Capitol Bancorp S4/A Registration of securities issued in business combination transactions (amended)

Audited financial statements of CDBL III as of December 31, 2008 and 2007 and each of the three years in the period ended December 31, 2008 are included in this proxy statement/prospectus as part of Appendix A-1. Unaudited interim financial statements of CDBL III as of June 30, 2009 and for the six months ended June, 2009 and 2008 are included in this prospectus as part of Appendix A-1.

Executive Officers and Directors of CDBL III

The directors of CDBL III are as follows:

Director Name	Age	Director Since	Present Principal Occupation, Business Experience, and Certain Other Information
Bruce Ash	57	2009	Mr. Ash is the President & CEO of Paul Ash Management Company, LLC. He also serves as a member of the Board of Directors of Bank of Tucson, an affiliate of Capitol.
James H. Hile	65	2009	Mr. Hile is the current owner of JHile Group, which offers consulting in the areas of management, quality systems, sales and marketing. He previously served as General Manager of IBM for 24 years, and as President, CEO and majority shareholder for Fakespace Corp. for 5 years. He was also a Captain and Vietnam Company Commander in the U.S. Army.
L. Douglas Johns	65	2005	Mr. Johns is the President of Mid-Michigan Investment Company. He is a member of the Board of Directors of Capitol Bancorp Ltd. and formerly served as a member of the Board of Directors of Capitol’s affiliate, Nevada Community Bancorp Limited, which was merged with and into Capitol. Mr. Johns serves as Secretary of Capitol Development Bancorp Limited III, IV, V, VI, VII and VIII.
Mark Kerrins	57	2009	Mr. Kerrins has been employed by the Michigan Chamber of Commerce for 35 years. He currently serves as Senior Manager of Membership Development. He also has 30 years of real estate investment experience in residential, commercial and industrial development and rental.
David McSherry	71	2009	Mr. McSherry currently serves as General Partner of Northwind Investment Company. He is the past President of MPI School & Instructional Supply. Mr. McSherry is a member of the Board of Directors of McLaren Health Care System and the Ingham Regional Medical Center, and formerly served on the Board of Directors of First California Bancorp, which was merged with and into Capitol.
Cristin K. Reid	40	2005	Ms. Reid is the Corporate President of Capitol and currently serves as Chairman and Chief Executive Officer of CDBL III, IV, V, VI, VII and VIII. She was previously Chief Operating Officer, Chief Administrative Officer, Executive Vice President, General Counsel and has served in other various executive capacities at Capitol since 1997. Ms. Reid was appointed to Capitol’s Board of Directors in 2001. She formerly served on the Board of Capitol’s affiliates Nevada Community Bancorp Limited, which was merged with and into Capitol, Camelback Community Bank, Portage Commerce Bank and Ann Arbor Commerce Bank. She is currently the Chairman of Capitol’s affiliate, Capitol National Bank.

Securities Ownership of Certain Beneficial Owners and Management of CDBL III

As of June 30, 2009, CDBL III had 15,745 shares of common stock outstanding, which were held by 100 holders of record. Individual members of CDBL III’s Board of Directors (with the exception of Bruce Ash) have indicated to Capitol that they intend to tender their CDBL shares pursuant to the Exchange Offer.

Except as otherwise set forth below, the following table sets forth information as of June 30, 2009, with respect to the number of shares of common stock owned by (i) each person known by Capitol to be a beneficial owner of more than 5% of CDBL III’s common stock, (ii) each of CDBL III’s Directors, (iii) each of CDBL III’s executive officers and (iv) all of CDBL III’s Directors and executive officers as a group.

	Amount and Nature of Beneficial Owner of CDBL III Common Stock (1) (2)

Name and Address of Beneficial Owner	Sole Voting or Dispositive Power(4)	Shared Voting or Dispositive Power (3)	Total Beneficial Ownership (4)	Percent of Total
Capitol Bancorp Ltd. Capitol Bancorp Center 200 Washington Square North, 4th Floor Lansing, Michigan 48933	1,000	0	1,000	6.35%
DeVisser Properties 151 Central Ave, Ste 220 Holland, MI 49423	1,000	0	1,000	6.35%
R & M Hamrick Family Trust 1500 Castlewall St. Las Vegas, NV 89117	800	0	800	5.08%
Michael R. Hourani 3120 N. Cambridge Lansing, MI 48911	1,000	0	1,000	6.35%

CDBL III’s Directors and Executive Officers:
Bruce Ash	100	0	100	0.64%
James H. Hile	0	0	0	--
L. Douglas Johns	0	0	0	--
Mark Kerrins	0	100	100	0.64%
David McSherry	0	100	100	0.64%
Cristin K. Reid	0	65	65	0.41%

Total of CDBL III shares held by Directors and Executive Officers	100	265	365	2.32%

(1)	The information shown in this table is based upon information known by Capitol or otherwise furnished to Capitol by the individuals named in the table as of June 30, 2009.

(2)	The number of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that under applicable regulations are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in fiduciary capacities by CDBL III are not included unless otherwise indicated. CDBL III and the directors and officers of CDBL III disclaim beneficial ownership of shares held by CDBL III in fiduciary capacities.

(3)

These numbers include shares as to which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust or other contract or property right, and shares held by spouses and minor children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by CDBL III are not included unless otherwise indicated. The directors and executive officers of CDBL III, by reason of their positions, may be in a position to influence the voting or disposition of shares held in trust by CDBL III to some degree, but disclaim beneficial ownership of these shares.

Directors and officers of CDBL III and their associates were customers of, and had transactions with, CDBL III’s bank subsidiaries and or affiliates in the ordinary course of business since CDBL III’s inception. All loans and commitments included in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.

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INFORMATION ABOUT CDBL IV

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Audited financial statements of CDBL IV as of December 31, 2008 and 2007 are included in this prospectus as part of Appendix A-2. Unaudited interim financial statements of CDBL IV as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 are included in this prospectus as part of Appendix A-2.

Executive Officers and Directors of CDBL IV

The directors of CDBL IV are as follows:

Director Name	Age	Director Since	Present Principal Occupation, Business Experience, and Certain Other Information
Bruce Ash	57	2009	Mr. Ash is the President & CEO of Paul Ash Management Company, LLC. He also serves as a member of the Board of Directors of Bank of Tucson, an affiliate of Capitol.
James H. Hile	65	2009	Mr. Hile is the current owner of JHile Group, which offers consulting in the areas of management, quality systems, sales and marketing. He previously served as General Manager of IBM for 24 years, and as President, CEO and majority shareholder for Fakespace Corp. for 5 years. He was also a Captain and Vietnam Company Commander in the U.S. Army.
L. Douglas Johns	65	2005	Mr. Johns is the President of Mid-Michigan Investment Company. He is a member of the Board of Directors of Capitol Bancorp Ltd. and formerly served as a member of the Board of Directors of Capitol’s affiliate, Nevada Community Bancorp Limited, which was merged with and into Capitol. Mr. Johns serves as Secretary of Capitol Development Bancorp Limited III, IV, V, VI, VII and VIII.
Mark Kerrins	57	2009	Mr. Kerrins has been employed by the Michigan Chamber of Commerce for 35 years. He currently serves as Senior Manager of Membership Development. He also has 30 years of real estate investment experience in residential, commercial and industrial development and rental.
David McSherry	71	2009	Mr. McSherry currently serves as General Partner of Northwind Investment Company. He is the past President of MPI School & Instructional Supply. Mr. McSherry is a member of the Board of Directors of McLaren Health Care System and the Ingham Regional Medical Center, and formerly served on the Board of Directors of First California Bancorp, which was merged with and into Capitol.
Cristin K. Reid	40	2005	Ms. Reid is the Corporate President of Capitol and currently serves as Chairman and Chief Executive Officer of CDBL III, IV, V, VI, VII and VIII. She was previously Chief Operating Officer, Chief Administrative Officer, Executive Vice President, General Counsel and has served in other various executive capacities at Capitol since 1997. Ms. Reid was appointed to Capitol’s Board of Directors in 2001. She formerly served on the Board of Capitol’s affiliates Nevada Community Bancorp Limited, which was merged with and into Capitol, Camelback Community Bank, Portage Commerce Bank and Ann Arbor Commerce Bank. She is currently the Chairman of Capitol’s affiliate, Capitol National Bank.

Securities Ownership of Certain Beneficial Owners and Management of CDBL IV

As of June 30, 2009, CDBL IV had 15,243 shares of common stock outstanding, which were held by 92 holders of record. Individual members of CDBL IV’s Board of Directors (with the exception of Bruce Ash) have indicated to Capitol that they intend to tender their CDBL shares pursuant to the Exchange Offer.

Except as otherwise set forth below, the following table sets forth information as of June 30, 2009, with respect to the number of shares of common stock owned by (i) each person known by Capitol to be a beneficial owner of more than 5% of CDBL IV’s common stock, (ii) each of CDBL IV’s Directors, (iii) each of CDBL IV’s executive officers and (iv) all of CDBL IV’s Directors and executive officers as a group.

	Amount and Nature of Beneficial Owner of CDBL IV Common Stock (1) (2)

Name and Address of Beneficial Owner	Sole Voting or Dispositive Power(4)	Shared Voting or Dispositive Power (3)	Total Beneficial Ownership (4)	Percent of Total
Capitol Bancorp Ltd. Capitol Bancorp Center 200 Washington Square North, 4th Floor Lansing, Michigan 48933	1,000	--	1,000	6.56%
Sam X. Eyde and Judith A. Eyde JT TEN 2800 Bryon Circle Lansing, MI 48912	1,000	0	1,000	6.56%
HSL RE Holdings, LLC 3901 E. Broadway Blvd. Tucson, AZ 85711	1,000	0	1,000	6.56%
B.G. Wetherington Farms L.P. P.O. Box 456 Hahira, GA 31632	900	0	900	5.90%

CDBL IV’s Directors and Executive Officers:
Bruce Ash	125	100	225	1.48%
James H. Hile	0	0	0	--
L. Douglas Johns	0	30	30	0.20%
Mark Kerrins	0	200	200	1.31%
David McSherry	0	0	0	--
Cristin K. Reid	0	0	0	--

Total of CDBL IV shares held by Directors and Executive Officers	125	330	455	2.98%

(1)	The information shown in this table is based upon information known by Capitol or otherwise furnished to Capitol by the individuals named in the table as of June 30, 2009.

(2)	The number of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that under applicable regulations are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in fiduciary capacities by CDBL IV are not included unless otherwise indicated. CDBL IV and the directors and officers of CDBL IV disclaim beneficial ownership of shares held by CDBL IV in fiduciary capacities.

(3)

These numbers include shares as to which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust or other contract or property right, and shares held by spouses and minor children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by CDBL IV are not included unless otherwise indicated. The directors and executive officers of CDBL IV, by reason of their positions, may be in a position to influence the voting or disposition of shares held in trust by CDBL IV to some degree, but disclaim beneficial ownership of these shares.

Directors and officers of CDBL IV and their associates were customers of, and had transactions with, CDBL IV’S bank subsidiaries and or affiliates in the ordinary course of business since CDBL IV’s inception. All loans and commitments included in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.

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INFORMATION ABOUT CDBL V

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, 2009 and 2008 and December 31, 2008, 2007 and 2006 are included in this prospectus as part of Appendix A-3.

Audited financial statements of CDBL V as of December 31, 2008 and 2007 are included in this prospectus as part of Appendix A-3. Unaudited interim financial statements of CDBL V as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 are included in this prospectus as part of Appendix A-3.

Executive Officers and Directors of CDBL V

The directors of CDBL V are as follows:

Director Name	Age	Director Since	Present Principal Occupation, Business Experience, and Certain Other Information
Bruce Ash	57	2009	Mr. Ash is the President & CEO of Paul Ash Management Company, LLC. He also serves as a member of the Board of Directors of Bank of Tucson, an affiliate of Capitol.
James H. Hile	65	2009	Mr. Hile is the current owner of JHile Group, which offers consulting in the areas of management, quality systems, sales and marketing. He previously served as General Manager of IBM for 24 years, and as President, CEO and majority shareholder for Fakespace Corp. for 5 years. He was also a Captain and Vietnam Company Commander in the U.S. Army.
L. Douglas Johns	65	2006	Mr. Johns is the President of Mid-Michigan Investment Company. He is a member of the Board of Directors of Capitol Bancorp Ltd. and formerly served as a member of the Board of Directors of Capitol’s affiliate, Nevada Community Bancorp Limited, which was merged with and into Capitol. Mr. Johns serves as Secretary of Capitol Development Bancorp Limited III, IV, V, VI, VII and VIII.
Mark Kerrins	57	2009	Mr. Kerrins has been employed by the Michigan Chamber of Commerce for 35 years. He currently serves as Senior Manager of Membership Development. He also has 30 years of real estate investment experience in residential, commercial and industrial development and rental.
David McSherry	71	2009	Mr. McSherry currently serves as General Partner of Northwind Investment Company. He is the past President of MPI School & Instructional Supply. Mr. McSherry is a member of the Board of Directors of McLaren Health Care System and the Ingham Regional Medical Center, and formerly served on the Board of Directors of First California Bancorp, which was merged with and into Capitol.
Cristin K. Reid	40	2006	Ms. Reid is the Corporate President of Capitol and currently serves as Chairman and Chief Executive Officer of CDBL III, IV, V, VI, VII and VIII. She was previously Chief Operating Officer, Chief Administrative Officer, Executive Vice President, General Counsel and has served in other various executive capacities at Capitol since 1997. Ms. Reid was appointed to Capitol’s Board of Directors in 2001. She formerly served on the Board of Capitol’s affiliates Nevada Community Bancorp Limited, which was merged with and into Capitol, Camelback Community Bank, Portage Commerce Bank and Ann Arbor Commerce Bank. She is currently the Chairman of Capitol’s affiliate, Capitol National Bank.

Securities Ownership of Certain Beneficial Owners and Management of CDBL V

As of June 30, 2009, CDBL V had 15,518 shares of common stock outstanding, which were held by 116 holders of record. Individual members of CDBL V’s Board of Directors (with the exception of Bruce Ash) have indicated to Capitol that they intend to tender their CDBL shares pursuant to the Exchange Offer.

Except as otherwise set forth below, the following table sets forth information as of June 30, 2009, with respect to the number of shares of common stock owned by (i) each person known by Capitol to be a beneficial owner of more than 5% of CDBL V’s common stock, (ii) each of CDBL V’s Directors, (iii) each of CDBL V’s executive officers and (iv) all of CDBL V’s Directors and executive officers as a group.

	Amount and Nature of Beneficial Owner of CDBL V common Stock (1) (2)

Name and Address of Beneficial Owner	Sole Voting or Dispositive Power(4)	Shared Voting or Dispositive Power (3)	Total Beneficial Ownership (4)	Percent of Total
Capitol Bancorp Ltd. Capitol Bancorp Center 200 Washington Square North, 4th Floor Lansing, Michigan 48933	1,000	--	1,000	6.44%
DeVisser Properties, LLC 151 Central Ave., Ste 220 Holland, MI 49423	1,000	0	1,000	6.44%
HSL RE Holdings, LLC 3901 E. Broadway Tucson, AZ 85716	1,500	0	1,500	9.67%

CDBL V’s Directors and Executive Officers:
Bruce Ash	100	250	350	2.26%
James H. Hile	720	0	720	4.64%
L. Douglas Johns	0	0	0	--
Mark Kerrins	0	0	0	--
David McSherry	0	0	0	--
Cristin K. Reid	0	35	35	0.23%

Total of CDBL V shares held by Directors and Executive Officers	820	285	1,105	7.12%

(1)	The information shown in this table is based upon information known by Capitol or otherwise furnished to Capitol by the individuals named in the table as of June 30, 2009.

(2)	The number of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that under applicable regulations are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in fiduciary capacities by CDBL V are not included unless otherwise indicated. CDBL V and the directors and officers of CDBL V disclaim beneficial ownership of shares held by CDBL V in fiduciary capacities.

(3)	These numbers include shares as to which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust or other contract or property right, and shares held by spouses and minor children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by CDBL V are not included unless otherwise indicated. The directors and executive officers of CDBL V, by reason of their positions, may be in a position to influence the voting or disposition of shares held in trust by CDBL V to some degree, but disclaim beneficial ownership of these shares.

Directors and officers of CDBL V and their associates were customers of, and had transactions with, CDBL V’s bank subsidiaries and or affiliates in the ordinary course of business since CDBL V’s inception. All loans and commitments included in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.

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INFORMATION ABOUT CDBL VI

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Audited financial statements of CDBL VI as of December 31, 2008 and 2007 are included in this prospectus as part of Appendix A-4. Unaudited interim financial statements of CDBL VI as of June 30, 2009 and for the six months ended June, 2009 and 2008 are included in this prospectus as part of Appendix A-4.

Executive Officers and Directors of CDBL VI

The directors of CDBL VI are as follows:

Director Name	Age	Director Since	Present Principal Occupation, Business Experience, and Certain Other Information
Bruce Ash	57	2009	Mr. Ash is the President & CEO of Paul Ash Management Company, LLC. He also serves as a member of the Board of Directors of Bank of Tucson, an affiliate of Capitol.
James H. Hile	65	2009	Mr. Hile is the current owner of JHile Group, which offers consulting in the areas of management, quality systems, sales and marketing. He previously served as General Manager of IBM for 24 years, and as President, CEO and majority shareholder for Fakespace Corp. for 5 years. He was also a Captain and Vietnam Company Commander in the U.S. Army.
L. Douglas Johns	65	2006	Mr. Johns is the President of Mid-Michigan Investment Company. He is a member of the Board of Directors of Capitol Bancorp Ltd. and formerly served as a member of the Board of Directors of Capitol’s affiliate, Nevada Community Bancorp Limited, which was merged with and into Capitol. Mr. Johns serves as Secretary of Capitol Development Bancorp Limited III, IV, V, VI, VII and VIII.
Mark Kerrins	57	2009	Mr. Kerrins has been employed by the Michigan Chamber of Commerce for 35 years. He currently serves as Senior Manager of Membership Development. He also has 30 years of real estate investment experience in residential, commercial and industrial development and rental.
David McSherry	71	2009	Mr. McSherry currently serves as General Partner of Northwind Investment Company. He is the past President of MPI School & Instructional Supply. Mr. McSherry is a member of the Board of Directors of McLaren Health Care System and the Ingham Regional Medical Center, and formerly served on the Board of Directors of First California Bancorp, which was merged with and into Capitol.
Cristin K. Reid	40	2006	Ms. Reid is the Corporate President of Capitol and currently serves as Chairman and Chief Executive Officer of CDBL III, IV, V, VI, VII and VIII. She was previously Chief Operating Officer, Chief Administrative Officer, Executive Vice President, General Counsel and has served in other various executive capacities at Capitol since 1997. Ms. Reid was appointed to Capitol’s Board of Directors in 2001. She formerly served on the Board of Capitol’s affiliates Nevada Community Bancorp Limited, which was merged with and into Capitol, Camelback Community Bank, Portage Commerce Bank and Ann Arbor Commerce Bank. She is currently the Chairman of Capitol’s affiliate, Capitol National Bank.

Securities Ownership of Certain Beneficial Owners and Management of CDBL VI

As of June 30, 2009, CDBL VI had 16,825 shares of its common stock outstanding, which were held by 89 holders of record. Individual members of CDBL III’s Board of Directors (with the exception of Bruce Ash) have indicated to Capitol that they intend to tender their CDBL shares pursuant to the Exchange Offer.

Except as otherwise set forth below, the following table sets forth information as of June 30, 2009, with respect to the number of shares of common stock owned by (i) each person known by Capitol to be a beneficial owner of more than 5% of CDBL VI’s common stock, (ii) each of CDBL VI’s Directors, (iii) each of CDBL VI’s executive officers and (iv) all of CDBL VI’s Directors and executive officers as a group.

	Amount and Nature of Beneficial Owner of CDBL VI common Stock (1) (2)

Name and Address of Beneficial Owner	Sole Voting or Dispositive Power(4)	Shared Voting or Dispositive Power (3)	Total Beneficial Ownership (4)	Percent of Total
Capitol Bancorp Ltd. Capitol Bancorp Center 200 Washington Square North, 4th Floor Lansing, Michigan 48933	1,000	--	1,000	5.94%
Donnelly Penman Financial Services Fund LP 17160 Kercheval Ave. Grosse Pointe, MI 48230	1,000	0	1,000	5.94%
Joel I. Ferguson Trust Dtd 2/11/1999 1223 Turner St., Ste 300 Lansing, MI 48906	3,000	0	3,000	17.83%

CDBL VI’s Directors and Executive Officers:
Bruce Ash	150	0	150	0.89%
James H. Hile	0	0	0	--
L. Douglas Johns	0	0	0	--
Mark Kerrins	0	200	200	1.19%
David McSherry	0	0	0	--
Cristin K. Reid	0	0	0	--

Total of CDBL VI shares held by Directors and Executive Officers	150	200	350	2.08%

(1)	The information shown in this table is based upon information known by Capitol or otherwise furnished to Capitol by the individuals named in the table as of June 30, 2009.

(2)	The number of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that under applicable regulations are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in fiduciary capacities by CDBL VI are not included unless otherwise indicated. CDBL VI and the directors and officers of CDBL VI disclaim beneficial ownership of shares held by CDBL VI in fiduciary capacities.

(3)	These numbers include shares as to which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust or other contract or property right, and shares held by spouses and minor children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by CDBL VI are not included unless otherwise indicated. The directors and executive officers of CDBL VI, by reason of their positions, may be in a position to influence the voting or disposition of shares held in trust by CDBL VI to some degree, but disclaim beneficial ownership of these shares.

Directors and officers of CDBL VI and their associates were customers of, and had transactions with, CDBL VI’s bank subsidiaries and or affiliates in the ordinary course of business since CDBL VI’s inception. All loans and commitments included in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.

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COMPARISON OF SHAREHOLDER RIGHTS

Holders of shares of a CDBL’s common stock who elect to accept and participate in the Exchange Offer will become holders of shares of the Series A Preferred which are convertible into shares of Capitol’s common stock. Capitol and each of the CDBLs are organized under the laws of the State of Michigan. The following is a summary of the material differences between (a) the current rights of the CDBLs’ common shareholders under Michigan law and the applicable articles of incorporation and bylaws, each as amended to date and (b) the current rights of shares of the Series A Preferred and common stock under Michigan law and Capitol’s articles of incorporation and bylaws. The following summary is not a complete statement of the rights of shareholders of the companies or a complete description of the specific provisions referred to below. For additional information which may be relevant, see the Michigan Business Corporation Act and Capitol and the CDBLs’ constituent documents, which the CDBLs’ common shareholders should read. Copies of Capitol’s constituent documents have been filed with the SEC. Copies of the CDBLs’ constituent documents are available upon written request from the CDBLs. To find out where copies of these documents can be obtained, see “Where You Can Find More Information.”

	CDBL Common Stock	Capitol Series A Preferred Stock	Capitol Common Stock
Authorized Capital Stock	51,000 shares of Common Stock 36,000 shares of Class A Voting 15,000 shares of Class B Non-Voting (CDBL III,-V) 15,825 shares of Class B Non-Voting (CDBLVI)	700,000	50,000,000
Voting Rights	Class B Common Stock (limited voting rights) Class A Common Stock (full voting rights)	None, except as required by Michigan law	50,000,000
Preemptive Rights	None	None	None
Quorum Requirements	Majority	Majority	Majority
Annual Meetings of Shareholders	Called by Board (for purposes of the Class A Common Stock)	Called by CEO, majority of the Board or shareholders representing 25% of the shares entitled to vote	Called by the Board
Shareholder Action by Written Consent	Yes, by the holders of shares having not less than the minimum number of votes that would be necessary to authorize or take action at a shareholder meeting	No	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	Not Applicable	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	Yes
Election of the Board of Directors	Elected Annually by the holders of shares of the Class A Common Stock	Nonvoting	One class is elected annually by shareholders to serve a term of three years; the board is divided into three classes
Cumulative Voting	No	No	No
Number of Directors	1-25	5-25	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 entitled to vote	By a majority of the outstanding shares of stock entitled to vote
Vacancies on the Board of Directors	May be filled by a majority of the Board of Directors	Nonvoting	May be filled by shareholders or 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	Eliminated to the fullest extent provided by law
Indemnification of Directors, Officers, Employees or Agents	Yes	Yes	Yes
Amendments to Articles of Incorporation	By a majority of the outstanding shares of the Class A Common Stock	Nonvoting	By a majority of the outstanding shares of stock entitled to vote
Amendments to Bylaws	By a majority of the outstanding shares entitled to vote or a majority of directors	Nonvoting	By majority of the outstanding shares or a majority of directors

COMPARISON OF RIGHTS BETWEEN THE TRUST-PREFERRED

SECURITIES AND SHARES OF A CDBL’S COMMON STOCK

The following briefly summarizes the material differences between the rights of holders of a CDBL’s Class B Common Stock as currently in effect and of holders of the Trust Preferred Securities to be issued in the Exchange Offer. You are encouraged to read the applicable CDBL’s articles of incorporation and bylaws, the amended and restated trust agreement of the Trust, the Statutory Trust Act of the State of Delaware, the Trust Indenture Act, applicable Michigan and Delaware law and other documents referred to herein.

