%













Asset quality ratios:











Allowance for loan losses / portfolio loans

5.52%


4.94%


4.44%


3.90%


3.57%


Total nonperforming loans / portfolio loans

11.90%


10.46%


9.93%


8.80%


7.60%


Total nonperforming assets / total assets

12.03%


10.62%


9.86%


8.97%


8.17%


Net charge-offs (annualized) / average portfolio loans

4.05%


4.89%


3.64%


4.25%


5.68%


Allowance for loan losses / nonperforming loans

46.38%


47.18%


44.67%


44.31%


47.04%













Capital ratios:











Capitol Bancorp Limited stockholders' equity / total assets

(1.75)%


0.85%


1.86%


2.31%


3.14%


Total equity / total assets

(1.09)%


1.56%


2.88%


3.46%


4.55%


(1)  Preliminary, as of March 4, 2011, subject to adjustment and year-end audit.    

(2)  Restated to reflect additional provision for loan losses of $11.7 million resulting from Michigan Commerce Bank's amended regulatory financial report as of and for the period ended September 30, 2010 filed in February 2011.  Michigan Commerce Bank is a significant subsidiary of Capitol Bancorp Ltd.

(3)  Excludes amounts related to operations discontinued in 2010 for dates prior to December 31, 2010.




Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements include expressions such as "expect," "intend," "believe," "estimate," "may," "will," "anticipate" and "should"

and similar expressions also identify forward-looking statements which are not necessarily statements of belief as to the expected outcomes

of future events.  Actual results could materially differ from those presented due to a variety of internal and external factors.  Actual results

could materially differ from those contained in, or implied by, such statements.  Capitol Bancorp Limited undertakes no obligation to release

revisions to these forward-looking statements or reflect events or circumstances after the date of this release.



 Supplemental analyses follow providing additional detail regarding Capitol's consolidated results of operations, financial position,        

 asset quality and other supplemental data.  



CAPITOL BANCORP LIMITED

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)












Three Months Ended December 31


Year Ended December 31



2010(1)


2009


2010(1)


2009

INTEREST INCOME:









 Portfolio loans (including fees)


$           37,853


$           45,544


$         160,645


$         194,951

 Loans held for sale


78


106


266


618

 Taxable investment securities


126


234


553


488

 Federal funds sold


2


4


10


43

 Other


566


824


2,217


1,685

           Total interest income


38,625


46,712


163,691


197,785










INTEREST EXPENSE:









 Deposits


9,931


15,266


47,269


70,363

 Debt obligations and other


3,872


4,280


16,313


20,749

           Total interest expense


13,803


19,546


63,582


91,112










           Net interest income


24,822


27,166


100,109


106,673










PROVISION FOR LOAN LOSSES


22,420


69,504


156,868


175,234

           Net interest income (deficiency) after        









             provision for loan losses    


2,402


(42,338)


(56,759)


(68,561)










NONINTEREST INCOME:









 Service charges on deposit accounts


935


1,098


3,848


4,694

 Trust and wealth-management revenue    


918


1,146


4,200


4,957

 Fees from origination of non-portfolio residential              









    mortgage loans    


605


491


1,921


2,846

 Gain on sale of government-guaranteed loans    


563


568


1,479


1,211

 Gain on debt extinguishment    


--


--


1,255


--

 Realized gain (loss) on sale of investment securities                  









    available for sale    


(361)


(35)


(351)


7

 Other


4,669


5,204


12,095


8,736

           Total noninterest income


7,329


8,472


24,447


22,451










NONINTEREST EXPENSE:









 Salaries and employee benefits


15,895


19,873


69,920


84,729

 Occupancy


3,888


3,906


15,403


15,422

 Equipment rent, depreciation and maintenance    


2,350


9,251


9,957


17,713

 Costs associated with foreclosed properties and other      









    real estate owned


5,544


27,234


40,400


44,965

 FDIC insurance premiums and other regulatory fees    


4,172


3,739


15,732


12,973

 Goodwill impairment


64,505


1,931


64,505


3,431

 Other


6,637


10,232


25,894


24,727

           Total noninterest expense    


102,991


76,166


241,811


203,960










           Loss before income taxes            


(93,260)


