CAPITOL BANCORP ANNOUNCES RECORD FULL YEAR EARNINGS, UP 18%
YEAR-END HIGHLIGHTS:
| · | Earnings exceed $42 million, increase 18% over 2005 |
| · | Diluted earnings per share climb 10% to record $2.57 |
| · | Nine new community banks added to national network |
| · | Wealth management subsidiary launched |
4th QUARTER HIGHLIGHTS:
| · | Net income exceeds $11 million, a 14% increase versus last year |
| · | Diluted earnings per share climb to a record $0.68 |
| · | Assets exceed $4 billion for first time |
| · | Loans and deposits post annualized linked-quarter double-digit percentage increases |
LANSING, Mich., and PHOENIX: Jan. 26, 2007: Today, Capitol Bancorp (NYSE:CBC) reported record year-end earnings for 2006 approximating $42.4 million, an 18 percent increase over 2005’s earnings which approximated $36 million. Basic and diluted earnings per share (EPS) for 2006, also records for Capitol Bancorp, were $2.69 and $2.57, respectively, even while the Corporation experienced a nearly 900,000 share increase, or approximately 6 percent expansion, in the outstanding share count to approximately 16.7 million shares at year-end 2006. For the fourth quarter 2006, Capitol Bancorp reported record earnings approximating $11.4 million, a 14 percent increase over the $10 million in earnings recorded in the preceding year. Record basic and diluted EPS for 2006’s closing quarter of $0.71 and $0.68, respectively, represent an 8 percent and 6 percent increase as compared to 2005’s fourth quarter amounts of $0.66 and $0.64.
Capitol’s balance sheet achieved double-digit growth during 2006 and a significant milestone in total assets at year-end. Total assets exceeded $4 billion at December 31, 2006, reflecting a 17 percent increase ($600 million) from the beginning of the year. Total deposits, approaching $3.3 billion, and total portfolio loans of nearly $3.5 billion, also reflect a 17 percent increase versus
totals posted at year-end 2005. Linked quarter annualized growth in assets (22 percent), portfolio loans (22 percent) and deposits (19 percent), demonstrate the continued momentum of Capitol’s development initiatives across the country.
Capitol Bancorp’s Chairman and CEO, Joseph D. Reid, said the yearly and quarterly financial performance reinforces the Corporation’s efforts to grow its national footprint while validating the benefits of a geographically diverse platform during these challenging economic times in the Great Lakes region.
“We continue to capitalize on opportunities to attract talented bankers in diverse communities to Capitol Bancorp. During the past two years, these efforts have resulted in 18 new banks joining our national network, primarily in the vibrant West, Southwest and Southeast regions. We believe we are well-positioned to continue with a high level of organic growth in 2007,” said Reid.
He added that Capitol’s disciplined growth and management oversight were the major contributors to the Corporation’s earnings for 2006. “Solid revenue growth, reflecting both franchise expansion and balance sheet management during a protracted period of industry-wide margin pressure, continue to position our Corporation to deliver on our objective of balancing compelling shareholder returns with value-added growth,” said Reid.
Quarterly Earnings Performance
Consolidated earnings approximating $11.4 million were up 14 percent compared to $10 million generated in the fourth quarter of 2005. Record net operating revenues in excess of $50 million for the fourth quarter represent an increase of 5 percent versus 2005’s comparable period figure of $47.5 million. Basic and diluted EPS of $0.71 and $0.68, both quarterly records for the Corporation, increased 8 percent and 6 percent respectively versus $0.66 and $0.64 reported a year ago, even with increasing operating costs (+11 percent) tied to both the Corporation’s expansion and margin compression attributable to the current challenging interest rate environment. Quarterly earnings were favorably impacted by year-end adjustments, primarily driven by loan fees, approximating $1.3 million.
Operating Results for 2006
Record net operating revenues exceeded $195 million for 2006, which represents an approximate 10 percent increase over 2005’s net operating revenues of approximately $178 million. Earnings exceeded $42 million for 2006 reflecting an increase of nearly 18 percent when compared to the $36 million of earnings generated in 2005. The Corporation reported basic EPS of $2.69 and diluted EPS of $2.57 for the year, both records, representing 11 percent and 10 percent increases, respectively, over 2005’s levels of $2.42 and $2.34. The Corporation’s strong bottom line was generated in light of Capitol’s historical track record of producing negative operating leverage during periods of active de novo bank development. In 2006, operating expenses increased 17 percent versus last year’s comparable period, offset in part by the existing and emerging core earnings performance tied to the Corporation’s expansion.
Balance Sheet
Capitol's equity-to-assets ratio was 8.9 percent at the end of 2006, compared to 8.7 percent at year-end 2005. The total capital-to-assets ratio was 14.5 percent, up from 14 percent a year ago. With total capital funds approaching $600 million on the Corporation's $4.1 billion consolidated balance sheet, adequate resources are in place to support the planned expansion of Capitol Bancorp’s national franchise.
Capitol attributed an increase in nonperforming loans to 0.98 percent from 0.90 percent for the previous quarter, and nonperforming assets to 1.08 percent from 0.99 percent for the previous quarter, to the ongoing weakness in the Michigan economy.
“Capitol’s banks continue to maintain an adequate consolidated allowance for loan losses,” said Reid. “A detailed analysis of the allowance for loan losses conducted on a bank-by-bank basis has resulted in higher loss reserves among our Michigan banks. Capitol’s operations in its other 13 states currently reflect strong asset quality. Due to the composition of our loan portfolio and our operating history, higher provisions are not necessarily indicative of higher losses.”
He noted that consistently strong earnings and steady EPS growth, coupled with ongoing efficient de novo development during 2006, have the Corporation well-positioned for expansion opportunities in 2007.
About Capitol Bancorp Limited
Capitol Bancorp Limited (NYSE: CBC) is a $4.1 billion national community bank development company, with a network of 50 separately chartered banks and bank operations in 14 states. It is the holder of the most individual bank charters in the country. Capitol Bancorp Limited identifies opportunities for the development of new community banks, raises capital for and mentors new community banks through their formative stages, and provides efficient services to its growing network of community banks. Each community bank has full local decision-making authority and is managed by an on-site president under the direction of a local board of directors, composed of business leaders from the bank’s community. Founded in 1988, Capitol Bancorp Limited has executive offices in Lansing, Michigan, and Phoenix, Arizona.
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