Governing Documents

Trust Preferred Securities: Holders of Trust Preferred Securities have their rights set forth in the Amended and Restated Trust Agreement, the Statutory Trust Act of the State of Delaware and the Trust Indenture Act.

Shares of a CDBL’s Class B Common Stock: Holders of shares of a CDBL’s common stock have their rights set forth in the applicable articles of incorporation (as amended), the bylaws and Michigan law.

Dividends and Distributions

Trust Preferred Securities: Holders of the Trust Preferred Securities are entitled to receive cumulative distributions at the annual rate of 10.50% of their liquidation amount payable quarterly in arrears.

The funds available to the Trust for distributions on the Trust Preferred Securities are limited to payments received from us on the underlying Debentures held by the Trust. Capitol may defer interest payments on the Debentures for up to twenty (20) consecutive quarters, provided no deferral period will extend beyond the maturity date of the underlying Debentures. If Capitol elects to defer interest payments on the Debentures, distributions on the Trust Preferred Securities will also be deferred. Interest payments on the Debentures continue to accrue during deferral periods and, as a result, deferred interest payments on the Trust Preferred Securities will accrue additional interest at 10.5%, to the extent permitted by applicable law. During a deferral period, Capitol cannot pay any dividends or make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any of its capital stock, except in some circumstances.

Shares of a CDBL’s Class B Common Stock: Holders of shares of Class B Common Stock of a CDBL are entitled to receive dividends when, as and if declared by such CDBL’s board of directors.

Ranking

Trust Preferred Securities: The Trust Preferred Securities rank senior to shares of Capitol’s common stock with respect to rights upon Capitol’s liquidation, dissolution or winding up. The liquidation amount of the Trust Preferred Securities is $10 per security, plus any accrued and unpaid distributions on such Trust Preferred Security.

Shares of a CDBL’s Class B Common Stock: Shares of each CDBL’s Class B Common are on parity with all such CDBL’s other securities and indebtedness with respect to dividend rights and rights upon such CDBL’s liquidation, dissolution and winding up.

Conversion Rights

Trust Preferred Securities: The Trust Preferred Securities are not convertible into shares of Capitol’s common stock or other securities.

Shares of a CDBL’s Class B Common Stock: Shares of a CDBL’s Class B Common Stock are convertible on a one share for one share basis into shares of such CDBL’s Class A Common Stock (which only differs from the Class B Common Stock of each CDBL in the full voting rights that are attributable to the shares of the Class A Common Stock).

Voting Rights

Trust Preferred Securities: Generally, holders of the Trust Preferred Securities do not have any voting rights with respect to Capitol, but do have the right to vote on modifications to certain documents governing the Trust Preferred Securities.

Shares of a CDBL’s Class B Common Stock: Generally, holders of shares of a CDBL’s Class B Common Stock do not have any voting rights with respect to such CDBL except in limited circumstances related to certain business combination transactions related to such CDBL.

Redemption

Trust Preferred Securities: Capitol may redeem the Debentures issued to the Trust at any time, on or after September 30, 2013, in whole or in part. Capitol may redeem the Debentures issued to the Trust in whole, but not in part, at any time if certain changes occur in tax or investment company laws or regulations, or in the treatment of the Trust Preferred Securities as Tier 1 capital of Capitol under the applicable capital guidelines of the Federal Reserve.

Capitol may redeem the Debentures issued to Trust at 100% of their principal amount plus accrued and unpaid interest through the redemption date.

The Trust will redeem the Trust Preferred Securities and the Trust’s common securities on the dates and to the extent Capitol redeems the Debentures. The redemption price for the Trust Preferred Securities will be the total liquidation amount of $10 per trust preferred security plus accumulated and unpaid distributions to the date of redemption. If the Trust redeems less than all the outstanding Trust Preferred Securities and common securities then the Trust will redeem each on a pro rata basis.

The Trust Preferred Securities are not redeemable at the option of the holders.

Shares of a CDBL’s Class B Common Stock: No CDBL has obligation or right to redeem shares of its common stock.

Listing

Trust Preferred Securities: The Trust Preferred Securities are listed for trading on the NYSE under the symbol “CBC PrB.”

Shares of a CDBL’s Class B Common Stock: The shares of a CDBL’s common stock are not listed for trading on any exchange.

DESCRIPTION OF THE CAPITAL STOCK OF CAPITOL

Capitol’s Articles of Incorporation, as amended, authorize the issuance of up to 50,000,000 shares of common stock, no par value, and 20,000,000 shares of preferred stock , 700,000 of which are designated as Series A Noncumulative Convertible Perpetual Preferred Stock and 20,000 of which are designated as Series X Junior Participating Preferred Stock. Capitol’s Articles of Incorporation do not authorize the issuance of any other class of stock. As of June 30, 2009, 17,517,331 shares of common stock were outstanding, no shares of Series A Preferred or Series X Junior Participating Preferred Stock were outstanding and no other shares of preferred stock were outstanding. BNY Mellon Shareowner Services serves as transfer agent and registrar for Capitol’s common stock.

Preferred Stock

Capitol’s board of directors is authorized to issue preferred stock in one or more series, from time to time, with full or limited voting powers, or without voting powers, and with all designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions upon the preferred stock, as may be provided in the resolution or resolutions adopted by Capitol’s board of directors. The authority of Capitol’s board of directors includes, but is not limited to, the determination or fixing of the following with respect to shares of any class or series of preferred stock:

·	the number of shares (up to the number of shares authorized) and designation of any series of preferred stock;

·	the dividend rate and whether dividends are to be cumulative;

·	whether shares are to be redeemable, and, if so, whether redeemable for cash, property or rights;

·	the rights to which the holders of shares shall be entitled, and the preferences, if any, over any other series;

·	whether the shares shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, upon what conditions;

·	whether the shares will be convertible into or exchangeable for shares of any other class or of any other series of any class of capital stock and the terms and conditions of the conversion or exchange;

·	the voting powers, full or limited, if any, of the shares;

·	whether the issuance of any additional shares, or of any shares of any other series, will be subject to restrictions as to issuance, or as to the powers, preferences or rights of any of these other series; and

·	any other preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions.

The actual effect of the issuance of any shares of the preferred stock upon the rights of holders of common stock cannot be stated until the board of directors determines the specific rights of any shares of the preferred stock. However, the effects might include, among other things, restricting dividends on the common stock, diluting the voting power of the common stock, reducing the market price of the common stock or impairing the liquidation rights of the common stock without further action by the shareholders. Holders of Capitol’s common stock will not have preemptive rights with respect to the preferred stock.

Although Capitol may consider issuing shares of the preferred stock in the future for purposes of raising additional capital or in connection with acquisition transactions, there are currently no binding agreements or commitments with respect to the issuance of the preferred stock.

Series A Preferred

Holders of shares of the Series A Preferred will generally have no voting rights, except as specifically required by Michigan law. If the shares of the Series A Preferred are converted into shares of Capitol’s common stock, the common stock will have the same voting rights as all other shares of Capitol’s common stock.

If declared by Capitol’s board of directors, cash dividends at an annual rate of 8.0% will be paid quarterly in arrears on the last day of March, June, September and December commencing December 31, 2009. Dividends will not be paid on Capitol common stock in any quarter until the dividend on the shares of the Series A Preferred has been paid for such quarter; however, there is no requirement that Capitol’s board of directors declare any dividends on the shares of the Series A Preferred and any unpaid dividends shall not be cumulative. The shares of the Series A Preferred will not participate in any dividends or distributions on Capitol’s common stock.

Each share of the Series A Preferred is immediately convertible at the option of the holder into 6.25 shares of Capitol common stock, subject to adjustment upon certain corporate events. The initial conversion rate is equivalent to an initial conversion price of $16.00 per share of Capitol common stock. At the option of Capitol , on and after December 31, 2013, at any time and from time to time, some or all of the shares of the Series A Preferred may be converted into shares of Capitol's common stock at the then-applicable conversion rate. After December 31, 2013, shares of the Series A Preferred will also remain convertible at the option of the holder of such shares of the Series A Preferred at then applicable conversation ratio. As of August 11 , 2009, the closing price of Capitol’s common stock was $ 4.23 as reported by NYSE. Capitol has historically paid dividends on its common stock. Most recently, Capitol has suspended its common stock dividends. There can be no assurance that Capitol will pay dividends on its common stock in the future.

The Series A Preferred will rank senior to Capitol’s common stock and any other stock that is expressly made junior to the Series A Preferred as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of Capitol. Upon the occurrence of certain reorganization events, each share of the Series A Preferred outstanding immediately prior to such reorganization event will, without the consent of the holders of the Series A Preferred, become convertible into the kind and amount of securities, cash and other property receivable in such reorganization event (without any interest thereon, and without any right to dividends or distribution thereon which have a record date that is prior to the applicable conversion date) per share of Capitol common stock by a holder of Capitol common stock.

Capitol will apply to list the shares of the Series A Preferred on the NASDAQ Capital Market under the symbol “CBCP.P.”

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 upon future conversion of Series A Preferred as described in this prospectus. All shares of common stock offered will be, when issued, fully paid and nonassessable.

The following description of the terms of the common stock of Capitol may not contain all of the information relevant to you. For additional information, please see Capitol’s articles of incorporation, as amended, and its bylaws, each of which have been previously filed with the SEC, and the Michigan Business Corporation Act (the “MBCA”). To find out where copies of these documents can be obtained, see “Where You Can Find More Information.”

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 shareholder 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 the MBCA, 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 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.

Capitol’s Trust-Preferred Securities

Capitol has issued debentures to Capitol Trust I and Capitol Trust XII, Delaware business trust subsidiaries of Capitol. Capitol Trust I and Capitol Trust XII purchased the debentures with the proceeds of preferred securities (which are traded on the New York Stock Exchange under the symbol “CBCPrA” and “CBCPrB”, respectively). 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 [$170. 8] million (excluding trust-preferred securities held by subsidiaries of Capitol) at an average interest rate currently approximating [6.3%] 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:

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 February 9, 2009 Capitol’s directors and executive officers beneficially owned (including immediately exercisable stock options and warrants) control of approximately 26.77% of Capitol’s outstanding common stock. It is now unknown what percentage will be owned by management upon completion of the Exchange Offer. If management’s shares are voted as a block, management 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.

Share Purchase Rights Plan. On July 20, 2009, Capitol adopted a Share Purchase Rights Plan (the “Rights Plan”). Terms of the Rights Plan provide for a dividend distribution of one preferred share purchase right (a “Right”) for each outstanding share of common stock, no par value per share (the “Common Shares”), of Capitol. The dividend is payable on July 31, 2009 (the “Record Date”) to the shareholders of record as of the close of business on that date. Common Shares that are newly issued after the Record Date will also carry Rights.

Each Right entitles the registered holder to purchase from Capitol one one-thousandth of a share of newly designated Series X Junior Participating Preferred Stock, no par value per share (the “Preferred Shares”), at a price of $5.00 per one one-thousandth of a Preferred Share (the “Purchase Price”), subject to adjustment. Each Preferred Share has the designations, powers, preferences and rights set forth in the Certificate of Designations of Series X Junior Participating Preferred Stock filed on July 21, 2009 with the Department of Labor and Economic Growth of the State of Michigan (the “Certificate of Designations”). The description and terms of the Rights are set forth in the Rights Agreement (the “Rights Agreement”), dated as of July 21, 2009, between Capitol and Mellon Investor Services LLC as Rights Agent (the “Rights Agent”). A Summary of the terms of the Rights (the “Summary of Rights”) is included in the Rights Agreement as Exhibit C thereto.

Until the earlier to occur of (i) the date of a public announcement that a person, entity, or group of affiliated or associated persons have acquired beneficial ownership of 10% or more of the outstanding Common Shares (an “Acquiring Person”) or (ii) 10 business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person or entity becomes an Acquiring Person) following the commencement of, or announcement of an intention to commence, a tender offer or Exchange Offer the consummation of which would result in any person or entity becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”), the Rights will be evidenced by the stock certificates representing the Common Shares then outstanding (with or without a copy of the Summary of Rights). Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Share certificates issued after the Record Date, upon transfer or new issuance of Common Shares, will contain a legend incorporating the Rights Agreement by reference.

Until the Distribution Date (or earlier redemption or expiration of the Rights), the Rights will be transferable with and only with the Common Shares, and the surrender or transfer of any Common Share certificates, even without a notation or a copy of the Summary of Rights attached, will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate.

The Rights are not exercisable until the Distribution Date. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights.

The Rights will expire as of the close of business on July 21, 2014 (the “Final Expiration Date”), unless the Rights are earlier redeemed or exchanged by Capitol, in each case, as described below.

The Purchase Price payable, and the number of Preferred Shares or other securities or other property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights or warrants to subscribe for or purchase Preferred Shares at a price, or securities convertible into Preferred Shares with a conversion price, less than the then current market price of the Preferred Shares, or (iii) upon distribution to holders of the Preferred Shares of evidence of indebtedness or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings or dividends payable in Preferred Shares) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. The exercise of Rights for Preferred Shares is at all times subject to the availability of a sufficient number of authorized but unissued Preferred Shares.

The number of outstanding Rights and the number of one one-thousandths of a Preferred Share issuable upon exercise of each Right are also subject to adjustment in the event of a stock split of the Common Shares or a stock dividend on the Common Shares payable in Common Shares or subdivisions, consolidation or combinations of the Common Shares occurring, in any case, prior to the Distribution Date. No fractional Preferred Shares will be issued (other than fractions which are integral multiples of the number of one one-thousandths of a Preferred Share issuable upon the exercise of one Right, which may, at the election of Capitol, be evidenced by depositary receipts), and in lieu thereof, an adjustment in cash will be made based on the market price of the Preferred Shares on the last trading day prior to the date of exercise.

Preferred Shares purchasable upon exercise of the Rights will not be redeemable. Each Preferred Share will be entitled to a minimum preferential quarterly dividend payment of $1.00 but will be entitled to an aggregate dividend of 1,000 times the dividend declared per Common Share. In the event of liquidation, the holders of the Preferred Shares would be entitled to a minimum preferential liquidation payment of $1,000 per share, but would also be entitled to receive an aggregate payment equal to 1,000 times the payment made per Common Share. Each Preferred Share will have 1,000 votes, voting together with the Common Shares. In the event of any merger, consolidation or other transaction in which Common Shares are exchanged, each Preferred Share will be entitled to receive 1,000 times the amount of consideration received per Common Share. These rights are protected by customary anti-dilution provisions. Because of the nature of the dividend, liquidation and voting rights of the Preferred Shares, the value of one one-thousandth of a Preferred Share purchasable upon exercise of each Right should approximate the value of one Common Share. The Preferred Shares would rank junior to any other series of Capitol’s preferred stock.

In the event that any person, entity or group of affiliated or associated persons becomes an Acquiring Person, proper provision shall be made so that each holder of a Right, other than Rights beneficially owned by the Acquiring Person and its associates and affiliates (which will thereafter be null and void), will thereafter have the right to receive upon exercise that number of Common Shares having a market value of two times the exercise price of the Right (or, if such number of shares is not and cannot be authorized, Capitol may issue Preferred Shares, cash, debt, stock or a combination thereof in exchange for the Rights). This right will terminate 60 days after the date on which the Rights become nonredeemable (as described below), unless there is an injunction or similar obstacle to exercise of the Rights, in which event this right will terminate 60 days after the date on which the Rights again become exercisable.

Generally, under the Rights Plan, an “Acquiring Person” shall not be deemed to include (i) Capitol, (ii) a subsidiary of Capitol, (iii) any employee benefit or compensation plan of Capitol, or (iv) any entity holding Common Shares for or pursuant to the terms of any such employee benefit or compensation plan. Except under limited circumstances, no person or entity shall become an Acquiring Person as the result of the acquisition of Common Shares by Capitol which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such person or entity to 10% or more of the Common Shares then outstanding, and no person shall become an Acquiring Person due to the acquisition of Common Shares directly from Capitol.

In the event that Capitol is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold to an Acquiring Person, its associates or affiliates or certain other persons in which such persons have an interest, proper provision will be made so that each holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the Right.

At any time after an Acquiring Person becomes an Acquiring Person and prior to the acquisition by such Acquiring Person of 50% or more of the outstanding Common Shares, the Board of Directors of Capitol may exchange the Rights (other than Rights owned by such person or group which have become null and void), in whole or in part, at an exchange ratio of one Common Share, or one one-thousandth of a Preferred Share, per Right (or, at the election of Capitol, Capitol may issue cash, debt, stock or a combination thereof in exchange for the Rights), subject to adjustment.

At any time prior to the earliest of (i) the day of the first public announcement that a person has become an Acquiring Person, or (ii) the Final Expiration Date, the Board of Directors of Capitol may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”). Following the expiration of the above periods, the Rights become nonredeemable. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

The terms of the Rights may be amended by the Board of Directors of Capitol without the consent of the holders of the Rights, except that from and after such time as the Rights are distributed no such amendment may adversely affect the interests of the holders of the Rights (excluding the interest of any Acquiring Person).

Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of Capitol, including, without limitation, the right to vote or to receive dividends.

The Rights have certain anti-takeover effects. The Rights will cause substantial dilution to a person, entity or group that attempts to acquire Capitol on terms not approved by Capitol’s Board of Directors. The Rights should not interfere with any merger or other business combination approved by the Board of Directors of Capitol since the Rights may be amended to permit such acquisition or redeemed by Capitol at $0.01 per Right prior to the earliest of (i) the time that a person or group has acquired beneficial ownership of 10% or more of the Common Shares or (ii) the Final Expiration Date.

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DESCRIPTION OF THE TRUST-PREFERRED SECURITIES AND RELATED INSTRUMENTS

The following description summarizes the material provisions of the Trust-Preferred Securities and the amended and restated trust agreement, which is sometimes referred to herein as the trust agreement. This description is not complete and is subject to, and is qualified in its entirety by reference to, the amended and restated trust agreement. Whenever particular defined terms of the amended and restated trust agreement are referred to in this prospectus, those defined terms are incorporated in this prospectus.

General

Pursuant to the terms of the trust agreement, the Trust sold the Trust-Preferred Securities to the public and common securities to Capitol. The Trust-Preferred Securities represent preferred beneficial interests in the Trust. Holders of the Trust-Preferred Securities will be entitled to receive distributions and amounts payable on redemption or liquidation pro-rata with the holders of the common securities unless there is an event of default under the trust agreement resulting from an event of default under the indenture, in which case payments to the holders of the Trust-Preferred Securities will have priority. See “—Subordination of Common Securities.” Holders of the Trust-Preferred Securities will also be entitled to other benefits as described in the trust agreement.

The Trust-Preferred Securities rank on a parity, and payments on them will be made pro rata, with the common securities of the Trust except as described under “—Subordination of Common Securities.” Legal title to the Debentures are held and administered by the property trustee in trust for the benefit of the holders of the Trust-Preferred Securities and common securities.

The guarantee agreement executed by Capitol for the benefit of the holders of the Trust-Preferred Securities is a guarantee on a subordinated basis with respect to the Trust-Preferred Securities but does not guarantee payment of distributions or amounts payable on redemption or liquidation of the Trust-Preferred Securities when the Trust does not have funds on hand available to make the payments. See “Description of the Guarantee.”

Distributions

Distributions on the Trust-Preferred Securities will be cumulative, will accumulate from the date of original issuance, scheduled to be payable quarterly in arrears on the last calendar day of March, June, September and December of each year, commencing on September 30, 2008. In the event that any date on which distributions are payable is not a business day, payment of that distribution will be made on the next business day (and without any interest or other payment in connection with this delay) except that, if the next business day falls in the next calendar year, payment of the distribution will be made on the immediately preceding business day, in either case with the same force and effect as if made on the original distribution date. Each date on which distributions are payable in accordance with the previous sentence is referred to as a “distribution date.” A “business day” means any day other than a Saturday or a Sunday, or a day on which federal banking institutions in the City of New York are authorized or required by law, executive order or regulation to remain closed or a day on which the corporate trust office of the property trustee or the indenture trustee, as applicable, is closed for business.

The Trust-Preferred Securities represent preferred beneficial interests in the Trust, and the distributions on each Trust-Preferred Security will be payable at a rate equal to 10.50% per annum of the liquidation amount, however such payments are currently being deferred.

When a deferral period occurs with respect to the Debentures, distributions on the Trust-Preferred Securities will be correspondingly deferred (but will continue to accumulate additional distributions at a rate of 10.50% per annum). See “Description of the Debentures—Option to Defer Interest Payments.”

The revenue of the Trust available for distribution to holders of the Trust-Preferred Securities will be limited to payments under the Debentures, which the Trust will acquire with the proceeds from the issuance and sale of its Trust-Preferred Securities and common securities. See “Description of the Debentures.” If Capitol does not make interest payments on the Debentures, the property trustee will not have funds available to pay distributions on the Trust-Preferred Securities. The payment of distributions (if and to the extent the Trust has funds legally available for the payment of distributions and cash sufficient to make payments) is guaranteed by Capitol on a limited basis as described under the heading “Description of the Guarantee.”

Distributions on the Trust-Preferred Securities will be payable to the holders of the Trust-Preferred Securities as they appear on the register of the Trust at the close of business on the relevant record date, which, as long as the Trust-Preferred Securities remain in global form, will be one business day prior to the distribution date. Subject to any applicable laws and regulations and the provisions of the trust agreement, each such payment will be made as described under the heading “Book-Entry System.” In the event any Trust-Preferred Securities are not in global form, the relevant record date for such Trust-Preferred Securities will be the 15th day of March, June, September or December for distributions payable on the last calendar day of the respective month.

Redemption or Exchange

Mandatory Redemption

Upon the repayment or redemption, in whole or in part, of the Debentures, whether at maturity or upon earlier redemption as provided in the indenture, the proceeds from the repayment or redemption will be applied by the property trustee to redeem a like amount of the Trust-Preferred Securities and common securities, upon not less than 30 nor more than 60 days notice, at a redemption price equal to the aggregate liquidation amount of those Trust-Preferred Securities and common securities plus accumulated but unpaid distributions to the date of redemption. See “Description of the Debentures—Redemption.” If less than all of the Debentures are to be repaid or redeemed on a redemption date, then the proceeds from the repayment or redemption will be allocated to the redemption, pro rata, of the Trust-Preferred Securities and the common securities based upon the liquidation amounts of these classes. The amount of premium, if any, paid by Capitol upon the redemption of all or any part of the Debentures to be repaid or redeemed on a redemption date will be allocated to the redemption pro rata of the Trust-Preferred Securities and the common securities. The redemption price will be payable on each redemption date only to the extent that the Trust has funds then on hand and available in the payment account for the payment of the redemption price.

Optional Redemption

Capitol will have the right to redeem the Debentures:

·	on or after September 30, 2013, in whole at any time or in part from time to time, or

·	at any time, in whole or in part, upon the occurrence of a capital treatment event, tax event or investment company event (as described below),

in each case in accordance with the indenture and subject to receipt of prior approval by the Federal Reserve Board if then required under applicable capital guidelines or policies of the Federal Reserve Board.

