Capitol Bancorp (CBCRQ) S-4 Registration of securities issued in business combination transactions

As filed with the Securities and Exchange Commission on September 15, 2006 Registration No. ____________

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Capitol Bancorp Ltd.

(Exact name of registrant as specified in its charter)

MICHIGAN	6711	38-2761672
(STATE OR OTHER JURISDICTION OF  INCORPORATION OR ORGANIZATION)	(PRIMARY STANDARD INDUSTRIAL  CLASSIFICATION CODE NUMBER)	(I.R.S. EMPLOYER  IDENTIFICATION NO.)

Capitol Bancorp Center

200 Washington Square North, Fourth Floor

Lansing, Michigan 48933

(517) 487-6555

(Address, including zip code, and telephone number,

including area code, of registrant's principal executive offices)

Cristin Reid English, Esq.

Capitol Bancorp Center

200 Washington Square North, Fourth Floor

Lansing, Michigan 48933

(517) 487-6555

(Name and address, including zip code, and telephone number,

including area code, of agent for service)

Copy to:

Phillip D. Torrence, Esq.

Miller, Canfield, Paddock and Stone, PLC

444 W. Michigan Ave.

Kalamazoo, Michigan 49007

(269) 383-5804

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.[_]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[_]

CALCULATION OF REGISTRATION FEE

Title Of Each Class Of Securities Being Registered	Amount To Be Registered (1)	Proposed Maximum Offering Price Per Share	Proposed Maximum Aggregate Offering Price (2)	Amount Of Registration Fee
Common stock (no par value)	394,356	$44.365	$17,495,604	$1,873

(1) Based on 10,900 shares of common stock, no par value, of Capitol Development Bancorp Limited I ("CDBL I"), which is the maximum number of shares of CDBL I Class B common stock that may be issued and outstanding immediately prior to the consummation of the share exchange transaction, multiplied by the proposed estimated exchange ratio of 36.17945.

(2) Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, as amended, the registration fee has been calculated based on a price of $44.365 per share of Capitol common stock (the average of the high and low price per share of common stock of Capitol as reported on the New York Stock Exchange on September 14, 2006), and the estimated number of Capitol shares that may be issued in the consummation of the share exchange transaction contemplated.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

PROXY STATEMENT/PROSPECTUS

PROPOSED PLAN OF SHARE EXCHANGE

The Board of Directors of Capitol Development Bancorp Limited I ("CDBL I") has approved an agreement and Plan of Share Exchange (the "Plan of Share Exchange ") that contemplates the exchange of CDBL I Class B common stock for Capitol Bancorp Limited ("Capitol") common stock. In order to complete the share exchange, holders of a majority of the shares of both CDBL I Class B common stock and Class A common stock must approve the Plan of Share Exchange. The vote must be approved by an overall majority of CDBL I shareholders as well. Capitol currently holds 100% of CDBL I's Class A voting common stock and none of CDBL I's Class B common stock. As a result of the exchange, if approved by CDBL I's Class A common stock shareholders and Class B shareholders, CDBL I will become a wholly-owned subsidiary of Capitol. Capitol intends to vote its CBDL I Class A shares in accordance with the vote of a majority of Class B common stock.

If the share exchange is approved and completed, each share of CDBL I Class B common stock will be converted into the right to receive Capitol common stock according to an exchange ratio. The exchange ratio is calculated by dividing $1,500.00, the per share value of CDBL I Class B common stock, by the average of the closing prices of Capitol's common stock for the month ended September 30, 2006. If the exchange ratio was calculated using the average closing price of Capitol common stock for the month ended August 31, 2006 ($41.46), each shareholder of CDBL I would receive 36.17945 shares of Capitol common stock for each share of CDBL I Class B common stock. The actual exchange ratio, if the proposed share exchange is approved, will be different.

Capitol estimates that it will issue approximately 394,356 shares of Capitol common stock to CDBL I Class B shareholders in the share exchange. Those shares will represent less than 5% of the outstanding Capitol common stock after the share exchange. Capitol's common stock currently trades on the New York Stock Exchange under the symbol "CBC."

CDBL I's Board of Directors has scheduled a meeting of CDBL I shareholders to consider and vote upon the Plan of Share Exchange. The attached proxy statement/prospectus includes detailed information about the time, date and place of the special shareholders' meeting.

This document gives you detailed information about the meeting and the proposed share exchange. You are encouraged to read this document carefully. IN PARTICULAR, YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 15 FOR A DESCRIPTION OF VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING THE SHARE EXCHANGE.

 

NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This proxy statement/prospectus is dated September ____, 2006, and is first being mailed to shareholders of CDBL I on or about September ___, 2006.

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TABLE OF CONTENTS
ANSWERS TO FREQUENTLY ASKED QUESTIONS	5
SUMMARY	8
Reasons for the Share Exchange	8
The Special Shareholders' Meeting	8
Recommendation to Shareholders	8
Votes Required	9
Record Date; Voting Power	9
What Shareholders Will Receive in the Share Exchange	9
Accounting Treatment	9
Tax Consequences of the Share Exchange to CDBL I Shareholders	9
Dissenters' Rights	10
The Plan of Share Exchange	10
Termination of the Share Exchange	10
Your Rights as a Shareholder Will Change	10
SELECTED CONSOLIDATED FINANCIAL DATA OF CAPITOL	11
SELECTED CONSOLIDATED FINANCIAL DATA OF CDBL I	13
RISK FACTORS	15
RECENT DEVELOPMENTS	20
CAPITALIZATION	21
DIVIDENDS AND MARKET FOR COMMON STOCK	22
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS	23
INFORMATION ABOUT CAPITOL	24
INFORMATION ABOUT CDBL I	24
COMPARATIVE HISTORICAL, PRO FORMA AND PRO FORMA EQUIVALENT	26
PER SHARE INFORMATION
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION	27
THE SHARE EXCHANGE	32
General	32
Background of the Share Exchange	32
CDBL I's Reasons for the Share Exchange	33
Capitol's Reasons for the Share Exchange	33
Terms of the Share Exchange	33
CDBL I's Board Recommendation	33
Accounting Treatment	34
Pro Forma Data	34
Material Federal Income Tax Consequences	34
Regulatory Matters	36
Federal Securities Laws Consequences; Stock Transfer Restrictions	36

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TABLE OF CONTENTS - Continued
THE CLOSING	37
Effective Time	37
Shares Held by Capitol	37
Procedures for Surrender of Certificates; Fractional Shares	37
Fees and Expenses	37
Stock Market Listing	38
Amendment and Termination	38
THE SPECIAL SHAREHOLDERS' MEETING	39
Date, Time and Place	39
Matters to be Considered at the Special Shareholders' Meeting	39
Record Date; Stock Entitled to Vote; Quorum	39
Votes Required	39
Share Ownership of Management	39
Voting of Proxies	40
General Information	40
Solicitation of Proxies; Expenses	40
COMPARISON OF SHAREHOLDER RIGHTS	41
DESCRIPTION OF THE CAPITAL STOCK OF CAPITOL	42
Rights of Common Stock	42
Shares Available for Issuance	42
Capitol's Preferred Securities	43
Anti-Takeover Provisions	43
WHERE YOU CAN FIND MORE INFORMATION	45
LEGAL MATTERS	46
EXPERTS	46
LIST OF ANNEXES
ANNEX A   Plan of Share Exchange	A -1
ANNEX B    Financial Information Regarding Capitol Development Bancorp Limited I	B - 1

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ANSWERS TO

FREQUENTLY ASKED QUESTIONS

Q: Why am I receiving these materials?

A: CDBL I's Board of Directors has approved the Plan of Share Exchange between Capitol Bancorp Limited and CDBL I pursuant to which CDBL I Class B shareholders receive Capitol common stock in exchange for their CDBL I Class B shares. The share exchange agreement requires the approval of each class of CDBL I's shareholders as well as both classes, combined. CDBL I is sending you these materials to help you decide whether to approve the share exchange.

Q: What will I receive in the share exchange?

A: You will receive shares of Capitol common stock, which are publicly traded currently on the New York Stock Exchange under the symbol "CBC." The number of shares you would receive will be based on an exchange ratio applied to the number of CDBL I Class B shares you own. The exchange ratio will be calculated by dividing $1,500.00, the per share value of CDBL I's Class B common stock, by the average of the closing prices of Capitol's common stock for the month ended September 30, 2006. Based on information as of August 31, 2006, if the exchange is approved, you would receive approximately 36.17945 shares of Capitol common stock for each share of CDBL I Class B common stock you own. The actual exchange ratio will be different, using information as of and for the month ended September 30, 2006. Any fractional shares will be paid in cash.

Q: What happens if the share exchange proposal is not approved?

A: If the share exchange proposal is not approved, you will not receive Capitol common stock in exchange for your CDBL I Class B common stock. Instead, each share of CDBL I Class B common stock is convertible on or after December 31, 2007 into shares of CDBL I Class A common stock. The shares of Class A common stock are entitled to vote on all matters that come before shareholders, including the election of directors. Capitol owns 100% of the currently issued and outstanding shares of CDBL I Class A common stock. Capitol holds warrants sufficient to ensure it will retain at least 51% voting control of CDBL I in the event that all holders of CDBL I Class B common stock convert their CDBL I Class B shares into CDBL I Class A common stock. Capitol will retain voting control of CDBL I at all times, as it is required to do so by the Federal Reserve Board.

Q: What do I need to do now?

A: After you have carefully read this document, indicate on the enclosed proxy card how you want to vote. Sign and mail the proxy card in the enclosed prepaid return envelope as soon as possible. You should indicate your vote now even if you expect to attend the special shareholders' meeting and vote in person. Indicating your vote now will not prevent you from later canceling or revoking your proxy right up to the day of the special shareholders' meeting and will ensure that your shares are voted if you later find you cannot attend the special shareholders' meeting.

Q: What do I do if I want to change my vote?

A: You may change your vote:

·   by sending a written notice to the Chairman of CDBL I prior to the special shareholders' meeting stating that you would like to revoke your proxy;

·   by signing a later-dated proxy card and returning it by mail prior to the special shareholders' meeting, no later than October 12, 2006; or

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·   by attending the special shareholders' meeting and voting in person.

Q: What vote is required to approve the share exchange?

A: In order to complete the share exchange, holders of a majority of the shares of both CDBL I Class B common stock and Class A common stock must approve the Plan of Share Exchange. The vote must be approved by an overall majority of all shares of CDBL I as well. Capitol intends to vote its CBDL I Class A shares in accordance with the vote of a majority of Class B common stock. If you do not vote your CDBL I Class B shares, the effect will be a vote against the Plan of Share Exchange.

Q: Should I send in my stock certificates at this time?

A: No. After the share exchange is completed, Capitol or Capitol's stock transfer agent will send CDBL I Class B shareholders written instructions for exchanging their stock certificates.

Q: When do you expect to complete the share exchange?

A: As quickly as possible after October 16, 2006. Approval by CDBL I's shareholders at the special shareholders' meeting must be obtained first. It is anticipated the share exchange will be completed by October 31, 2006.

Q: Where can I find more information about Capitol?

A: This document incorporates important business and financial information about Capitol from documents filed with the SEC that have not been delivered or included with this document. This information is available to you without charge upon written or oral request. You can obtain the documents incorporated by reference in this proxy statement/prospectus through the Securities and Exchange Commission website at www.sec.gov or by requesting them in writing or by telephone from Capitol at the following address:

Capitol Bancorp Limited

Capitol Bancorp Center

200 Washington Square North, Fourth Floor

Lansing, Michigan 48933

Attention: Brian K. English, General Counsel

Telephone Number: (517) 487-6555

IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE SPECIAL SHAREHOLDERS' MEETING, YOU SHOULD MAKE YOUR REQUEST NO LATER THAN OCTOBER 11, 2006.

For more information on the matters incorporated by reference in this document, see "Where You Can Find More Information".

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WHO CAN ANSWER YOUR QUESTIONS?

If you have additional questions, you should contact:

Capitol Development Bancorp Limited I

Capitol Bancorp Center

200 Washington Square North, Fourth Floor

Lansing, Michigan 48933

(517) 487-6555

Attention: Cristin Reid English

Chairman and Chief Executive Officer

or

Capitol Bancorp Limited

Capitol Bancorp Center

200 Washington Square North, Fourth Floor

Lansing, Michigan 48933

(517) 487-6555

Attention: Brian K. English

General Counsel

If you would like additional copies of this

proxy statement/prospectus you should contact:

Capitol Bancorp Limited at the above address and phone number.

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus. It does not contain all of the information that may be important to you. To understand the proposed share exchange fully and the consequences to you, you should read carefully the entire proxy statement/prospectus and the documents referred to in this document. See "Where You Can Find More Information".

Capitol Bancorp Limited is a bank holding company with headquarters located at the Capitol Bancorp Center, 200 Washington Square North, Fourth Floor, Lansing, Michigan 48933. Capitol's telephone number is (517) 487-6555. Additionally, Capitol has Western Region headquarters located at 2777 East Camelback Road, Suite 375, Phoenix, Arizona 85016. Capitol's telephone number at its Western Region headquarters is (602) 955-6100.

Capitol is a uniquely structured affiliation of community banks. It currently has nearly 50 wholly or majority-owned bank subsidiaries, including two bank subsidiaries (Bank of Michigan which commenced operations on January 10, 2005 and Bank of Belleville which commenced operations on November 4, 2005) which are majority-owned by CDBL I. Each of Capitol's banks are viewed by management as being a separate business from the perspective of monitoring performance and allocation of financial resources. Capitol uses a unique strategy of bank ownership and development.

Capitol's operating strategy is to provide transactional, processing and administrative support and mentoring to aid in the effective growth and development of its banks. It provides access to support services and management with significant experience in community banking. These administrative and operational support services do not require a direct interface with the bank customer and therefore can be consolidated more efficiently without affecting the bank customer relationship. Subsidiary banks have full decision-making authority in structuring and approving loans and in the delivery and pricing of other banking services.

CDBL I is a bank development company (regulatorily a bank holding company) with its headquarters at 200 Washington Square North, Fourth Floor, Lansing, Michigan 48933. CDBL I's telephone number is (517) 487-6555.

CDBL I is now and has been, since it commenced business, an affiliate and a controlled subsidiary of Capitol. Capitol owns 100% of the outstanding shares of CDBL I's Class A voting common stock (1,000 shares as of August 31, 2006). CDBL I's executive management and Board of Directors hold 9.17% of the outstanding shares of CDBL I's Class B common stock. Capitol's executive management and Board of Directors that are not executive management and directors of CDBL I hold 27.29% of the outstanding shares of CDBL I's Class B common stock.

Reasons for the Share Exchange (page 33)

It is believed that the share exchange will provide you with greater liquidity and flexibility because Capitol's common stock is publicly traded. The share exchange will also provide you with greater diversification, since Capitol is active in more than one geographic area and across a broader customer base.

The Special Shareholders' Meeting (page 39)

The special meeting of CDBL I shareholders will be held on October 16, 2006 at 3:00 p.m., local time, at 200 Washington Square North, Lansing, Michigan. At the special shareholders' meeting, you will be asked to approve the Plan of Share Exchange.

Recommendation to Shareholders (page 33)

The CDBL I board believes that the share exchange is fair to you and in the best interests of both you and CDBL I and recommends that you vote FOR approval of the Plan of Share Exchange (the "Plan of Share Exchange").

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Votes Required (page 39)

Approval of the Plan of Share Exchange requires the favorable vote of a majority of the outstanding shares of CDBL I Class A common stock and Class B common stock, as well as a majority of the outstanding shares of CDBL I as a whole. Capitol will vote its Class A shares in accordance with the wishes of the majority of Class B shareholders. Capitol has agreed to do so to be sure the share exchange is what Class B shareholders of CDBL I want. Capitol holds 100% of the outstanding shares of CDBL I's Class A common stock. CDBL I's Board of Directors and officers hold 9.17% of the outstanding shares of CDBL I's Class B common stock. The Board of Directors have indicated that they currently intend to vote their shares FOR approval of the Plan of Share Exchange.

Record Date; Voting Power (page 39)

CDBL I shareholders may vote at the special shareholders' meeting if they owned shares of common stock at the close of business on September 18, 2006. At the close of business on August 31, 2006, 10,900 shares of CDBL I Class B common stock were outstanding and 1,000 shares of CDBL I Class A common stock were outstanding. For each share of CDBL I Class B common stock that you owned as of the close of business on that date, you will have one vote in the vote of Class B common shareholders at the special shareholders' meeting on the proposal to approve the Plan of Share Exchange, even though the Class B shares are ordinarily nonvoting.

What Shareholders Will Receive in the Share Exchange (page 33)

If the Plan of Share Exchange is approved and the share exchange is completed, each share of CDBL I Class B common stock will be converted into the right to receive Capitol common stock according to an exchange ratio. The exchange ratio will be calculated by dividing the CDBL I Share Value by the Capitol Share Value, where:

CDBL I Share Value. The value of each share of CDBL I Class B common stock shall be $1,500.00.

Capitol Share Value. The share value of each share of Capitol common stock will be determined by computing the average of the closing prices of Capitol common stock for the month ended September 30, 2006, as reported by the New York Stock Exchange.

Based on the estimated exchange ratio as proposed, and if the Plan of Share Exchange is approved, each shareholder would receive 36.17945 shares of Capitol common stock for each share of CDBL I Class B common stock based upon the average of the closing price of Capitol common stock for the month ended August 31, 2006.