(110,032)


(274,123)


(250,070)










Income taxes (benefit)  


(1,434)


(22,057)


(7,310)


13,248










           Loss from continuing operations


(91,826)


(87,975)


(266,813)


(263,318)










Discontinued operations:









 Income (loss) from operations of bank subsidiaries sold


753


(994)


6,035


2,761

 Gain on sale of bank subsidiaries


2,405


--


15,784


1,187

 Income taxes expense (benefit)    


2,593


(3,411)


9,370


5,170

           Income (loss) from discontinued operations  


565


2,417


12,449


(1,222)










           NET LOSS      


(91,261)


(85,558)


(254,364)


(264,540)










Net losses attributable to noncontrolling interests in                    









   consolidated subsidiaries


7,097


10,056


29,149


69,371










       NET LOSS ATTRIBUTABLE TO CAPITOL BANCORP              









         LIMITED      


$         (84,164)


$         (75,502)


$       (225,215)


$       (195,169)










       NET LOSS PER COMMON SHARE ATTRIBUTABLE TO          









         CAPITOL BANCORP LIMITED            


$             (3.95)


$             (4.34)


$           (11.16)


$           (11.28)



















(1)  Preliminary, as of March 4, 2011, subject to adjustment and year-end audit.    



CAPITOL BANCORP LIMITED

Condensed Consolidated Balance Sheets

(in thousands, except share and per-share data)








December 31


(Unaudited)




2010(1)


2009

ASSETS








Cash and due from banks

$      58,347


$      56,231

Money market and interest-bearing deposits      

506,413


608,727

Federal funds sold

418


4,861

           Cash and cash equivalents      

565,178


669,819

Loans held for sale

7,041


10,966

Investment securities:




 Available for sale, carried at fair value      

24,139


35,765

 Held for long-term investment, carried at      




   amortized cost which approximates fair value        

2,893


5,790

           Total investment securities    

27,032


41,555

Federal Home Loan Bank and Federal Reserve    




 Bank stock (carried on the basis of cost)  

18,167


18,628

Portfolio loans:




 Loans secured by real estate:




       Commercial

1,411,551


1,560,866

       Residential (including multi-family)    

570,252


623,368

       Construction, land development and other land    

257,751


383,071

           Total loans secured by real estate      

2,239,554


2,567,305

 Commercial and other business-purpose loans        

390,183


511,102

 Consumer

26,824


32,599

 Other 

15,151


24,292

           Total portfolio loans

2,671,712


3,135,298

 Less allowance for loan losses

(147,421)


(129,795)

           Net portfolio loans

2,524,291


3,005,503

Premises and equipment

38,393


42,219

Accrued interest income

9,246


12,239

Goodwill    

--


65,210

Other real estate owned

107,874


107,013

Recoverable income taxes  

--


43,763

Other assets

20,110


31,922

Assets of discontinued operations

222,882


1,083,103





         TOTAL ASSETS

$ 3,540,214


$ 5,131,940





LIABILITIES AND EQUITY








LIABILITIES:  




Deposits:




 Noninterest-bearing

$    516,873


$    491,763

 Interest-bearing

2,511,811


3,027,063

           Total deposits    

3,028,684


3,518,826

Debt obligations:




 Notes payable and short-term borrowings    

123,377


197,653

 Subordinated debentures

167,586


167,441

           Total debt obligations      

290,963


365,094

Accrued interest on deposits and other liabilities

50,420


42,099

Liabilities of discontinued operations

208,828


972,315

           Total liabilities      

3,578,895


4,898,334





EQUITY:




Capitol Bancorp Limited stockholders' equity:  




 Preferred stock (Series A), 700,000 shares authorized        




   ($100 liquidation preference per share); 50,980 shares            




   issued and outstanding in 2010 (none in 2009)      