Distribution of the Debentures

Subject to Capitol’s having received prior approval of the Federal Reserve Board to do so if such approval is then required under applicable capital guidelines or policies of the Federal Reserve Board, Capitol has the right at any time to terminate the Trust and, after satisfaction of the liabilities of creditors of the Trust as provided by applicable law, cause the Debentures in respect of the Trust-Preferred Securities and common securities issued by the Trust to be distributed to the holders of the Trust-Preferred Securities and common securities in liquidation of the Trust.

Capital Treatment Event, Tax Event or Investment Company Event Redemption

If a capital treatment event, tax event or investment company event in respect of the Trust-Preferred Securities and common securities has occurred and is continuing, Capitol has the right to redeem the Debentures in whole or in part and thereby cause a mandatory redemption of the Trust-Preferred Securities and common securities in whole or in part within 180 days following the occurrence of the capital treatment event, tax event or investment company event. If a capital treatment event, tax event or investment company event has occurred and is continuing in respect of the Trust-Preferred Securities and common securities and Capitol does not elect to redeem the Debentures and thereby cause a mandatory redemption of the Trust-Preferred Securities or to liquidate the Trust and cause the Debentures to be distributed to holders of the Trust-Preferred Securities and common securities in liquidation of the Trust as described above, those Trust-Preferred Securities will remain outstanding and additional sums (as defined below) may be payable on the Debentures. See “Description of the Debentures—Redemption.”

The term “additional sums” means the additional amounts as may be necessary in order that the amount of distributions then due and payable by the Trust on the outstanding Trust-Preferred Securities and common securities of the Trust will not be reduced as a result of any additional taxes, duties and other governmental charges to which the Trust has become subject as a result of a tax event.

The term “liquidation amount” means the stated amount per Trust-Preferred Security and common security of $10.

After the liquidation date is fixed for any distribution of Debentures for the Trust-Preferred Securities:

·	the Trust-Preferred Securities will no longer be deemed to be outstanding;

·	The Depository Trust Company, commonly referred to as DTC, or its nominee, as the record holder of the Trust-Preferred Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon the distribution; and

any Trust-Preferred Securities certificates not held by DTC or its nominee will be deemed to represent the Debentures having a principal amount equal to the liquidation amount of the Trust-Preferred Securities, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid distributions on the Trust-Preferred Securities until the certificates are presented to the administrative trustees or their agent for transfer or reissuance.

Any distribution of Debentures to holders of Trust-Preferred Securities will be made to the applicable record holders as they appear on the register for the Trust-Preferred Securities on the relevant record date, which will be not more than 45 business days prior to the liquidation date.

There can be no assurance as to the market prices for the Trust-Preferred Securities or the Debentures that may be distributed in exchange for Trust-Preferred Securities if a dissolution and liquidation of the Trust were to occur. Accordingly, the Trust-Preferred Securities that an investor may purchase, or the Debentures that the investor may receive on dissolution and liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the Trust-Preferred Securities being offered in connection with this prospectus.

Redemption Procedures

Trust-Preferred Securities redeemed on each redemption date will be redeemed at the redemption price with the applicable proceeds from the contemporaneous redemption of the Debentures. Redemptions of the Trust-Preferred Securities will be made and the redemption price will be payable on each redemption date only to the extent that the Trust has funds on hand available for the payment of the redemption price. See also “—Subordination of Common Securities.”

Subject to applicable law (including, without limitation, U.S. federal securities law), Capitol or its subsidiaries may at any time and from time to time purchase outstanding Trust-Preferred Securities by tender, in the open market or by private agreement.

Payment of the redemption price on the Trust-Preferred Securities and any distribution of Debentures to holders of Trust-Preferred Securities will be made to the applicable record holders as they appear on the register for the Trust-Preferred Securities on the relevant record date.

If less than all of the Trust-Preferred Securities and common securities issued by the Trust are to be redeemed on a redemption date, then the aggregate liquidation amount of the Trust-Preferred Securities and common securities to be redeemed will be allocated pro rata to the Trust-Preferred Securities and the common securities based upon the relative liquidation amounts of these classes. The particular Trust-Preferred Securities to be redeemed will be selected on a pro rata basis not more than 60 days prior to the redemption date by the property trustee from the outstanding Trust-Preferred Securities not previously called for redemption, by a customary

method that the property trustee deems fair and appropriate and which may provide for the selection for redemption of portions (equal to $10 or an integral multiple of $10) of the liquidation amount of Trust-Preferred Securities or a denomination larger than $10. The property trustee will promptly notify the securities registrar in writing of the Trust-Preferred Securities selected for redemption and, in the case of any Trust-Preferred Securities selected for partial redemption, the liquidation amount to be redeemed. For all purposes of the trust agreement, unless the context otherwise requires, all provisions relating to the redemption of Trust-Preferred Securities will relate, in the case of any Trust-Preferred Securities redeemed or to be redeemed only in part, to the portion of the aggregate liquidation amount of Trust-Preferred Securities which has been or is to be redeemed.

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Trust-Preferred Securities and common securities to be redeemed at its registered address. Unless Capitol defaults in payment of the redemption price on the Debentures, on and after the redemption date interest will cease to accrue on Debentures or portions thereof (and distributions will cease to accrue on the Trust-Preferred Securities or portions thereof) called for redemption.

Subordination of Common Securities

Payment of distributions on, and the redemption price of, the Trust-Preferred Securities and common securities, as applicable, will be made pro rata based on the liquidation amount of the Trust-Preferred Securities and common securities; provided, however, that if on any distribution date, redemption date or liquidation date a debenture event of default has occurred and is continuing as a result of any failure by Capitol to pay any amounts in respect of the Debentures when due, no payment of any distribution on, or redemption price of, or liquidation distribution in respect of, any of the Trust’s common securities, and no other payment on account of the redemption, liquidation or other acquisition of the common securities, will be made unless payment in full in cash of all accumulated and unpaid distributions on all of the Trust’s outstanding Trust-Preferred Securities for all distribution periods terminating on or prior to that date, or in the case of payment of the redemption price the full amount of the redemption price on all of the Trust’s outstanding Trust-Preferred Securities then called for redemption, or in the case of payment of the liquidation distribution the full amount of the liquidation distribution on all outstanding Trust-Preferred Securities, has been made or provided for, and all funds available to the property trustee must first be applied to the payment in full in cash of all distributions on, or redemption price of, or liquidation distribution in respect of, the Trust-Preferred Securities then due and payable. The existence of an event of default does not entitle the holders of the Trust-Preferred Securities to accelerate the maturity thereof.

In the case of any event of default under the trust agreement resulting from a debenture event of default, Capitol as holder of the Trust’s common securities will have no right to act with respect to the event of default until the effect of all events of default with respect to the Trust-Preferred Securities have been cured, waived or otherwise eliminated. Until any events of default under the trust agreement with respect to the Trust-Preferred Securities have been cured, waived or otherwise eliminated, the property trustee will act solely on behalf of the holders of the Trust-Preferred Securities and not on behalf of Capitol as holder of the Trust’s common securities, and only the holders of the Trust-Preferred Securities will have the right to direct the property trustee to act on their behalf.

Liquidation Distribution Upon Dissolution

Pursuant to the trust agreement, the Trust will terminate on the first to occur of:

·	the expiration of its term;

·	certain events of bankruptcy, dissolution or liquidation of the holder of the common securities;

the distribution of a like amount of the Debentures to the holders of its Trust-Preferred Securities, if Capitol, as depositor, has given written direction to the administrative trustees and property trustee to terminate the Trust (subject to Capitol receiving prior approval of the Federal Reserve Board if then required under applicable capital guidelines or policies). Such written direction by Capitol is optional and solely within Capitol’s discretion;

·	redemption of all of the Trust-Preferred Securities as described under “—Redemption or Exchange;” and

·	the entry of an order for the dissolution of the Trust by a court of competent jurisdiction.

If an early dissolution occurs as described in the second, third and fifth bullet points above, the Trust will be liquidated by the trustees as expeditiously as the administrative trustees determine to be possible by instructing the property trustee to deliver, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to the holders of the Trust-Preferred Securities and common securities a like amount of the Debentures in exchange for their Trust-Preferred Securities and common securities, unless the distribution is determined not to be practical, in which event the holders will be entitled to receive out of the assets of the Trust available for distribution to holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to, in the case of holders of Trust-Preferred Securities, the aggregate of the liquidation amount plus accrued and unpaid

distributions to the date of payment (an amount referred to as the “liquidation distribution” ). If the liquidation distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate liquidation distribution, then the amounts payable directly by the Trust on its Trust-Preferred Securities will be paid on a pro rata basis. The holder of the Trust’s common securities will be entitled to receive distributions upon any liquidation pro rata with the holders of its Trust-Preferred Securities, except that if a debenture event of default has occurred and is continuing as a result of any failure by Capitol to pay any amounts in respect of the Debentures when due, the Trust-Preferred Securities will have a priority over the common securities.

Events of Default; Notice

The following events will be “events of default” with respect to Trust-Preferred Securities issued under the trust agreement:

·	any debenture event of default (see “Description of the Debentures—Events of Default”);

·	default for 30 days by the Trust in the payment of any distribution;

·	default by the Trust in the payment of any redemption price of any Trust-Preferred Security or common security;

failure by the Trust trustees for 60 days in performing, in any material respect, any other covenant or warranty in the trust agreement after the holders of at least 25% in aggregate liquidation amount of the outstanding Trust-Preferred Securities of the Trust give written notice to Capitol and the Trust trustees; or

·	bankruptcy, insolvency or reorganization of the property trustee and the failure by Capitol to appoint a successor property trustee within 60 days.

Within 30 days after the occurrence of any event of default actually known to the property trustee, the property trustee will transmit notice of the event of default to the holders of the Trust-Preferred Securities, the administrative trustees and Capitol, unless the event of default has been cured or waived.

Capitol, as depositor, and the administrative trustees on behalf of the Trust are required to file annually with the property trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the trust agreement.

If a debenture event of default has occurred and is continuing, the Trust-Preferred Securities will have a preference over the common securities as described above. See “—Liquidation Distribution Upon Dissolution.” The existence of an event of default does not entitle the holders of Trust-Preferred Securities to accelerate the maturity of the Trust-Preferred Securities; provided that the holders of Trust-Preferred Securities are entitled, under certain circumstances, to accelerate the maturity of the Debentures.

Removal of Trust Trustees

Unless a debenture event of default has occurred and is continuing, any Trust trustee may be removed at any time by the holder of the common securities. If a debenture event of default has occurred and is continuing, the property trustee and the Delaware trustee may be removed by the holders of a majority in liquidation amount of the outstanding Trust-Preferred Securities. In no event will the holders of the Trust-Preferred Securities have the right to vote to appoint, remove or replace the administrative trustees. Such voting rights are vested exclusively in Capitol as the holder of the common securities. No resignation or removal of a trustee and no appointment of a successor trustee will be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the trust agreement.

Co-Trustees and Separate Property Trustee

Unless an event of default has occurred and is continuing, at any time or from time to time, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the trust property may at the time be located, the Depositor will have power to appoint one or more persons approved by the property trustee either to act as a co-trustee, jointly with the property trustee, of all or any part of the trust property, or to act as separate trustee of any trust property, in either case with the powers specified in the instrument of appointment, and to vest in the person or persons in this capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of the trust agreement.

Merger or Consolidation of Trustees

Any person into which the property trustee or the Delaware trustee may be merged or converted or with which it may be consolidated, or any person resulting from any merger, conversion or consolidation to which the property trustee or the Delaware trustee is a party, or any person succeeding to all or substantially all the corporate trust business of the property trustee or the Delaware trustee, will automatically become the successor of the trustee under the trust agreement, provided the person is otherwise qualified and eligible.

Mergers, Consolidations, Amalgamations or Replacements of the Trust

The Trust may not merge with or into, convert into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other person, except as described below. The Trust may, at Capitol’s request, with the consent of the administrative trustees, but without the consent of the holders of the Trust-Preferred Securities, the Delaware trustee or the property trustee, merge with or into, convert into, consolidate, amalgamate, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized under the laws of any state, provided that:

·	the successor entity either:

■	expressly assumes all of the obligations of the Trust with respect to the Trust-Preferred Securities; or

■

substitutes for the Trust-Preferred Securities other securities having substantially the same terms as the Trust-Preferred Securities (referred to as the “successor Trust-Preferred Securities”) so long as the successor Trust-Preferred Securities rank the same as the Trust-Preferred Securities in priority with respect to distributions and payments upon liquidation, redemption and otherwise;

·	Capitol expressly appoints a trustee of the successor entity possessing the same powers and duties as the property trustee and as the holder of the Debentures;

·	the successor Trust-Preferred Securities are listed or traded on a national securities exchange or other organization on which the Trust-Preferred Securities are then listed;

·	the merger, conversion, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Trust-Preferred Securities (including any successor Trust-Preferred Securities) in any material respect;

·	the successor entity has a purpose substantially identical to that of the Trust;

·	prior to the merger, conversion, consolidation, amalgamation, replacement, conveyance, transfer or lease, Capitol has received an opinion of independent counsel to the Trust experienced in such matters to the effect that:

■	the merger, conversion, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Trust-Preferred Securities (including any successor Trust-Preferred Securities) in any material respect; and

■	following the merger, conversion, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor the successor entity will be required to register as an investment company under the Investment Company Act of 1940, as amended; and

Capitol or any permitted successor or assignee owns all of the common securities of the successor entity and guarantees the obligations of the successor entity under the successor Trust-Preferred Securities at least to the extent provided by the related guarantee, Debentures, trust agreement and expense agreement.

For the purposes of the foregoing, any consolidation, conversion, merger, sale, conveyance, transfer or other disposition involving Capitol, the result of which Capitol is not the surviving entity and the surviving entity is not both the obligor in respect of the Debentures and the guarantee, shall be deemed to constitute a replacement trust, unless the parent company of such surviving entity is a bank holding company or other regulated holding company that provides the same guaranty as Capitol did before such transaction.

Notwithstanding the foregoing, the Trust may not, except with the consent of holders of 100% in liquidation amount of the Trust-Preferred Securities, consolidate, convert, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, convert, amalgamate, merge with or into, or replace it if the consolidation, conversion, amalgamation, merger or replacement would cause the Trust or the successor entity to be classified as other than a grantor trust for U.S. federal income tax purposes.

There are no provisions that afford holders of any Trust-Preferred Securities protection in the event of a sudden and dramatic decline in credit quality resulting from any highly leveraged transaction, takeover, merger, recapitalization or similar restructuring or change in control of Capitol, nor are there any provisions that require the repurchase of any Trust-Preferred Securities upon a change in control of Capitol.

Voting Rights; Amendment of Trust Agreement

Except as provided below and under “Description of the Guarantee—Amendments and Assignment” and as otherwise required by law and the trust agreement, the holders of the Trust-Preferred Securities will have no voting rights or the right to in any manner otherwise control the administration, operation or management of the Trust.

The trust agreement may be amended from time to time by the property trustee, the administrative trustees and the Depositor without the consent of the holders of the Trust-Preferred Securities:

to cure any ambiguity, correct or supplement any provisions in the trust agreement that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the trust agreement, which will not be inconsistent with the other provisions of the trust agreement; or

·	to modify, eliminate or add to any provisions of the trust agreement as necessary to ensure that the Trust:

■	will be classified for U.S. federal income tax purposes as a grantor trust or as other than an association taxable as a corporation at all times that any Trust-Preferred Securities or common securities are outstanding; and

■	will not be required to register as an “investment company” under the Investment Company Act; or

·	to effect a split or reverse split of the Trust-Preferred Securities for the purpose of maintaining their eligibility for listing or quoting on an exchange or quotation system;

provided that:

·	no such amendment may adversely affect in any material respect the rights of the holders of the Trust-Preferred Securities; and

·	any such amendment will become effective when notice of the amendment is given to the holders of Trust-Preferred Securities and common securities.

The trust agreement may be amended by the property trustee, the administrative trustees and the Depositor with:

·	the consent of holders representing at least a majority (based upon liquidation amounts) of the outstanding Trust-Preferred Securities and common securities; and

receipt by the Trust trustees of an opinion of counsel to the effect that the amendment or the exercise of any power granted to the Trust trustees in accordance with the amendment will not cause the Trust to be taxable as a corporation or affect the Trust’s status as a grantor trust for U.S. federal income tax purposes or the Trust’s exemption from status as an “investment company” under the Investment Company Act,

provided that, without the consent of each holder of Trust-Preferred Securities and common securities, the trust agreement may not be amended to:

·	change the amount or timing of any distribution on the Trust-Preferred Securities or common securities or otherwise adversely affect the amount of any distribution required to be made in respect of the Trust-Preferred Securities or common securities as of a specified date; or

·	restrict the right of a holder of Trust-Preferred Securities or common securities to institute suit for the enforcement of any such payment on or after such date.

So long as the Debentures are held by the property trustee on behalf of the Trust, the property trustee may not:

·	direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee, or executing any trust or power conferred on the indenture trustee with respect to the Debentures;

·	waive any past default that is waivable under the indenture;

·	exercise any right to rescind or annul a declaration that the principal of all the Debentures will be due and payable; or

·	consent to any amendment, modification or termination of the indenture or the Debentures, where this consent is required, without, in each case, obtaining the prior approval of the holders of a majority in aggregate liquidation amount of all outstanding Trust-Preferred Securities;

provided, however, that where a consent under the indenture would require the consent of each holder of Debentures affected, no such consent will be given by the property trustee without the prior consent of each holder of the Trust-Preferred Securities. The property trustee will not revoke any action previously authorized or approved by a vote of the holders of the Trust-Preferred Securities except by subsequent vote of the holders of those Trust-Preferred Securities. The property trustee will notify each holder of Trust-Preferred Securities of any notice of default with respect to the Debentures. In addition to obtaining the foregoing approvals of the holders of the Trust-Preferred Securities, prior to taking any of the foregoing actions, the property trustee must obtain an opinion of counsel to the effect that:

·	the Trust will not be classified as an association taxable as a corporation for U.S. federal income tax purposes on account of the action; and

·	the action will not cause the Trust to be classified as other than a grantor trust for U.S. federal income tax purposes.

Any required approval of holders of Trust-Preferred Securities may be given at a meeting of holders of Trust-Preferred Securities convened for that purpose or pursuant to written consent. The property trustee will cause a notice of any meeting at which holders of Trust-Preferred Securities are entitled to vote, or of any matter upon which action by written consent of those holders is to be taken, to be given to each holder of record of Trust-Preferred Securities in the manner set forth in the trust agreement.

No vote or consent of the holders of Trust-Preferred Securities will be required for the Trust to redeem and cancel its Trust-Preferred Securities in accordance with the trust agreement.

Notwithstanding that holders of Trust-Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Trust-Preferred Securities that are owned by Capitol, the Trust trustees or any affiliate of Capitol (including Capitol’s bank subsidiaries) or any Trust trustees, will, for purposes of that vote or consent, be treated as if they were not outstanding.

Global Trust-Preferred Securities

The Trust-Preferred Securities are represented by fully registered global certificates issued as global Trust-Preferred Securities that were deposited with, or on behalf of, a depositary with respect to that series instead of paper certificates issued to each individual holder. The depositary arrangements that will apply, including the manner in which principal of and premium, if any, and interest on Trust-Preferred Securities and other payments will be payable, are discussed in more detail under the heading “Book-Entry System.”

Payment and Paying Agency

Payments in respect of Trust-Preferred Securities will be made to DTC. If any Trust-Preferred Securities are not represented by global certificates, payments will be made by check mailed to the address of the holder entitled to them as it appears on the register. The paying agent will initially be the property trustee and any co-paying agent chosen by the property trustee and reasonably acceptable to the administrative trustees and Capitol. The paying agent will be permitted to resign as paying agent upon 30 days’ written notice to the administrative trustees, the property trustee and Capitol. In the event that the property trustee is no longer the paying agent, the administrative trustees will appoint a successor (which will be a bank or trust company acceptable to the property trustee and Capitol) to act as paying agent.

Registrar and Transfer Agent

The property trustee, Wells Fargo Bank, N.A., will act as registrar and transfer agent for the Trust-Preferred Securities.

Registration of transfers of Trust-Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. The Trust will not be required to register or cause to be registered the transfer of Trust-Preferred Securities after the Trust-Preferred Securities have been called for redemption.

Information Concerning the Property Trustee

The property trustee, other than during the occurrence and continuance of an event of default, undertakes to perform only those duties specifically set forth in the trust agreement and, after an event of default, must also exercise any rights and powers imposed on it under applicable law. The property trustee is under no obligation to exercise any of the powers vested in it by the trust agreement at the request of any holder of Trust-Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred as a result. If no event of default has occurred and is continuing and the property trustee is required to decide between alternative causes of action, construe ambiguous provisions in the trust agreement or is unsure of the application of any provision of the trust agreement, and the matter is not one on which holders of Trust-Preferred Securities are entitled under the trust agreement to vote, then the property trustee will take such action as is directed by Capitol and if not so directed, will take such action as it deems advisable and in the best interests of the holders of the Trust-Preferred Securities and common securities and will have no liability except for its own bad faith, negligence or willful misconduct.

Miscellaneous

The administrative trustees and the property trustee are authorized and directed to conduct the affairs of and to operate the Trust in such a way that the Trust will not be (1) deemed to be an “investment company” required to be registered under the Investment Company Act or (2) classified as an association taxable as a corporation or as other than a grantor trust for U.S. federal income tax purposes and so that the Debentures will be treated as indebtedness of Capitol for U.S. federal income tax purposes. In addition, Capitol, the administrative trustees and the property trustee are authorized to take any action not inconsistent with applicable law, the certificate of trust of the Trust or the trust agreement, that Capitol and the administrative trustees determine in their discretion to be necessary or desirable for such purposes as long as such action does not materially adversely affect the interests of the holders of the Trust-Preferred Securities.

Holders of the Trust-Preferred Securities have no preemptive or similar rights.

The Trust may not borrow money or issue debt or mortgage or pledge any of its assets.

DESCRIPTION OF THE DEBENTURES

The following description summarizes the material provisions of the indenture and the 10.50% Junior Subordinated Debentures (the “Debentures”) issued under the indenture. This description is not complete and is qualified in its entirety by reference to the indenture and the Trust Indenture Act. The indenture was qualified under the Trust Indenture Act and has been incorporated by reference as an exhibit to Capitol’s registration statement to which this proxy statement/prospectus relates. Whenever particular defined terms of the indenture are referred to in this prospectus, those defined terms are incorporated in this prospectus by reference.

General

The Debentures were issued under the indenture, entered into between Capitol and Wells Fargo Bank, N.A., as indenture trustee. The Debentures are unsecured and subordinate and junior in right of payment to the extent and in the manner set forth in the indenture to all of Capitol’s senior and subordinated indebtedness, including any senior debt securities and any subordinated debt securities. Because Capitol is a holding company and a legal entity separate and distinct from Capitol’s subsidiaries, Capitol’s right to participate in any distribution of assets of a subsidiary upon its liquidation, reorganization or otherwise, and the holders of the Debentures’ ability to benefit indirectly from that distribution, would be subject to prior creditor’s claims, except to the extent Capitol may ourselves be recognized as a creditor of that subsidiary. Accordingly, the Debentures will be effectively subordinated to all existing and future liabilities of Capitol’s subsidiaries, and holders of Debentures should look only to Capitol’s assets for payments on the Debentures. The indenture does not limit the incurrence or issuance of other secured or unsecured debt of Capitol, including senior debt, whether under any existing indenture or any other indenture that Capitol may enter into in the future or otherwise, except that it does limit Capitol’s right to incur additional junior indebtedness that is equal in right of payment to the Debentures. See “—Limitation on Additional Junior Indebtedness” and “—Subordination of the Debentures.”

The Debentures are limited in aggregate principal amount to $39,226,820. This amount represents the sum of the aggregate stated liquidation amounts of the Trust-Preferred Securities and common securities. The Debentures bear interest at the rate of 10.50% per annum. The interest will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on September 30, 2008, to the person in whose name such Debenture is registered at the close of business on the record date for such interest installment, which will be the 15th day of the last month of each calendar quarter.

The amount of interest payable for any period ending on or prior to March 31, 2038 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period commencing on or after March 31, 2038 will be computed on the basis of a 360-day year and the actual number of days elapsed during the relevant period. In the event that any date on which interest is payable on the Debentures is not a business day, then payment of interest payable on such date will be made on the next succeeding day which is a business day (and without any interest or other payment in respect of any such delay) except that, if such business day is in the next succeeding calendar year, such payment will be made on the immediately preceding business day (and without any reduction of interest or any other payment in respect of any such acceleration), in each case with the same force and effect as if made on the date such payment was originally payable.