Each CDBL I Class B shareholder will receive shares of Capitol common stock in exchange for his, her or their CDBL I Class B common stock calculated by multiplying the number of shares of CDBL I Class B common stock held by the shareholder by the exchange ratio. Any fractional shares will be paid in cash.

Accounting Treatment (page 34)

Capitol's acquisition of the Class B shares of CDBL I in the share exchange, if the proposed share exchange is approved, will be accounted for under the purchase method of accounting. After the share exchange, all of CDBL I's results from operations will be included in Capitol's income statement, as opposed to only a portion, which is currently reported.

Tax Consequences of the Share Exchange to CDBL I Shareholders (page 34)

Capitol's tax counsel has rendered its opinion that the share exchange should be treated as a reorganization for United States federal income tax purposes. Accordingly, holders of CDBL I's Class B shares generally will not recognize any gain or loss for United States federal income tax purposes on the exchange of their CDBL I Class B shares for shares of Capitol's common stock in the share exchange, except for any gain or loss recognized in connection with the receipt of cash instead of a fractional share of Capitol's common stock. Tax counsel's opinion is subject to certain assumptions which may limit its application in particular instances.

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Tax matters are very complicated, and the tax consequences of the share exchange to each holder of CDBL I Class B shares will depend on the facts of that shareholder's situation. You are urged to consult your tax advisor for a full understanding of the tax consequences of the Plan of Share Exchange to you.

Dissenters' Rights

Dissenters' rights will not be available to CDBL I Class B shareholders.

The Plan of Share Exchange (page 33)

The Plan of Share Exchange is attached as Annex A to this proxy statement/prospectus. You are encouraged to read the Plan of Share Exchange because it is the legal document that governs the share exchange.

Termination of the Share Exchange (page 38)

CDBL I and Capitol can jointly agree to terminate the Plan of Share Exchange at any time prior to completing the share exchange.

CDBL I can terminate the share exchange if a majority of CDBL I's Class A or Class B shareholders fail to approve the Plan of Share Exchange at the special shareholders' meeting, if the overall majority of CDBL I's shareholders fail to approve the Plan of Share Exchange at the special shareholders' meeting, or a governmental authority prohibits the share exchange.

Your Rights as a Shareholder Will Change (page 41)

Your rights as a holder of CDBL I Class B shares are determined by Michigan's corporate law and by CDBL I's articles of incorporation and by-laws. If the share exchange is completed, your rights as a Capitol shareholder will be determined by Michigan law relating to business corporations and by Capitol's articles of incorporation and bylaws. See "Comparison of Shareholder Rights".

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SELECTED CONSOLIDATED FINANCIAL DATA OF CAPITOL BANCORP LIMITED

The consolidated financial data below summarizes historical consolidated financial information for the periods indicated and should be read in conjunction with the financial statements and other information included in Capitol's Annual Report on Form 10-K for the year ended December 31, 2005, which is incorporated herein by reference. The consolidated financial data below for the interim periods indicated has been derived from, and should be read in conjunction with, Capitol's Quarterly Report on Form 10-Q for the period ended June 30, 2006. See "Where You Can Find More Information". The interim results include all adjustments of a normal recurring nature that are, in the opinion of management, considered necessary for a fair presentation. Interim results for the six months ended June 30, 2006 are not necessarily indicative of results which may be expected in future periods, including the year ending December 31, 2006. Because of the number of banks added throughout the period of Capitol's existence, and because of the differing ownership percentage of banks included in the consolidated amounts, historical operating results are of limited relevance in comparing financial performance and predicting Capitol's future operating results.

Capitol's consolidated balance sheets as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the years ended December 31, 2005, 2004 and 2003 are incorporated herein by reference. The selected financial data provided below as of June 30, 2006 and for the six months ended June 30, 2006 and 2005 have been derived from Capitol's consolidated financial statements which are incorporated herein by reference. Selected balance sheet data as of June 30, 2005 and December 31, 2003, 2002 and 2001 and results of operations data for the years ended December 31, 2002 and 2001 were derived from consolidated financial statements which are not incorporated in this proxy statement/prospectus.

Under current accounting rules, generally, entities for which a controlling financial interest (usually a majority voting interest) is owned by another are consolidated or combined for financial reporting purposes. This means that all of the assets and liabilities of subsidiaries (including CDBL I) are included in Capitol's consolidated balance sheet. Capitol's consolidated net income, however, only includes its subsidiaries' (including CDBL I) net income or net loss to the extent of its ownership percentage. This means that when a newly formed bank or bank-development subsidiary incurs early start-up losses, Capitol will only reflect that loss based on its ownership percentage. Conversely, when banks generate income, Capitol will only reflect that income based on its ownership percentage.

Capitol Bancorp Limited
As of and for the Six Months Ended June 30		As of and for the Years Ended December 31
		2006		2005		2005		2004		2003			2002			2001
(dollars in thousands, except per share data)
Selected Results of Operations Data:
Interest income	$	131,293	$	104,412	$	224,439	$	179,809	$	164,416		$	156,454		$	153,797
Interest expense		46,303		30,017		67,579		47,496		49,490			55,860			73,292
Net interest income		84,990		74,395		156,860		131,593		114,926			100,594			80,505
Provision for loan losses		5,271		5,062		10,960		12,708		9,861			12,676			8,167
Net interest income after provision
for loan losses		79,719		69,333		145,900		118,885		105,065			87,918			72,338
Noninterest income		10,566		10,197		21,048		19,252		20,087			14,982			9,585
Noninterest expense		68,446		55,169		117,289		97,787		86,952			76,538			63,944
Income before income tax expense and
minority interest		21,839		24,361		49,659		40,350		38,200			26,362			17,979
Income tax expense		7,945		9,323		19,232		14,699		14,035			9,314			6,016
Minority interest in net losses (income)
of consolidated subsidiaries		6,326		1,274		5,498		1,065		(785	)		(395	)		(1,245	)
Net income		20,220		16,312		35,925		26,716		23,380			16,653			10,718

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Capitol Bancorp Limited
		As of and for the Six Months Ended June 30										As of and for the Years Ended December  31
		2006			2005			2005			2004			2003			2002			2001
(dollars and shares in thousands, except per share data)
Per Share Data:
Net income per common share:
Basic	$	1.29		$	1.11		$	2.42		$	1.88		$	1.86		$	1.64		$	1.38
Diluted		1.24			1.06			2.34			1.79			1.77			1.57			1.35
Cash dividends declared		0.45			0.35			0.72			0.65			0.51			0.44			0.40
Book value		19.95			17.75			19.13			17.00			15.60			13.72			10.24
Pro forma consolidated book value (1)		20.47			N/A			19.68			N/A			N/A			N/A			N/A
Dividend payout ratio		34.88	%		31.53	%		29.75	%		34.57	%		27.42	%		26.83	%		28.99	%
Weighted average number of
common shares outstanding		15,674			14,694			14,867			14,183			12,602			10,139			7,784
Selected Balance Sheet Data:
Total assets	$	3,722,642		$	3,341,000		$	3,475,721		$	3,091,418		$	2,737,062		$	2,409,288		$	2,044,006
Investment securities		42,549			47,550			43,674			42,363			93,207			34,139			43,687
Portfolio loans		3,196,209			2,843,508			2,991,189			2,692,904			2,247,440			1,991,372			1,734,589
Allowance for loan losses		(43,311	)		(38,870	)		(40,559	)		(37,572	)		(31,404	)		(28,953	)		(23,238	)
Deposits		2,987,606			2,721,257			2,785,259			2,510,072			2,288,664			2,062,072			1,740,385
Debt obligations:
Notes payable and short-term		177,076			165,998			175,729			172,534			92,774			93,398			89,911
borrowings
Subordinated debentures		100,988			100,893			100,940			100,845			90,816			51,583			48,621
Total debt obligations		278,064			266,891			276,669			273,379			183,590			144,981			138,532
Minority interests in
consolidated subsidiaries		116,602			66,588			83,838			39,520			30,946			28,016			70,673
Stockholders' equity		318,308			266,083			301,866			252,159			218,897			160,037			80,172
Performance Ratios (2)
Return on average equity		13.01	%		12.68	%		13.34	%		11.25	%		12.97	%		13.33	%		15.22	%
Return on average assets		1.13	%		1.02	%		1.08	%		0.91	%		0.91	%		0.75	%		0.58	%
Net interest margin (fully taxable
equivalent)		5.12	%		4.98	%		5.09	%		4.81	%		4.80	%		4.80	%		4.60	%
Efficiency ratio (3)		71.63	%		65.22	%		65.93	%		64.83	%		64.40	%		66.22	%		70.98	%
Asset Quality:
Nonperforming loans (4)	$	27,743		$	26,861		$	26,732		$	28,471		$	26,872		$	22,890		$	17,238
Allowance for loan losses to
nonperforming loans		156.12	%		144.71	%		151.72	%		131.97	%		116.87	%		126.49	%		134.81	%
Allowance for loan losses to
portfolio loans		1.36	%		1.37	%		1.36	%		1.40	%		1.40	%		1.45	%		1.34	%
Nonperforming loans to total
portfolio loans		0.87	%		0.94	%		0.89	%		1.06	%		1.20	%		1.15	%		0.99	%
Net loan losses to average
portfolio loans		0.16	%		0.27	%		0.28	%		0.29	%		0.36	%		0.37	%		0.15	%
Capital Ratios:
Average equity to average assets		8.71	%		8.02	%		8.12	%		8.06	%		7.01	%		5.59	%		3.78	%
Tier 1 risk-based capital ratio		14.69	%		13.17	%		14.25	%		12.03	%		12.25	%		10.52	%		10.54	%
Total risk-based capital ratio		15.94	%		14.56	%		15.50	%		13.91	%		14.31	%		11.77	%		11.85	%
Leverage ratio		13.60	%		11.94	%		12.91	%		10.93	%		11.03	%		9.07	%		10.23	%
____________________
N/A -- Not applicable
(1) Based on the estimated exchange ratio of 36.17945 shares of Capitol for each share of CDBL I, as discussed in this prospectus. The actual exchange ratio will         be different. Excludes the pro forma effect of other share exchange transactions or proposals of Capitol (see "Recent Developments").
(2) These ratios are annualized for the periods indicated.
(3) Efficiency ratio is computed by dividing noninterest expense by the sum of net interest income and noninterest income.
(4) Nonperforming loans consist of loans on nonaccrual status and loans more than 90 days delinquent.

12

SELECTED CONSOLIDATED FINANCIAL DATA OF CDBL I

The financial data below summarizes historical financial information (in $1,000's, except per share data) for the periods indicated and should be read in conjunction with the consolidated financial statements of CDBL I attached to this prospectus.

		As of and for the Six Months Ended June 30						As of and for the Periods Ended December 31
Selected Results of Operations Data:		2006			2005			2005			2004			2003
Interest income	$	1,769		$	197		$	898		$	114		$	8
Interest expense		748			30			286			--			--
Net interest income		1,021			167			612			114			8
Provision for loan losses		230			47			444			--			--
Net interest income after
provision for loan losses		791			120			168			114			8
Noninterest income		64			8			25			--			--
Noninterest expense		1,745			2,577			4,253			1,683			3
Income (loss) before income taxes
(benefit) and minority interest credit		(890	)		(2,449	)		(4,060	)		(1,569	)		5
Income taxes (benefit)		(282	)		(843	)		(1,376	)		(538	)		2
Credit resulting from minority interest
in net losses of consolidated subsidiaries		287			243			697			--			--
Net income (loss)		(321	)		(1,363	)		(1,987	)		(1,031	)		3
Per Share Data:
Net income (loss) per common share -  basic and diluted	$	(27.00	)	$	(114.56	)	$	(167.01	)	$	(86.60	)	$	0.26
Book value		719.66			799.10			746.65			913.66			1,000.26
Selected Balance Sheet Data:
Total assets	$	61,444		$	21,521		$	46,964		$	10,873		$	11,905
Portfolio loans		44,592			3,057			29,596			--			--
Allowance for loan losses		(674	)		(47	)		(444	)		--			--
Deposits		45,252			8,294			30,064			--			--
Stockholders' equity		8,564			9,509			8,885			10,873			11,903
Performance Ratios:
Net interest margin (fully taxable
equivalent)		3.99	%		2.34	%		3.30	%		0.98	%		0.13	%
Efficiency ratio (1)		160.87	%		1474.98	%		667.31	%		1472.66	%		33.84	%
Asset Quality:
Non-performing loans	$	--		$	--		$	--		$	--		$	--
Allowance for loan losses to
non-performing loans		--			--			--			--			--
Allowance for loan losses to
portfolio loans		1.51	%		1.54	%		1.50	%		--			--
Capital Ratios:
Average equity to average assets		15.94	%		62.00	%		43.54	%		99.66	%		99.98	%
Tier 1 risk-based capital ratio		30.69	%		155.80	%		45.49	%		416.37	%		499.92	%
Total risk-based capital ratio		31.94	%		156.36	%		46.74	%		416.37	%		499.92	%
Leverage ratio		26.25	%		71.32	%		42.76	%		97.63	%		99.98	%
(1) Efficiency ratio is computed by dividing noninterest expense by the sum of net interest income and noninterest income.

13

SELECTED CONSOLIDATED FINANCIAL DATA OF BANK OF CDBL I, continued

		Quarterly Results of Operations
		Total for			Fourth			Third			Second			First
		the period			Quarter			Quarter			Quarter			Quarter
Six months ended June 30, 2006:
Interest income	$	1,769								$	965		$	804
Interest expense		748									412			336
Net interest income		1,021									553			468
Provision for loan losses		230									117			113
Net loss		(321	)								(146	)		(175	)
Net loss per share (basic and diluted)		(27.00	)								(12.26	)		(14.73	)
Year ended December 31, 2005:
Interest income	$	898		$	471		$	230		$	119		$	78
Interest expense		286			185			71			28			2
Net interest income		612			286			159			91			76
Provision for loan losses		444			280			117			32			15
Net income (loss)		(1,987	)		76			(700	)		(667	)		(696	)
Net income (loss) per share (basic and diluted)		(167.01	)		6.38			(58.82	)		(56.05	)		(58.51	)
Year ended December 31, 2004:
Interest income	$	114		$	39		$	39		$	21		$	15
Interest expense		--			--			--			--			--
Net interest income		114			39			39			21			15
Provision for loan losses		--			--			--			--			--
Net income (loss)		(1,031	)		(804	)		(63	)		(173	)		9
Net income (loss) per share (basic and diluted)		(86.60	)		(67.57	)		(5.31	)		(14.49	)		0.77
Period of December 1, 2003 (date of inception)
through December 31, 2003:
Interest income	$	8		$	8
Interest expense		--			--
Net interest income		8			8
Provision for loan losses		--			--
Net income		3			3
Net income per share (basic and diluted)
	$	0.26		$	0.26

[The remainder of this page left intentionally blank]

14

RISK FACTORS

The shares of common stock that are being offered are not savings accounts or deposits or other obligations of a bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

Investing in Capitol's common stock will provide you with an equity ownership interest in Capitol. As a Capitol shareholder, your investment may be impacted by risks inherent in its business. You should carefully consider the following factors, as well as other information contained in this prospectus, before deciding to vote to exchange your CDBL I Class B nonvoting common stock for Capitol's common stock.

This proxy statement/prospectus also contains certain forward-looking statements that involve risks and uncertainties. These statements relate to Capitol's future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as "believes," "expects," "may," "will," "should," "seeks," "pro forma," "anticipates," and similar expressions. Actual results could differ materially from those discussed in these statements. Factors that could contribute to these differences include those discussed below and elsewhere in this prospectus.

Inherent Conflicts of Interest in the Proposed Share Exchange.

CDBL I is already a majority-owned and controlled subsidiary of Capitol. By virtue of the existing relationship between CDBL I and Capitol, the proposed share exchange presents inherent conflicts of interest. For example, no other proposals are being considered and, if there were any, Capitol would likely vote its CDBL I Class A shares against any other proposals. Under Michigan law, a share exchange must be approved by the affirmative vote of the holders of a majority of the outstanding shares of the corporation entitled to vote on the plan, and if a class or series is entitled to vote on the plan as a class, the affirmative vote of the holders of a majority of the outstanding shares of the class or series. Capitol's proposal to value CDBL I Class B shares at $1,500.00 per share in the proposed share exchange is based solely on its judgment in making such proposal. Accordingly, the CDBL I share value and related exchange ratio have not been determined absent the inherent conflicts of interest between Capitol and CDBL I. It is unknown what exchange ratio or CDBL I share value, if any, might be negotiated between CDBL I and unaffiliated entities.

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

Many of Capitol's bank subsidiaries are less than three years old and Capitol's oldest bank is twenty-four years old. Capitol engaged in significant new bank development activity in 2006. Newly formed banks are expected to incur operating losses in their early periods of operation because of an inability to generate sufficient net interest income to cover operating costs. Newly formed banks may never become profitable. Current accounting rules require immediate write-off, rather than capitalization, of start-up costs and, as a result, future newly formed banks are expected to report larger early period operating losses. Those operating losses can be significant and can occur for longer periods than planned depending upon the ability to control operating expenses and generate net interest income, which could affect the availability of earnings retained to support future growth.