5,098


--

 Preferred stock (for potential future issuance),        




   19,300,000 shares authorized; none issued and outstanding  

--


--

 Common stock, no par value,  50,000,000 shares authorized;  




   issued and outstanding:    2010 - 21,614,856 shares




                                             2009 - 17,545,631 shares

287,190


277,707

 Retained-earnings deficit  

(353,757)


(115,751)

 Undistributed common stock held by employee-benefit trust        

(541)


(558)

 Fair value adjustment (net of tax effect) for investment securities      




   available for sale (accumulated other comprehensive income)          

156


(63)

           Total Capitol Bancorp Limited stockholders' equity (deficit)      

(61,854)


161,335

Noncontrolling interests in consolidated subsidiaries    

23,173


72,271

           Total equity (deficit)        

(38,681)


233,606






         TOTAL LIABILITIES AND EQUITY    

$ 3,540,214


$ 5,131,940





(1)  Preliminary, as of March 4, 2011, subject to adjustment and year-end audit.    



CAPITOL BANCORP LIMITED

Allowance for Loan Losses Activity



ALLOWANCE FOR LOAN LOSSES ACTIVITY (in thousands):




Periods Ended December 31



Three Month Period


Year Ended



2010(1)


2009(2)


2010(1)


2009(2)










Allowance for loan losses at beginning of period


$      152,940


$      111,209


$      129,795


$        77,328










Allowance for loan losses of previously-deconsolidated bank subsidiary






1,769












Loans charged-off:









   Loans secured by real estate:









       Commercial


(4,027)


(17,839)


(51,644)


(29,194)

       Residential (including multi-family)


(10,591)


(13,335)


(38,325)


(33,076)

       Construction, land development and other land


(9,046)


(10,405)


(35,764)


(33,112)

           Total loans secured by real estate


(23,664)


(41,579)


(125,733)


(95,382)

   Commercial and other business-purpose loans


(8,474)


(9,941)


(28,357)


(29,005)

   Consumer


(695)


(314)


(1,961)


(1,277)

   Other


--


--


--


(34)

           Total charge-offs


(32,833)


(51,834)


(156,051)


(125,698)

Recoveries:









   Loans secured by real estate:









       Commercial


1,631


255


3,126


406

       Residential (including multi-family)


1,968


91


3,634


343

       Construction, land development and other land


429


403


5,230


909

           Total loans secured by real estate


4,028


749


11,990


1,658

   Commercial and other business-purpose loans


710


150


2,800


1,140

   Consumer


156


17


250


133

           Total recoveries


4,894


916


15,040


2,931

           Net charge-offs


(27,939)


(50,918)


(141,011)


(122,767)

Additions to allowance charged to expense (provision for loan losses)


22,420


69,504


156,868


175,234










       Allowance for loan losses at end of period


$      147,421


$      129,795


$      147,421


$      129,795










Average total portfolio loans for the period


$   2,759,110


$   3,271,257


$   2,940,894


$   3,544,759










Ratio of net charge-offs (annualized) to average portfolio loans outstanding


4.05%


6.23%


4.79%


3.46%


(1) Preliminary, as of March 4, 2011, subject to adjustment and year-end audit.


(2) Excludes amounts related to operations discontinued in 2010.



CAPITOL BANCORP LIMITED

Asset Quality Data



ASSET QUALITY (in thousands):




December 31

2010(1)


September 30

2010(2)


June 30

2010(2)


March 31

2010(2)

Nonaccrual loans:









   Loans secured by real estate:









       Commercial


$      154,504


$      158,949


$      160,364


$      149,163

       Residential (including multi-family)


60,840


64,922


56,388


62,648

       Construction, land development and other land


62,177


72,103


86,626


77,085

           Total loans secured by real estate


277,521


295,974


303,378


288,896

   Commercial and other business-purpose loans


30,746


28,293


30,196


27,083

   Consumer


211


573


1,371


400

           Total nonaccrual loans


308,478


324,840


334,945


316,379










Past due (> 90 days) loans and accruing interest:









   Loans secured by real estate:









       Commercial


2,875


2,523


5,544


5,796

       Residential (including multi-family)


1,784


855


2,508


768

       Construction, land development and other land


2,380


18


2,113


3,035

           Total loans secured by real estate


7,039


3,396


10,165


9,599

Commercial and other business-purpose loans


2,073


387


1,344


2,101

Consumer


279


38


32


12

           Total past due loans


9,391


3,821


11,541


11,712










           Total nonperforming loans


$      317,869


$      328,661


$      346,486


$      328,091










             Real estate owned and other repossessed assets


107,874


105,311


105,855


106,961










           Total nonperforming assets


$      425,743


$      433,972


$      452,341


$      435,052


(1) Preliminary, as of March 4, 2011, subject to adjustment and year-end audit.


(2) Excludes amounts related to operations discontinued in 2010.



CAPITOL BANCORP LIMITED

Selected Supplemental Data



EPS COMPUTATION COMPONENTS (in thousands):


Periods Ended December 31


Three Month Period


Year Ended


2010(1)


2009


2010(1)


2009









Numerator—net loss attributable to Capitol Bancorp Limited for the period

$      (84,164)


$      (75,502)


$    (225,215)


$    (195,169)









Denominator:








   Weighted average number of common shares outstanding, excluding unvested restricted shares of common stock (denominator for basic and diluted earnings per share)

21,305


17,401


20,186


17,302









Number of antidilutive stock options excluded from diluted net loss per share computation

1,746


2,504


1,746


2,504









Number of antidilutive unvested restricted shares excluded from basic and diluted net loss per share computation

310


145


310


145









Number of antidilutive warrants excluded from diluted net loss per share computation

76


76


76


76



AVERAGE BALANCES (in thousands):


Periods Ended December 31


Three Month Period


Year Ended


2010(1)


2009


2010(1)


2009









Portfolio loans

$  2,759,110


$  3,271,257


$  2,940,894


$  3,544,759

Earning assets

3,376,021


3,998,994


3,633,572


4,175,890

Total assets

3,873,673


5,335,720


4,580,606


5,607,375

Deposits

3,180,157


3,641,803


3,398,159


3,708,510

Capitol Bancorp Limited stockholders' equity

7,142


225,033


84,786


299,551


(1) Preliminary, as of March 4, 2011, subject to adjustment and year-end audit.



Capitol Bancorp's National Network of Community Banks



Arizona Region:


Central Arizona Bank

Casa Grande, Arizona

Sunrise Bank of Albuquerque

Albuquerque, New Mexico

Sunrise Bank of Arizona

Phoenix, Arizona



California Region:


Bank of Feather River

Yuba City, California

Sunrise Bank

San Diego, California



Colorado Region:


Mountain View Bank of Commerce

Westminster, Colorado



 Great Lakes Region:


Bank of Maumee

Maumee, Ohio

Bank of Michigan

Farmington Hills, Michigan

Capitol National Bank

Lansing, Michigan

Evansville Commerce Bank

Evansville, Indiana

Indiana Community Bank

Goshen, Indiana

Michigan Commerce Bank

Ann Arbor, Michigan



 Midwest Region:


Summit Bank of Kansas City

Lee's Summit, Missouri



Nevada Region:


1st Commerce Bank

North Las Vegas, Nevada

Bank of Las Vegas

Las Vegas, Nevada



 Northwest Region:


Bank of the Northwest

Bellevue, Washington

High Desert Bank

Bend, Oregon



 Southeast Region:


Community Bank of Rowan

Salisbury, North Carolina

First Carolina State Bank

Rocky Mount, North Carolina

Pisgah Community Bank

Asheville, North Carolina

Sunrise Bank  

Valdosta, Georgia



Texas Region:


Bank of Fort Bend

Sugar Land, Texas

Bank of Las Colinas

Irving, Texas






SOURCE Capitol Bancorp Ltd.



RELATED LINKS

http://www.capitolbancorp.com