The Debentures will mature on September 30, 2038, the stated maturity date. Capitol may at any time before the day which is 90 days before the stated maturity date and after September 30, 2013, shorten the maturity date only once, provided that Capitol receives prior approval of the Federal Reserve Board, if then required under applicable capital guidelines, policies or regulations of the Federal Reserve Board.

Capitol will give notice to the indenture trustee and the holders of the Debentures at least 35 days and no more than 180 days prior to the effectiveness of any change in the stated maturity date; provided, however, in accordance with the indenture, Capitol retains the right to redeem all or a portion of the Debentures at such time or times on or after September 30, 2013, or at any time upon the occurrence of a “capital treatment event,” a “tax event” or an “investment company event.” See “—Redemption” for a description of what constitutes a “capital treatment event,” a “tax event” or an “investment company event.”

Principal and interest, if any, on the Debentures will be payable, and the Debentures will be transferable, at the office of the indenture trustee, which will be the initial paying agent, except that interest may be paid at Capitol’s option by check mailed to the address of the holder entitled to it as it appears on the security register.

The indenture does not contain any provisions that would provide protection to holders of the Debentures against any highly leveraged or other transaction involving Capitol that may adversely affect holders of the Debentures.

The indenture allows Capitol to merge or consolidate with another company, or to sell all or substantially all of Capitol’s assets to another company. If these events occur, the other company will be required to assume Capitol’s responsibilities relating to the Debentures, and Capitol will be released from all liabilities and obligations. See “—Consolidation, Merger, Sale of Assets and Other Transactions” below for a more detailed discussion. The indenture provides that Capitol and the indenture trustee may change certain of Capitol’s obligations or certain rights of holders of the Debentures. However, to change the amount or timing of principal, interest or other payments under the Debentures, every holder in the series must consent. See “—Modification of the Indenture” below for a more detailed discussion.

Denominations, Registration and Transfer

The Debentures are issued only in registered form, without coupons, in denominations of $10 and any integral multiple thereof. Subject to restrictions relating to Debentures represented by global securities, the Debentures will be exchangeable for other debentures in denominations of integral multiples of $10, of a like aggregate principal amount, of the same original issue date and stated maturity and bearing the same interest rate.

Subject to restrictions relating to Debentures represented by global securities, the Debentures may be presented for exchange as provided above, and may be presented for registration of transfer (with the form of transfer endorsed thereon, or a satisfactory written instrument of transfer, duly executed) at the office of the appropriate securities registrar or at the office of any transfer agent designated by Capitol for such purpose without service charge and upon payment of any taxes and other governmental charges as described in the indenture. The registrar for the purpose of registering and transferring Debentures shall initially be the indenture trustee.

In the event of any redemption, neither Capitol nor the indenture trustee will be required to:

·	issue, register the transfer of or exchange the Debentures during the period beginning at the opening of business 15 days before the day of selection for redemption of the Debentures and ending at the close of business on the day of mailing of the relevant notice of redemption; or

·	transfer or exchange any of the Debentures so selected for redemption, except, in the case of any Debentures being redeemed in part, any portion thereof not being redeemed.

Option to Defer Interest Payments

So long as no debenture event of default (as defined below) has occurred and is continuing, Capitol will have the right at any time and from time to time during the term of the Debentures to defer payment of interest for up to 20 consecutive quarters, referred to as an “extension period.” During the extension period, no interest will be due and payable, and no extension period may extend beyond the maturity date of the Debentures or end on a date other than an interest payment date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension period, will bear interest at a rate of 10.50% compounded quarterly for each quarter of the extension period. At the end of the extension period, Capitol must calculate and pay all interest accrued and unpaid on the Debentures, including any additional interest and compounded interest. Upon the termination of any extension period and upon the payment of all interest then due, Capitol may commence a new extension period, subject to the foregoing requirements. No interest will be due and payable during an extension period, except at the end thereof.

As a consequence of any such deferral, distributions on the Trust-Preferred Securities would be deferred (but would continue to accumulate additional distributions at a rate of 10.50% per annum) by the Trust during the extension period. During any applicable extension period, Capitol may not:

·	declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of Capitol’s capital stock other than:

■	dividends or distributions in Capitol’s common stock or a declaration of a non-cash dividend in connection with implementing a shareholder rights plan, or the issuance or redemption of stock pursuant to a shareholder rights plan,

■	purchases of Capitol’s common stock under officer, director or employee benefit plans, or

■	as a result of reclassifying Capitol’s stock;

make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any of Capitol’s debt securities that rank on a parity in all respects with or junior in interest to the Debentures, or make any payment under a guarantee of any subsidiary’s securities if the guarantee ranks on a parity in all respects with or junior in interest to the Debentures; or

·	acquire any of the Trust-Preferred Securities or redeem or acquire less than all of the Debentures.

The above prohibitions will also apply if the Debentures are held by the Trust and:

·	an event of default under the indenture with respect to the Debentures occurs, or

On April 17, 2009, Capitol announced that it had elected to defer regularly scheduled interest payments on its junior subordinated debentures, including the Debentures.

Redemption

The Debentures will not be subject to any sinking fund.

Capitol may, at its option and subject to receipt of prior approval by the Federal Reserve Board if such approval is then required under applicable capital guidelines or policies, redeem the Debentures in whole or in part, from time to time, on or after September 30, 2013. If the Debentures are only partially redeemed, the Debentures will be redeemed pro rata or by lot or in such other manner as the indenture trustee deems appropriate and fair in its discretion. Unless otherwise indicated in the form of security, Debentures in denominations larger than the liquidation amount may be redeemed in part but only in integral multiples of the liquidation amount. The redemption price for any Debenture will equal any accrued and unpaid interest (including any additional interest) to the redemption date, plus 100% of the principal amount.

In addition, Capitol has the right to redeem Debentures at any time and from time to time in a principal amount equal to the liquidation amount of Trust-Preferred Securities purchased and beneficially owned by Capitol, plus an additional principal amount of Debentures equal to the liquidation amount of that number of common securities that bears the same proportion to the total number of common securities then outstanding as the number of Trust-Preferred Securities to be redeemed bears to the total number of Trust-Preferred Securities then outstanding.

If a partial redemption of the Debentures would result in the delisting of the Trust-Preferred Securities from the New York Stock Exchange or any other national securities exchange or other organization on which the Trust-Preferred Securities are then listed or quoted, Capitol will not be permitted to effect such partial redemption and may only redeem the Debentures in whole.

If a tax event (as defined below), a capital treatment event (as defined below) or an investment company event (as defined below) has occurred and is continuing, Capitol may, at its option and subject to receipt of prior approval by the Federal Reserve Board if such approval is then required under applicable capital guidelines or policies, redeem the Debentures in whole or in part at any time within 180 days following the occurrence of the tax event, capital treatment event or investment company event, at a redemption price equal to 100% of the principal amount of the Debentures then outstanding plus accrued and unpaid interest to the date fixed for redemption.

A “capital treatment event” means, in respect of the Trust, the receipt by Capitol and the Trust of an opinion of counsel, experienced in such matters, to the effect that as a result of:

any amendment to or change, including any announced prospective change, in the laws, or any rules or regulations under the laws, of the United States or of any political subdivision of or in the United States, if the amendment or change is effective on or after the date the Trust-Preferred Securities of the Trust are issued; or

·	any official or administrative pronouncement or action or any judicial decision interpreting or applying such laws or regulations, if the pronouncement, action or decision is announced on or after the date the Trust-Preferred Securities of the Trust are issued;

there is more than an insubstantial risk that Capitol will not be entitled to treat the liquidation amount of the Trust-Preferred Securities as “Tier 1 Capital” for purposes of the applicable Federal Reserve risk-based capital adequacy guidelines as then in effect.

A “tax event” means the receipt by Capitol and the Trust of an opinion of counsel, experienced in such matters, to the effect that, as a result of any amendment to or change, including any announced prospective change, in the laws or any regulations under the laws of the United States or of any political subdivision or taxing authority of or in the United States effective or announced on or after the date the Debentures are issued, or as a result of any official administrative pronouncement or any judicial decision interpreting or applying such laws or regulations effective or announced on or after the date the Debentures are issued, there is more than an insubstantial risk that any of the following will occur:

·	the Trust is, or will be within 90 days of the delivery of the opinion of counsel, subject to U.S. federal income tax on income received or accrued on the Debentures;

·	interest payable by Capitol on the Debentures is not, or within 90 days of the delivery of the opinion of counsel will not be, deductible by Capitol, in whole or in part, for U.S. federal income tax purposes; or

·	the Trust is, or will be within 90 days of the delivery of the opinion of counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

An “investment company event” means the receipt by Capitol and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority and, the Trust is or will be considered an “investment company” that is required to be registered under the Investment Company Act of 1940, as amended, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Trust-Preferred Securities.

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Debentures to be redeemed at its registered address. Unless Capitol defaults in payment of the redemption price, on and after the redemption date interest will cease to accrue on the Debentures or portions thereof called for redemption.

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Modification of the Indenture

From time to time Capitol and the indenture trustee may, without the consent of the holders of the Debentures, amend, waive or supplement the provisions of the indenture for specified purposes, including, among other things, curing ambiguities, defects or inconsistencies (provided that any such action does not materially adversely affect the interests of the holders of the Debentures or, in the case of the Debentures, the holders of the Trust-Preferred Securities so long as they remain outstanding) and qualifying, or maintaining the qualification of, the indenture under the Trust Indenture Act. The indenture contains provisions permitting Capitol and the indenture trustee, with the consent of the holders of not less than a majority in principal amount of the Debentures affected, to modify the indenture in a manner adversely affecting the rights of the holders of the Debentures in any material respect; provided, that no such modification may, without the consent of the holder of each outstanding Debenture so affected:

·	extend the fixed maturity of the Debentures, reduce their principal amount or reduce the amount or extend the time for payment of interest; or

·	reduce the above-stated percentage of outstanding Debentures necessary to modify or amend the indenture.

Where an amendment or supplement requires the consent of a majority of the outstanding Debentures, it will not be effective until it is consented to by a majority in liquidation preference of the Trust-Preferred Securities. Where an amendment or supplement requires the consent of each holder of the Debentures, it will not be effective until consented to by each holder of the Trust-Preferred Securities.

Events of Default

The following events will be “debenture events of default” with respect to the Debentures:

·	the consent of holders representing at least a majority (based upon liquidation amounts) of the outstanding Trust-Preferred Securities and common securities;

·	default for 30 days in interest payment upon any of the Debentures, including any additional interest (subject to the deferral of any due date in the case of an extension period);

·	default in any principal payment on the Debentures at the stated maturity, upon redemption, by declaration or otherwise;

·	failure by Capitol for 90 days in performing any other covenant or agreement in the indenture after:

§	Capitol is given written notice by the indenture trustee; or

§	the holders of at least 25% in aggregate principal amount of the outstanding Debentures give written notice to Capitol and the indenture trustee;

§	Capitol’s bankruptcy, insolvency or reorganization; or

the Trust dissolves, winds up its business or otherwise terminates its existence, except in connection with the distribution of Debentures to holders of Trust-Preferred Securities or common securities in liquidation of their interests, the redemption of all of the Trust’s outstanding Trust-Preferred Securities and common securities or certain permitted mergers, consolidations or amalgamations.

The holders of a majority in aggregate outstanding principal amount of the Debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee. The principal will become due and payable immediately upon a debenture event of default resulting from Capitol’s bankruptcy, insolvency or reorganization. The indenture trustee or the holders of at least 25% in aggregate outstanding principal amount of the Debentures may declare the principal due and payable immediately upon any other debenture event of default. Should the indenture trustee or the holders of such Debentures fail to make this declaration, the holders of at least 25% in aggregate liquidation amount of the Trust-Preferred Securities will have the right to make this declaration. The holders of a majority in aggregate outstanding principal amount of the Debentures may annul the declaration and waive the default, provided all defaults have been cured and all payment obligations have been made current. Should the holders of such Debentures fail to annul the declaration and waive the default, the holders of a majority in aggregate liquidation amount of the Trust-Preferred Securities will have the right to do so. In the event of Capitol’s bankruptcy, insolvency or reorganization, the Debentures holders’ claims would fall under the broad equity power of a federal bankruptcy court, and to that court’s determination of the nature of those holders’ rights.

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The holders of a majority in aggregate outstanding principal amount of the Debentures affected may, on behalf of the holders of all the Debentures, waive any default, except a default in the payment of principal or premium, if any, or interest (including any additional interest) (unless the default has been cured and a sum sufficient to pay all matured installments of interest (including any additional interest) and principal due otherwise than by acceleration has been deposited with the indenture trustee) or a default in respect of a covenant or provision which under the indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. Should the holders of such Debentures fail to waive the default, the holders of a majority in aggregate liquidation amount of the Trust-Preferred Securities will have the right to do so. Capitol is required to file annually with the indenture trustee a certificate as to whether or not Capitol is in compliance with all the conditions and covenants applicable to Capitol under the indenture.

In case a debenture event of default has occurred and is continuing as to the Debentures, if neither the indenture trustee nor the holders of the Debentures accelerate the Debentures, the holders of the Trust-Preferred Securities will have the right to declare the principal of and the interest on the Debentures, and any other amounts payable under the indenture, to be immediately due and payable and to enforce their other rights as creditors with respect to the Debentures.

Enforcement of Certain Rights by Holders of Trust-Preferred Securities

If a debenture event of default has occurred and is continuing and the event is attributable to Capitol’s failure to pay interest or principal on the Debentures on the date the interest or principal is due and payable, a holder of the Trust-Preferred Securities may institute a legal proceeding directly against Capitol for enforcement of payment to that holder of the principal of or interest (including any additional interest) on the Debentures having a principal amount equal to the aggregate liquidation amount of the Trust-Preferred Securities of that holder (a “direct action”). Capitol may not amend the indenture to remove this right to bring a direct action without the prior written consent of the holders of all of the Trust-Preferred Securities outstanding. If the right to bring a direct action is removed, the Trust may become subject to reporting obligations under the Exchange Act. Capitol will have the right under the indenture to set-off any payment made to the holder of the Trust-Preferred Securities by Capitol in connection with a direct action.

The holders of Trust-Preferred Securities will not be able to exercise directly any remedies other than those set forth in the preceding paragraph available to the holders of the Debentures unless there has occurred an event of default under the trust agreement. See “Description of the Trust-Preferred Securities and Related Instruments—Events of Default; Notice.”

Consolidation, Merger, Sale of Assets and Other Transactions

The indenture allows Capitol to consolidate or merge with or into another corporation or to sell, convey, transfer or otherwise dispose of its property as an entirety, or substantially as an entirety, to another corporation. In the indenture, however, Capitol covenants and agrees that:

upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of and premium, if any and interest on all of the Debentures, and the due and punctual performance and observance of all of Capitol’s covenants under the indenture, will be expressly assumed by the entity formed by the consolidation or into which Capitol is merged, or by the entity that acquires Capitol’s property, and, if applicable, the ultimate parent entity of the successor entity will expressly assume Capitol’s obligations under the related guarantee;

·	the successor will be organized under the laws of the United States or any state or the District of Columbia; and

·	immediately after giving effect to the transaction, no debenture event of default, and no event which, after notice or lapse of time or both, would become a debenture event of default, will have occurred and be continuing.

The general provisions of the indenture do not afford holders of the Debentures protection in the event of a highly leveraged or other transaction involving Capitol that may adversely affect holders of the Debentures.

Satisfaction and Discharge

The indenture provides that when, among other things, all Debentures not previously delivered to the indenture trustee for cancellation:

·	have become due and payable;

·	will become due and payable at their stated maturity within one year; or

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·	are to be called for redemption within one year under arrangements satisfactory to the indenture trustee for the giving of notice of redemption by the indenture trustee;

and Capitol deposits or causes to be deposited with the indenture trustee funds, in trust, for the purpose and in an amount in the currency or currencies in which the Debentures are payable sufficient to pay and discharge the entire indebtedness on the Debentures not previously delivered to the indenture trustee for cancellation, for the principal, premium, if any, and interest (including any additional interest) to the date of the deposit or to the stated maturity, as the case may be, then the indenture will cease to be of further effect (except as to Capitol’s obligations to pay all other sums due under the indenture and to provide the officers’ certificates and opinions of counsel described therein), and Capitol will be deemed to have satisfied and discharged the indenture.

Subordination of the Debentures

The Debentures will be subordinate in right of payment, to the extent set forth in the indenture, to all of Capitol’s senior and subordinated indebtedness. As used in this prospectus with respect to the Debentures, the term “senior and subordinated indebtedness” means:

senior debt, which means all debt (as defined in the indenture) incurred before or after the date of the indenture unless the instrument evidencing the debts provides that it is not superior in right of payment to the Debentures or to other debt which ranks equally with, or is subordinate to, the Debentures, except that senior debt does not include:

■	non-recourse debt;

■	debt Capitol owes to its subsidiaries;

■	debt Capitol owes to any employee;

■	debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business; or

■	subordinated debt (as defined below);

·	subordinated debt, which means debt incurred before or after the date of the indenture which is by its terms expressly provided to be junior and subordinate to Capitol’s senior debt (other than the Debentures), except that subordinated debt does not include:

■	non-recourse debt;

■	debt Capitol owes to its subsidiaries;

■	debt Capitol owes to any employee;

■	debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business;

■	senior debt (as defined above); and

■

debt under debt securities (and guarantees in respect of these debt securities) initially issued to any trust, partnership or other entity affiliated with Capitol that is, directly or indirectly, Capitol’s financing vehicle in connection with the issuance by that entity of Trust-Preferred securities or other securities which are intended to qualify for Tier 1 capital treatment; and

additional senior obligations, which means all of Capitol’s indebtedness incurred before or after the date of the indenture for claims in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements, except that additional senior obligations do not include:

■	claims in respect of senior debt or subordinated debt; or

■	obligations which, by their terms, are expressly stated to be not superior in right of payment to the Debentures or to rank pari passu in right of payment with the Debentures.

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If Capitol defaults in the payment of any principal, premium, if any, or interest, if any, or any other amount payable on any senior or subordinated indebtedness when it becomes due and payable, whether at maturity or at a date fixed for redemption or by declaration of acceleration or otherwise, then Capitol may not make any payment on the Debentures. With some limitations, if the indenture trustee receives a prohibited payment, it must pay it over to the holders of senior or subordinated indebtedness.

In any distribution to creditors upon Capitol’s dissolution or winding-up or liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all senior or subordinated indebtedness must first be paid in full before Capitol makes any payment of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by Capitol, or distribution of Capitol’s assets to which the holders of Debentures or the indenture trustee would be entitled to receive must instead be paid by Capitol or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making the payment or distribution, or by the holders of the Debentures or the indenture trustee if received by them, directly to the holders of Capitol’s senior or subordinated indebtedness to the extent necessary to pay the senior or subordinated indebtedness in full before any payment or distribution is made to the holders of the Debentures or the indenture trustee.

The indenture places no limitation on the amount of additional senior or subordinated indebtedness that may be incurred by Capitol. Capitol expects from time to time to incur additional indebtedness constituting senior or subordinated indebtedness.

Limitation on Additional Junior Indebtedness

Under the indenture, Capitol agreed not to issue or incur, directly or indirectly, any additional junior indebtedness that is equal in right of payment to the Debentures unless: the pro forma sum of all outstanding debt issued by Capitol or any of Capitol’s subsidiaries in connection with any Trust-Preferred securities issued by any of Capitol’s financing subsidiaries, including the Debentures and the maximum liquidation amount of the additional Trust-Preferred or similar securities that Capitol or its financing subsidiaries are then issuing, plus Capitol’s total long-term debt, excluding any long-term debt which, by its terms, is expressly stated to be junior and subordinate to the Debentures, is less than 60% of the sum of Capitol’s equity, any perpetual preferred stock and minority interest, calculated in accordance with applicable capital adequacy guidelines, plus any long-term debt which, by its terms, is expressly stated to be junior and subordinate to the Debentures, in each case on a consolidated basis at the time of issuance.

Trust Expenses

Pursuant to the guarantee and the expense agreement, entered into between Capitol and the Trust, Capitol, as borrower, agreed to pay all debts and other obligations (other than with respect to the Trust-Preferred Securities) and all costs and expenses of the Trust (including costs and expenses relating to the organization of the Trust, the fees and expenses of the trustees of the Trust and the cost and expenses relating to the operation of the Trust) and to pay any and all taxes and all costs and expenses with respect thereto (other than United States withholding taxes) to which the Trust might become subject.

Governing Law

The indenture and the Debentures is governed by and construed in accordance with the laws of the State of New York.

Information Concerning the Indenture Trustee

The indenture trustee has, and be subject to, all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to these provisions, the indenture trustee is under no obligation to exercise any of the powers vested in it by the indenture at the request of any holder of Debentures, unless offered reasonable indemnity by that holder against the costs, expenses and liabilities which might be incurred thereby. The indenture trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the indenture trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it.

DESCRIPTION OF THE GUARANTEE

The following description summarizes the material provisions of the guarantee. This description is not complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the guarantee, including the definitions therein, and the Trust Indenture Act. The form of the guarantee has been filed as an exhibit to Capitol’s registration statement to which this prospectus relates. Whenever particular defined terms of the guarantee are referred to in this prospectus, those defined terms are incorporated in this prospectus by reference.

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General

The guarantee was executed and delivered by Capitol at the same time the Trust issued its Trust-Preferred Securities. The guarantee is for the benefit of the holders from time to time of the Trust-Preferred Securities. Wells Fargo Bank, N.A. acts as trustee (referred to below as the “guarantee trustee”) under the guarantee for the purposes of compliance with the Trust Indenture Act and the guarantee is qualified under the Trust Indenture Act. The guarantee trustee holds the guarantee for the benefit of the holders of the Trust-Preferred Securities.

Capitol irrevocably and unconditionally agreed to pay in full on a subordinated basis, to the extent described below, the guarantee payments (as defined below) to the holders of the Trust-Preferred Securities, as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert other than the defense of payment. The following payments or distributions with respect to the Trust-Preferred Securities, to the extent not paid by or on behalf of the Issuer Trust (referred to as the “guarantee payments”), will be subject to the guarantee:

·	any accumulated and unpaid distributions required to be paid on the Trust-Preferred Securities, to the extent that the Trust has funds on hand available for the distributions;

·	the redemption price with respect to Trust-Preferred Securities called for redemption, to the extent that the Trust has funds on hand available for the redemptions; or

·	upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust (unless the Debentures are distributed to holders of such Trust-Preferred Securities in exchange for their Trust-Preferred Securities), the lesser of:

■	the liquidation distribution to the extent the Trust has funds available therefor; and

■

the amount of assets of the Trust remaining available for distribution to holders of Trust-Preferred Securities after satisfaction of liabilities to creditors of the Trust as required by applicable law.

Capitol’s obligation to make a guarantee payment may be satisfied by direct payment of the required amounts by Capitol to the holders of the Trust-Preferred Securities or by causing the Trust to pay these amounts to the holders.

The guarantee is an irrevocable and unconditional guarantee on a subordinated basis of the Trust’s obligations under the Trust-Preferred Securities, but will apply only to the extent the Trust has funds sufficient to make such payments, and is not a guarantee of collection. See “—Status of the Guarantee.”

If Capitol does not make interest payments on the Debentures held by the Trust, the Trust will not be able to pay distributions on the Trust-Preferred Securities and will not have funds legally available for the distributions. The guarantee constitutes an unsecured obligation of Capitol and will rank subordinate and junior in right of payment to all of Capitol’s senior or subordinated indebtedness. See “—Status of the Guarantee.” Because Capitol is a holding company, Capitol’s right to participate in any distribution of assets of any subsidiary upon such subsidiary’s liquidation or reorganization or otherwise, is subject to the prior claims of creditors of that subsidiary, except to the extent Capitol may ourselves be recognized as a creditor of that subsidiary. Accordingly, Capitol’s obligations under the guarantee will be effectively subordinated to all existing and future liabilities of Capitol’s subsidiaries, and claimants should look only to Capitol’s assets for payments. The guarantee does not limit the incurrence or issuance of other secured or unsecured debt of Capitol’s, including senior or subordinated indebtedness, whether under any other existing indenture or any other indenture that Capitol may enter into in the future or otherwise.