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

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

- transaction processing;

- operational and financial management; and

15

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

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

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

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

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

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

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

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

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

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

Federal and the various state laws and regulations govern numerous aspects of the banks' operations, including:

- adequate capital and financial condition;

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

- permissible nonbanking activities; and

- restrictions on dividend payments.

16

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

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

Regulatory Action Could Severely Limit Future Expansion Plans.

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

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

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

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

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

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

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

17

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

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

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

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

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

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

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

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

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

Capitol has a credit facility with an unaffiliated bank under which borrowings of up to $25 million are permitted, subject to certain conditions. Capitol is reliant upon its bank subsidiaries' earnings and dividends to service this debt obligation which may be inadequate to service the obligations. In the event of violation of the covenants relating to the credit facility, or due to failure to make timely payments of interest and debt principal, the lender may terminate

18

the credit facility. In addition, upon such occurrences, dividends on Capitol's common stock may be prohibited or Capitol may be otherwise unable to make future dividends payments or obtain replacement credit facilities.

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

Capitol's Stock Price Fluctuates, and Decreases in Capitol's Stock Price Will Adversely Affect the Value of the Consideration You Receive in the Share Exchange.

The trading price of Capitol common stock has been and may continue to be subject to fluctuations, which affect the value of the consideration you receive in the share exchange offer. As of September 14, 2006, Capitol's 52-week high and low stock prices were $47.22 and $29.10, respectively. Capitol's stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, and news reports relating to trends in Capitol's markets. In addition, the stock market in general, and the market prices for financial services companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of Capitol stock, regardless of its operating performance.

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

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

19

RECENT DEVELOPMENTS

On February 21, 2006, Capitol opened its 42^nd bank affiliate, Community Bank of Rowan, in Salisbury, North Carolina. Community Bank of Rowan is Capitol's second bank in North Carolina.

On April 27, 2006, Capitol opened its 43^rd bank affiliate, Asian Bank of Arizona, in Phoenix, Arizona. Asian Bank of Arizona is Capitol's tenth bank in Arizona.

On May 30, 2006, Capitol opened its 44^th community bank, Evansville Commerce Bank, in Evansville, Indiana. Evansville Commerce Bank is Capitol's third bank in Indiana.

On June 21, 2006, Capitol opened its 45^th community bank, Bank of Valdosta, in Valdosta, Georgia. Bank of Valdosta is Capitol's second bank in Georgia.

On June 21, 2006, Capitol opened its 46^th community bank, Sunrise Bank of Atlanta, in Atlanta, Georgia. Sunrise Bank of Atlanta is Capitol's third bank in Georgia. Sunrise Bank of Atlanta was previously a loan production office operating in Atlanta, Georgia since 2002.

On June 30, 2006, Capitol opened its 47^th community bank, Bank of Everett, in Everett, Washington. Bank of Everett is Capitol's second bank in Washington.

Each of the recently-opened banks in 2006 are majority-owned by Capitol or its bank-development subsidiaries.

On July 27, 2006, Capitol announced its 56^th consecutive quarterly dividend, payable September 1, 2006 to shareholders of record as of August 8, 2006. This quarterly dividend of $0.25 per common share represents a 39 percent increase over the dividend paid in the same period in the prior year ($0.18).

As of September 15, 2006, a proposed share tender offer proposal is under consideration regarding Capitol's majority-owned California subsidiary Bank of Escondido. If all shareholders of Bank of Escondido tender their shares, Capitol expects to issue approximately 176,225 shares of previously unissued common stock resulting from such share tender offer.

As of September 15, 2006, applications were pending and in various stages of organization for several de novo banks in the states of California, Washington, Ohio and Nevada.

Bank development efforts are currently under consideration in several states including pre-development exploratory discussions, lease and employment negotiations and preparation of preliminary regulatory applications for formation and/or acquisition of community banks.

20

CAPITALIZATION

The table presented below shows Capitol's actual total capitalization as of June 30, 2006 and the proposed share exchange as described in this proxy statement/prospectus.

	As of June 30, 2006
	(dollars in thousands, except per share data)
		Actual			As Adjusted for the Proposed CDBL I Share Exchange(4)
D Debt obligations:
Notes payable and short-term borrowings	$	177,076		$	177,076
Subordinated debentures		100,988			100,988
Total debt obligations	$	278,064		$	278,064
Minority interests in consolidated subsidiaries	$	116,602		$	108,758
Stockholders' equity(1):
Common stock, no par value; 50,000,000 shares authorized; issued, and outstanding:
Actual - 15,958,076 shares	$	220,016
As adjusted for the proposed CDBL I share exchange - 16,352,432(4)				$	236,366
Retained earnings		98,617			98,617
Market value adjustment for available-for-sale securities (net of tax effect)		(325	)		(325	)
Total stockholders' equity	$	318,308		$	334,658
Book value per share of common stock	$	19.95		$	20.47
Total capitalization(2)	$	434,910		$	443,416
Total capital funds(3)	$	535,898		$	544,404
Capital ratios:
Stockholders' equity to total assets		8.55	%		8.97	%
Total capitalization to total assets		11.68	%		11.88	%
Total capital funds to total assets		14.40	%		14.59	%

(1)   Does not include approximately 2.7 million shares of common stock issuable upon exercise of stock options.

(2)   Total capitalization includes stockholders' equity and minority interests in consolidated subsidiaries.

(3)   Total capital funds include stockholders' equity, minority interests in consolidated subsidiaries and subordinated debentures.

(4)   Assumes issuance of 394,356 shares of Capitol common stock upon completion of the proposed CDBL I share exchange based on the proposed estimated exchange ratio of 36.17945. See "Unaudited Pro Forma Consolidated Financial Information." The actual share exchange ratio will be different. Does not include the pro forma effect of other pending share exchange transactions or proposals of Capitol (see "Recent Developments").

21

DIVIDENDS AND MARKET FOR COMMON STOCK

Capitol's common stock is listed on the New York Stock Exchange under the symbol "CBC". The following table shows the high and low sale prices per share of common stock as reported on the New York Stock Exchange for the periods indicated and the quarterly cash dividends paid by Capitol during those periods. The table reflects inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. The last reported sale price of Capitol's common stock was $44.72 on September 14, 2006.

Cash Dividends
2004		High		Low		Paid
Quarter ended March 31	$	29.70	$	26.47	$	0.15
Quarter ended June 30		28.00		24.05		0.16
Quarter ended September 30		29.80		24.15		0.17
Quarter ended December 31		36.00		28.51		0.17
2005
Quarter ended March 31		35.82		29.30		0.17
Quarter ended June 30		34.00		28.75		0.18
Quarter ended September 30		36.96		31.25		0.18
Quarter ending December 31		38.93		29.10		0.19
2006
Quarter ended March 31		47.22		36.74		0.20
Quarter ended June 30		47.16		37.84		0.25
Quarter ending September 30		45.18		36.89		0.25
(through September 14)

As of June 30, 2006, there were 3,448 beneficial holders of Capitol's common stock based on information supplied by its stock transfer agent and other sources.

Holders of common stock are entitled to receive dividends when, as and if declared by Capitol's Board of Directors out of funds legally available. Although Capitol has paid dividends on its common stock for the preceding five years, there is no assurance that dividends will be paid in the future. The declaration and payment of dividends on Capitol's common stock depends upon the earnings and financial condition of Capitol, liquidity and capital requirements, the general economic and regulatory climate, Capitol's ability to service debt obligations senior to its common stock and other factors deemed relevant by Capitol's Board of Directors. Regulatory authorities impose limitations on the ability of banks to pay dividends to Capitol and the ability of Capitol to pay dividends to its shareholders.

There is no market for CDBL I's common stock. Any transfers of CDBL I common stock have been made privately and are not reported. CDBL I has never paid a dividend on its common stock.

22

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus includes forward-looking statements. Capitol has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements may be impacted by risks, uncertainties and assumptions. Examples of some of the risks, uncertainties or assumptions that may impact the forward-looking statements are:

- the results of management's efforts to implement Capitol's business strategy including planned expansion

into new markets;

- adverse changes in the banks' loan portfolios and the resulting credit risk-related losses and expenses;

- adverse changes in the economy of the banks' market areas that could increase credit-related losses

and expenses;

- adverse changes in real estate market conditions that could also negatively affect credit risk;

- the possibility of increased competition for financial services in Capitol's markets;

- fluctuations in interest rates and market prices, which could negatively affect net interest margins, asset

valuations and expense expectations; and

- other factors described in "Risk Factors".

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INFORMATION ABOUT CAPITOL

 In addition to this proxy statement/prospectus a copy of the following documents which are incorporated by reference can be found at www.capitolbancorp.com:

-     Report on Form 8-K filed May 12, 2006 

-     Report on Form 8-K filed April 26, 2006

-     Report on Form 8-K filed April 20, 2006

-     Report on Form 8-K filed March 14, 2006

-     Report on Form 8-K filed January 31, 2006

-     Report on Form 8-K filed January 27, 2006

-      Report on Form 10-Q for period ended June 30, 2006

-      Report on Form 10-Q for period ended March 31, 2006

-      Annual Report to Shareholders for year ended December 31, 2005

-      Annual Report on Form 10-K for year ended December 31, 2005

-      Proxy statement for Capitol's Annual Meeting of Shareholders held on April 26, 2006

INFORMATION ABOUT CDBL I

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

Management's discussion and analysis of financial condition and results of operations for the periods ended June 30, 2006 and 2005 and December 31, 2005 and 2004 are included in this proxy statement/prospectus as part of Annex B.

Financial Statements.

Unaudited interim condensed consolidated financial statements of CDBL I as of June 30, 2006 and for the six months ended June 30, 2006 and 2005 are included in this proxy statement/prospectus as part of Annex B. Audited consolidated financial statements of CDBL I as of and for the periods ended December 31, 2005 and 2004 are included in this proxy statement/prospectus as part of Annex B.

Equity Compensation Plans and Summary Compensation.

CDBL I has not provided equity or cash compensation to its directors or officers for any period.

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Voting Securities and Principal Holders.

The following table shows the share holdings of each person (including any group as that term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934) who was known to be the beneficial owner of more than 5% of CDBL I common stock, each director and officer of CDBL I and all directors and officers as a group as of June 30, 2006. Where applicable, the table includes shares held by members of their immediate families.

	CDBL I Class A shares beneficially owned
Name of Beneficial owner	Number	Percentage of all CDBL I Class A Shares
Capitol Bancorp Limited	1,000	100.00	%
CDBL I's Directors
and Officer:
Cristin Reid English	-	-
L. Douglas Johns	-	-
Joseph D. Reid	-	-
Total of Directors and Officers	-	-
	CDBL I Class B shares beneficially owned
Name of Beneficial owner	Number	Percentage of all CDBL I Class A Shares
Capitol Bancorp Limited	-	-
Hardy Construction	879	8.06	%
L. Douglas Johns	1,000	9.17	%
Kasten Family L. L. C.	1,000	9.17	%
L & M Maas Investments	1,000	9.17	%
Total of 5% or greater owners	3,879	35.59	%
CDBL I's Directors
and Officer:
Cristin Reid English	-	-
L. Douglas Johns	1,000	9.17	%
Joseph D. Reid	-	-
Total of Directors and Officers	1,000	9.17	%

Other than indicated above, no entity or individual owns greater than 5% of the outstanding shares of CDBL I.

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COMPARATIVE HISTORICAL, PRO FORMA AND PRO FORMA EQUIVALENT

PER SHARE INFORMATION

The following table, which should be read in conjunction with the unaudited pro forma condensed consolidated balance sheet, pro forma condensed consolidated statements of operations and related notes to the pro forma condensed consolidated financial statements, which appear elsewhere herein, summarizes per share information:

	As of and for the Six Months Ended June 30, 2006			For the Year Ended December 31, 2005
Capitol common stock:
Net income per share:
Basic:
Historical	$	1.29		$	2.42
Pro forma consolidated(1)		1.24			2.23
Diluted:
Historical		1.24			2.34
Pro forma consolidated(1)		1.19			2.16
Cash dividends per share:
Historical		0.45			0.72
Pro forma consolidated(2)		0.45			0.72
Book value per share at June 30, 2006:
Historical		19.95
Pro forma consolidated(1)	$	20.47
CDBL I common stock:
Net income (loss) per share:
Basic:
Historical	$	(27.00	)	$	(167.01	)
Pro forma equivalent(3)		44.86			80.68
Diluted:
Historical		(27.00	)		(167.01	)
Pro forma equivalent(3)		43.05			78.15
Cash dividends per share:
Historical		--			--
Pro forma equivalent(3)		16.28			26.05
Book value per share at June 30, 2006:
Historical		719.66
Pro forma equivalent(3)	$	740.59

1—Assumes completion of proposed CDBL I share exchange based on an estimated exchange ratio (per Note 3 below) and excludes the pro forma effect of other pending share exchange transactions or proposals of Capitol (see "Recent Developments").

2—The Capitol pro forma consolidated dividends per share represent historical dividends per share.

3—The CDBL I pro forma equivalent per share amounts are calculated by multiplying Capitol pro forma consolidated per share amounts by the estimated exchange ratio of 36.17945. The actual exchange ratio will be different.

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PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

CDBL I is already included in Capitol's consolidated financial statements. Unaudited pro forma consolidated financial information follow, adjusted for the proposed CDBL I share exchange, which will be accounted for under the purchase method of accounting (if consummated), as if it had occurred effective June 30, 2006 (shown on page 28) and at the beginning of 2005 (shown on page 30), using the proposed estimated share exchange ratio, and does not give effect to any other share exchange transactions or proposals regarding other bank affiliates of Capitol. The accompanying notes to the unaudited pro forma consolidated financial statements are an integral part of the unaudited pro forma financial information. The unaudited pro forma results of operations for the period ended June 30, 2006 are not necessarily indicative of results for any subsequent period thereafter. The unaudited pro forma results of operations do not give effect to any potential cost savings or other synergies that could result from the share exchange.

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27

Unaudited Pro Forma Condensed Consolidated Balance Sheet
Capitol Bancorp Ltd. And Subsidiaries
June 30, 2006
(in $1,000s, except share and per-share data)
		Pro Forma		Pro Forma
		Adjustments		Amounts
	Historical	Regarding		After
	Amounts	Proposed		Proposed
	As Reported	Share Exchange		Share Exchange
ASSETS
Cash and cash equivalents	$350,259			$350,259
Loans held for resale	18,027			18,027
Investment securities	42,549			42,549
Portfolio loans	3,196,209			3,196,209
Less allowance for loan losses	(43,311)			(43,311)
Net portfolio loans	3,152,898			3,152,898
Premises and equipment, net	50,595			50,595
Goodwill and other intangibles	50,086	$8,506	B	58,592
Other assets	58,228			58,228
TOTAL ASSETS	$3,722,642	$8,506	A	$3,731,148
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$2,987,606			$2,987,606
Debt obligations	278,064			278,064
Other liabilities	22,062			22,062
Total liabilities	3,287,732	-		3,287,732
Minority interests in consolidated subsidiaries	116,602	$(7,844)	B	108,758
Stockholders' equity:
Common stock	220,016	16,350	C	236,366
Retained earnings	98,617			98,617
Other, net	(325)			(325)
Total stockholders' equity	318,308	16,350		334,658
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$3,722,642	$8,506		$3,731,148
Number of common shares issued and outstanding	15,958,076	394,356		16,352,432
Book value per Capitol share	$19.95			$20.47

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Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet:

A--Goodwill arising from proposed share exchange. Based on current estimates, there are no material identifiable intangible assets

regarding the proposed share exchange. The net carrying values of Capitol Development Bancorp Limited I's assets and liabilities

approximate fair value. No core deposit intangible asset has been estimated due to the brief period of the entity's operation and, as such,

any core deposit intangible would be immaterial.

B--Elimination of minority interests associated with Capitol Development Bancorp Limited I's shareholders other than Capitol.

C--Estimated net proceeds applicable to proposed share exchange with Capitol Development Bancorp Limited I's shareholders other than

Capitol based on estimated number of Capitol shares to be issued (394,356 shares at $41.46 per share). The actual number of shares to be issued will be different.

Does not include the pro forma effect of other pending share exchange transactions or proposals of Capitol (see "Recent

Developments").

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Unaudited Pro Forma Condensed Consolidated Statements of Operations
Capitol Bancorp Ltd. And Subsidiaries
(in $1,000s, except share and per-share data)
	Six Months Ended June 30, 2006				Year Ended December 31, 2005
	Historical	Pro Forma		Pro Forma	Historical	Pro Forma		Pro Forma
	Amounts	Adjustments		Amounts	Amounts	Adjustments		Amounts
Interest income	$131,293			$131,293	$224,439			$224,439
Interest expense	46,303			46,303	67,579			67,579
Net interest income	84,990			84,990	156,860			156,860
Provision for loan losses	5,271			5,271	10,960			10,960
Net interest income after provision for loan losses	79,719			79,719	145,900			145,900
Noninterest income	10,566			10,566	21,048			21,048
Noninterest expense	68,446			68,446	117,289			117,289
Income before income taxes and minority interest	21,839			21,839	49,659			49,659
Income taxes	7,945			7,945	19,232			19,232
Income before minority interest	13,894			13,894	30,427			30,427
Minority interest in net losses of
consolidated subsidiaries	6,326	$(294)	A	6,032	5,498	$(1,820)	A	3,678
NET INCOME	$20,220	$(294)		$19,926	$35,925	$(1,820)		$34,105
NET INCOME PER SHARE:
Basic	$1.29			$1.24	$2.42			$2.23
Diluted	$1.24			$1.19	$2.34			$2.16
Elements of net income per share computations (in 1,000s):
Average number of common shares outstanding
for purposes of computing basic net income per
share--denominator for basic net income per share	15,674	394	B	16,068	14,867	394	B	15,261
Effect of dilutive securities--stock options and unvested restricted shares	681			681	498			498
Average number of common shares and dilutive securities for purposes of computing diluted net income per share--denominator for diluted net income per share	16,355	394		16,749	15,365	394		15,759

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Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations:

A--Amount represents effect on operating results attributable to minority interest due to proposed share exchange regarding Capitol Development Bancorp Limited I. Does not include

 the pro forma effect of other share exchange transactions or proposals of Capitol (see "Recent Developments").