Capitol has, through the guarantee, the trust agreement, the Debentures and indenture, taken together, fully, irrevocably and unconditionally guaranteed all of the Trust’s obligations under the Trust-Preferred Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes a guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the Trust’s obligations under its Trust-Preferred Securities. See “Relationship Among the Trust-Preferred Securities, Debentures and Guarantee.” In addition, pursuant to the expense agreement entered into between Capitol and the Trust, Capitol agreed to pay all debts and other obligations (other than with respect to the Trust-Preferred Securities) and all costs and expenses of the Trust.

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Status of the Guarantee

The guarantee constitutes an unsecured obligation of Capitol and ranks subordinate and junior in right of payment to all of Capitol’s senior or subordinated indebtedness in the same manner as the Debentures.

The guarantee constitutes a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against Capitol to enforce its rights under the guarantee without first instituting a legal proceeding against any other person or entity). The guarantee is held for the benefit of the holders of the Trust-Preferred Securities. The guarantee will not be discharged except by payment of the guarantee payments in full to the extent not paid by the Trust or upon distribution to the holders of the Trust-Preferred Securities of the Debentures. The guarantee does not place a limitation on the amount of additional senior or subordinated indebtedness that may be incurred by Capitol. Capitol expects from time to time to incur additional indebtedness constituting senior or subordinated indebtedness.

Amendments and Assignment

Except with respect to any changes which do not adversely affect the material rights of holders of the Trust-Preferred Securities (in which case no vote of the holders will be required), the guarantee may not be amended without the prior approval of the holders of at least a majority of the aggregate liquidation amount of the Trust-Preferred Securities. The manner of obtaining any such approval will be as described under “Description of the Trust-Preferred Securities and Related Instruments—Voting Rights; Amendment of Trust Agreement.” All guarantees and agreements contained in the guarantee bind Capitol’s successors, assigns, receivers, trustees and representatives and will inure to the benefit of the holders of the Trust-Preferred Securities then outstanding.

Events of Default

An event of default under the guarantee will occur upon Capitol’s failure to perform any of Capitol’s payment obligations under the guarantee or to perform any non-payment obligations. The holders of at least a majority in aggregate liquidation amount of the Trust-Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the guarantee trustee in respect of the guarantee or to direct the exercise of any trust or power conferred upon the guarantee trustee under the guarantee.

The holders of at least a majority in aggregate liquidation amount of the Trust-Preferred Securities have the right, by vote, to waive any past events of default and its consequences under the guarantee. If such a waiver occurs, any event of default will cease to exist and be deemed to have been cured under the terms of the guarantee.

Any holder of the Trust-Preferred Securities may, to the extent permissible under applicable law, institute a legal proceeding directly against Capitol to enforce its rights under the guarantee without first instituting a legal proceeding against the Trust, the guarantee trustee or any other person or entity.

Capitol, as guarantor, is required to file annually with the guarantee trustee a certificate as to whether or not Capitol is in compliance with all the conditions and covenants applicable to it under the guarantee.

Information Concerning the Guarantee Trustee

The guarantee trustee, other than during the occurrence and continuance of a default by Capitol in performance of the guarantee, undertakes to perform only those duties specifically set forth in the guarantee and, after default with respect to the guarantee, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the guarantee trustee is under no obligation to exercise any of the powers vested in it by the guarantee at the request of any holder of the Trust-Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred as a result. However, such a requirement does not relieve the guarantee trustee of its obligations to exercise its rights and powers under the guarantee upon the occurrence of an event of default.

Termination of the Guarantee

The guarantee will terminate and be of no further force and effect upon:

·	full payment of the redemption price of the Trust-Preferred Securities;

·	full payment of the amounts payable upon liquidation of the Trust; or

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·	the distribution of the Debentures to the holders of the Trust-Preferred Securities in exchange for their Trust-Preferred Securities.

The guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the Trust-Preferred Securities must restore payment of any sums paid under the Trust-Preferred Securities or the guarantee.

Governing Law

The guarantee is governed by and construed in accordance with the laws of the State of New York.

RELATIONSHIP AMONG THE TRUST-PREFERRED SECURITIES, DEBENTURES AND GUARANTEE

The following description of the relationship among the Trust-Preferred Securities, the Debentures and the guarantee is not complete and is subject to, and is qualified in its entirety by reference to, the trust agreement, the indenture and the guarantee, forms of each of which has been filed as an exhibit to Capitol’s registration statement to which this prospectus relates.

Full and Unconditional Guarantee

Payments of distributions and other amounts due on the Trust-Preferred Securities (to the extent the Trust has funds available for the payment of such distributions) are irrevocably guaranteed by Capitol as described under “Description of the Guarantee.” Taken together, Capitol’s obligations under the Debentures, the indenture, the trust agreement and the guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the Trust-Preferred Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the Trust’s obligations under the Trust-Preferred Securities. If and to the extent that Capitol does not make payments on the Debentures, the Trust will not pay distributions or other amounts due on its Trust-Preferred Securities. The guarantee does not cover payment of distributions when the Trust does not have sufficient funds to pay such distributions. In such an event, the remedy of a holder of any Trust-Preferred Securities is to institute a legal proceeding directly against Capitol pursuant to the terms of the indenture for enforcement of payment of amounts of such distributions to such holder. Capitol’s obligations under the guarantee are subordinate and junior in right of payment to all of Capitol’s senior or subordinated indebtedness.

Sufficiency of Payments

As long as payments of interest and other payments are made when due on the Debentures, such payments will be sufficient to cover distributions and other payments due on the Trust-Preferred Securities, primarily because:

·	the aggregate principal amount of the Debentures will be equal to the sum of the aggregate stated liquidation amount of the Trust-Preferred Securities and common securities;

·	the interest rate and interest and other payment dates on the Debentures will match the distribution rate and distribution and other payment dates for the Trust-Preferred Securities; and

·	the trust agreement provides that the Trust will not engage in any activity that is inconsistent with the limited purposes of the Trust.

Notwithstanding anything to the contrary in the indenture, Capitol has the right to set-off any payment Capitol is otherwise required to make under the indenture with a payment Capitol makes under the guarantee.

Enforcement Rights of Holders of Trust-Preferred Securities

A holder of any Trust-Preferred Security may, to the extent permissible under applicable law, institute a legal proceeding directly against Capitol to enforce its rights under the guarantee without first instituting a legal proceeding against the guarantee trustee, the Trust or any other person or entity.

A default or event of default under any of Capitol’s senior or subordinated indebtedness would not constitute a default or event of default under the indenture. However, in the event of payment defaults under, or acceleration of, Capitol’s senior or subordinated indebtedness, the subordination provisions of the indenture provide that no payments may be made in respect of the Debentures until the senior or subordinated indebtedness has been paid in full or any payment default has been cured or waived. Failure to make required payments on the Debentures would constitute an event of default under the indenture.

107

Limited Purpose of the Trust

The Trust-Preferred Securities evidence a preferred and undivided beneficial interest in the Trust, and the Trust exists for the sole purpose of issuing its Trust-Preferred Securities and common securities and investing the proceeds thereof in Debentures and engaging in only those other activities necessary or incidental thereto. A principal difference between the rights of a holder of a Trust-Preferred Security and a holder of a Debenture is that a holder of a Debenture is entitled to receive from Capitol the principal amount of and interest accrued on Debentures held, while a holder of Trust-Preferred Securities is entitled to receive distributions from the Trust (or from Capitol under the applicable guarantee) if and to the extent the Trust has funds available for the payment of such distributions.

Rights upon Termination

Upon any voluntary or involuntary termination, winding-up or liquidation of the Trust involving Capitol’s liquidation, the holders of the Trust-Preferred Securities will be entitled to receive, out of the assets held by the Trust, the liquidation distribution in cash. See “Description of the Trust-Preferred Securities and Related Instruments—Liquidation Distribution Upon Dissolution.” Upon any voluntary or involuntary liquidation or bankruptcy of ours, the property trustee, as holder of the Debentures, would be a subordinated creditor of ours, subordinated in right of payment to all senior or subordinated indebtedness as set forth in the indenture, but entitled to receive payment in full of principal and interest, before any shareholders of ours receive payments or distributions. Since Capitol is the guarantor under the guarantee, the positions of a holder of Trust-Preferred Securities and a holder of Debentures relative to other creditors and to Capitol’s shareholders in the event of Capitol’s liquidation or bankruptcy are expected to be substantially the same.

BOOK-ENTRY SYSTEM

The Depository Trust Company, which Capitol refers to along with its successors in this capacity as “DTC,” acts as securities depository for the Trust-Preferred Securities. The Trust-Preferred Securities were issued only as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One or more fully registered global security certificates, representing the total aggregate number of each class of Trust-Preferred Securities has been issued and deposited with DTC. At any time when the Debentures may be held by persons other than the property trustee, one or more fully registered global security certificates, representing the total aggregate principal amount of Debentures, will be issued and will be deposited with DTC.

The laws of some jurisdictions may require that some purchasers of securities take physical delivery of securities in definitive form. These laws may impair the ability to transfer beneficial interests in Trust-Preferred Securities or Debentures, so long as the corresponding securities are represented by global security certificates.

DTC has advised Capitol that it is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its direct participants deposit with DTC. DTC also facilitates the post-trade settlement among participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation, which, in turn, is owned by a number of direct participants of DTC and members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation, as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC and Financial Industry Regulatory Authority Inc. (“FINRA” ). Access to the DTC system is also available to others, referred to as “indirect participants,” such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a direct or indirect custodial relationship with a direct participant. The rules applicable to DTC and its participants are on file with the SEC.

Purchases of securities under the DTC system must be made by or through direct participants, which will receive a credit for the securities on DTC’s records. The ownership interest of each beneficial owner of securities will be recorded on the direct or indirect participants’ records. Beneficial owners will not receive written confirmation from DTC of their purchase. Beneficial owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the direct or indirect participant through which the beneficial owner entered into the transaction. Under a book-entry format, holders may experience some delay in their receipt of payments, as such payments will be forwarded by the depository to Cede & Co., as nominee for DTC. DTC will forward the payments to its participants, who will then forward them to indirect participants or holders. Beneficial owners of securities other than DTC or its nominees will not be recognized by the relevant registrar, transfer agent, paying agent or trustee as registered holders of the securities entitled to the benefits of the Trust Agreement and the guarantee or the indenture. Beneficial owners that are not participants will be permitted to exercise their rights only indirectly through and according to the procedures of participants and, if applicable, indirect participants.

108

To facilitate subsequent transfers, all securities deposited by direct participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the securities; DTC’s records reflect only the identity of the direct participants to whose accounts the securities are credited, which may or may not be the beneficial owners. The direct and indirect participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of redemption notices and other communications by DTC to direct participants, by direct participants to indirect participants, and by direct and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. If less than all of the securities of any class are being redeemed, DTC will determine the amount of the interest of each direct participant to be redeemed in accordance with its then current procedures.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to any securities unless authorized by a direct participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an omnibus proxy to the issuer as soon as possible after the record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those direct participants to whose accounts securities are credited on the record date (identified in a listing attached to the omnibus proxy).

DTC may discontinue providing its services as securities depository with respect to the Trust-Preferred Securities at any time by giving reasonable notice to the issuer or its agent. Under these circumstances, in the event that a successor securities depository is not obtained, certificates for the Trust-Preferred Securities are required to be printed and delivered. Capitol may decide to discontinue the use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates for the Trust-Preferred Securities will be printed and delivered to DTC.

As long as DTC or its nominee is the registered owner of the global security certificates, DTC or its nominee, as the case may be, will be considered the sole owner and holder of the global security certificates and all securities represented by these certificates for all purposes under the instruments governing the rights and obligations of holders of such securities. Except in the limited circumstances referred to above, owners of beneficial interests in global security certificates:

·	will not be entitled to have such global security certificates or the securities represented by these certificates registered in their names;

·	will not receive or be entitled to receive physical delivery of securities certificates in exchange for beneficial interests in global security certificates; and

·	will not be considered to be owners or holders of the global security certificates or any securities represented by these certificates for any purpose under the instruments governing the rights and obligations of holders of such securities.

All redemption proceeds, distributions and dividend payments on the securities represented by the global security certificates and all transfers and deliveries of such securities will be made to DTC or its nominee, as the case may be, as the registered holder of the securities. DTC’s practice is to credit direct participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the issuer or its agent, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of that participant and not of DTC, the depository, the issuer or any of their agents, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the issuer or its agent, disbursement of such payments to direct participants will be the responsibility of DTC, and disbursement of such payments to the beneficial owners will be the responsibility of direct and indirect participants.

Ownership of beneficial interests in the global security certificates will be limited to participants or persons that may hold beneficial interests through institutions that have accounts with DTC or its nominee. Ownership of beneficial interests in global security certificates will be shown only on, and the transfer of those ownership interests will be effected only through, records maintained by DTC or its nominee, with respect to participants’ interests, or any participant, with respect to interests of persons held by the participant on their behalf. Payments, transfers, deliveries, exchanges, redemptions and other matters relating to beneficial interests in global security certificates may be subject to various policies and procedures adopted by DTC from time to time. None of Capitol, the Trust, the trustees of the Trust or any agent for Capitol or any of them, will have any responsibility or liability for any aspect of DTC’s or any direct or indirect participant’s records relating to, or for payments made on account of, beneficial interests in global security certificates, or for maintaining, supervising or reviewing any of DTC’s records or any direct or indirect participant’s records relating to these beneficial ownership interests.

109

Although DTC has agreed to the foregoing procedures in order to facilitate the transfer of interests in the global security certificates among participants, DTC is under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. Capitol will not have any responsibility for the performance by DTC or its direct participants or indirect participants under the rules and procedures governing DTC.

Because DTC can act only on behalf of direct participants, who in turn act only on behalf of direct or indirect participants, and certain banks, trust companies and other persons approved by it, the ability of a beneficial owner of securities to pledge them to persons or entities that do not participate in the DTC system may be limited due to the unavailability of physical certificates for the securities.

DTC has advised Capitol that it will take any action permitted to be taken by a registered holder of any securities under the Trust Agreement, the guarantee, the indenture or Capitol’s Articles of Incorporation, only at the direction of one or more participants to whose accounts with DTC the relevant securities are credited.

The information in this section concerning DTC and its book-entry system has been obtained from sources that Capitol and the trustees of the Trust believe to be accurate, but Capitol assumes no responsibility for the accuracy thereof.

WHERE YOU CAN FIND MORE INFORMATION

Capitol has filed a registration statement on Form S-4 to register with the SEC the units to be issued to shareholders of the CDBLs in the Exchange Offer. This prospectus is a part of that registration statement and constitutes a prospectus of Capitol in addition to being a proxy statement of the CDBLs for the special meetings. As allowed by SEC rules, this 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 world wide web site 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 National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

The SEC allows Capitol to “incorporate by reference” 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 prospectus, except for any information superseded by information in, or incorporated by reference in, this prospectus. Capitol incorporates by reference the documents listed below and any documents Capitol files with the SEC in the future under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) until Capitol’s offering is completed. Any statement contained in this 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 prospectus to the extent that a statement contained in this 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 superseded such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

·	Capitol’s Annual Report on Form 10-K for the year ended December 31, 2008;

·	Capitol’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009;

·	Capitol’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009;

·	Capitol’s Current Reports on Form 8-K filed with the SEC on January 29, 2009, February 3, 2009, February 6, 2009, February 17, 2009, February 27, 2009, March 31, 2009, April 17, 2009, April 23, 2009, May 6, 2009, June 19, 2009, July 7, 2009, July 21, 2009, July 23, 2009 and August 6, 2009 ;

110

·	the description of Capitol’s common stock contained in Capitol’s Registration Statement on Form 8-A filed April 19, 1990;

·	the description of the shares of the Series A Preferred Stock contained in Capitol’s Registration Statement on Form 8-A filed on August 12, 2009 ;

·	the description of the shares of Capitol's Series X Junior Participating Preferred Stock contained in Capitol's Registration Statement on Form 8-A filed on July 21, 2009; and

·	the description of the Trust-Preferred Securities contained in Capitol’s Registration Statement on Form 8-A filed on June 12, 2008.

Information furnished under Item 2.02 or 7.01 of Capitol’s Current Reports on Form 8-K is not incorporated by reference.

You may request a copy of any of these filings, other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing, at no cost, by writing to or telephoning Capitol at the following address:

Capitol Bancorp Ltd.

Capitol Bancorp Center

200 Washington Square North, Fourth Floor

Lansing, Michigan 48933

Attention: Investor Relations

Telephone: (517) 487-6555

Internet website: www.capitolbancorp.com

IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST MAKE REQUESTS NO LATER THAN SEPTEMBER 3 , 2009 (FIVE BUSINESS DAYS BEFORE THE INITIALLY SCHEDULED EXPIRATION DATE OF THE EXCHANGE OFFER). If you request exhibits to any incorporated documents, 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 the CDBLs, Capitol or the Exchange Offer that differs from, or adds to, the information in this document or in documents that are publicly filed with the SEC. Therefore, if anyone gives you different or additional information, you should not rely on it.

If you are in a jurisdiction where it is unlawful to offer the units, or to ask for offer the securities offered by this 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 prospectus does not extend to you.

The information contained in this 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 each CDBL has been supplied by each such CDBL.

LEGAL MATTERS

Certain legal matters relating to the validity of the shares of the Series A Preferred and Trust-Preferred Securities offered by this prospectus will be passed upon for Capitol by Brian English, Capitol’s General Counsel. Certain federal income tax matters relating to the Exchange Offer will be passed upon for Capitol by Honigman Miller Schwartz and Cohn LLP.

EXPERTS

The consolidated financial statements of Capitol and the effectiveness of internal control over financial reporting incorporated by reference in this prospectus have been so incorporated in reliance on the reports of BDO Seidman, LLP, an independent registered public accounting firm, to the extent and for the periods set forth in their reports, incorporated herein by reference, given on the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of each of the CDBLs attached to this prospectus as Appendix A 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, which is attached as part of Appendix A, given on the authority of said firm as experts in accounting and auditing.

111

APPENDIX A-1

FINANCIAL INFORMATION REGARDING CAPITOL DEVELOPMENT BANCORP LIMITED III

Management's discussion and analysis of financial condition and results of operations	A1-2
Condensed interim consolidated financial statements as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 (unaudited)	A1-5
Audited consolidated financial statements as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006	A1-18

A1-1

Management's Discussion and Analysis of Financial Condition

Capitol Development Bancorp Limited III ("CDBL III") is a bank-development company engaged in commercial banking activities through its subsidiaries (collectively, the "Banks"), Community Bank of Rowan (located in Salisbury, North Carolina) which is 51% owned, Bank of Santa Barbara (located in Santa Barbara, California) which is 51% owned and Summit Bank of Kansas City (located in Lee's Summit, Missouri) which is 55% owned. CDBL III'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 $262.7 million at June 30, 2009, a decrease from $264.8 million at December 31, 2008. Total assets approximated $227.3 million at year-end 2007. Decreased assets in the six-month 2009 period resulted from lower levels of portfolio loans. Increased assets from 2007 to 2008 resulted mainly from higher levels of portfolio loans at the Banks, funded by growth in deposits.

Total portfolio loans approximated $210.5 million at June 30, 2009 compared to $213.9 million at December 31, 2008 ($193.8 million at December 31, 2007).

The allowance for loan losses at June 30, 2009 approximated $3.8 million or 1.79% of total portfolio loans, compared to the December 31, 2008 ratio of 1.6% (1.5% at December 31, 2007).

The allowance for loan losses, which is considered a critical accounting policy of CDBL III, 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.

Accounting for income taxes is considered a critical accounting policy of CDBL III and requires significant estimates and management judgments. At December 31, 2008 and June 30, 2009, it had a deferred tax asset approximating $3.7 million. The deferred tax asset is composed primarily of net operating loss carryforwards and temporary differences relating to the allowance for loan losses and start-up expenses of the Banks. If it is determined that realization of the deferred tax asset is in doubt, a valuation reserve is required to reduce the deferred tax asset to the amount which is more-likely-than-not realizable. No valuation reserve has been deemed necessary by management, inasmuch as it is believed that it is more-likely-than-not that the deferred tax asset will be realized. Such conclusion is based on Capitol's prior experience with de novo banks which incur operating losses and large provisions for loan losses in their most early periods of operation and ultimately become profitable. If the Banks do not ultimately become profitable in the manner anticipated, a valuation allowance against the deferred tax asset may be necessary in the future which would adversely affect CDBL III's results of operations in that period.

Total deposits approximated $203.8 million at June 30, 2009, a decrease of approximately $3.6 million from the $207.4 million level at December 31, 2008 ($184.7 million at December 31, 2007).

The Banks seek to obtain noninterest-bearing deposits as a means to reduce their cost of funds. Noninterest-bearing deposits approximated $25.4 million at June 30, 2009 or about 12.49% of total deposits, a decrease of approximately $194,000 from December 31, 2008 compared to an increase of $6.5 million during 2008. Noninterest-bearing deposits can fluctuate significantly from day to day, depending upon customer account activity.

CDBL III's stockholders' equity approximated $14.4 million at June 30, 2009 or approximately 5.48% of total assets. Total equity approximated $24.5 million and $25.0 million at June 30, 2009 and December 31, 2008, respectively, or 9.34% and 9.4% of total assets. Capital adequacy is discussed elsewhere in this narrative.

A1-2

The net loss attributable to CDBL III for the six months ended June 30, 2009 approximated $174,000, compared with net income of approximately $137,000 in the corresponding 2008 period. Net income attributable to CDBL III for the year ended December 31, 2008 approximated $186,000, compared with a net loss of approximately $706,000 for 2007 and a net loss of $2.7 million in 2006. Net losses in 2007 and 2006 related 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, 2009 approximated $6.2 million, compared with $6.9 million for the six-month 2008 period. Total interest income for the year ended December 31, 2008 approximated $13.5 million, compared with $13 million in 2007 and $4.6 million in 2006. The interim decrease in interest income in 2009 relates primarily to decreased rates in the current environment, coupled with a slight decrease in portfolio loans during the period. Increased interest income in 2008 and 2007 resulted primarily from higher levels of portfolio loans and other earning assets associated with the Banks' growth.

Total interest expense approximated $2.5 million for the six months ended June 30, 2009 and $3.6 million for the corresponding 2008 period. For the year ended December 31, 2008, total interest expense approximated $6.8 million ($6.6 million at December 31, 2007). Increases in interest expense correlate with growth in interest-bearing deposits during the periods.

Net interest income approximated $3.7 million for the six months ended June 30, 2009, compared with $3.3 million for the 2008 corresponding period. Net interest income for the year ended December 31, 2008 approximated $6.8 million, compared with $6.4 million in 2007.

The provision for loan losses was $1.3 million for the six months ended June 30, 2009, compared with $429,000 in the corresponding 2008 period. The provision for loan losses was $967,000 for the year ended December 31, 2008 ($1.5 million in 2007 and $1.2 million in 2006). The increased provision 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.

Total noninterest income approximated $653,000 for the six months ended June 30, 2009, compared with $484,000 for the corresponding 2008 period. Noninterest income for the year ended December 31, 2008 approximated $921,000 ($977,000 in 2007 and $328,000 in 2006). Noninterest income is generated by fees from syndication and placement of non-portfolio residential mortgage and commercial loans and gains on sales of government-guaranteed loans. These revenue sources may fluctuate due to interest rates, real estate values, and the variability of loan purchasers and related pricing of potential loan sales which can influence the decision on whether loans will be sold.

Total noninterest expense approximated $3.6 million for the six months ended June 30, 2009, compared with $2.9 million for the corresponding 2008 period. For the year ended December 31, 2008, total noninterest expense approximated $6 million, compared with $7.6 million in 2007 and $8.5 million in 2006. The significant decrease in operating expense in 2008 was mainly attributable to the deferral of compensation costs related to loan origination activities. Noninterest expense in 2006 included $589,000 of nonrecurring start-up and preopening costs related to new bank activity.

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 $39.0 million at June 30, 2009, $34.6 million at December 31, 2008 and $25.9 million at December 31, 2007. 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, 2009 is adequate to fund loan demand and to meet depositor needs.

A1-3

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 CDBL III, 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, CDBL III and its Banks meet or exceed regulatory capital requirements to which they are subject.

There are certain new accounting standards either becoming effective or being issued in 2009 and 2008. They are discussed in Note E of the accompanying condensed consolidated interim financial statements and Note B of the accompanying annual consolidated financial statements.

As discussed in Note B of the annual consolidated annual financial statements, Financial Accounting Standards Statement No. 160 (FAS 160), Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, became effective January 1, 2009. FAS 160 revises the classification of noncontrolling interests (previously described as minority interests in consolidated subsidiaries) to the equity section of the balance sheet and revises certain line items within the consolidated statement of operations. The accompanying consolidated financial statements for periods prior to January 1, 2009 have been adjusted to reflect the implementation of FAS 160 as if it had occurred at the beginning of the periods presented.

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A1-4

CAPITOL DEVELOPMENT BANCORP LIMITED III

Condensed Interim Consolidated Financial Statements

A1-5

See notes to condensed interim consolidated financial statements.

	June 30, 2009 (Unaudited)			December 31, 2008
				(as adjusted)
ASSETS
Cash and due from banks	$	3,401,733		$	3,616,711
Money-market funds and interest-bearing deposits		25,049,149			10,132,462
Federal funds sold		10,570,000			20,849,000
Cash and cash equivalents		39,020,882			34,598,173
Loans held for sale					192,000
Investment securities—Note B:
Available for sale, carried at fair value		4,587,257			8,238,752
Held for long-term investment, carried at amortized
cost which approximates fair value		1,978,300			1,800,964
Total investment securities		6,565,557			10,039,716
Portfolio loans, less allowance for loan losses of
$3,760,000 in 2009 and $3,481,000 in 2008		206,740,612			210,411,917
Premises and equipment		3,528,032			3,709,639
Accrued interest income		838,192			840,426
Goodwill		300,000			300,000
Other real estate owned		1,342,497			648,955
Other assets		4,396,528			4,026,313

TOTAL ASSETS	$	262,732,300		$	264,767,139

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	25,442,403		$	25,248,494
Interest-bearing		178,330,073			182,135,961
Total deposits		203,772,476			207,384,455
Debt obligations		33,860,000			31,810,000
Accrued interest on deposits and other liabilities		550,633			558,724
Total liabilities		238,183,109			239,753,179

EQUITY:
CDBL III stockholders' equity:
Common stock, no par value,
51,000 shares authorized;
15,745 shares issued and outstanding		18,275,000			18,275,000
Retained-earnings deficit		(3,766,446	)		(3,592,061	)
Fair value adjustment (net of tax effect) for investment
securities available for sale (accumulated other
comprehensive income)		(101,087	)		33,404
Total CDBL III stockholders' equity		14,407,467			14,716,343
Noncontrolling interests		10,141,724			10,297,617
Total equity		24,549,191			25,013,960

TOTAL LIABILITIES AND EQUITY	$	262,732,300		$	264,767,139

A1-6

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

See notes to condensed interim consolidated financial statements.

	Six Months Ended June 30
	2009			2008
				(as adjusted)
Interest income:
Portfolio loans (including fees)	$	6,081,021		$	6,622,480
Loans held for sale		6,777			3,285
Taxable investment securities		129,455			2,252
Federal funds sold		14,170			195,749
Money market and interest bearing deposits		11,967			9,340
Other		3,221			37,603
Total interest income		6,246,611			6,870,709
Interest expense:
Deposits		2,357,602			3,149,378
Debt obligations and other		185,364			411,718
Total interest expense		2,542,966			3,561,096
Net interest income		3,703,645			3,309,613
Provision for loan losses		1,292,116			428,698
Net interest income after provision
for loan losses		2,411,529			2,880,915

Noninterest income:
Service charges on deposit accounts		90,061			43,273
Fees from origination of non-portfolio residential
mortgage loans		112,045			107,489
Fees from servicing government-guaranteed loans		38,602			31,980
Gain on sales of government-guaranteed loans		342,666			214,083
Other		69,311			86,999
Total noninterest income		652,685			483,824

Noninterest expense:
Salaries and employee benefits		1,379,642			1,182,935
Occupancy		301,029			316,057
Equipment rent, depreciation and maintenance		182,113			228,236
Other		1,748,008			1,170,986
Total noninterest expense		3,610,792			2,898,214
Income (loss) before income taxes		(546,578	)		466,525
Income taxes (benefit)		(216,300	)		185,600
NET INCOME (LOSS)		(330,278	)		280,925
Less net losses (income) attributable to noncontrolling
interests		155,893			(143,547	)

NET INCOME (LOSS) ATTRIBUTABLE TO
CDBL III	$	(174,385	)	$	137,378

NET INCOME (LOSS) PER SHARE
ATTRIBUTABLE TO CDBL III—Note C	$	(11.08	)	$	8.73

A1-7

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

See notes to condensed interim consolidated financial statements.

	Capitol Development Bancorp Limited III Stockholders' Equity
	Common Stock		Retained- Earnings Deficit			Accumulated Other Comprehensive Income (Loss)			Total CDBL III Stockholders' Equity			Noncontrolling Interests			Total Equity

Six Months Ended June 30, 2008
Balances at January 1, 2008	$	17,745,000	$	(3,778,299	)				$	13,966,701		$	10,084,030		$	24,050,731

Cash capital contribution from
majority shareholder		230,000								230,000						230,000

Components of comprehensive
income:
Net income for 2008 period				137,378						137,378			143,547			280,925
Fair value adjustment for
investment securities
available for sale (net of
tax effect)						$	16,645			16,645						16,645
Comprehensive income
for the 2008 period										154,023			143,547			297,570

BALANCES AT JUNE 30, 2008	$	17,975,000	$	(3,640,921	)	$	16,645		$	14,350,724		$	10,227,577		$	24,578,301

Six Months Ended June 30, 2009
Balances at January 1, 2009	$	18,275,000	$	(3,592,061	)	$	33,404		$	14,716,343		$	10,297,617		$	25,013,960

Components of comprehensive
loss:
Net loss for 2009 period				(174,385	)					(174,385	)		(155,893	)		(330,278	)
Fair value adjustment for
investment securities
available for sale (net of
tax effect)							(134,491	)		(134,491	)					(134,491	)
Comprehensive loss
for the 2009 period										(308,876	)					(464,769	)

BALANCES AT JUNE 30, 2009	$	18,275,000	$	(3,766,446	)	$	(101,087	)	$	14,407,467		$	10,141,724		$	24,549,191

A1-8

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

See notes to condensed interim consolidated financial statements.

	Six Months Ended June 30
	2009			2008
				(as adjusted)
OPERATING ACTIVITIES
Net income (loss) for the period	$	(330,278	)	$	280,925
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses		1,292,116			428,698
Depreciation of premises and equipment		207,592			264,498
Net accretion of investment security
premiums discounts		(53,413	)
Gain on sales of government-guaranteed loans		(342,666	)		(214,083	)
Write-down on other real estate owned		30,000
Originations and purchases of loans held for sale		(1,962,925	)		(1,112,832	)
Proceeds from sales of loans held for sale		2,154,925			1,616,032
Increase in accrued interest income and other assets		(299,634	)		(64,187	)
Decrease in accrued interest expense and other liabilities		(8,091	)		(199,430	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		687,626			999,621

INVESTING ACTIVITIES
Proceeds from calls, prepayments and maturities of investment
securities		5,442,134			2,552,901
Purchase of securities available for sale		(1,978,400	)		(6,630,763	)
Purchase of securities held for long-term investment		(139,000	)		(542,300	)
Net increase in portfolio loans		1,998,313			(12,185,111	)
Purchases of premises and equipment		(25,985	)		(52,390	)

NET CASH USED BY INVESTING ACTIVITIES		5,297,062			(16,857,663	)

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and
savings accounts		64,102,132			19,027,047
Net decrease in certificates of deposit		(67,714,111	)		(1,669,656	)
Net borrowings from debt obligations		2,050,000			1,561,000
Capital contribution from majority shareholder					230,000

NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES		(1,561,979	)		19,148,391

INCREASE IN CASH AND CASH EQUIVALENTS		4,422,709			3,290,349
Cash and cash equivalents at beginning of period		34,598,173			25,858,332

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	39,020,882		$	29,148,681

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	2,674,147		$	3,876,168
Transfers of loans to other real estate owned		723,542

A1-9

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

The accompanying condensed consolidated financial statements of Capitol Development Bancorp Limited III ("CDBL III") 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 CDBL III considers necessary for a fair presentation of the interim periods.

The consolidated financial statements include the accounts of CDBL III and its majority-owned subsidiaries after elimination of intercompany accounts and transactions and giving effect to applicable noncontrolling interests.

The results of operations for the six-month period ended June 30, 2009 are not necessarily indicative of the results to be expected for the year ending December 31, 2009.

Investment securities consisted of the following (in $1,000s):

	June 30, 2009				December 31, 2008
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Available for sale:
United States government agency securities	$	3,500	$	3,500	$	6,746	$	6,831
Mortgage backed securities		941		982		1,142		1,175
Trust-preferred securities		300		105		300		233
		4,741		4,587		8,188		8,239
Held for long-term investment:
Federal Home Loan Bank stock		1,926		1,926		1,750		1,750
Other		52		52		51		51
		1,978		1,978		1,801		1,801

	$	6,719	$	6,565	$	9,989	$	10,040

Investments in Federal Home Loan Bank stock are restricted and may only be resold to, or redeemed by, the issuer. The trust-preferred securities were issued by a subsidiary of Capitol Bancorp Limited.

Gross unrealized gains and losses on investment securities available for sale were as follows (in $1,000s):

	June 30, 2009				December 31, 2008
	Gains		Losses		Gains		Losses
United States government agency securities					$	85
Mortgage backed securities	$	41				33
Trust-preferred securities			$	195			$	67

	$	41	$	195	$	118	$	67

A1-10

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

NOTE B—INVESTMENT SECURITIES—Continued

Management does not believe any individual unrealized loss as of June 30, 2009 represents an other-than-temporary loss (primarily due to such amounts being attributable to changes in interest rates). Further, it does not intend to sell such securities and believes it is unlikely sale would become required before the amortized cost can be recovered.

Gross realized gains and losses from sales and maturities of investment securities were insignificant for the periods presented.

Scheduled maturities of investment securities held as of June 30, 2009 were as follows (in $1,000s):

	Amortized Cost		Estimated Fair Value

Due in one year or less	$	3,500	$	3,500
After ten years		1,241		1,087
Securities held for long-term investment, without standard maturities		1,978		1,978
	$	6,719	$	6,565

NOTE C—NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO CDBL III

Net income (loss) per share attributable to CDBL III is based on the weighted average number of common shares outstanding (15,745 shares). There were no common stock equivalents or other forms of dilutive instruments outstanding during the periods presented.

FAS No. 157 establishes a hierarchy that prioritizes the use of fair value inputs used in valuation methodologies into the following three levels:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be derived from or corroborated by observable market data by correlation or other means.

Level 3: Significant unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of CDBL III's valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Investment securities available for sale: Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based on quoted prices, when available. If quoted prices are not available, fair values are measured using independent pricing models, as Level 2 values.

Mortgage loans held for sale: Mortgage loans held for sale are carried at the lower of cost or fair value and are measured on a nonrecurring basis. Fair value is based on independent quoted market prices, where applicable, or the prices for other mortgage whole loans with similar characteristics.

A1-11

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Loans: CDBL III does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of the collateral.

Other real estate owned: At the time of foreclosure, foreclosed properties are adjusted to fair value less estimated costs to sell upon transfer from portfolio loans to other real estate owned, establishing a new accounting basis. CDBL III subsequently adjusts fair value on other real estate owned on a nonrecurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value.

The balances of assets and liabilities measured at fair value on a recurring basis as of June 30, 2009 were as follows (in $1,000s):

	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)

Securities available for sale:
United State government agency securities	$	3,500			$	3,500
Mortgage backed securities		982				982
Trust-preferred securities		105	$	105
	$	4,587	$	105	$	4,482

The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2008 were as follows:

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale
United State government agency securities	$	6,831	$	6,831
Mortgage backed securities		1,175		1,175
Trust-preferred securities		233		233
	$	8,239	$	8,239

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2009 were as follows (in $1,000s):

	Total		Significant Unobservable Inputs (Level 3)

Impaired loans (1)	$	2,126	$	2,126

Other real estate owned (1)	$	1,342	$	1,342

(1)	Represents carrying value and related write-downs for which adjustments are based on the appraised value of the applicable collateral or foreclosed property or other estimates of fair value.

A1-12

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2008, other than mortgage loans held for sale, were as follows (in $1,000's):

	Total		Significant Other Observable Inputs (Level 2)

Impaired loans (1)	$	3,476	$	3,476

(1)	Represents carrying value and related write-downs for which adjustments are based on the appraised value of the collateral.

CDBL III began applying the fair value measurement and disclosure provisions of FAS No. 157 effective January 1, 2009 to nonfinancial assets and liabilities measured on a nonrecurring basis which did not have a material effect on CDBL III's consolidated financial position upon implementation. CDBL III measures the fair value of the following on a nonrecurring basis: (1) long-lived assets and (2) foreclosed assets.

[The remainder of this page intentionally left blank]

A1-13

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Carrying values and estimated fair values of financial instruments for FAS No. 107 disclosure purposes were as follows (in $1,000s):

	June 30, 2009						December 31, 2008
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	39,021		$	39,021		$	34,598		$	34,598
Loans held for sale								192			192
Investment securities:
Available for sale		4,587			4,587			8,239			8,239
Held for long-term investment		1,978			1,978			1,801			1,801
		6,565			6,565			10,040			10,040
Portfolio loans:
Loans secured by real estate:
Commercial		60,515			60,329			61,644			62,441
Residential (including multi-family)		68,093			68,245			60,826			60,562
Construction, land development and other land		43,421			41,651			51,584			50,186
Total loans secured by real estate		172,029			170,225			174,054			173,189
Commercial and other business-purpose loans		32,161			31,700			33,469			33,243
Consumer		5,687			5,756			6,002			5,988
Other		624			600			368			44
Total portfolio loans		210,501			208,281			213,893			212,464
Less allowance for loan losses		(3,760	)		(3,760	)		(3,481	)		(3,481	)
Net portfolio loans		206,741			204,521			210,412			208,983

Financial Liabilities:
Deposits:
Noninterest-bearing		25,442			25,442			25,248			25,248
Interest-bearing:
Demand accounts		55,800			55,484			54,896			54,896
Time certificates of less than $100,000		58,548			58,557			76,346			76,504
Time certificates of $100,000 or more		63,982			63,993			50,894			50,991
Total interest-bearing		178,330			178,034			182,136			182,391
Total deposits		203,772			203,476			207,384			207,639
Debt obligations		33,860			33,958			31,810			31,858

Estimated fair values of financial assets and liabilities in the preceding table 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). For example, the estimated fair value of portfolio loans is based on discounted cash flow computations. Similarly, the estimated fair value of time deposits, debt obligations and subordinated debentures were determined through discounted cash flow computations. Such estimates of fair value are not intended to represent market value or portfolio liquidation value, and only represent an estimate of fair value based on current financial reporting requirements.

Given current market conditions, a portion of the loan portfolio is not readily marketable and market prices do not exist. CDBL III has not attempted to market the loan portfolio to potential buyers, if any exist, to determine the fair value of those instruments in accordance with the definition in FAS No. 157. Since negotiated prices in illiquid markets depend upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Accordingly, the fair value measurements for loans included in the table above are unlikely to represent the instruments' liquidation values.

A1-14

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements, which provides a definition of fair value for accounting purposes, establishes a framework for measuring fair value and expands related financial statement disclosures. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which deferred the effective date of SFAS No. 157 until January 1, 2009 for nonfinancial assets and nonfinancial liabilities except those items recognized or disclosed at fair value on an annual or on a more frequently recurring basis. The implementation of previously deferred aspects of Statement No. 157 in 2009 (as permitted by FSP FAS 157-2) did not have a material effect on CDBL III's results of operations or financial position. Fair value disclosures are set forth in Note D to the condensed interim financial statements.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations, to further enhance the accounting and financial reporting related to business combinations. Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, (3) requires that acquisition-related and restructuring costs be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The effects of CDBL III's adoption of Statement No. 141(R) had no impact upon implementation and its subsequent impact will depend upon the extent and magnitude of acquisitions in the future.

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent's equity, (2) the amount of consolidated net income (loss) attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 became effective for CDBL III on January 1, 2009 and the accompanying condensed consolidated financial statements reflect implementation of the new accounting standard as if it occurred as of the beginning of the periods presented.

On April 9, 2009, the FASB issued the following three FASB Staff Positions (FSP), which become effective for second quarter reporting, with earlier implementation permitted for the first quarter of 2009. CDBL III elected to implement the new guidance effective January 1, 2009.

FSP FAS 107-1 and APB 28-1 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, and APB Opinion No. 28, Interim Financial Reporting, to require interim disclosures about fair value of financial instruments in addition to annual reporting. The required disclosures are included in Note D to the condensed consolidated financial statements.

FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance for debt securities to make it more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in financial statements. Implementation of this new guidance did not have a material effect on CDBL III's consolidated financial statements. The expanded interim disclosures about investment securities are set forth in Note B to the condensed consolidated financial statements.

A1-15

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

FSP FAS 157-4 amends prior fair value guidance to aid in determining fair value when the volume and level of activity for an asset or liability have significantly decreased and identifying transactions that are not orderly. This new guidance is intended to clarify that significant adjustments to quoted prices may be necessary to estimate fair value when there has been a significant decrease in the volume and activity for the asset/liability in relation to normal market activity. Fair value is the price that would be received to sell an asset (or paid to transfer a liability) in an orderly transaction (that is, not a forced liquidation or distressed sale) between willing market participants under current market conditions. CDBL III's implementation of FSP FAS 157-4 and related disclosures are set forth in Note D to the condensed consolidated financial statements.

In March 2008 the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. This new guidance revises the presentation and disclosure of derivatives and hedging activities, became effective for CDBL III on January 1, 2009 and did not have a material impact on CDBL III's condensed consolidated financial statements upon implementation.

In February 2008, the FASB issued FSB FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The new guidance clarifies transfers and certain transactions' accounting subject to the provisions of FAS 140 and becomes effective January 1, 2009. This new guidance did not have a material impact on CDBL III's consolidated financial position or results of operations upon implementation.

In June 2009, the FASB issued Statement No. 166, Accounting for Transfers of Financial Assets – an Amendment of FASB Statement No. 140. This new guidance revises the presentation and disclosure of transfers of financial assets and the effects of a transfer on an entity's financial position, operating results and cash flows. Statement No. 166 applies to annual financial statements and interim periods beginning on or after November 15, 2009. Management has not completed its review of this new guidance.

In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification™ and The Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162. On the effective date of this statement, the FASB Accounting Standards Codification™ (Codification) will supersede all then-existing non-Securities and Exchange Commission (SEC) accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009 and will not have a material impact to the Corporation's consolidated financial statements.

In June 2009, the FASB issued Statements No. 166 and 167 which relate to consolidation of variable-interest entities and to amend existing guidance for when a company 'derecognizes' transfers of financial assets, respectively. Both new standards require a number of additional disclosures upon implementation January 1, 2010. These new standards are not expected to have a material impact on CDBL III's consolidated financial statements upon implementation.

The FASB has also recently issued several proposals to amend, supersede or interpret existing accounting standards which may impact CDBL III's financial statements at a later date, such as a proposed amendment to Statement No. 128, Earnings per Share, among other things.

CDBL III's management has not completed its analysis of this new guidance (as proposed, where applicable) although it anticipates the potential impact (if finalized, where applicable) would not be material to CDBL III'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 CDBL III's consolidated financial statements.

A1-16

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Management has reviewed subsequent events through the time of filing these condensed consolidated financial statements with the Securities and Exchange Commission on August 12 , 2009.

NOTE F—SUBSEQUENT EVENTS

In July 2009, definitive agreements were entered into to sell CDBL III's interests in Bank of Santa Barbara and Community Bank of Rowan, subject to regulatory approval and other contingencies. Sale proceeds of the divestiture of these two institutions are estimated to approximate $14.8 million.

[The remainder of this page intentionally left blank]

A1-17

Years ended December 31, 2008, 2007 and 2006

A1-18

	Page
Report of Independent Registered Public Accounting Firm	A1-20
Consolidated Balance Sheets	A1-21
Consolidated Statements of Operations	A1-22
Consolidated Statements of Changes in Stockholders' Equity	A1-23
Consolidated Statements of Cash Flows	A1-24
Notes to Consolidated Financial Statements	A1-25 – A1-44

A1-19

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheets of Capitol Development Bancorp Limited III and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2008. 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.