B--Assumes issuance of an estimated 394,356 shares of Capitol common stock in the proposed share exchange described in Note A above. The actual number of shares to be issued will

 be different.

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THE SHARE EXCHANGE

General

The CDBL I Board of Directors is using this proxy statement/prospectus to solicit proxies from the holders of CDBL I common stock for use at the special shareholders' meeting.

At the special shareholders' meeting to be held on October 16, 2006, CDBL I shareholders will be asked to approve the Plan of Share Exchange. The Plan of Share Exchange provides for the share exchange of CDBL I Class B common stock for Capitol common stock. If the share exchange is approved, CDBL I will become a 100% owned subsidiary of Capitol. Upon consummation of the share exchange, CDBL I Class B shareholders will receive shares of Capitol's common stock in exchange for their CDBL I Class B shares.

Background of the Share Exchange

The concept of a potential share exchange transaction with Capitol was contemplated at the formation of CDBL I. From formation of CDBL I, Capitol expressed its hope to be able to offer a share exchange to CDBL I Class B shareholders around the 36^th month of operations of CDBL I. Recently, Capitol expressed a willingness to extend an offer of such a share exchange. The objectives of the potential share exchange would be to enable Class B shareholders of CDBL I to achieve liquidity in their investment, a reasonable return on their investment in the form of a 'premium' and to accomplish such a share exchange on a tax-free basis. Without the share exchange, Class B shareholders of CDBL I will continue to hold CDBL I Class B stock which has no market, no near-term prospects of dividends and is illiquid.

CDBL I's Board of Directors has not solicited or received any other proposals for the potential exchange or sale of CDBL I's shares of common stock which are not owned by Capitol. If other proposals were under consideration for sale or exchange of CDBL I's shares to an entity other than Capitol, it is likely that Capitol would not vote its Class A shares of CDBL I in favor of any such proposals. Further, Capitol has no intentions of selling its controlling interest in CDBL I. Hence, the only proposal under consideration is the share exchange proposal with Capitol.

Capitol based its proposal on its prior transactions, whereby it has acquired the minority interests in banks and subsidiary bank-development companies it controls. In those prior transactions, Capitol has offered those minority shareholders an opportunity to exchange their bank or bank-development company shares for Capitol common stock on or after the 36^th month of the bank or bank development company's operations. Although Capitol is under no contractual obligation to make such an offer to acquire the interests in any of its present bank subsidiaries or subsidiary bank-development companies, it has made this proposal to CDBL I's Board of Directors consistent with its prior desire. As in other transactions, Capitol based its proposal at some premium over the book value of the subject bank or subsidiary bank development company's common stock. However, Capitol's determination of the Class B share value of CDBL I, for purposes of the proposed share exchange, is solely based on its arbitrary valuation as offered by Capitol.

In certain prior transactions, the subsidiary banks and subsidiary regional bank-development companies involved in share exchange transactions with Capitol have obtained a fairness opinion regarding the fairness of the compensation being offered to shareholders. CDBL I's Board of Directors decided not to obtain a fairness opinion with regards to the proposed share exchange. CDBL I's Board of Directors' decision was based upon numerous factors. Some of these factors include: (1) all of CDBL I's Class B shareholders are accredited investors who have a higher level of financial understanding and sophistication than the average investor, thereby decreasing the potential value to the minority shareholders of a fairness opinion; (2) the proposed estimated share exchange ratio is not based upon the financial performance of CDBL I but rather upon a fixed ratio with relation to the original CDBL I Class B common stock subscription price; and (3) CDBL I is not required by Michigan law to provide a fairness opinion to its Class B shareholders in a share exchange offer.

Consensus between Capitol and CDBL I was reached in August 2006, to approve the Plan of Share Exchange subject only to obtaining approval of the Plan of Share Exchange by a majority of CDBL I's Class A

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shares and Class B shares and a majority of all of CDBL I's shares. Capitol intends to vote its CBDL I Class A shares in accordance with the vote of a majority of Class B common stock.

In August 2006, CDBL I's Board of Directors approved the Plan of Share Exchange and agreed to call a special shareholder meeting for a shareholder vote to approve the Plan of Share Exchange.

CDBL I's Reasons for the Share Exchange

CDBL I's reasons for the share exchange are that the Class B shareholders of CDBL I will be best served by the share exchange in order to maximize their shareholder value and to provide them:

·      better protection through diversification geographically and by customer base through Capitol's subsidiary banks rather than dependence upon the resources of     CDBL I's subsidiary banks.

·      the CDBL I Class B shareholders will receive publicly traded shares, providing them liquidity as opposed to the CDBL I Class B common stock for which there is no    public market. CDBL I Class B shareholders who choose to do so may continue to hold the Capitol stock they receive in the share exchange without being forced to    have their investment reduced by the immediate recognition of a capital gains tax.

Capitol's Reasons for the Share Exchange

Capitol believes that CDBL I's majority-owned subsidiaries' profitability will increase. As noted elsewhere in this proxy statement/prospectus, while CDBL I's assets are reported as part of Capitol's assets for purposes of its consolidated financial statements, CDBL I's income (or loss) is attributed to Capitol only in the percentage which Capitol owns of CDBL I common stock. Capitol desires to acquire CDBL I's Class B common stock so that Capitol can include 100% of CDBL I's income (or loss) in Capitol's consolidated income statement.

Terms of the Share Exchange

Terms of the share exchange are set forth in the Plan of Share Exchange. The Plan of Share Exchange is included as Annex A to this proxy statement/prospectus. You should review the Plan of Share Exchange in its entirety.

The terms of the share exchange can be summarized as follows:

Upon completion of the share exchange each share of CDBL I Class B common stock will be converted into of the right to receive Capitol common stock according to an exchange ratio. The exchange ratio is determined by dividing the CDBL I Class B share value ($1,500.00) by the Capitol share value.

The share value of each share of Capitol common stock shall be the average of the closing prices of Capitol common stock for the month ended September 30, 2006, as reported by the New York Stock Exchange.

Each CDBL I Class B shareholder will receive shares of Capitol common stock in exchange for his, her or their CDBL I Class B common stock calculated by multiplying the number of shares of CDBL I Class B common stock held by the shareholder by the exchange ratio. Any fractional shares will be paid in cash.

CDBL I's Board Recommendation

In determining whether to recommend the Plan of Share Exchange to CDBL I's shareholders, CDBL I's board considered the matters discussed in "CDBL I's Reasons for the Share Exchange". In addition, CDBL I's board considered:

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·   no other share exchange proposals would be offered either by Capitol or unaffiliated parties;

·   Capitol already has a controlling ownership of CDBL I;

·   there is no assurance Capitol would repeat or improve its share exchange proposal at any time in the future;

·   absent any potential alternatives other than rejecting Capitol's proposal, which could result in CDBL I's minority shareholders having no future opportunities to exchange, sell or otherwise dispose of their CDBL I Class B shares; and

THE CDBL I BOARD HAS DETERMINED THAT THE SHARE EXCHANGE IS FAIR TO AND IN THE BEST INTERESTS OF THE CDBL I SHAREHOLDERS, HAS APPROVED THE PLAN OF SHARE EXCHANGE AND RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE PLAN OF SHARE EXCHANGE.

Accounting Treatment

Capitol expects the share exchange to be treated as the acquisition of a minority interest using the purchase method of accounting.

Pro Forma Data

Because CDBL I is already a controlled subsidiary of Capitol, it is already included in Capitol's consolidated financial statements. Unaudited pro forma consolidated financial information is presented in this document, adjusted for the proposed CDBL I Class B share exchange, which will be accounted for under the purchase method of accounting (if consummated), as if it had occurred effective June 30, 2006 (shown on page 28) and at the beginning of 2005 (shown on page 30), using the proposed estimated exchange ratio, and does not give effect to any other proposed share exchanges regarding other bank affiliates of Capitol (see "Recent Developments"). The accompanying notes to the unaudited pro forma consolidated financial statements are an integral part of the unaudited pro forma financial information. The unaudited pro forma results of operations for the period ended June 30, 2006 are not necessarily indicative of results for any subsequent period thereafter. The unaudited pro forma results of operations do not give effect to any potential cost savings or other synergies that could result from the share exchange.

Material Federal Income Tax Consequences

The income tax discussion below represents the opinion of Miller, Canfield, Paddock and Stone, PLC, tax counsel to Capitol, on the material federal income tax consequences of the exchange. That opinion has been filed with the Securities and Exchange Commission as an exhibit to the registration statement on Form S-4 in connection with the proposed share exchange. This discussion is not a comprehensive description of all of the tax consequences that may be relevant to you. For example, counsel did not address tax consequences that arise from rules that apply generally to all taxpayers or to some classes of taxpayers, or tax consequences that are generally assumed to be known by investors. This discussion is based upon the Internal Revenue Code, the regulations of the U.S. Treasury Department, and court and administrative rulings and decisions in effect on the date of this proxy statement/prospectus. These laws may change, possibly retroactively, and any change could affect the continuing validity of this discussion.

This discussion also is based upon certain representations made by CDBL I and Capitol. Miller, Canfield Paddock & Stone, P.L.C., counsel to Capitol, has issued a tax opinion with respect to the exchange. You should read carefully the full text of the tax opinion of Miller, Canfield, Paddock and Stone, PLC. This discussion also assumes that the exchange will be effected pursuant to applicable state law and otherwise completed according to the terms of the Plan of Share Exchange. You should not rely upon this discussion if any of these factual assumptions or representations is, or later becomes, inaccurate.

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This discussion also assumes that shareholders hold their shares of CDBL I Class B common stock as a capital asset and does not address the tax consequences that may be relevant to a particular shareholder receiving special treatment under some federal income tax laws. Shareholders receiving special treatment include:

·       banks;

·       tax-exempt organizations;

·       insurance companies;

·       dealers in securities or foreign currencies;

·       CDBL I Class B shareholders who received their CDBL I Class B common stock through the exercise of employee stock options or otherwise as compensation;

·       CDBL I Class B shareholders who are not U.S. persons; and

·       CDBL I Class B shareholders who hold CDBL I Class B common stock as part of a hedge, straddle or conversion transaction.

The discussion also does not address any consequences arising under the laws of any state, locality or foreign jurisdiction. No rulings have been or will be sought from the Internal Revenue Service regarding any matters relating to the proposed share exchange.

Based on the assumptions and representations above, it is the opinion of Miller, Canfield, Paddock and Stone, PLC, tax counsel to Capitol, that:

·       the proposed share exchange will qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code;

·       no gain or loss will be recognized by the shareholders of CDBL I who exchange their CDBL I Class B common stock solely for Capitol common stock (except with     respect to cash received instead of fractional shares of Capitol common stock);

·       the aggregate tax basis of the Capitol common stock received by CDBL I Class B shareholders who exchange all of their CDBL I Class B common stock for Capitol    common stock in the exchange will be the same as the aggregate tax basis of the CDBL I Class B common stock surrendered in the exchange (reduced by any    adjusted basis allocable to a fractional share of Capitol common stock for which cash is received);

·      the holding period of the Capitol common stock received by a former shareholder of CDBL I will include the holding period of shares of CDBL I Class B common    stock surrendered in exchange; and

·       a holder of CDBL I Class B common stock who receives a cash payment instead of a fractional share of Capitol common stock will recognize capital gain or loss to     the extent such cash payment is treated pursuant to Section 302 of the Internal Revenue Code as made in exchange for the fractional share. Such gain or loss will be    equal to the difference between the cash amount received and the portion of the holder's adjusted basis in shares of CDBL I Class B common stock allocable to the    fractional share, and such gain or loss will be long-term capital gain or loss for federal income tax purposes if the holder's holding period in the CDBL I Class B   common stock satisfies the long-term holding period requirement.

The tax opinion of Miller, Canfield, Paddock and Stone, PLC is not binding upon the Internal Revenue Service or the courts.

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TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE EXCHANGE TO YOU WILL DEPEND ON YOUR PARTICULAR SITUATION. YOU ARE ENCOURAGED TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE EXCHANGE, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGE IN THE TAX LAWS.

Regulatory Matters

As a bank holding company, Capitol is subject to regulation by the Federal Reserve Board. Federal Reserve Board rules require Capitol to obtain the Federal Reserve Board's permission to acquire at least 51% of a subsidiary. The rules of the Federal Reserve Board do not differentiate between ownership of 51% and ownership of 100% of the stock of the subsidiary. Of course, Capitol received permission to acquire 51% or more ownership of CDBL I prior to CDBL I commencing the business of operating as a bank holding company. Accordingly, Capitol will not be required to seek any further approval from the Federal Reserve Board for the share exchange.

It is a condition of the proposed share exchange that the shares of Capitol stock to be issued pursuant to the Plan of Share Exchange be approved for listing on the New York Stock Exchange, subject to official notice of issuance. An application will be filed to list Capitol's additional shares resulting from the proposed share exchange, if the Plan of Share Exchange is approved by CDBL I's shareholders other than Capitol. Accordingly, the shares of Capitol common stock to be issued in exchange for the CDBL I Class B common stock will be publicly tradable upon consummation of the share exchange. There will be no restriction on the ability of a former CDBL I Class B shareholder to sell in the open market the Capitol common stock received (unless the CDBL I Class B shareholder is also an officer, director or affiliate of either CDBL I or Capitol, in which case Rule 144 and Rule 145 issued by the SEC do impose certain restrictions on the sale of Capitol common stock).

Federal Securities Laws Consequences; Stock Transfer Restrictions

This proxy statement/prospectus does not cover any resales of the Capitol common stock you will receive in the share exchange, and no person is authorized to make any use of this proxy statement/prospectus in connection with any such resale.

All shares of Capitol common stock you will receive in the share exchange will be freely transferable, except that if you are deemed to be an "affiliate" of CDBL I under the Securities Act of 1933 at the time of the special shareholders' meeting, you may resell those shares only in transactions permitted by Rule 145 under the Securities Act or as otherwise permitted under the Securities Act. Persons who may be affiliates of CDBL I for those purposes generally include individuals or entities that control, are controlled by, or are under common control with, CDBL I, and would not include shareholders who are not officers, directors or principal shareholders of CDBL I.

The affiliates of CDBL I may not offer, sell or otherwise dispose of any of the shares of Capitol common stock issued to that affiliate in the share exchange or otherwise owned or acquired by that affiliate:

(1) for a period beginning 30 days prior to the share exchange and continuing until financial results covering at least 30 days of post-share exchange combined operations of Capitol and CDBL I have been publicly filed by Capitol; or

(2) in violation of the Securities Act.

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36

THE CLOSING

Effective Time

The share exchange will be effective at 5:00 p.m., Eastern Time, on October 16, 2006, and will be closed as soon as possible after the vote at the meeting of CDBL I's shareholders. If the Plan of Share Exchange is approved at the special meeting of CDBL I's shareholders, as of the effective time, each outstanding share of CDBL I Class B common stock will be automatically converted into the right to receive Capitol common stock according to the exchange ratio.

Shares Held by Capitol

Shares of CDBL I Class A voting common stock owned by Capitol since Capitol's organization will be unaffected by the share exchange. Those shares will not be exchanged for any securities of Capitol or other consideration.

Procedures for Surrender of Certificates; Fractional Shares

As soon as reasonably practicable after the effective date of the share exchange, Capitol or Capitol's transfer agent will send CDBL I's Class B shareholders a letter of transmittal. The letter of transmittal will contain instructions with respect to the surrender of your CDBL I Class B common stock certificates. YOU SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

Commencing immediately after the effective time of the share exchange, upon surrender by you of your stock certificates representing CDBL I Class B shares in accordance with the instructions in the letter of transmittal, you will be entitled to receive stock certificates representing shares of Capitol common stock into which those CDBL I Class B shares have been converted, together with a cash payment in lieu of fractional shares, if any.

After the effective date, each certificate that previously represented shares of CDBL I Class B stock will represent only the right to receive the shares of Capitol common stock into which shares of CDBL I Class B stock were converted in the share exchange, and the right to receive cash in lieu of fractional shares of Capitol common stock as described below.

Until your CDBL I Class B certificates are surrendered to Capitol or Capitol's agent, you will not be paid any dividends or distributions on the Capitol common stock into which your CDBL I Class B shares have been converted with a record date after the share exchange, and will not be paid cash in lieu of a fractional share. When those certificates are surrendered, any unpaid dividends and any cash in lieu of fractional shares of Capitol common stock payable as described below will be paid to you without interest.