The consolidated financial statements include retrospective adjustments associated with a new accounting pronouncement that became effective for the Corporation on January 1, 2009—specifically, Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51, which resulted in the reclassification of the Corporation's prior minority interests in consolidated subsidiaries to a new noncontrolling interests component of total equity. Note B to the consolidated financial statements describes the retrospective application of this new accounting method in greater detail.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capitol Development Bancorp Limited III and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

(July 6, 2009 as to the retrospective adoption of

May 26, 2009

Financial Accounting Standards Statement No. 160 as described

in Note B of the consolidated financial statements)

A1-20

	December 31
	2008			2007
	(as adjusted)			(as adjusted)
ASSETS
Cash and due from banks	$	3,616,711		$	20,081,619
Money-market and interest-bearing deposits		10,132,462			483,713
Federal funds sold		20,849,000			5,293,000
Cash and cash equivalents		34,598,173			25,858,332
Loans held for sale		192,000			639,600
Investment securities available for sale, carried at fair value—Note C		8,238,752
Investment securities held for long-term investment, carried at amortized cost which approximates fair value—Note C		1,800,964			1,008,000
Total investment securities		10,039,716			1,008,000
Portfolio loans, less allowance for loan losses of $3,481,000 in 2008 and $2,826,000 in 2007—Note D		210,411,917			190,950,366
Premises and equipment—Note F		3,709,639			4,114,852
Accrued interest income		840,426			816,009
Goodwill		300,000			300,000
Other real estate owned		648,955
Other assets		4,026,313			3,654,330

TOTAL ASSETS	$	264,767,139		$	227,341,489

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	25,248,494		$	18,796,166
Interest-bearing—Note G		182,135,961			165,920,416
Total deposits		207,384,455			184,716,582
Debt obligations—Note H		31,810,000			17,679,000
Accrued interest on deposits and other liabilities		558,724			895,176
Total liabilities		239,753,179			203,290,758

EQUITY—Notes I and O:
CDBL III stockholders' equity:
Common stock, no par value, 51,000 shares authorized; 15,745 shares issued and outstanding		18,275,000			17,745,000
Retained-earnings deficit		(3,592,061	)		(3,778,299	)
Fair value adjustment (net of tax effect) for investment securities available for sale (accumulated other comprehensive income)		33,404
Total CDBL III stockholders' equity		14,716,343			13,966,701
Noncontrolling interests		10,297,617			10,084,030
Total equity		25,013,960			24,050,731

TOTAL LIABILITIES AND EQUITY	$	264,767,139		$	227,341,489

A1-21

	Year Ended December 31
	2008			2007			2006
	(as adjusted)			(as adjusted)			(as adjusted)
Interest income:
Portfolio loans (including fees)	$	12,965,760		$	11,744,111		$	3,885,370
Loans held for sale		8,330			185,927			7,819
Taxable investment securities		154,668
Federal funds sold		276,161			997,914			594,507
Money market and interest-bearing deposits		36,788			12,825			104,202
Other		79,363			24,530			3,664
Total interest income		13,521,070			12,965,307			4,595,562
Interest expense:
Deposits		6,143,791			6,298,505			1,494,876
Debt obligations		616,257			271,807
Total interest expense		6,760,048			6,570,312			1,494,876
Net interest income		6,761,022			6,394,995			3,100,686
Provision for loan losses—Note D		966,994			1,524,000			1,238,000
Net interest income after provision for loan losses		5,794,028			4,870,995			1,862,686
Noninterest income:
Service charges on deposit accts		116,799			35,565			9,774
Fees from origination of non-portfolio residential
mortgage loans		198,827			264,943			151,581
Fees from syndication and placement of non- portfolio commercial loans					35,700
Fees from servicing government-guaranteed loans		77,922			31,652
Gain on sales of government-guaranteed loans		341,125			486,370			23,358
Other		186,773			122,520			143,435
Total noninterest income		921,446			976,750			328,148
Noninterest expense:
Salaries and employee benefits		2,587,804			3,952,009			4,421,352
Occupancy		628,251			600,425			494,773
Equipment rent, depreciation and maintenance		468,339			472,481			413,200
Preopening and start-up costs								589,156
Other—Note K		2,364,455			2,565,541			2,582,331
Total noninterest expense		6,048,849			7,590,456			8,500,812
Income (loss) before income tax benefit		666,625			(1,742,711	)		(6,309,978	)
Income taxes (benefit)—Note L		266,800			(670,500	)		(2,468,900	)
NET INCOME (LOSS)		399,825			(1,072,211	)		(3,841,078	)
Less net losses (income) attributable to noncontrolling interests		(213,587	)		366,185			1,113,941

NET INCOME (LOSS) ATTRIBUTABLE
TO CDBL III	$	186,238		$	(706,026	)	$	(2,727,137	)

NET INCOME (LOSS) PER SHARE
ATTRIBUTABLE TO CDBL III	$	11.83		$	(44.84	)	$	(173.21	)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

A1-22

	Capitol Development Bancorp Limited III Stockholders' Equity									As Adjusted
	Common Stock		Retained- Earnings Deficit			Accumulated Other Comprehensive Income	Total CDBL III Stockholders' Equity			Noncontrolling Interests			Total Equity

Balances at January 1, 2006	$	15,745,000	$	(345,136	)		$	15,399,864		$	7,281,237		$	22,681,101

Noncontrolling interests' investment in formation of banks											4,282,919			4,282,919

Net loss for 2006				(2,727,137	)			(2,727,137	)		(1,113,941	)		(3,841,078	)

BALANCES AT DECEMBER 31, 2006		15,745,000		(3,072,273	)			12,672,727			10,450,215			23,122,942

Cash capital contribution from majority shareholder—Note E		2,000,000						2,000,000						2,000,000

Net loss for 2007				(706,026	)			(706,026	)		(366,185	)		(1,072,211	)

BALANCES AT DECEMBER 31, 2007		17,745,000		(3,778,299	)			13,966,701			10,084,030			24,050,731

Cash capital contribution from majority shareholder—Note E		530,000						530,000						530,000

Components of comprehensive income:
Net income for 2008				186,238				186,238			213,587			399,825
Fair value adjustment for investment securities available for sale (net of tax income tax effect)						$ 33,404		33,404						33,404
Comprehensive income for 2008								219,642						433,229

BALANCES AT DECEMBER 31, 2008	$	18,275,000	$	(3,592,061	)	$ 33,404	$	14,716,343		$	10,297,617		$	25,013,960

A1-23

	Year Ended December 31
	2008			2007			2006
	(as adjusted)			(as adjusted)			(as adjusted)
OPERATING ACTIVITIES
Net income (loss)	$	399,825		$	(1,072,211	)	$	(3,841,078	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Provision for loan losses		966,994			1,524,000			1,238,000
Depreciation of premises and equipment		529,513			507,217			392,824
Net amortization (accretion) of investment security premiums (discounts)		(29,029	)
Loss (gain) on sale of premises and equipment		(771	)		1,702
Gain on sales of government-guaranteed loans		(341,125	)		(486,370	)		(23,358	)
Write-down of other real estate owned		2,039
Deferred income tax credit		(204,900	)		(670,500	)		(2,404,900	)
Originations and purchases of loans held for sale		(2,652,357	)		(21,174,024	)		(2,625,885	)
Proceeds from sales of loans held for sale		3,099,957			20,922,624			2,237,685
Increase in accrued interest income and other assets		(215,772	)		(317,871	)		(286,234	)
Increase (decrease) in accrued interest expense and other liabilities		(336,452	)		590,185			(1,686,951	)

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES		1,217,922			(175,248	)		(6,999,897	)

INVESTING ACTIVITIES
Proceeds from calls, prepayments and maturities of investment securities		8,911,307
Purchase of securities available for sale		(17,050,218	)
Purchase of securities held for long-term investment		(805,600	)		(873,600	)		(54,000	)
Net increase in portfolio loans		(20,808,314	)		(100,913,529	)		(88,163,225	)
Proceeds from sales of other real estate owned		69,400
Proceeds from sales of premises and equipment		5,353			5,338
Purchases of premises and equipment		(128,882	)		(210,541	)		(3,809,924	)

NET CASH USED BY INVESTING ACTIVITIES		(29,806,954	)		(101,992,332	)		(92,027,149	)

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings accounts		15,203,259			28,353,647			30,900,168
Net increase in certificates of deposit		7,464,614			70,948,582			48,407,169
Net borrowings from debt obligations		14,131,000			17,679,000
Resources provided by noncontrolling interests								4,282,919
Capital contribution from majority shareholder		530,000			2,000,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		37,328,873			118,981,229			83,590,256
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		8,739,841			16,813,649			(15,436,790	)
Cash and cash equivalents at beginning of year		25,858,332			9,044,683			24,481,473

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	34,598,173		$	25,858,332		$	9,044,683

Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	7,017,830		$	6,184,349		$	1,298,179
Transfers of loans to other real estate owned		720,894

A1-24

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

Capitol Development Bancorp Limited III (the "Corporation" or "CDBL III") is a bank development company. At December 31, 2008, it had three majority-owned subsidiaries (collectively, the “Banks”), Community Bank of Rowan (51% owned), which commenced operations in February 2006, in Salisbury, North Carolina; Bank of Santa Barbara (51% owned), which commenced operations in December 2005, in Santa Barbara, California; and Summit Bank of Kansas City (55% owned), which commenced operations in November 2005, in Lee's Summit, Missouri.

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

The Corporation and the 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 noncontrolling interests.

Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted 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.

Loans Held for Sale: Loans held for sale represent residential real estate mortgage loans held for sale into the secondary market. Loans held for sale are stated at the aggregate lower of cost or market. Fees from the origination of loans held for sale are recognized in the period the loans are originated.

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Investment Securities: Investment securities available for sale are carried at fair value with unrealized gains and losses reported as a separate component of stockholders' equity, net of tax effect (accumulated other comprehensive income). All other investment securities are classified as held for long-term investment and are carried at amortized cost which approximates fair value. 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 based on evaluation of the portfolio (including potential impairment of individual loans and concentrations of credit), past loss experience, current economic conditions, volume, amount and composition of the loan portfolio, loan commitments outstanding and other factors. The allowance is increased by provisions charged to operations and reduced by net charge-offs.

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.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the transferred asset has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the bank does not maintain effective control over the transferred asset through an agreement to repurchase it before its maturity. Transfers of financial assets are generally limited to commercial loans sold, which were

A1-26

insignificant for the periods presented, and the sale of residential mortgage loans into the secondary market, the extent of which is disclosed in the statements of cash flows.

Interest and Fees on Loans: Interest income on loans is recognized based upon the principal balance of loans outstanding. Direct costs of successful origination of portfolio loans generally exceed fees from loan originations (net deferred costs approximated $367,000 at December 31, 2008).

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 of equipment, furniture and software, which have 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. Buildings are generally depreciated on a straight-line basis with estimated useful lives of approximately 40 years.

Other Real Estate Owned: Other real estate owned is comprised of properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. These properties held for sale are carried at estimated fair value (net of estimated selling cost) at the date acquired and are periodically reviewed for subsequent changes in fair value.

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

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.

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. If it is determined that realization of deferred tax assets is in doubt, a valuation allowance is required to reduce deferred tax assets to the amount which is more-likely-than-not realizable. 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.

A1-27

Net Income (Loss) Per Share Attributable to CDBL III: Net income (loss) per share attributable to CDBL III is based on the weighted average number of common shares outstanding (15,745 shares). There were no common stock equivalents or other forms of dilutive instruments for the periods presented.

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's only element of comprehensive income (loss) other than net income (loss) from operations was the net change in the fair value adjustment for investment securities.

New Accounting Standards: In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements, which provides a definition of fair value for accounting purposes, establishes a framework for measuring fair value and expands related financial statement disclosures. Statement No. 157 does not require any new fair value measurements and was initially effective for the Corporation beginning January 1, 2008. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which defers the effective date of SFAS No. 157 until January 1, 2009 for nonfinancial assets and nonfinancial liabilities except those items recognized or disclosed at fair value on an annual or on a more frequently recurring basis. The partial implementation of Statement No. 157 in 2008 (as permitted by FSP FAS 157-2) did not have a material effect on the Corporation's results of operations or financial position. Fair value disclosures are set forth in Note M to the consolidated financial statements.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected are required to be reported in results of operations at each reporting date. Statement No. 159 was applied prospectively and implemented by the Corporation effective January 1, 2008. As of December 31, 2008, the Corporation has not elected the fair value option.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations, to further enhance the accounting and financial reporting related to business combinations. Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, (3) requires that acquisition-related and restructuring costs be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The effects of the Corporation's adoption of Statement No. 141(R) will depend upon the extent and magnitude of acquisitions after December 31, 2008.

A1-28

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent's equity, (2) the amount of consolidated net income (loss) attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 applies to years beginning on or after December 15, 2008. This new guidance has been retrospectively adopted and the accompanying consolidated financial statements have been adjusted to reflect its implementation as of the beginning of the periods presented.

In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities about Transfers of Financial Assets and Variable Interest Entities. This new guidance expands on disclosures regarding financial assets transferred in a securitization or asset-backed financing arrangement, servicing assets and information about variable-interest entities and became effective for the Corporation on December 31, 2008. The new disclosure requirements had no material effect on the Corporation's consolidated financial statements, inasmuch as the Corporation has not engaged in securitizations or asset-backed financing arrangements, has no servicing assets or investments in variable-interest entities.

In February 2008, the FASB issued FSB FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The new guidance clarifies transfers and certain transactions' accounting subject to the provisions of FAS 140 and becomes effective January 1, 2009. Management does not expect this new guidance to have a material impact on the Corporation's financial position or results of operations upon implementation.

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

·	Proposed amendment to Statement No. 128, Earnings per Share; and
·	FASB FSP to require recalculation of leveraged leases if the timing of tax benefits affect cash flows.

A1-29

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

Investment securities consisted of the following at December 31:

	2008							2007
	Amortized Cost		Estimated Fair Value		Gross Unrealized Gain (Loss)			Amortized Cost		Estimated Fair Value		Gross Unrealized Gain (Loss)
Available for sale:
United States government agency securities	$	6,745,737	$	6,830,094	$	84,357
Mortgage backed securities		1,142,403		1,175,258		32,855
Trust-preferred securities		300,000		233,400		(66,600	)
		8,188,140		8,238,752		50,612
Held for long-term investment:
Federal Home Loan Bank stock		1,750,100		1,750,100		--		$	958,000	$	958,000	$	--
Common stock		50,864		50,864		--			50,000		50,000
		1,800,964		1,800,964		--			1,008,000		1,008,000		--

	$	9,989,104	$	10,039,716	$	50,612		$	1,008,000	$	1,008,000	$	--

Investment securities available for sale are scheduled to mature at varying dates up to 30 years. The trust-preferred securities were issued by Capitol Trust XII, a subsidiary of Capitol. The gross unrealized loss at December 31, 2008 has been outstanding for less than one year. Management has both the intent and ability to hold these securities for a time period necessary to recover the amortized costs.

Investments in Federal Home Loan Bank stock are restricted and may only be resold to or redeemed by the issuer.

A1-30

Portfolio loans consisted of the following at December 31:

	2008			2007
Loans secured by real estate:
Commercial	$	61,644,530		$	61,243,931
Residential (including multi-family)		60,826,730			50,997,933
Construction, land development and other land		51,582,948			44,093,528
Total loans secured by real estate		174,054,208			156,335,392
Commercial and other business-purpose loans		33,468,695			31,244,570
Consumer		6,001,305			4,172,230
Other		368,709			2,024,174
Total portfolio loans		213,892,917			193,776,366
Less allowance for loan losses		(3,481,000	)		(2,826,000	)
Net portfolio loans	$	210,411,917		$	190,950,366

Transactions in the allowance for loan losses are summarized below:

	2008			2007		2006
Balance at beginning of period	$	2,826,000		$	1,302,000	$	64,000
Provision charged to operations		966,994			1,524,000		1,238,000
Loans charged off (deduction)		(311,994	)		--		--
Recoveries		--			--		--

Balance at December 31	$	3,481,000		$	2,826,000	$	1,302,000

Nonperforming loans (i.e., loans which are 90 days or more past due and loans on nonaccrual status) as of December 31, 2008 (none as of December 31, 2007) are summarized below:

Nonaccrual loans:
Loans secured by real estate:
Residential (including multi-family)	$	813,000
Construction, land development and other land		2,895,000
Commercial and other business-purpose loans		600,000
Total nonaccrual loans		4,308,000

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

Total nonperforming loans	$	4,308,000

If nonperforming loans had performed in accordance with their contractual terms during 2008, additional interest income of $209,000 would have been recorded. At December 31, 2008, there were no material amounts of loans which were restructured or otherwise renegotiated as a concession to troubled borrowers.

A1-31

Loans are considered impaired when it is probable that all amounts due according to the contractual terms of a loan agreement will not be collected, including contractually scheduled interest and principal payments. Impaired loans, which are included in nonperforming loans, as of December 31, 2008 (none as of December 31, 2007) are summarized below:


Impaired loans:
Loans which have an allowance requirement	$	484,000
Loans which do not have an allowance requirement		3,824,000

Total impaired loans	$	4,308,000

Allowance for loan losses related to impaired loans	$	68,000

Impaired loans which do not have an allowance requirement include collateral-dependent loans for which direct write-downs have been made (when necessary) and, accordingly, no allowance requirement or allocation is necessary. During 2008, the average recorded investment in impaired loans approximated $1.5 million. Interest income is recorded on impaired loans if not on nonaccrual status, or may be recorded on a cash basis in some circumstances, if such payments are not credited to principal. In 2008, interest income recorded on impaired loans approximated $1,000.

The amounts of the allowance for loan losses allocated in the following table 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:

	December 31, 2008					December 31, 2007
	Amount		Percentage of Total Portfolio Loans			Amount		Percentage of Total Portfolio Loans

Loans secured by real estate:
Commercial	$	816,000		0.38	%	$	879,000		0.45	%
Residential (including multi-family)		924,000		0.43			651,000		0.34
Construction, land development and other land		776,000		0.37			714,000		0.37
Total loans secured by real estate		2,516,000		1.18			2,244,000		1.16
Commercial and other business-purpose loans		864,000		0.40			512,000		0.26
Consumer		97,000		0.05			70,000		0.04
Other		4,000

Total allowance for loan losses	$	3,481,000		1.63	%	$	2,826,000		1.46	%

A1-32

In the ordinary course of business, the Banks make loans to officers and directors of the Corporation and its subsidiaries including their immediate families and companies in which they are principal owners. At December 31, 2008 total loans to these persons approximated $8,439,000 ($11,535,000 as of December 31, 2007). During 2008, $4,010,000 of new loans were made to these persons and repayments totaled $7,106,000. 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 and those deposits, as of December 31, 2008 and 2007, approximated $17.1 million and $17.7 million, respectively. 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 $902,000 in 2008 ($866,000 and $785,000 in 2007 and 2006, respectively).

During 2008, Capitol made cash capital contributions of $400,000 and $130,000 to assist Bank of Santa Barbara and Community Bank of Rowan, respectively, in meeting interim regulatory capital ratio requirements (a similar contribution in the amount of $2,000,000 was made to the Community Bank of Rowan in 2007). Such additional investment in the respective banks by the Corporation did not alter the Corporation's ownership percentage of the respective banks, however, it creates a future claim on the respective banks' equity in the event of a share exchange transaction or other future capital event.

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

	2008			2007
Land, building and improvements	$	2,641,320		$	2,622,399
Leasehold improvements		637,175			630,899
Equipment, furniture and software		1,859,392			1,764,930
		5,137,887			5,018,228
Less accumulated depreciation		(1,428,248	)		(903,376	)

	$	3,709,639		$	4,114,852

The Banks rent office space under operating leases. Rent expense under these lease agreements approximated $346,000, $328,000 and $279,000 in 2008, 2007 and 2006, respectively, net of sublease income of approximately $34,000 and $29,000 in 2008 and 2007, respectively (none in 2006).

A1-33

NOTE F—PREMISES AND EQUIPMENT—Continued

At December 31, 2008 future minimum rental payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year were as follows:

2009	$	350,000
2010		358,000
2011		365,000
2012		318,000
2013		169,000
2014 and thereafter		485,000

Total	$	2,045,000

NOTE G—DEPOSITS

The aggregate amount of time deposits of $100,000 or more approximated $50.9 million as of December 31, 2008 ($46.4 million as of December 31, 2007).

At December 31, 2008, the scheduled maturities of time deposits were as follows:

2009	$	119,745,000
2010		6,799,000
2011		585,000
2012		60,000
2014 and thereafter		51,000

Total	$	127,240,000

NOTE H—DEBT OBLIGATIONS

Debt obligations ($31,810,000 and $17,679,000 at December 31, 2008 and 2007, respectively) consisted of borrowings from a Federal Home Loan Bank (FHLB) which represent advances secured by certain portfolio residential real estate mortgage loans and other eligible collateral. Such FHLB advances become due at varying dates and bear interest at market short-term rates (approximately 2.19% at December 31, 2008). At December 31, 2008, assets pledged to secure these credit facilities approximated $41.0 million and unused lines of credit under these facilities approximated $9.2 million.

At December 31, 2008, scheduled debt maturities of debt obligations were as follows:

2009	$	25,620,000
2010		4,190,000
2011		2,000,000

Total	$	31,810,000

A1-34

NOTE I—STOCKHOLDERS' EQUITY

The Corporation's common stock consists of two classes outstanding at December 31, 2008 and 2007:

Class A			1,000
Class B			14,745

Total shares issued and outstanding			15,745

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 March 31, 2009, 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 expire in June 2009.

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

NOTE J—EMPLOYEE RETIREMENT PLAN

Eligible employees 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 $73,000, $76,000 and $30,000 in 2008, 2007 and 2006, respectively.

NOTE K—OTHER NONINTEREST EXPENSE

The more significant elements of other noninterest expense consisted of the following:

	2008		2007		2006
Contracted data processing and administrative services	$	911,106	$	874,724	$	792,517
Bank services (ATMs, telephone banking and Internet banking)		135,014		109,546		54,679
Advertising		271,901		307,812		211,312
FDIC insurance premiums and other regulatory fees		178,992		133,419
Paper, printing and supplies		139,778		143,460		180,482
Other		727,664		996,580		1,343,341

	$	2,364,455	$	2,565,541	$	2,582,331

A1-35

Income taxes include the following components:

NOTE L—INCOME TAXES

	2008			2007			2006
Federal:
Current expense (credit)	$	386,000		$	-0-		$	(64,000	)
Deferred (credit)		(157,000	)		(529,000	)		(1,869,000	)
		229,000			(529,000	)		(1,933,000	)
State:
Current expense		85,700
Deferred (credit)		(47,900	)		(141,500	)		(535,900	)
		37,800			(141,500	)		(535,900	)

	$	266,800		$	(670,500	)	$	(2,468,900	)

Net federal deferred income tax assets, included as a component of other assets, consisted of the following at December 31:

	2008			2007
Allowance for loan losses	$	1,184,000		$	961,000
Net operating loss carryforwards		1,832,000			1,701,000
Organizational costs		449,000			485,000
Other, net		(470,000	)		(309,000	)

	$	2,995,000		$	2,838,000

Net state deferred income tax assets, included as a component of other assets, consisted of the following at December 31:

	2008		2007
Allowance for loan losses	$	285,700	$	264,900
Net operating loss carryforwards		247,200		298,100
Organizational costs		111,800		142,200
Other, net		80,600		(27,800	)

	$	725,300	$	677,400

A1-36

NOTE L—INCOME TAXES—Continued

In conjunction with its annual review, management concluded that there were no significant uncertain tax positions requiring recognition in the financial statements. The evaluation was performed for the tax years ended 2005, 2006, 2007 and 2008, the tax years which remain subject to examination by major tax jurisdictions and was updated as of December 31, 2008.

The Corporation may from time to time be assessed interest or penalties associated with tax liabilities by major tax jurisdictions, although any such assessments are estimated to be minimal and immaterial. To the extent the Corporation has received an assessment for interest and/or penalties, it has been classified in the statements of operations as a component of other noninterest expense.

NOTE M—FAIR VALUE

Effective January 1, 2008, the Corporation implemented FAS No. 157, as discussed in Note B. FAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not to be adjusted for transaction costs. An orderly transaction is one that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

FAS No. 157 requires the use of valuation techniques which are consistent with a market approach, income approach and/or cost method. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost method is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques are to be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, FAS No. 157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy follows:

A1-37

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 3: Significant unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of the Corporation's valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Loans: The Corporation does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of the collateral.

Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon estimates, are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique and, further, changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values.

The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2008 were as follows:

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale	$	8,238,752	$	8,238,752

A1-38

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2008, other than mortgage loans held for sale, were as follows:

	Total		Significant Other Observable Inputs (Level 2)	Total Gain (Losses)

Impaired loans (1)	$	3,476,000	$ 3,476,000	$ 203,000

(1)	Represents carrying value and related write-downs for which adjustments are based on the appraised value of the collateral.

The Corporation will apply the fair value measurement and disclosure provisions of FAS No. 157 effective January 1, 2009 to nonfinancial assets and liabilities measured on a nonrecurring basis. The Corporation measures the fair value of the following on a nonrecurring basis: (1) long-lived assets and (2) foreclosed assets.

Carrying values and estimated fair values of financial instruments for FAS No. 107 disclosure purposes were as follows at December 31 (in $1,000s):

	2008						2007
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	34,598		$	34,598		$	25,858		$	25,858
Investment securities available for sale		8,239			8,239
Investment securities held for long-term investment		1,801			1,801			1,008			1,008
Loans held for sale		192			192			640			640
Portfolio loans:
Loans secured by real estate:
Commercial		61,644			62,441			61,244			61,309
Residential (including multi-family)		60,826			60,562			50,998			51,110
Construction, land development and other land		51,584			50,186			44,093			43,982
Total loans secured by real estate		174,054			173,189			156,335			156,401
Commercial and other business-purpose loans		33,469			33,243			31,245			31,390
Consumer		6,002			5,988			4,172			4,157
Other		368			44			2,024			2,023
Total portfolio loans		213,893			212,464			193,776			193,971
Less allowance for loan losses		(3,481	)		(3,481	)		(2,826	)		(2,826	)
Net portfolio loans		210,412			208,983			190,950			191,145

Financial Liabilities:
Deposits:
Noninterest-bearing		25,248			25,248			18,796			18,796
Interest-bearing:
Demand accounts		54,896			54,896			46,147			46,146
Time certificates of less than $100,000		76,346			76,504			73,331			73,398
Time certificates of $100,000 or more		50,894			50,991			46,443			46,457
Total interest-bearing		182,136			182,391			165,921			166,001
Total deposits		207,384			207,639			184,717			184,797
Debt obligations		31,810			31,858			17,679			17,645

A1-39

Estimated fair values of financial assets and liabilities in the preceding table 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). For example, the estimated fair values of portfolio loans, time deposits and debt obligations were determined through discounted cash flow computations. 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.

Given current market conditions, a portion of the loan portfolio is not readily marketable and market prices do not exist. The Corporation has not attempted to market the loan portfolio to potential buyers, if any exist, to determine the fair value of those instruments in accordance with the definition in FAS No. 157. Since negotiated prices in illiquid markets depend upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Accordingly, the fair value measurements for loans included in the preceding table above are unlikely to represent the instruments' liquidation values.

NOTE N—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 ($19,000 and $49,000 at December 31, 2008 and 2007, respectively). Other loan commitments outstanding consist of unused lines of credit and approved, but unfunded, specific loan commitments ($45.6 million and $48.4 million at December 31, 2008 and 2007, respectively). These loan commitments (stand-by letters of credit and unfunded loans) generally expire within one year and are reviewed periodically for continuance or renewal.