CDBL I's transfer books will be closed at the effective date of the share exchange and no further transfers of shares will be recorded on the transfer books. If a transfer of ownership of CDBL I Class B stock that is not registered in the records of CDBL I has occurred, then, so long as the CDBL I Class B stock certificates are accompanied by all documents required to evidence and effect the transfer, as set forth in the transmittal letter and accompanying instructions, a certificate representing the proper number of shares of Capitol common stock will be issued to a person other than the person in whose name the certificate so surrendered is registered, together with a cash payment in lieu of fractional shares, if any, and payment of dividends or distributions, if any.

No fractional share of Capitol common stock will be issued upon surrender of certificates previously representing CDBL I Class B shares. Instead, Capitol will pay you an amount in cash determined by multiplying the fractional share interest to which you would otherwise be entitled by the Capitol share value used in determining the exchange ratio.

Fees and Expenses

Whether or not the share exchange is completed, Capitol and CDBL I will each pay its own costs and expenses incurred in connection with the share exchange, including the costs of (a) the filing fees in connection with

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Capitol's Form S-4 registration statement and this proxy statement/prospectus, (b) the filing fees in connection with any filing, permits or approvals obtained under applicable state securities and "blue sky" laws, (c) the expenses in connection with printing and mailing of the Capitol Form S-4 registration statement and this proxy statement/prospectus, and (d) all other expenses.

Stock Market Listing

Capitol will promptly prepare a listing application with respect to the maximum number of shares of Capitol common stock issuable to CDBL I Class B shareholders in the share exchange, and Capitol must use reasonable best efforts to obtain approval for the listing of Capitol common shares on the New York Stock Exchange.

Amendment And Termination

Capitol and CDBL I may amend or terminate the share exchange at any time before or after shareholder approval of the Plan of Share Exchange. After shareholder approval of the share exchange, it may not be further amended without the approval of the shareholders.

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38

THE SPECIAL SHAREHOLDERS' MEETING

Date, Time And Place

The special shareholders' meeting will be held on October 16, 2006 at Capitol Development Bancorp Limited I, at the Capitol Bancorp Center, located at 200 Washington Square North 4^th Floor, Lansing, Michigan at 3:00 p.m., local time.

Matters To Be Considered At The Special Shareholders' Meeting

At the special shareholders' meeting, holders of CDBL I common stock will vote on whether to approve the Plan of Share Exchange. See "The Share Exchange".

Record Date; Stock Entitled To Vote; Quorum

Holders of record of CDBL I Class A and Class B common stock at the close of business on September 18, 2006, the record date for the special shareholders' meeting, are entitled to receive notice of and to vote at the special shareholders' meeting. At August 31, 2006, 1,000 shares of CDBL I Class A common stock were issued and outstanding and all of which are held by Capitol and 10,900 shares of CDBL I Class B common stock were issued and outstanding and held by approximately 40 holders of record. Capitol held 1,000 shares of CDBL I Class A common stock on that date and no shares of CDBL I Class B common stock.

A majority of the shares of the CDBL I Class A common stock and Class B common stock entitled to vote on the record date must be represented in person or by proxy at the special shareholders' meeting in order for a quorum to be present for purposes of transacting business at the meeting. In the event that a quorum of common stock is not represented at the special shareholders' meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies. Holders of record of CDBL I common stock on the record date are each entitled to one vote per share with respect to approval of the Plan of Share Exchange at CDBL I's special shareholders' meeting.

CDBL I does not expect any other matters to come before the special shareholders' meeting. However, if any other matters are properly presented at the meeting for consideration, the persons named in the enclosed form of proxy, and acting thereunder, will have discretion to vote or not vote on those matters in accordance with their best judgment, unless authorization to use that discretion is withheld. If a proposal to adjourn the meeting is properly presented, however, the persons named in the enclosed form of proxy will not have discretion to vote in favor of the adjournment proposal any shares which have been voted against the proposal(s) to be presented at the meeting. CDBL I is not aware of any matters expected to be presented at the meeting other than as described in the notice of the meeting.

Votes Required

Although approval of the Plan of Share Exchange by an affirmative vote of a majority of the outstanding Class A voting and Class B shares entitled to vote is required by law, CDBL I and Capitol have agreed that approval of the Plan of Share Exchange will require the affirmative vote of a majority of the CDBL I Class B common stock outstanding on the record date. Capitol will vote its CDBL I Class A voting common stock along with the wishes of a majority of the shareholders of Class B common stock. Abstentions and broker non-votes will have the same effect as a vote against the proposal to approve the Plan of Share Exchange.

Share Ownership Of Management

As of the close of business on August 31, 2006, the directors and executive officers of CDBL I and their affiliates were entitled to vote approximately 3,000 shares of CDBL I Class B common stock. These shares represent approximately 27.52% of the outstanding shares of CDBL I Class B common stock. The directors and executive officers of CDBL I have indicated that they currently intend to vote their shares of CDBL I Class B common stock in favor of the Plan of Share Exchange.

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Voting Of Proxies

Submitting Proxies

You may vote by attending the special shareholders' meeting and voting your shares in person at the meeting, or by completing the enclosed proxy card, signing and dating it, and mailing it in the enclosed postage pre-paid envelope. If you sign a written proxy card and return it without instructions, your shares will be voted FOR the Plan of Share Exchange at the special shareholders' meeting.

If your shares are held in the name of a trustee, bank, broker or other record holder, you must either direct the record holder of your shares as to how to vote your shares or obtain a proxy from the record holder to vote at the special shareholders' meeting.

Shareholders who submit proxy cards should not send in any stock certificates with their proxy cards. A transmittal form with instructions for the surrender of certificates representing shares of CDBL I Class B stock will be mailed by Capitol to former CDBL I Class B shareholders shortly after the share exchange is effective.

Revoking Proxies

If you are a shareholder of record, you may revoke your proxy at any time prior to the time it is voted at the special shareholders' meeting. Proxies may be revoked by written notice, including by telegram or telecopy, to the Chairman and Chief Executive Officer of CDBL I, by a later-dated proxy signed and returned by mail or by attending the special shareholders' meeting and voting in person. Attendance at CDBL I's special shareholders' meeting will not in and of itself constitute a revocation of a proxy. Any written notice of a revocation of a proxy must be sent so as to be delivered before the taking of the vote at the special shareholders' meeting to:

Capitol Development Bancorp Limited I

Capitol Bancorp Center

200 Washington Square North, Fourth Floor

Lansing, Michigan 48933

Attn: Cristin Reid English, Chairman and Chief Executive Officer

If you require assistance in changing or revoking a proxy, you should contact Cristin Reid English at the address above or at phone number (517) 487-6555.

General Information

Brokers who hold shares in street name for customers who are the beneficial owners of those shares are prohibited from giving a proxy to vote on non-routine matters, such as the proposal to be voted on at the special shareholders' meeting, unless they receive specific instructions from the customer. These so-called broker non-votes will have the same effect as a vote against the Plan of Share Exchange.

Abstentions may be specified on all proposals. If you submit a proxy with an abstention, you will be treated as present at the special shareholders' meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. An abstention will have the same effect as a vote against the Plan of Share Exchange.

Solicitation of Proxies; Expenses

Capitol or CDBL I will pay the cost of solicitation of proxies. In addition to solicitation by mail, the directors, officers and employees of CDBL I may also solicit proxies from shareholders by telephone, telecopy, telegram or in person.

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COMPARISON OF SHAREHOLDER RIGHTS

As a result of the share exchange, holders of shares of CDBL I Class B stock will become holders of shares of Capitol common stock. This comparison of shareholder rights is not intended to be complete and is qualified by reference to the Michigan Business Corporation Act, as well as to CDBL I's articles of incorporation and by-laws and Capitol's articles of incorporation and by-laws, (copies of which are on file with the SEC).

The following summary compares various rights, privileges and restrictions applicable to shareholders of CDBL I and Capitol:

	CDBL I	Capitol
Authorized Capital Stock	51,000	50,000,000
Preemptive Rights	None	None
Quorum Requirements	Majority	Majority
Annual Meetings of Shareholders	Called by Board (for purposes of Class A shares)	Called by CEO, majority of the Board or shareholders representing 25% of the shares entitled to vote
Stockholder Action by Written Consent	Yes, if a majority	Yes, if unanimous
Inspection of Voting List of Shareholders	Inspector may be appointed by the Board, by the person presiding at shareholders' meeting or by the request of a shareholder	Inspector may be appointed by the Board, by the person presiding at shareholders' meeting or by the request of a shareholder
Classification of the Board of Directors	No	No
Election of the Board of Directors	Annually by shareholders of Class A common stock	Annually by shareholders
Cumulative Voting	No	No
Number of Directors	1-25	\5-25
Removal of Directors	By a majority of the outstanding shares of stock entitled to vote	By a majority of the outstanding shares of stock
Vacancies on the Board of Directors	May be filled by a majority of the Board of Directors	May be filled by a majority of the Board of Directors
Liability of Directors	Eliminated to the fullest extent provided by law	Eliminated to the fullest extent provided by law
Indemnification of Directors, Officers, Employees or Agents	Yes	Yes
Amendments to Articles of Incorporation	By a majority of the outstanding shares	By a majority of the outstanding shares
Amendments to Bylaws	By a majority of the outstanding shares or a majority of directors	By majority of directors
Appraisal/Dissenters' Rights	No	No

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DESCRIPTION OF THE CAPITAL STOCK OF CAPITOL

Capitol's Articles of Incorporation, as amended to date, authorize the issuance of up to 50,000,000 shares of common stock, without par value. Capitol's articles of incorporation do not authorize the issuance of any other class of stock. As of June 30, 2006, 15,958,076 shares of common stock were outstanding. UMB Bank, n.a., serves as transfer agent and registrar for Capitol's common stock.

Michigan law allows Capitol's board of directors to issue additional shares of stock up to the total amount of common stock authorized without obtaining the prior approval of the shareholders.

Capitol's board of directors has authorized the issuance of the shares of common stock as described in this proxy statement/prospectus. All shares of common stock offered will be, when issued, fully paid and nonassessable.

The following summary of the terms and provisions of the common stock does not purport to be complete and is qualified in its entirety by reference to Capitol's articles of incorporation, as amended, a copy of which is on file with the SEC, and to the Michigan Business Corporation Act ("MBCA").

Rights of Common Stock

All voting rights are vested in the holders of shares of common stock. Each share of common stock is entitled to one vote. The shares of common stock do not have cumulative voting rights, which means that a stockholder is entitled to vote each of his or her shares once for each director to be elected at any election of directors and may not cumulate shares in order to cast more than one vote per share for any one director. The holders of the common stock do not have any preemptive, conversion or redemption rights. Holders of common stock are entitled to receive dividends if and when declared by Capitol's board of directors out of funds legally available. Under Michigan law, dividends may be legally declared or paid only if after the distribution the corporation can pay its debts as they come due in the usual course of business and the corporation's total assets equal or exceed the sum of its liabilities. In the event of liquidation, the holders of common stock will be entitled, after payment of amounts due to creditors and senior security holders, to share ratably in the remaining assets.

Shares Available for Issuance

The availability for issuance of a substantial number of shares of common stock at the discretion of the board of directors provides Capitol with the flexibility to take advantage of opportunities to issue additional stock in order to obtain capital, as consideration for possible acquisitions and for other purposes (including, without limitation, the issuance of additional shares through stock splits and stock dividends in appropriate circumstances). There are, at present, no plans, understandings, agreements or arrangements concerning the issuance of additional shares of common stock, except as described in this proxy statement/prospectus and for the shares of common stock reserved for issuance under Capitol's stock option program.

Uncommitted authorized but unissued shares of common stock may be issued from time to time to persons and in amounts the board of directors of Capitol may determine and holders of the then outstanding shares of common stock may or may not be given the opportunity to vote thereon, depending upon the nature of those transactions, applicable law and the judgment of the board of directors of Capitol regarding the submission of an issuance to or vote by Capitol's shareholders. As noted, Capitol's shareholders have no preemptive rights to subscribe to newly issued shares.

Moreover, it will be possible that additional shares of common stock would be issued for the purpose of making an acquisition by an unwanted suitor of a controlling interest in Capitol more difficult, time consuming or costly or would otherwise discourage an attempt to acquire control of Capitol. Under such circumstances, the availability of authorized and unissued shares of common stock may make it more difficult for shareholders to obtain a premium for their shares. Such authorized and unissued shares could be used to create voting or other impediments or to frustrate a person seeking to obtain control of Capitol by means of a merger, tender offer, proxy contest or other means. Such shares could be privately placed with purchasers who might cooperate with the board of directors of Capitol in opposing such an attempt by a third party to gain control of Capitol. The issuance of new shares of common stock could also be used to dilute ownership of a person or entity seeking to obtain control of Capitol. Although Capitol does not currently contemplate taking that action, shares of Capitol common stock could be issued for the purposes and effects described above, and the board of directors reserves its rights (if consistent with its fiduciary responsibilities) to issue shares for such purposes.

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Capitol's Preferred Securities

Capitol has issued debentures to Capitol Trust I, a Delaware business trust subsidiary of Capitol. Capitol Trust I purchased the debentures with the proceeds of preferred securities (which are traded on the New York Stock Exchange under the symbol "CBCPrA"). Capitol also has additional trust-preferred securities which were privately placed. Capitol has guaranteed the preferred securities. The documents governing these securities, including the indenture under which the debentures were issued, restrict Capitol's right to pay a dividend on its common stock under certain circumstances and give the holders of the preferred securities preference on liquidation over the holders of Capitol's common stock. Specifically, Capitol may not declare or pay a cash dividend on its common stock if (a) an event of default has occurred as defined in the indenture, (b) Capitol is in default under its guarantee, or (c) Capitol has exercised its right under the debentures and the preferred securities to extend the interest payment period. In addition, if any of these conditions have occurred and until they are cured, Capitol is restricted from redeeming or purchasing any shares of its common stock except under very limited circumstances. Capitol's obligation under the debentures, the preferred securities and the guarantee approximates $103.3 million at an average interest rate currently approximating 8.7% per annum, payable quarterly.

Anti-Takeover Provisions

In addition to the utilization of authorized but unissued shares as described above, the MBCA contains other provisions which could be utilized by Capitol to impede efforts to acquire control of Capitol. Those provisions include the following:

Control Share Acquisitions. The MBCA contains an article intended to protect shareholders and prohibit or discourage certain types of hostile takeover activities. These provisions regulate the acquisition of "control shares" of large public Michigan corporations.

The act establishes procedures governing "control share acquisitions." A control share acquisition is defined as an acquisition of shares by an acquirer which, when combined with other shares held by that person or entity, would give the acquirer voting power at or above any of the following thresholds: 20%, 33-1/3% or 50%. Under that act, an acquirer may not vote "control shares" unless the corporation's disinterested shareholders vote to confer voting rights on the control shares. The acquiring person, officers of the target corporation, and directors of the target corporation who are also employees of the corporation are precluded from voting on the issue of whether the control shares shall be accorded voting rights. The act does not affect the voting rights of shares owned by an acquiring person prior to the control share acquisition.

The act entitles corporations to redeem control shares from the acquiring person under certain circumstances. In other cases, the act confers dissenters' rights upon all of a corporation's shareholders except the acquiring person.

The act applies only to an "issuing public corporation." Capitol falls within the statutory definition of an "issuing public corporation." The act automatically applies to any "issuing public corporation" unless the corporation "opts out" of the statute by so providing in its articles of incorporation or bylaws. Capitol has not "opted out" of the provisions of the act.

Fair Price Act. Certain provisions of the MBCA establish a statutory scheme similar to the supermajority and fair price provisions found in many corporate charters. The act provides that a super majority vote of 90% of the shareholders and no less than two-thirds of the votes of non-interested shareholders must approve a "business combination." The act defines a "business combination" to encompass any merger, consolidation, share exchange, sale of assets, stock issue, liquidation, or reclassification of securities involving an "interested shareholder" or certain "affiliates." An "interested shareholder" is generally any person who owns 10% or more of the outstanding voting shares of the company. An "affiliate" is a person who directly or indirectly controls, is controlled by, or is under common control with a specified person.

As of January 31, 2006, Capitol's directors and executive officers beneficially owned (including immediately exercisable stock options and warrants) control of approximately 26.78% of Capitol's outstanding

43

common stock. Based upon information as of January 31, 2006 and the proposed estimated exchange ration, upon completion of the share exchange Capitol's directors and executive officers will beneficially own (including immediately exercisable stock options and warrants) control of approximately 26.79% of Capitol's outstanding common stock. If Capitol's directors' and executive officers' shares are voted as a block, Capitol's directors and executive officers will be able to prevent the attainment of the required supermajority approval.

The supermajority vote required by the act does not apply to business combinations that satisfy certain conditions. These conditions include, among others, that: (i) the purchase price to be paid for the shares of the company is at least equal to the greater of (a) the market value of the shares or (b) the highest per share price paid by the interested shareholder within the preceding two-year period or in the transaction in which the shareholder became an interested shareholder, whichever is higher; and (ii) once a person has become an interested shareholder, the person must not become the beneficial owner of any additional shares of the company except as part of the transaction which resulted in the interested shareholder becoming an interested shareholder or by virtue of proportionate stock splits or stock dividends.

The requirements of the act do not apply to business combinations with an interested shareholder that the Board of Directors has approved or exempted from the requirements of the act by resolution at any time prior to the time that the interested shareholder first became an interested shareholder.

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44

WHERE YOU CAN FIND MORE INFORMATION

Capitol has filed a registration statement on Form S-4 to register with the SEC the Capitol common stock to be issued to CDBL I Class B shareholders in the share exchange. This proxy statement/prospectus is a part of that registration statement and constitutes a prospectus of Capitol in addition to being a proxy statement of CDBL I for the special shareholders' meeting. As allowed by SEC rules, this proxy statement/prospectus does not contain all the information you can find in the registration statement or the exhibits to the registration statement.

In addition, Capitol files reports, proxy statements and other information with the SEC under the Exchange Act. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may read and copy this information at the following locations of the SEC:

Public Reference Room 100 F Street Washington, D.C. 20549 Chicago Regional Office Citicorp Center 500 West Madison Street, Suite 1400 Chicago, Illinois 60661-2511

You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, Washington, D.C. 20549, at prescribed rates. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, including Capitol, who file electronically with the SEC. The address of that site is www.sec.gov. You can also inspect reports, proxy statements and other information about Capitol at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York, 10005.

The SEC allows Capitol to "incorporate by reference" some of the information it files with the SEC. This permits Capitol to disclose important information to you by referring to these filed documents. Any information referred to in this way is considered part of this proxy statement/prospectus, except for any information superseded by information in, or incorporated by reference in, this proxy statement/prospectus. Capitol incorporates by reference the following documents that have been filed with the SEC:

Capitol Bancorp Ltd. SEC Filings (File No. 0-18461)	Period
·Current Report on Form 8-K	Filed May 12, 2006
·Current Report on Form 8-K	Filed April 26, 2006
·Current Report on Form 8-K	Filed April 20, 2006
·Current Report on Form 8-K	Filed March 14, 2006
·Current Report on Form 8-K	Filed January 31, 2006
·Current Report on Form 8-K	Filed January 27, 2006
·Quarterly Report on Form 10-Q	Period ended March 31, 2006
·Quarterly Report on Form 10-Q	Period ended June 30, 2006
·Proxy Statement on Schedule 14A	Annual Meeting held April 26, 2006
·Annual Report on Form 10-K	Year Ended December 31, 2005
·Registration Statement on Form 8-A                         filed April 19, 1990	Filed April 19, 1990

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In addition, all subsequent documents filed with the SEC by Capitol pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this proxy statement/ prospectus shall be deemed to be incorporated by reference into this proxy statement/prospectus and to be a part hereof from the date of filing such documents. Any statement contained in this proxy statement/prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus or another such document shall be deemed to be modified or superseded for purposes of this proxy statement/prospectus to the extent that a statement contained in this proxy statement/prospectus or another such document or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modified or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified superseded, to constitute a part of this proxy statement/prospectus.

IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY OCTOBER 11, 2006 TO RECEIVE THEM BEFORE THE SPECIAL SHAREHOLDERS' MEETING. If you request exhibits to any incorporated documents from us, Capitol will mail them to you by first class mail, or another equally prompt means, within one business day after Capitol receives your request.

No one has been authorized to give any information or make any representation about CDBL I, Capitol or the share exchange, that differs from, or adds to, the information in this document or in documents that are publicly filed with the SEC. Therefore, if anyone does give you different or additional information, you should not rely on it.

If you are in a jurisdiction where it is unlawful to offer to exchange, or to ask for offers of exchange, the securities offered by this proxy statement/prospectus or to ask for proxies, or if you are a person to whom it is unlawful to direct these activities, then the offer presented by this proxy statement/prospectus does not extend to you.

The information contained in this proxy statement/prospectus speaks only as of its date unless the information specifically indicates that another date applies. Information in this document about Capitol has been supplied by Capitol, and information about CDBL I has been supplied by CDBL I.

LEGAL MATTERS

Certain legal matters relating to the validity of the shares of Capitol common stock offered by this proxy statement/prospectus will be passed upon for Capitol by Brian English, Capitol's General Counsel. Certain federal income tax matters relating to the share exchange will be passed upon for Capitol by Miller, Canfield, Paddock and Stone, PLC.

EXPERTS

The consolidated financial statements of Capitol and management's assessment of internal control over financial reporting as of December 31, 2005 incorporated by reference in this proxy statement/prospectus have been audited by BDO Seidman, LLP, an independent registered public accounting firm, to the extent and for the periods set forth in their reports and incorporated herein in reliance upon such reports given upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Capitol Development Bancorp Limited I attached to this proxy statement/prospectus as Annex B have been audited by BDO Seidman, LLP, an independent registered public accounting firm, to the extent and for the periods stated in their report, which is attached as part of Annex B, and included in reliance upon such report given upon the authority of said firm as experts in accounting and auditing.

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ANNEX A

PLAN OF SHARE EXCHANGE

THIS PLAN OF SHARE EXCHANGE ("Plan") is entered into effective August 31, 2006 between and among CAPITOL BANCORP LIMITED, a Michigan corporation ("Capitol") and CAPITOL DEVELOPMENT BANCORP LIMITED I ("CDBL I").

R E C I T A L S

CDBL I is a Michigan banking corporation which commenced the business of bank development December 1, 2003.

Capitol is the holder of 1,000 shares of the duly issued and outstanding Class A voting common stock of CDBL I ("CDBL I Class A voting common stock").

There are 10,900 shares of duly issued and outstanding Class B common stock of CDBL I ("CDBL I Class B common stock", and, together with the CDBL Class A voting common stock, "CDBL I common stock")

D.All of CDBL I's Class B common stock is held by accredited investors (as defined by Rule 501 of Regulation D as promulgated by the Securities and Exchange Commission) purchased pursuant to a private placement memorandum dated October 13, 2003.

E.CDBL I common stock is privately held and not traded in any public market.

F.Capitol's common stock ("Capitol common stock") is traded on the New York Stock Exchange.

G.CDBL I's Board of Directors has determined that it would be in the best interest of CDBL I's stockholders to exchange their shares of stock in CDBL I for shares of Capitol common stock as described in this Plan, and Capitol is willing to make an exchange on those terms.

The parties adopt this Plan as of the effective date.

1.The Exchange. Each shareholder who holds CDBL I Class B common stock will exchange his, her or their shares of CDBL I Class B common stock for shares of Capitol common stock according to an exchange ratio determined as follows:

CDBL I Share Value. The value of each share of CDBL I Class B common stock shall be $1,500.

Capitol Share Value. The share value of each share of Capitol common stock shall be the average of the closing prices of Capitol's common stock for the month ended September 30, 2006, as reported by the New York Stock Exchange.

Exchange Ratio. The exchange ratio will be determined by dividing the CDBL I Share Value by the Capitol Share Value.

Each CDBL I Class B shareholder will receive shares of Capitol common stock in exchange for his, her or their CDBL I Class B common stock calculated by multiplying the number of shares of CDBL I Class B common stock held by the shareholder by the exchange ratio. Any fractional shares will be paid in cash.

2.     Approvals Necessary. The following approvals will be necessary prior to the Plan becoming effective:

A - 1

a.      The Board of Directors of CDBL I shall have approved and adopted the Plan.

b.      The Board of Directors of Capitol shall have approved and adopted the Plan.

c.      A majority of the Class A voting and Class B common stock of CDBL I as well as an overall majority of CDBL I common stock shall have been voted to approve and adopt the Plan at a meeting of the shareholders called for that purpose.

d.     The Securities and Exchange Commission shall have declared effective the Registration Statement registering the shares of stock of Capitol common stock to be issued in the exchange.

4.Tax Opinion. Miller, Canfield, Paddock and Stone, PLC, shall have issued its legal opinion that the share exchange will constitute a reorganization within the means of Section 368 of the Internal Revenue Code of 1986, as amended, and that the exchange shall not be a taxable event to the Class B shareholders of CDBL I (except to the extent of cash received in lieu of fractional shares).

5.Surrender of Certificates. Each shareholder of CDBL I Class B common stock shall surrender to Capitol his, her or their certificate(s) for shares of CDBL I Class B common stock. Capitol shall direct its transfer agent, UMB Bank, n.a., to issue certificate(s) of Capitol common stock to be issued in the exchange. Certificate(s) of Capitol common stock shall be issued and registered in the same name as the shares of CDBL I Class B common stock surrendered in exchange therefor, and shall thereafter be transferable in the same manner as otherwise provided for Capitol common stock. Shareholders of CDBL I Class B common stock will not be paid dividend payments, if any, paid by Capitol until such time as their certificates have been exchanged. Any such withheld dividend payment will be paid upon exchange of the certificate(s).

6.New CDBL I Class B Stock Certificate. CDBL I shall issue its certificate registering in the name of Capitol all shares of Class B stock now registered to shareholders other than Capitol.

A - 2

ANNEX B

FINANCIAL INFORMATION REGARDING CAPITOL DEVELOPMENT BANCORP LIMITED I

Management’s discussion and analysis of financial condition and results of operations	B-2
Condensed interim consolidated financial statements as of June 30, 2006 and for the six months ended June 30, 2006 and 2005 (unaudited)	B-4
Audited consolidated financial statements as of December 31, 2005 and 2004 and for the periods ended December 31, 2005, 2004 and 2003	B-11

B - 1

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Capitol Development Bancorp Limited I

Periods Ended June 30, 3006 and 2005 and

December 31, 2005 and 2004

Financial Condition

Capitol Development Bancorp Limited I (the “Corporation”) is a bank-development company engaged in commercial banking activities through its subsidiaries (collectively, the “Banks”), Bank of Belleville (located in Belleville, Illinois) and Bank of Michigan (located in Farmington Hills, Michigan), which are 51%-owned by the Corporation. The Corporation’s Banks provide a full array of banking services, principally loans and deposits, to entrepreneurs, professionals and other high net worth individuals in their respective communities.

Total assets approximated $61 million at June 30, 2006, an increase from $47 million at December 31, 2005. Total assets approximated $11 million at year-end 2004. Increased assets resulted mainly from higher levels of portfolio loans at the Banks, funded by growth in deposits.

Total portfolio loans approximated $45 million at June 30, 2006, an increase from the $30 million level at December 31, 2005 (none at December 31, 2004). Commercial loans approximated 95% of total portfolio loans at June 30, 2006 consistent with the Banks’ emphasis on commercial lending activities.

The allowance for loan losses at June 30, 2006 approximated $674,000 or 1.51% of total portfolio loans, compared to the December 31, 2005 ratio of 1.50% (none at December 31, 2004).

The allowance for loan losses is maintained at a level believed adequate by management to absorb potential losses inherent in the loan portfolio at the balance sheet date. Management’s determination of the adequacy of the allowance is based on evaluation of the portfolio (including volume, amount and composition, potential impairment of individual loans and concentrations of credit), past loss experience, current economic conditions, loan commitments outstanding and other factors.

Total deposits approximated $45 million at June 30, 2006, an increase of approximately $15 million from the $30 million level at December 31, 2005 (none at December 31, 2004).

The Banks seek to obtain noninterest-bearing deposits as a means to reduce their cost of funds. Noninterest-bearing deposits approximated $4 million at June 30, 2006 or about 10% of total deposits, an increase of approximately $2.5 million from December 31, 2005. Noninterest-bearing deposits can fluctuate significantly from day to day, depending upon customer account activity.

Stockholders’ equity approximated $8.6 million at June 30, 2006 or approximately 14% of total assets. Capital adequacy is discussed elsewhere in this narrative.

Results of Operations

The net loss for the six months ended June 30, 2006 approximated $321,000, compared with a net loss of approximately $1,363,000 in the corresponding 2005 period. The net loss for the year ended December 31, 2005 approximated $1,987,000, compared with a net loss of approximately $1,031,000 for the year ended December 31, 2004. The net losses for these periods relates to the expected early-period operations of the Banks.

The principal source of operating revenues is interest income. Total interest income for the six months ended June 30, 2006 approximated $1.8 million, compared with $197,000 for the six-month 2005 period. Total interest income for the year ended December 31, 2005 approximated $898,000, compared with $114,000 for the year ended December 31, 2004. The increase in interest income relates primarily to loan portfolio growth.

Total interest expense approximated $748,000 for the six months ended June 30. 2006 and $30,000 for the six-month 2005 period. For the year ended December 31, 2005, total interest expense approximated $286,000 (none in 2004).

B - 2

Net interest income approximated $1 million for the six months ended June 30, 2006, compared with $167,000 for the 2005 corresponding period. Net interest income for the year ended December 31, 2005 approximated $612,000, compared with $114,000 in 2004.

The provision for loan losses was $230,000 for the six months ended June 30, 2006, compared with $47,000 in the corresponding 2005 period. The provision for loan losses was $444,000 for the year ended December 31, 2005 (none for the year ended December 31, 2004). The provisions for loan losses for these periods related primarily to portfolio loan growth. The provision for loan losses is based upon amounts necessary to maintain the allowance for loan losses based on management’s analysis of allowance requirements, as discussed previously. Through June 30, 2006, the Corporation’s Banks incurred no loan charge-offs.

Total noninterest income approximated $64,000 for the six months ended June 30, 2006, compared with $7,000 for the corresponding 2005 period. Noninterest income for the year ended December 31, 2005 approximated $25,000 (none in 2004). Noninterest income in 2005, and in the interim 2006 period, increased significantly due to service charges on deposits which were not previously a significant revenue source for the Banks.

Total noninterest expense approximated $1.7 million for the six months ended June 30, 2006, compared with $2.6 million for the corresponding 2005 period. For the year ended December 31, 2005, total noninterest expense approximated $4.3 million, compared with $1.7 million in 2004. The principal component of noninterest expense is salaries and employee benefits which have increased in 2005 and 2004 annual periods due to the increased staffing required to serve customers and to facilitate growth. Noninterest expense in 2005 also included the write-off of start-up and preopening expenditures for the Banks upon commencement of their operations; noninterest expense was less in the interim 2006 period (compared to the corresponding 2005 period) due to lower start-up and preopening expenditures.

Liquidity and Capital Resources

The principal funding source for asset growth and loan origination activities is deposits. Changes in deposits and loans were previously discussed in this narrative. Most of the deposit growth has been deployed into commercial loans, consistent with the Banks’ emphasis on commercial lending activities.

Cash and cash equivalents approximated $14 million at June 30, 2006, $15 million at December 31, 2005 and $10 million at December 31, 2004. As liquidity levels vary continuously based upon customer activities, amounts of cash and cash equivalents can vary widely at any given point in time. Management believes the Banks’ liquidity position at June 30, 2006 is adequate to fund loan demand and to meet depositor needs.

All banks are subject to a complex series of capital ratio requirements which are imposed by state and federal banking agencies. In the case of the Corporation, its Banks are subject to a more restrictive requirement than is applicable to most banks inasmuch as the Banks must maintain a capital-to-asset ratio of not less than 8% for their first three years of operation. In the opinion of management, the Corporation and its Banks meet or exceed regulatory capital requirements to which they are subject.

Impact of New Accounting Standards

There are certain new accounting standards either becoming effective or being issued in 2006 and 2005. They are discussed in Note C of the accompanying condensed consolidated interim financial statements and Note B of the accompanying audited consolidated financial statements.

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B - 3

CAPITOL DEVELOPMENT BANCORP LIMITED I

------

Condensed Interim Consolidated Financial Statements

Six months ended June 30, 2006 and 2005

B - 4

CONDENSED CONSOLIDATED BALANCE SHEETS

Capitol Development Bancorp Limited I

		June 30, 2006 (Unaudited)			December 31, 2005
ASSETS
Cash and due from banks	$	1,298,613		$	1,523,500
Money-market funds and interest-bearing deposits		1,654,215			1,518,155
Federal funds sold		10,898,000			11,501,000
Cash and cash equivalents		13,850,828			14,542,655
Portfolio loans:
Commercial		42,138,629			28,876,441
Real estate mortgage		1,020,453			658,780
Installment		1,432,587			61,273
Total portfolio loans		44,591,669			29,596,494
Less allowance for loan losses		(674,000	)		(444,000	)
Net portfolio loans		43,917,669			29,152,494
Premises and equipment		1,237,865			1,013,908
Accrued interest income		163,248			119,346
Other assets		2,273,951			2,135,973
TOTAL ASSETS	$	61,443,561		$	46,964,376
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	4,381,077		$	1,887,931
Interest-bearing		40,871,344			28,176,500
Total deposits		45,252,421			30,064,431
Accrued interest on deposits and other liabilities		531,637			632,404
Total liabilities		45,784,058			30,696,835
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES		7,095,600			7,382,370
STOCKHOLDERS’ EQUITY:
Common stock, no par value, 51,000 shares
authorized; 11,900 shares issued and
outstanding		11,900,000			11,900,000
Retained-earnings deficit		(3,336,097	)		(3,014,829	)
Total stockholders’ equity		8,563,903			8,885,171
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY	$	61,443,561		$	46,964,376

See notes to condensed interim consolidated financial statements.

B - 5

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Capitol Development Bancorp Limited I

	Six Months Ended June 30
		2006			2005
Interest income:
Portfolio loans (including fees)	$	1,432,962		$	44,499
Loans held for resale		2,503
Federal funds sold		295,316			98,464
Money market and interest bearing deposits with banks		37,760			54,299
Total interest income		1,768,541			197,261
Interest expense on deposits		747,806			29,923
Net interest income		1,020,735			167,338
Provision for loan losses		230,000			47,000
Net interest income after provision for
loan losses		790,735			120,338
Noninterest income:
Service charges on deposit accounts		21,410			6,944
Fees from origination of non-portfolio residential
mortgage loans		10,835
Other		31,436			442
Total noninterest income		63,681			7,385
Noninterest expense:
Salaries and employee benefits		983,185			1,542,934
Occupancy		138,949			53,984
Equipment rent, depreciation and maintenance		123,809			48,020
Other		498,512			932,200
Total noninterest expense		1,744,455			2,577,138
Loss before income tax benefit and minority interest credit		(890,038	)		(2,449,415	)
Income tax benefit		(282,000	)		(843,000	)
Loss before minority interest credit		(608,038	)		(1,606,415	)
Credit resulting from minority interest in net losses
of consolidated subsidiaries		286,770			243,113
NET LOSS	$	(321,268	)	$	(1,363,302	)
NET LOSS PER SHARE (basic and diluted)	$	(27.00	)	$	(114.56	)

See notes to condensed interim consolidated financial statements.

B - 6

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

Capitol Development Bancorp Limited I

Common Stock		Common Stock		Retained- Earnings Deficit			Total
Six Months Ended June 30, 2005
Balances at January 1, 2005	$	11,900,000	$	(1,027,454	)	$	10,872,546
Net loss for the period		__________		(1,363,302	)		(1,363,302	)
BALANCES AT JUNE 30, 2005	$	11,900,000	$	(2,390,756	)	$	9,509,244
Six Months Ended June 30, 2006
Balances at January 31, 2006	$	11,900,000	$	(3,014,829	)	$	8,885,171
Net loss for the period		__________		(321,268	)		(321,268	)
BALANCES AT JUNE 30, 2006	$	11,900,000	$	(3,336,097	)	$	8,563,903

See notes to condensed interim consolidated financial statements.

B - 7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Capitol Development Bancorp Limited I

	Six Months Ended June 30
		2006			2005
OPERATING ACTIVITIES
Net loss for the period	$	(321,268	)	$	(1,363,302	)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for loan losses		230,000			47,000
Depreciation of premises and equipment		116,993			44,288
Gain on sale of equipment		(161	)
Minority interest in net losses of consolidated subsidiaries		(286,770	)		(243,113	)
Increase in accrued interest income and other assets		(181,880	)		(892,013	)
Increase (decrease) in accrued interest expense on deposits and other liabilities		(100,767	)		35,091
NET CASH USED BY OPERATING ACTIVITIES		(543,853	)		(2,372,049	)
INVESTING ACTIVITIES
Net increase in portfolio loans		(14,995,175	)		(3,056,651	)
Proceeds from sales of equipment		1,198
Purchases of premises and equipment		(341,987	)		(773,986	)
NET CASH USED BY INVESTING ACTIVITIES		(15,335,964	)		(3,830,637	)
FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings accounts		4,861,064			3,774,047
Net increase in certificates of deposit		10,326,926			4,520,377
Resources provided by minority interests					3,925,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		15,187,990			12,219,424
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(691,827	)		6,016,738
Cash and cash equivalents at beginning of period		14,542,655			10,326,831
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	13,850,828		$	16,343,569

See notes to condensed interim consolidated financial statements.

B - 8

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited)

Capitol Development Bancorp Limited I

NOTE A—BASIS OF PRESENTATION

The accompanying condensed financial statements of the Corporation have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America.

The statements do, however, include all adjustments of a normal recurring nature which the Corporation considers necessary for a fair presentation of the interim periods.

The results of operations for the six-month period ended June 30, 2006 are not necessarily indicative of the results to be expected for the year ending December 31, 2006.

NOTE B—NET LOSS PER SHARE

Net loss per share is based on the weighted average number of common shares outstanding (11,900 shares).

NOTE C—NEW ACCOUNTING STANDARDS

In March 2006, the FASB issued Statement No. 156, Accounting for Servicing of Financial Assets, which is an amendment of Statement No. 140, intended to simplify the accounting for servicing assets and liabilities, such as those common with mortgage securitization activities. Statement No. 156 is effective for years beginning after September 15, 2006, although earlier adoption is permitted. The Corporation’s management has not completed its review of the new guidance; however, the effect of the standard’s adoption is not expected to be material.

In July 2006, the FASB issued Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes thresholds and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will become effective January 1, 2007. The Corporation’s management has not completed its review of the new guidance; however, the effect of FIN 48’s adoption is not expected to be material.

Also recently, the FASB has issued several proposals to amend, supersede or interpret existing accounting standards which may impact the Corporation’s financial statements at a later date:

· Proposed amendments to Statement No. 128, Earnings Per Share  

· Proposed amendments to guidance regarding postemployment obligations, including pensions;  

· Proposed replacement of Statement No. 141 regarding Business Combinations; and  

· Proposed replacement of Accounting Research Bulletin No. 51 regarding Consolidated Financial Statements, Including Accounting and Reporting for Noncontrolling Interests.

B - 9

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited)—Continued

Capitol Development Bancorp Limited I

NOTE C—NEW ACCOUNTING STANDARDS—Continued

Due to the uncertain future status of these proposals, the Corporation’s management is unable to estimate their potential impact on the Corporation’s consolidated financial statements.

Other proposals, interpretations of existing pronouncements or FASB staff positions have been recently issued which include the following:

· FASB FSP to require recalculation of leveraged leases if the timing of tax benefits affect cash flows;  

· EITF Issue No. 06-4 which addresses accounting for deferred compensation and post retirement benefits of endorsement split-dollar life insurance; and  

· EITF Issue No. 06-5 which encompasses accounting for purchases of life insurance and the ramifications of determining the amount that could be realized in accordance with FASB Technical Bulletin 84-4.

The Corporation’s management has not completed its analysis of these (as proposed, where applicable) although it anticipates their potential impact (if finalized, where applicable) would not be material to the Corporation’s consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Corporation’s consolidated financial statements.

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B - 10

Capitol Development Bancorp Limited I

______

Consolidated Financial Statements

Periods ended December 31, 2005, 2004 and 2003

B - 11

Capitol Development Bancorp Limited I

Table of Contents

	Page
Report of Independent Registered Public Accounting Firm	1
Consolidated Balance Sheets	2
Consolidated Statements of Operations	3
Consolidated Statements of Changes in Stockholders’ Equity	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6-18

B - 12

BDO Seidman, LLP

Accountants and Consultants

99 Monroe Avenue, N. W., Suite 800

Grand Rapids, Michigan 49503-2654

Telephone: (616) 774-7000

Fax: (616) 776-3680

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Capitol Development Bancorp Limited I

We have audited the accompanying consolidated balance sheets of Capitol Development Bancorp Limited I and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years ended December 31, 2005 and 2004, and the period from December 1, 2003 (date of inception) to December 31, 2003. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capitol Development Bancorp Limited I and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for the years ended December 31, 2005 and 2004, and the period from December 1, 2003 (date of inception) to December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

BDO Seidman, LLP

Accountants and Consultants

Grand Rapids, Michigan

February 24, 2006

B - 13

CONSOLIDATED BALANCE SHEETS

Capitol Development Bancorp Limited I

	December 31
		2005			2004
ASSETS
Cash and due from banks	$	1,523,500
Money-market funds and interest-bearing deposits		1,518,155		$	10,326,831
Federal funds sold		11,501,000
Cash and cash equivalents		14,542,655			10,326,831
Portfolio loans—Note C:
Commercial		28,876,441
Real estate mortgage		658,780
Installment		61,273
Total portfolio loans		29,596,494
Less allowance for loan losses		(444,000	)
Net portfolio loans		29,152,494
Premises and equipment—Note E		1,013,908			3,215
Accrued interest income		119,346
Other assets		2,135,973			542,500
TOTAL ASSETS	$	46,964,376		$	10,872,546
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	1,887,931
Interest-bearing—Note F		28,176,500
Total deposits		30,064,431
Accrued interest on deposits and other liabilities		632,404
Total liabilities		30,696,835
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES—Note A		7,382,370
STOCKHOLDERS’ EQUITY—Notes G and L:
Common stock, no par value, 51,000 shares
authorized; 11,900 shares issued and
outstanding		11,900,000		$	11,900,000
Retained-earnings deficit		(3,014,829	)		(1,027,454	)
Total stockholders’ equity		8,885,171			10,872,546
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	46,964,376		$	10,872,546

See notes to consolidated financial statements.

B - 14

CONSOLIDATED STATEMENTS OF OPERATIONS

Capitol Development Bancorp Limited I

	Year Ended December 31							Period Ended December 31,
		2005			2004			2003
Interest income:
Portfolio loans (including fees)		541,515
Money market and interest bearing deposits		83,493		$	114,274		$	7,766
Federal funds sold		273,407
Total interest income		898,415			114,274			7,766
Interest expense on deposits		286,471
Net interest income		611,944			114,274			7,766
Provision for loan losses—Note C		444,000
Net interest income after provision for loan losses		167,944			114,274			7,766
Noninterest income:
Service charges on deposit accounts		18,137
Other		7,309
Total noninterest income		25,446
Noninterest expense:
Salaries and employee benefits		2,080,482			1,200,857
Occupancy		135,733			16,000
Equipment rent, depreciation and maintenance		129,761			1,550
Preopening and start-up costs		577,548			50,000
Contracted data processing and administrative services		331,292
Paper, printing and supplies		84,345
Travel , lodging and meals		33,504			15,571
Advertising		25,012
Telephone		17,501
Bank services		17,222
Professional fees		17,169			57,918
Directors’ fees		12,800
Postage		9,859
Other		781,128			340,970			2,628
Total noninterest expense		4,253,356			1,682,866			2,628
Income (loss) before federal income taxes (benefit) and minority interest credit		(4,059,966	)		(1,568,592	)		5,138
Federal income taxes (benefit) Note I		(1,376,000	)		(538,000	)		2,000
Income (loss) before minority interest credit		(2,683,966	)		(1,030,592	)		3,138
Credit resulting from minority interest in net losses of consolidated subsidiaries		696,591
NET INCOME (LOSS)	$	(1,987,375	)	$	(1,030,592	)	$	3,138
NET INCOME (LOSS) PER SHARE	$	(167.01	)	$	(86.60	)	$	0.26

See notes to consolidated financial statements.

B - 15

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Capitol Development Bancorp Limited I

Period Ended December 31, 2005

		Common Stock		Retained Earnings (Deficit)			Total
Balances at December 1, 2003, beginning of period	$	-0-	$	-0-		$	-0-
Issuance of 11,900 shares of common stock for cash consideration of $1,000.00 per share		11,900,000					11,900,000
Net income for the 2003 period				3,138			3,138
BALANCES AT DECEMBER 31, 2003		11,900,000		3,138			11,903,138
Net loss for 2004				(1,030,592	)		(1,030,592	)
BALANCES AT DECEMBER 31, 2004		11,900,000		(1,027,454	)		10,872,546
Net loss for 2005				(1,987,375	)		(1,987,375	)
BALANCES AT DECEMBER 31, 2005	$	11,900,000	$	(3,014,829	)	$	8,885,171

See notes to consolidated financial statements.

B - 16

CONSOLIDATED STATEMENTS OF CASH FLOWS

Capitol Development Bancorp Limited I

	Year Ended December 31							Period Ended December 31,
		2005			2004			2003
OPERATING ACTIVITIES
Net income (loss) for the period	$	(1,987,375	)	$	(1,030,592	)	$	3,138
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Provision for loan losses		444,000
Depreciation of premises and equipment		123,824			918
Minority interest in net losses of consolidated subsidiaries		(696,591	)
Credit for deferred income taxes		(1,370,000	)		(542,000	)
Increase in accrued interest income and other assets		(342,819	)		(500	)
Increase (decrease) in accrued interest expense on deposits and other liabilities		632,404			(2,000	)		2,000
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES		(3,196,557	)		(1,574,174	)		5,138
INVESTING ACTIVITIES
Net increase in portfolio loans		(15,462,675	)
Purchase of loans		(14,133,819	)
Purchases of premises and equipment		(1,134,517	)		(4,133	)
NET CASH USED BY INVESTING ACTIVITIES		(30,731,011	)		(4,133	)
FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and and savings accounts		11,113,758
Net increase in certificates of deposit		18,950,673
Resources provided by minority interests		8,078,961
Net proceeds from issuance of common stock								11,900,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		38,143,392						11,900,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,215,824			(1,578,307	)		11,905,138
Cash and cash equivalents at beginning of period		10,326,831			11,905,138			-0-
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	14,542,655		$	10,326,831		$	11,905,138

See notes to consolidated financial statements.

B - 17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE A—NATURE OF OPERATIONS, BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

Capitol Development Bancorp Limited I (the "Corporation") is a bank development company. At December 31, 2005, it had two majority-owned subsidiaries (collectively, the “Banks”), Bank of Michigan (51% owned), which commenced operations in January 2005, in Farmington Hills, Michigan, and Bank of Belleville (51% owned), which commenced operations in November 2005, in Belleville, Illinois.

The Corporation is a controlled subsidiary of Capitol Bancorp Limited (“Capitol”), a national community-bank development company.

The Corporation’s banks are engaged in a single business activity--banking. The Banks provide a full range of banking services to individuals, businesses and other customers located in their communities. The Banks 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. The principal markets for the Banks’ financial services are the communities in which the Banks are located and the areas immediately surrounding those communities.

The 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.

NOTE B—SIGNIFICANT ACCOUNTING POLICIES

Estimates: The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates because of the inherent subjectivity and inaccuracy of any estimation.

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, amounts due from banks (interest-bearing and noninterest-bearing), money-market funds and federal funds sold. Generally, federal funds transactions are entered into for a one-day period.

B - 18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

Investment Securities: Investment securities available for sale (none at December 31, 2005 and 2004) 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 (none at December 31, 2005 and 2004) and are carried at amortized cost. 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 area. Consistent with the Banks’ emphasis on business lending, there are concentrations of credit in loans secured by commercial real estate and less significant concentrations exist in loans secured by equipment and other business assets. The maximum potential credit risk to the Banks and the Corporation, without regard to underlying collateral and guarantees, is the total of loans and loan commitments outstanding. The Banks’ management reduces exposure to losses from credit risk by requiring collateral and/or guarantees for loans granted and by monitoring concentrations of credit, in addition to recording provisions for loan losses and maintaining an allowance for loan losses.

The allowance for loan losses is maintained at a level believed adequate by management to absorb estimated losses inherent in the portfolio at the balance sheet date. Management’s determination of the adequacy of the allowance is an estimate based on evaluation of the portfolio (including potential impairment of individual loans and concentrations of credit), 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.

The Banks have stand-by letters of credit outstanding that, when issued, commit the Banks to make payments on behalf of customers if certain specified future events occur, generally being non-payment by the customer. These obligations generally expire within one year and require collateral and/or personal guarantees based on management’s credit assessment. The maximum credit risk associated with these instruments equals their contractual amounts, assuming that the counterparty defaults and the collateral proves to be worthless. The total contractual amounts do not necessarily represent future cash requirements since many of these guarantees may expire without being drawn upon. The Banks record a liability, generally equal to the fees received, for these stand-by letters of credit.

B - 19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

Credit risk also arises from amounts of funds on deposit at other financial institutions (i.e., due from banks) to the extent balances exceed the limits of federal deposit insurance. The Corporation monitors the financial position of such financial institutions to evaluate credit risk periodically.

Interest and Fees on Loans: Interest income on loans is recognized based upon the principal balance of loans outstanding. Fees from origination of portfolio loans generally approximate the direct costs of successful loan originations.

The accrual of interest is generally discontinued when a loan becomes 90 days past due as to interest. When interest accruals are discontinued, interest previously accrued (but unpaid) is reversed. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal balance and accrued interest and the loan is in process of collection.

Premises and Equipment: Premises and equipment are stated on the basis of cost. Depreciation, which relates primarily to equipment and furniture with estimated useful lives of three to seven years, is computed principally by the straight-line method. Leasehold improvements are generally depreciated over the shorter of the respective lease term or estimated useful life.

Preopening and Start-up Costs: Costs incurred prior to commencement of operations are charged to expense on the opening date. Such costs consist primarily of salaries, wages and employee benefits.

Other Real Estate: Other real estate (none at December 31, 2005 and 2004) 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 changes in fair value.

Trust Assets and Related Income: Customer property, other than funds on deposit, held in a fiduciary or agency capacity by the Banks are not included in the consolidated balance sheet because it is not an asset of the Banks or the Corporation. Trust fee income is recorded on the accrual method.

Federal Income Taxes: 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.

B - 20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

Net Income (Loss) Per Share: Net income (loss) per share is based on the weighted average number of common shares outstanding (11,900 shares in 2005, 2004 and 2003).

Comprehensive Income (Loss): Comprehensive income (loss) is the sum of net income (loss) and certain other items which are charged or credited to stockholders’ equity. For the periods presented, the Corporation had no element of comprehensive income (loss) other than net income (loss).

New Accounting Standards: AICPA Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3), addresses the accounting for differences between contractual cash flows and cash flows expected to be collected from the initial investment in loans acquired in a transfer if those differences are attributable, at least in part, to credit quality. It includes such loans acquired in purchase business combinations and does not apply to loans originated by the entity. The SOP prohibits carrying over or creation of valuation allowances in the initial accounting for loans acquired in a transfer. It is effective for loans acquired in fiscal years beginning after December 15, 2004. The effect of this new guidance on the Corporation’s consolidated financial statements was not material.

In late 2005, the staff of the Financial Accounting Standards Board (FASB) issued Staff Position (FSP) FAS 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. This FSP provides additional guidance on when an investment in a debt or equity security should be considered impaired and when that impairment should be considered other-than-temporary and recognized as a loss. Additionally, the FSP requires certain disclosures about unrealized losses which have not been recognized as other-than-temporary. The Bank’s management believes this guidance will not have a material effect on the Bank’s financial statements upon implementation on January 1, 2006.

Most recently, the FASB has issued several proposals to amend, supersede or interpret existing accounting standards which may impact the Corporation’s financial statements at a later date:

· Proposed amendment to Statement No. 128, Earnings per Share.  

· Proposed amendments to Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.  

· Proposed interpretation regarding Uncertain Tax Positions.  

· Proposed replacement of Statement No. 141 regarding Business Combinations.

· Proposed replacement of Accounting Research Bulletin No. 51 regarding Consolidated Financial Statements, Including Accounting and Reporting for Noncontrolling Interests.

B - 21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE B—SIGNIFICANT ACCOUNTING POLICIES—Continued

Due to the uncertain future status of these proposals, the Corporation’s management is unable to estimate their potential impact on the Corporation’s consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Corporation’s consolidated financial statements.

NOTE C—LOANS

Transactions in the allowance for loan losses are summarized below:

		2005		2004
Balance at beginning of period	$	-0-	$	-0-
Provision charged to operations		444,000		--
Loans charged off (deduction)		--		--
Recoveries		--		--
Balance at December 31	$	444,000	$	-0-

The amounts of the allowance for loan losses allocated in the following table, as of December 31, 2005, are based on management’s estimate of losses inherent in the portfolio at the balance sheet date, and should not be interpreted as an indication of future charge-offs:

		Amount	Percentage of  Total  Portfolio Loans
Commercial	$	438,000	1.48	%
Real estate mortgage		6,000	0.02
Total allowance for loan losses	$	444,000	1.50	%

B - 22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE D—RELATED PARTIES TRANSACTIONS

In the ordinary course of business, the Banks make loans to officers and directors of the Banks including their immediate families and companies in which they are principal owners. At December 31, 2005 total loans to these persons approximated $1,788,000. During the 2005 period, $1,856,000 of new loans were made to these persons and repayments totaled $68,000. Such loans are made at the Banks’ normal credit terms.

Such officers and directors of the Banks (and their associates, family and/or affiliates) are also depositors of the Banks. Such deposits are similarly made at the Banks’ normal terms as to interest rate, term and deposit insurance.

The Banks purchase certain data processing and management services from Capitol. Amounts paid for such services aggregated $329,000 in 2005 (none in 2004 and 2003).

NOTE E—PREMISES AND EQUIPMENT

Major classes of premises and equipment consisted of the following at December 31:

	2005			2004
Leasehold improvements	$	501,100
Equipment, furniture and software		637,550		$	4,133
		1,138,650			4,133
Less accumulated depreciation		(124,742	)		(918	)
	$	1,013,908		$	3,215

The Banks rent office space under operating leases. Rent expense under these lease agreements approximated $136,000 and $16,000 in 2005 and 2004, respectively (none in 2003).

At December 31, 2005 future minimum rental payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year were as follows:

2006	$	194,000
2007		207,000
2008		212,000
2009		217,000
2010		185,000
2011 and thereafter		56,000
Total	$	1,071,000

B - 23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE F—DEPOSITS

The aggregate amount of time deposits of $100,000 or more approximated $18 million as of December 31, 2005.

At December 31, 2005, the scheduled maturities of time deposits were as follows:

2006	$	13,956,000
2007		4,807,000
2008		6,000
2010		182,000
Total	$	18,951,000

Interest paid approximates amounts charged to operations on an accrual basis for the periods presented.

NOTE G—STOCKHOLDERS’ EQUITY

The Corporation’s common stock consists of two classes outstanding at December 31, 2005 and 2004:

Class A	1,000
Class B	10,900
Total shares issued and outstanding	11,900

All of the outstanding Class A shares are voting and are owned by Capitol. All of the Class B shares are owned by accredited investors and are nonvoting, except in certain limited circumstances.

Each share of Class B common stock is convertible, on or after December 31, 2007, into Class A common stock of the Corporation on a share-for-share basis.

In conjunction with Capitol’s purchase of the Corporation’s Class A common stock, warrants were issued to Capitol in a number sufficient to ensure it will retain at least 51% voting control of the Corporation in the event the Corporation’s outstanding Class B common stock is converted into Class A common stock. Each warrant permits the holder to purchase one share of Class A common stock for $2,000 per share and expires four years after issuance of the warrant.

The Corporation has entered into an antidilution agreement with Capitol which obligates Capitol to maintain 51% voting control of the Corporation.

B - 24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE H—EMPLOYEE RETIREMENT PLAN

Eligible employees of bank subsidiaries participate in a multi-employer employee 401(k) retirement plan. The Plan provides for employer contributions in amounts determined annually by the Corporation’s board of directors. Eligible employees make voluntary contributions to the Plan. Contributions to the Plan charged to expense approximated $3,000 in 2005 (none in 2004 and 2003).

NOTE I—FEDERAL INCOME TAXES

Federal income taxes (benefit) consisted of the following components:

		2005			2004			2003
Current (credit) expense	$	(6,000	)	$	4,000		$	2,000
Deferred credit		(1,370,000	)		(542,000	)		-0-
	$	(1,376,000	)	$	(538,000	)	$	2,000

Net deferred income tax assets consisted of the following at December 31:

		2005		2004
Allowance for loan losses	$	151,100
Net operating loss carryforwards of parent and subsidiaries		1,551,000	$	516,000
Organizational costs		201,000		14,000
Other, net		9,000		12,000
	$	1,912,000	$	542,000

The Corporation and the Banks have net operating loss carryforwards, which may reduce income taxes payable in future periods. Such carryforwards approximate $4,562,000 at December 31, 2005 ($1,518,000 which expires in 2024 and $3,044,000 which expires in 2025). No federal income taxes were paid during 2005. Taxes of $6,500 were paid in 2004 (none in 2003) and, as a result of a loss carryback, were refunded in 2005. Management believes that, based on its estimate of future taxable income, it is more likely than not the Corporation will generate sufficient taxable income to fully utilize the net operating loss carryforward.

B - 25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE J—ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying values and estimated fair values of financial instruments were as follows at December 31 (in thousands):

	2005						2004
		Carrying Value			Estimated Fair Value			Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	14,543		$	14,543		$	10,327	$	10,327
Portfolio loans:
Commercial		28,876			29,006
Real estate mortgage		659			659
Installment		61			61
Total portfolio loans		29,596			29,726
Less allowance for loan losses		(444	)		(444	)
Net portfolio loans		29,152			29,282
Financial Liabilities:
Deposits:
Noninterest-bearing		1,888			1,888
Interest-bearing:
Demand accounts		9,225			9,225
Time certificates of deposit less than $100,000		870			871
Time certificates of deposit $100,000 or more		18,081			18,100
Total interest-bearing deposits		28,176			28,196
Total deposits		30,064			30,084

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.

B - 26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE K—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 Banks to make payments on behalf of customers if certain specified future events occur and are used infrequently by the Banks ($35,000 outstanding at December 31, 2005). Other loan commitments outstanding consist of unused lines of credit and approved, but unfunded, specific loan commitments ($2.8 million at December 31, 2005). These loan commitments (stand-by letters of credit and unfunded loans) generally expire within one year and are reviewed periodically for continuance or renewal.

All loan commitments have credit risk essentially the same as that involved in routinely making loans to customers and are made subject to the Banks’ normal credit policies. In making these loan commitments, collateral and/or personal guarantees of the borrowers are generally obtained based on management’s credit assessment.

The Banks are required to maintain an average reserve balance in the form of cash on hand and balances due from the Federal Reserve Bank and certain correspondent banks. The amount of reserve balances required as of December 31, 2005 was $25,000.

Deposits at the Banks are insured up to the maximum amount covered by FDIC insurance.

NOTE L—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 the Corporation (and other bank shareholders, as applicable) without prior approval from regulatory authorities. Substantially all of the remaining net assets of the subsidiary are restricted as to payments to the Corporation.

The Banks and the Corporation 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 the Corporation’s consolidated financial statements.

B - 27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE L—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL REQUIREMENTS—Continued

Under the regulatory capital adequacy guidelines and related framework for prompt corrective action, the specific capital requirements involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by regulatory agencies with regard to components, risk weighting and other factors.

As a condition of their charter approval, de novo banks are generally required to maintain a core capital (Tier 1) to average total 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, 2005, 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, 2005, that the Corporation and the Banks meet all capital adequacy requirements to which the entities are subject.

The following table summarizes the amounts (in thousands) and related ratios of the Banks and consolidated regulatory capital position as of December 31, 2005 and 2004:

	2005										2004
		Bank of Michigan			Bank of Belleville			Consolidated			Consolidated
Tier 1 capital to average total assets:
Minimum required amount	$	³1,830		$	³ 556		$	³3,044		$	³891
Actual amount	$	6,462		$	7,890		$	16,267		$	10,873
Ratio		28.25	%		113.56	%		42.76	%		97.63	%
Tier 1 capital to risk-weighted assets:
Minimum required amount(1)	$	³1,195		$	³ 190		$	³1,430		$	³104
Actual amount	$	6,462		$	7,890		$	16,267		$	10,873
Ratio		21.63	%		166.19	%		45.49	%		416.37	%
Combined Tier 1 and Tier 2 capital to
risk-weighted assets:
Minimum required amount(2)	$	³2,390		$	³ 380		$	³2,860		$	³209
Amount required to meet “Well-
Capitalized” category(3)	$	³2,988		$	³ 475		$	³3,576		$	³261
Actual amount	$	6,836		$	7,913		$	16,711		$	10,873
Ratio		22.88	%		166.68	%		46.74	%		416.37	%

(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.

B - 28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE M—PARENT COMPANY FINANCIAL INFORMATION

Condensed Balance Sheets

	December 31
		2005		2004
ASSETS
Money market funds on deposit with affiliated banks	$	15,638	$	10,326,831
Investments in subsidiaries		7,695,368
Software		1,837		3,215
Other assets		1,186,078		542,500
TOTAL ASSETS	$	8,898,921	$	10,872,546
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable, accrued expenses and other liabilities	$	13,750
Stockholders’ equity		8,885,171	$	10,872,546
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY	$	8,898,921	$	10,872,546

Condensed Statements of Operations

	Year Ended December 31							Period Ended December 31,
		2005			2004			2003
Interest income	$	80,616		$	114,274		$	7,766
Expenses:
Salaries and employee benefits		1,237,846			1,200,857
Occupancy		3,160			16,000
Equipment rent and depreciation		20,229			1,550
Other		731,084			464,459			2,628
Total expenses		1,992,319			1,682,866			2,628
Income (loss) before equity in net losses of consolidated subsidiaries and federal income taxes (credit)		(1,911,703	)		(1,568,592	)		5,138
Equity in undistributed net losses of consolidated subsidiaries		725,672
Income (loss) before federal income taxes (credit)		(2,637,375	)		(1,568,592	)		5,138
Federal income taxes (credit)		(650,000	)		(538,000	)		2,000
NET INCOME (LOSS)	$	(1,987,375	)	$	(1,030,592	)	$	3,138

B - 29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitol Development Bancorp Limited I

NOTE M—PARENT COMPANY FINANCIAL INFORMATION—Continued

Condensed Statements of Cash Flows

	Year Ended December 31							Period Ended December 31,
		2005			2004			2003
OPERATING ACTIVITIES
Net income (loss) for the period	$	(1,987,375	)	$	(1,030,592	)	$	3,138
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Equity in undistributed net losses of subsidiaries		725,672
Depreciation expense		1,378			918
Increase in other assets		(643,578	)		(542,500	)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		13,750			(2,000	)		2,000
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES		(1,890,153	)		(1,574,174	)		5,138
INVESTING ACTIVITIES
Net cash investments in subsidiaries		(8,421,040	)
Purchase of software					(4,133	)
NET CASH USED BY INVESTING ACTIVITIES		(8,421,040	)		(4,133	)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock								11,900,000
NET CASH PROVIDED BY FINANCING ACTIVITIES								11,900,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(10,311,193	)		(1,578,307	)		11,905,138
Cash and cash equivalents at beginning of period		10,326,831			11,905,138			-0-
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	15,638		$	10,326,831		$	11,905,138

B - 30

PART II

Item 20. Indemnification of Directors and Officers.

Sections 561 - 571 of the Michigan Business Corporation Act ("MBCA"), grant the Registrant broad powers to indemnify any person in connection with legal proceedings brought against him by reason of his present or past status as an officer or director of the Registrant, provided that the person acted in good faith and in a manner he reasonably believed to be in (when acting in an official capacity) or not opposed to (when acting in all other circumstances) the best interests of the Registrant, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The MBCA also gives the Registrant powers to indemnify any such person against reasonable expenses in connection with any action by or in the right of the Registrant, provided the person acted in good faith and in a manner he reasonably believed to be in (when acting in an official capacity) or not opposed to (when acting in all other circumstances) the best interests of the Registrant, except that no indemnification may be made if such person is adjudged to be liable to the Registrant, or in connection with any proceeding charging improper personal benefit to the director whether or not involving action in the director's official capacity, in which the director was held liable on the basis that the personal benefit was improperly received by the director. In addition, to the extent that any such person is successful in the defense of any such legal proceeding, the Registrant is required by the MBCA to indemnify him against expenses, including attorneys' fees that are actually and reasonably incurred by him in connection therewith.

The Registrant's Articles of Incorporation contain provisions entitling directors and executive officers of the Registrant to indemnification against certain liabilities and expenses to the full extent permitted by Michigan law.

Under an insurance policy maintained by the Registrant, the directors and officers of the Registrant are insured within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of certain claims, actions, suits or proceedings, and certain liabilities which might be imposed as a result of such claims, actions, suits or proceedings, which may be brought against them by reason of being or having been such directors and officers.

Item 21. Exhibits And Financial Statement Schedules.

(a)Exhibits.

Reference is made to the Exhibit Index at Page II-7 of the Registration Statement.

(b) All Financial Statements Schedules are omitted from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005 because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto that are incorporated herein by reference.

Item 22. Undertakings.

(A)The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Securities Act");

(ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act, if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this Registration Statement; provided, however, that the undertakings set forth in paragraphs (1)(i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in this registration statement.

(2) That, for the purpose of determining any liability under the Securities Act each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(B) The undersigned Registrant hereby undertakes, that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(C) The undersigned Registrant hereby undertakes:

(1) That, prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

(2) That every prospectus (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(D) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(E) The undersigned Registrant hereby undertakes:

(1) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, 13 of this Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request.

(2) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Lansing, Michigan on September 15, 2006.

CAPITOL BANCORP LIMITED

By: /s/ JOSEPH D. REID

JOSEPH D. REID

Chairman of the Board and

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Joseph D. Reid, Cristin Reid English, and Lee W. Hendrickson and each of them (with full power to each of them to act alone), his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, including any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on September 15, 2006.

Signature	Capacity
/s/ JOSEPH D. REID Joseph D. Reid	Chairman of the Board and Chief Executive Officer, Director (Principal Executive Officer)
/s/ LEE W. HENDRICKSON Lee W. Hendrickson	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Robert C. Carr	Vice-Chairman, Director
/s/ DAVID O’LEARY David O’Leary	Secretary, Director
/s/ LOUIS G. ALLEN Louis G. Allen	Director
/s/ PAUL R. BALLARD Paul R. Ballard	Director
/s/ DAVID L. BECKER David L. Becker	Director
/s/ DOUGLAS E. CRIST Douglas E. Crist	Director
/s/ MICHAEL J. DEVINE Michael J. DeVine	Director
/s/ JAMES C. EPOLITO James C. Epolito	Director
/s/ GARY A. FALKENBERG Gary A. Falkenberg	Director
/s/ JOEL I. FERGUSON Joel I. Ferguson	Director
/s/ KATHLEEN A. GASKIN Kathleen A. Gaskin	Director
/s/ H. NICHOLAS GENOVA H. Nicholas Genova	Director

/s/ MICHAEL F. HANNLEY Michael F. Hannley	Director
/s/ RICHARD A. HENDERSON Richard A. Henderson	Director
/s/ L. DOUGLAS JOHNS L. Douglas Johns	Director
/s/ MICHAEL L. KASTEN Michael L. Kasten	Vice Chairman, Director
/s/ JOHN S. LEWIS John S. Lewis	President, Western Regions, Director
/s/ LEONARD MAAS Leonard Maas	Vice Chairman, Director
/s/ LYLE W. MILLER Lyle W. Miller	Director
/s/ MYRL D. NOFZIGER Myrl D. Nofziger	Director
/s/ CRISTIN REID ENGLISH Cristin Reid English	Director
/s/ RON K. SABLE Ron K. Sable	Director

EXHIBIT INDEX

Exhibit No.	Description
2.1	Plan of Share Exchange (included in the Proxy Statement/Prospectus as Annex A).
5	Opinion of Brian K. English, General Counsel, as to the validity of the shares.
8	Tax Opinion of Miller, Canfield, Paddock and Stone, PLC
23.1a	Consent of BDO Seidman, LLP.
23.1b	Consent of BDO Seidman, LLP.
23.2	Consent of Miller, Canfield, Paddock and Stone, PLC (included in Exhibit 8).
24	Power of Attorney (included on the signature page of the Registration Statement).
99	Form of proxy for the Special Meeting of Shareholders of Capitol Development Bancorp Limited I.