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

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 balance required as of December 31, 2008 and 2007 was $172,000 and $25,000, respectively.

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

A1-40

NOTE O—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.

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.

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% (4% for other banks) and an allowance for loan losses of not less than 1% for the first three years of operations.

As of December 31, 2008, 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, 2008, that the Corporation and the Banks meet all capital adequacy requirements to which the entities are subject.

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A1-41

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

The following table summarizes the amounts (in thousands) and related ratios of the Corporation's consolidated regulatory capital position:

	December 31
	2008			2007

Tier 1 capital to average total assets:
Minimum required amount	$	³ 21,319		$	³ 17,822
Actual amount	$	24,681		$	23,740
Ratio		9.27	%		10.67	%

Tier 1 capital to risk-weighted assets:
Minimum required amount(1)	$	³ 8,572		$	³ 7,840
Actual amount	$	24,681		$	23,740
Ratio		11.52	%		12.11	%

Combined Tier 1 and Tier 2 capital to risk- weighted assets:
Minimum required amount(2)	$	³ 17,144		$	³ 15,680
Amount required to meet “Well-Capitalized” category(3)	$	³ 21,430		$	³ 19,600
Actual amount	$	27,370		$	26,195
Ratio		12.77	%		13.36	%

(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.

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A1-42

NOTE P—PARENT COMPANY FINANCIAL INFORMATION

	December 31
	2008		2007
ASSETS
Money market funds on deposit with affiliated banks	$	43,525	$	98,453
Premises and equipment				4,810
Investments in subsidiaries		13,771,614		13,026,688
Other assets		911,404		863,000

TOTAL ASSETS	$	14,726,543	$	13,992,951

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities	$	10,200	$	26,250
Stockholders' equity attributable to CDBL III		14,716,343		13,966,701

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	14,726,543	$	13,992,951

	Year Ended December 31
	2008			2007			2006
Interest income	$	1,590		$	12,825		$	74,464
Expenses:
Salary and employee benefits					74,754			1,433,018
Equipment expense and depreciation		4,810			10,947
Other		40,468			373,276			922,106
Total expenses		45,278			458,977			2,355,124
Loss before equity in net losses (income) of consolidated subsidiaries and federal income taxes		(43,688	)		(446,152	)		(2,280,660	)
Equity in undistributed net losses (income) of consolidated subsidiaries		(214,926	)		411,874			1,204,477
Income (loss) before federal income tax benefit		171,238			(858,026	)		(3,485,137	)
Federal income tax credit		(15,000	)		(152,000	)		(758,000	)

NET INCOME (LOSS) ATTRIBUTABLE TO CDBL III	$	186,238		$	(706,026	)	$	(2,727,137	)

A1-43

NOTE P—PARENT COMPANY FINANCIAL INFORMATION—Continued

On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis-point special assessment on each insured depository institution's assets minus Tier 1 capital as of June 30, subject to a maximum amount based on 10 basis-points applied to the institution's assessment base for the second quarter of 2009. The amount of the special assessment for the Corporation's bank subsidiaries is estimated to approximate $111,000. The special assessment is payable September 30, 2009 and the FDIC has announced that an additional special assessment of up to 5 basis-points later in 2009 is probable, but the amount is uncertain.

	Year Ended December 31
	2008			2007			2006
OPERATING ACTIVITIES
Net income (loss) for the period	$	186,238		$	(706,026	)	$	(2,727,137	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Equity in undistributed net losses (income) of subsidiaries		(214,926	)		411,874			1,204,477
Depreciation expense		4,810			1,804
Increase in other assets		(15,000	)		(57,000	)		(789,000	)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		(16,050	)		8,750			(9,000	)
NET CASH USED BY OPERATING ACTIVITIES		(54,928	)		(340,598	)		(2,320,660	)

INVESTING ACTIVITIES
Net cash investments in subsidiaries		(530,000	)		(2,000,000	)		(4,457,723	)
Purchase of software					(6,614	)
NET CASH USED BY INVESTING ACTIVITIES		(530,000	)		(2,006,614	)		(4,457,723	)

FINANCING ACTIVITIES
Capital contribution from majority shareholder		530,000			2,000,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		530,000			2,000,000

DECREASE IN CASH AND CASH EQUIVALENTS		(54,928	)		(347,212	)		(6,778,383	)
Cash and cash equivalents at beginning of year		98,453			445,665			7,224,048

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	43,525		$	98,453		$	445,665

NOTE Q—SUBSEQUENT EVENT

A1-44

APPENDIX A-2

FINANCIAL INFORMATION REGARDING CAPITOL DEVELOPMENT BANCORP LIMITED IV

Management's discussion and analysis of financial condition and results of operations	A2-2
Condensed interim consolidated financial statements as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 (unaudited)	A2-5
Audited consolidated financial statements as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006	A2-15

A2-1

Management's Discussion and Analysis of Financial Condition

Capitol Development Bancorp Limited IV ("CDBL IV") is a bank-development company engaged in commercial banking activities and wealth management services through its subsidiaries, Sunrise Bank of Atlanta (located in Atlanta, Georgia) which is 51% owned, Bank of Valdosta (located in Valdosta, Georgia) which is 56% owned, Evansville Commerce Bank (located in Evansville, Indiana) which is 51% owned, Asian Bank of Arizona (located in Phoenix, Arizona) which is 51% owned (collectively, the “Banks”) and Capitol Wealth, Incorporated (located in Charlotte, North Carolina) which is 100% owned. CDBL IV'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. Through Capitol Wealth Incorporated, CDBL IV offers various wealth products, including investment management, brokerage, insurance, trusts and estate and tax planning.

Total assets approximated $226 million at June 30, 2009, a slight decrease from $229 million at December 31, 2008. Total assets approximated $172.9 million at December 31, 2007. Increased assets in 2008 resulted mainly from higher levels of portfolio loans at the Banks, funded by growth in deposits. Assets and, in particular, portfolio loans decreased in early 2009.

Total portfolio loans approximated $176.3 million at June 30, 2009 compared to $193.2 million at December 31, 2008 ($156.3 million at December 31, 2007).

The allowance for loan losses at June 30, 2009 approximated $4.1 million or 2.3% of total portfolio loans, compared to the December 31, 2008 ratio of 1.8% (1.6% at December 31, 2007).

The allowance for loan losses, which is considered a critical accounting policy of CDBL IV, 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.

Accounting for income taxes is considered a critical accounting policy of CDBL IV and requires significant estimates and management judgments. At December 31, 2008 and June 30, 2009, it had a deferred tax asset approximating $7.8 million. The deferred tax asset is composed primarily of net operating loss carryforwards and temporary differences relating to the allowance for loan losses and start-up expenses of the Banks. If it is determined that realization of the deferred tax asset is in doubt, a valuation reserve is required to reduce the deferred tax asset to the amount which is more-likely-than-not realizable. No valuation reserve has been deemed necessary by management, inasmuch as it is believed that it is more-likely-than-not that the deferred tax asset will be realized. Such conclusion is based on Capitol's prior experience with de novo banks which incur operating losses and large provisions for loan losses in their most early periods of operation and ultimately become profitable. If the Banks do not ultimately become profitable in the manner anticipated, a valuation allowance against the deferred tax asset may be necessary in the future which would adversely affect CDBL IV's results of operations in that period.

Total deposits approximated $185.2 million at June 30, 2009, an increase of approximately $2.8 million from the $182.4 million level at December 31, 2008 ($128.4 million at December 31, 2007) resulting from higher levels of noninterest-bearing deposits at the Banks. Increases in deposits in 2008 and 2007 relate to the Banks' early-period growth.

The Banks seek to obtain noninterest-bearing deposits as a means to reduce their cost of funds. Noninterest-bearing deposits approximated $16.8 million at June 30, 2009 or about 9.1%

of total deposits, an increase of approximately $6.2 million from December 31, 2008 compared to an increase of $1.9 million during 2008. Noninterest-bearing deposits can fluctuate significantly from day to day, depending upon customer account activity.

A2-2

CDBL IV stockholders' equity approximated $3.5 million at June 30, 2009 or approximately 1.5% of total assets. Total equity approximated $14.4 million and $16.4 million at June 30, 2009 and December 31, 2008, respectively, or 6.4% and 7.2% of total assets. Capital adequacy is discussed elsewhere in this narrative.

The net loss attributable to CDBL IV for the six months ended June 30, 2009 approximated $1.6 million, compared with $2.0 million in the corresponding 2008 period. The net loss attributable to CDBL IV for the year ended December 31, 2008 approximated $3.7 million, compared with $4.1 million for 2007 and $3.1 million in 2006. The net losses for these periods relates to the expected early-period operations of the subsidiaries.

The principal source of operating revenues is interest income. Total interest income for the six months ended June 30, 2009 approximated $5.7 million, compared with $6.3 million for the six-month 2008 period. Total interest income for the year ended December 31, 2008 approximated $12.8 million, compared with $10.3 million in 2007 and $2.7 million in 2006. The interim decrease in interest income in 2009 related primarily to decreased rates in the current environment, coupled with lower levels of portfolio loans during the period. Increased interest income in 2008 and 2007 resulted from higher levels of portfolio loans and other earning assets associated with the Banks' growth.

Total interest expense approximated $2.9 million for the six months ended June 30, 2009 and $3.5 million for the corresponding 2008 period; the lower interim 2009 interest expense resulted primarily from decreased interest rates. For the year ended December 31, 2008, total interest expense approximated $7.1 million ($4.7 million for the year ended December 31, 2007 and $730,000 in 2006). Increases in interest expense correlate with growth in interest-bearing deposits during the periods.

Net interest income approximated $2.7 million for the six months ended June 30, 2009, compared with $2.8 million for the 2008 corresponding period. Net interest income for the year ended December 31, 2008 approximated $5.7 million, compared with $5.5 million in 2007 and $2.0 million in 2006. Changes in net interest income during these periods resulted from the Banks' growth and, in 2009, lower interest rates.

The provision for loan losses was approximately $1.8 million for the six months ended June 30, 2009, compared with $1.5 million in the corresponding 2008 period. The provision for loan losses was $2.5 million for the year ended December 31, 2008 ($1.8 million in 2007 and $930,000 in 2006). The provisions for loan losses for these periods related primarily to portfolio loan growth and, in 2009, changes in asset quality. 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.

Total noninterest income approximated $3.1 million for the six months ended June 30, 2009, compared with $3.4 million for the corresponding 2008 period. Noninterest income for the year ended December 31, 2008 approximated $6.5 million ($5.1 million in 2007 and $2.7 million in 2006). Noninterest income in 2008 increased significantly due to wealth-management revenue and placement of non-portfolio residential mortgages. Wealth-management revenue also decreased significantly during the interim 2009 period, due to adverse changes in market conditions for wealth-management products. Revenues from residential mortgage loan originations and gain on sales of government-guaranteed loans may fluctuate due to market volatility, interest rates, real estate values, and the variability of loan purchasers and related pricing of potential sales of government-guaranteed loans which can influence the decision on whether loans will be sold.

Total noninterest expense approximated $7.7 million for the six months ended June 30, 2009, compared with $8.6 million for the corresponding 2008 period. For the year ended December 31, 2008, total noninterest expense approximated $16.9 million, compared with $16.3 million in 2007 and $10.9 million in 2006. The largest component of noninterest expense is salaries and employee benefits which decreased in early 2009 due to decreased staffing levels at Capitol Wealth. Salaries and benefits increased significantly from 2006 to 2008 due to early-period growth at the subsidiaries.

Cash and cash equivalents approximated $31.4 million at June 30, 2009, $23.9 million at December 31, 2008 and $6.1 million at December 31, 2007. 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, 2009 is adequate to fund loan demand and to meet depositor needs.

A2-3

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 CDBL IV, 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, CDBL IV and its Banks meet or exceed regulatory capital requirements to which they are subject.

As discussed in Note B of the annual consolidated financial statements, Financial Accounting Standards Statement No. 160 (FAS 160), Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, became effective January 1, 2009. FAS 160 revises the classification of noncontrolling interests (previously described as minority interests in consolidated subsidiaries) to the equity section of the balance sheet and revises certain line items within the consolidated statement of operations. The accompanying consolidated financial statements for periods prior to January 1, 2009 have been adjusted to reflect the implementation of FAS 160 as if it had occurred at the beginning of the periods presented.

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A2-4

CAPITOL DEVELOPMENT BANCORP LIMITED IV

Condensed Interim Consolidated Financial Statements

A2-5

See notes to condensed interim consolidated financial statements.

	June 30, 2009 (Unaudited)			December 31, 2008
				(as adjusted)
ASSETS
Cash and due from banks	$	4,502,888		$	4,286,151
Money-market funds and interest-bearing deposits		26,574,298			13,769,498
Federal funds sold		296,000			5,862,000
Cash and cash equivalents		31,373,186			23,917,649
Loans held for sale		2,100,405			667,901
Investment securities held for long-term investment,
carried at amortized cost which approximates
fair value		906,200			869,200
Portfolio loans, less allowance for loan losses of
$4,127,000 in 2009 and $3,535,000 in 2008		172,198,494			189,658,176
Premises and equipment		1,863,636			2,157,804
Accrued interest income		779,090			863,973
Goodwill		210,000			210,000
Other intangibles		697,833			1,445,757
Other real estate owned		4,750,849			537,065
Other assets		11,075,020			8,631,825

TOTAL ASSETS	$	225,954,713		$	228,959,350

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	16,792,535		$	10,547,718
Interest-bearing		168,387,406			171,870,431
Total deposits		185,179,941			182,418,149
Debt obligations		16,131,989			21,032,548
Accrued interest on deposits and other liabilities		10,232,140			9,124,515
Total liabilities		211,544,070			212,575,212

EQUITY:
CDBL IV stockholders’ equity:
Common stock, no par value,
51,000 shares authorized;
15,243 shares issued and outstanding		16,279,000			15,938,000
Retained-earnings deficit		(12,807,956	)		(11,224,296	)
Total CDBL IV stockholders’ equity		3,471,044			4,713,704
Noncontrolling interests in consolidated subsidiaries		10,939,599			11,670,434
Total equity		14,410,643			16,384,138

TOTAL LIABILITIES AND EQUITY	$	225,954,713		$	228,959,350

A2-6

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

See notes to condensed interim consolidated financial statements.

	Six Months Ended June 30
	2009			2008
				(as adjusted)
Interest income:
Portfolio loans (including fees)	$	5,599,454		$	6,103,467
Loans held for sale		29,878			23,252
Federal funds sold		3,805			161,706
Money market and interest bearing deposits		32,303			12,298
Other					24,395
Total interest income		5,665,440			6,325,118
Interest expense:
Deposits		2,509,539			3,028,023
Debt obligations and other		434,827			499,078
Total interest expense		2,944,366			3,527,101
Net interest income		2,721,074			2,798,017
Provision for loan losses		1,834,073			1,537,378
Net interest income after provision
for loan losses		887,001			1,260,639

Noninterest income:
Trust and wealth-management revenue		1,906,854			2,624,174
Service charges on deposit accounts		113,197			76,222
Fees from origination of non-portfolio residential
mortgage loans		188,831			143,654
Fees from syndication and placement of non-
portfolio commercial loans		55,666			13,705
Fees from servicing government-guaranteed loans		8,615			111,323
Gain on sales of government-guaranteed loans		73,561			160,229
Other		739,902			312,595
Total noninterest income		3,086,626			3,441,901

Noninterest expense:
Salaries and employee benefits		4,446,348			5,412,721
Occupancy		447,879			452,737
Equipment rent, depreciation and maintenance		285,353			287,864
Other		2,471,042			2,400,916
Total noninterest expense		7,650,622			8,554,238
Loss before income tax benefit		(3,676,995	)		(3,851,698	)
Income tax benefit		(1,362,500	)		(1,377,500	)
NET LOSS		(2,314,495	)		(2,474,198	)
Less net losses attributable to noncontrolling interests		730,835			463,020

NET LOSS ATTRIBUTABLE TO CDBL IV	$	(1,583,660	)	$	(2,011,178	)

NET LOSS PER SHARE ATTRIBUTABLE
TO CDBL IV—Note C	$	(103.89	)	$	(131.94	)

A2-7

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

See notes to condensed interim consolidated financial statements.

	Capitol Development Bancorp Limited IV Stockholders' Equity
	Common Stock		Retained- Earnings Deficit			Total CDBL IV Stockholders' Equity			Noncontrolling Interests			Total Equity

Six Months Ended June 30, 2008
Balances at January 1, 2008	$	15,243,000	$	(7,499,939	)	$	7,743,061		$	12,117,811		$	19,860,872

Investment in consolidated subsidiaries
by noncontrolling interests										490,000			490,000

Cash capital contribution from
majority shareholder		415,000					415,000						415,000

Net loss for the 2008 period				(2,011,178	)		(2,011,178	)		(463,020	)		(2,474,198	)

BALANCES AT JUNE 30, 2008	$	15,658,000	$	(9,511,117	)	$	6,146,883		$	12,144,791		$	18,291,674

Six Months Ended June 30, 2009
Balances at January 1, 2009	$	15,938,000	$	(11,224,296	)	$	4,713,704		$	11,670,434		$	16,384,138

Cash capital contribution from
majority shareholder		341,000					341,000						341,000

Net loss for the 2009 period				(1,583,660	)		(1,583,660	)		(730,835	)		(2,314,495	)

BALANCES AT JUNE 30, 2009	$	16,279,000	$	(12,807,956	)	$	3,471,044		$	10,939,599		$	14,410,643

A2-8

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

See notes to condensed interim consolidated financial statements.

	Six Months Ended June 30
	2009			2008
				(as adjusted)
OPERATING ACTIVITIES
Net loss for the period	$	(2,314,495	)	$	(2,474,198	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Provision for loan losses		1,834,073			1,537,378
Depreciation of premises and equipment		282,535			297,350
Amortization of goodwill and intangibles		133,565			131,560
Loss on sale of premises and equipment		4,811			375
Gain on sales of government-guaranteed loans		(73,561	)		(160,229	)
Reductions to other real estate owned		83,280			415,000
Originations and purchases of loans held for sale		(11,552,854	)		(7,565,665	)
Proceeds from sales of loans held for sale		10,120,350			8,478,181
Increase in accrued interest income and other assets		(1,743,953	)		(3,056,412	)
Increase in accrued interest expense and other liabilities		1,107,625			2,400,883

NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES		(2,118,624	)		4,223

INVESTING ACTIVITIES
Proceeds from calls, prepayments and maturities of investment
securities		87,800
Purchase of securities held for long-term investment		(124,800	)		(377,000	)
Net decrease (increase) in portfolio loans		11,402,106			(34,982,732	)
Proceeds from sales of premises and equipment		25,020
Purchases of premises and equipment		(18,198	)		(77,186	)

NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES		11,371,928			(35,436,918	)

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and
savings accounts		9,373,354			3,179,448
Net increase (decrease) in certificates of deposit		(6,611,562	)		39,152,228
Net borrowings from (payments on) debt obligations		(4,900,559	)		9,574,000
Resources provided by noncontrolling interests					490,000
Capital contribution from majority shareholder		341,000			415,000

NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES		(1,797,767	)		52,810,676

INCREASE IN CASH AND CASH EQUIVALENTS		7,455,537			17,377,982
Cash and cash equivalents at beginning of period		23,917,649			6,099,714

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	31,373,186		$	23,477,696

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	3,090,159		$	3,560,993
Transfers of loans to other real estate owned		4,297,064

A2-9

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited)

The accompanying condensed consolidated financial statements of Capitol Development Bancorp Limited IV ("CDBL IV") 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 CDBL IV considers necessary for a fair presentation of the interim periods.

The consolidated financial statements include the accounts of CDBL IV and its majority-owned subsidiaries after elimination of intercompany accounts and transactions and giving effect to applicable noncontrolling interests.

The results of operations for the six-month period ended June 30, 2009 are not necessarily indicative of the results to be expected for the year ending December 31, 2009.

Investment securities consisted of Federal Home Loan Bank stock at June 30, 2009 and December 31, 2008. Such investment is restricted and may only be resold to or redeemed by the issuer.

NOTE C—NET LOSS PER SHARE ATTRIBUTABLE TO CDBL IV

Net loss per share attributable to CDBL IV is based on the weighted average number of common shares outstanding (15,243 shares). There were no common stock equivalents or other forms of dilutive instruments outstanding during the periods presented.

FAS No. 157 establishes a hierarchy that prioritizes the use of fair value inputs used in valuation methodologies into the following three levels:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 3: Significant unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of CDBL IV's valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

A2-10

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited)

Loans: CDBL IV does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of the collateral.

Other real estate owned: At the time of foreclosure, foreclosed properties are adjusted to fair value less estimated costs to sell upon transfer from portfolio loans to other real estate owned, establishing a new accounting basis. CDBL IV subsequently adjusts fair value on other real estate owned on a nonrecurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value.

There were no assets and liabilities measured at fair value on a recurring basis as of June 30, 2009 and December 31, 2008.

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2009 were as follows (in $1,000s):

	Total		Significant Unobservable Inputs (Level 3)

Impaired loans (1)	$	2,380	$	2,380

Other real estate owned (1)	$	4,751	$	4,751

(1)	Represents carrying value and related write-downs for which adjustments are based on the appraised value of the applicable collateral or foreclosed property or other estimates of fair value.

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2008, other than mortgage loans held for sale, were as follows (in $1,000's):

	Total		Significant Other Observable Inputs (Level 2)

Impaired loans (1)	$	371	$	371

(1)	Represents carrying value and related write-downs for which adjustments are based on the appraised value of the collateral.

CDBL IV began applying the fair value measurement and disclosure provisions of FAS No. 157 effective January 1, 2009 to nonfinancial assets and liabilities measured on a nonrecurring basis; which did not have a material effect on CDBL IV's consolidated financial position upon implementation. CDBL IV measures the fair value of the following on a nonrecurring basis: (1) long-lived assets and (2) foreclosed assets.

A2-11

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited)

Carrying values and estimated fair values of financial instruments for FAS No. 107 disclosure purposes were as follows (in $1,000s):

	June 30, 2009						December 31, 2008
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	31,373		$	31,373		$	23,918		$	23,918
Loans held for sale		2,100			2,100			667			667
Investment securities held for long-term investment		906			906			870			870
Portfolio loans:
Loans secured by real estate:
Commercial		74,672			75,621			74,768			76,354
Residential (including multi-family)		47,360			48,262			48,608			48,796
Construction, land development and other land		31,754			30,708			41,213			40,155
Total loans secured by real estate		153,786			154,591			164,589			165,305
Commercial and other business-purpose loans		18,695			18,666			24,443			24,147
Consumer		2,952			2,964			3,230			3,213
Other		892			811			932			691
Total portfolio loans		176,325			177,032			193,194			193,356
Less allowance for loan losses		(4,127	)		(4,127	)		(3,535	)		(3,535	)
Net portfolio loans		172,198			172,905			189,659			189,821

Financial Liabilities:
Deposits:
Noninterest-bearing		16,793			16,793			10,547			10,547
Interest-bearing:
Demand accounts		40,070			40,045			36,941			36,941
Time certificates of less than $100,000		73,669			73,655			86,258			86,452
Time certificates of $100,000 or more		54,648			54,605			48,672			48,770
Total interest-bearing		168,387			168,305			171,871			172,163
Total deposits		185,180			185,098			182,418			182,710
Debt obligations		16,132			16,159			21,033			20,974

Given current market conditions, a portion of the loan portfolio is not readily marketable and market prices do not exist. CDBL IV has not attempted to market the loan portfolio to potential buyers, if any exist, to determine the fair value of those instruments in accordance with the definition in FAS No. 157. Since negotiated prices in illiquid markets depend upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Accordingly, the fair value measurements for loans included in the table above are unlikely to represent the instruments' liquidation values.

A2-12

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited)

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements, which provides a definition of fair value for accounting purposes, establishes a framework for measuring fair value and expands related financial statement disclosures. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which deferred the effective date of SFAS No. 157 until January 1, 2009 for nonfinancial assets and nonfinancial liabilities except those items recognized or disclosed at fair value on an annual or on a more frequently recurring basis. The implementation of previously deferred aspects of Statement No. 157 in 2009 (as permitted by FSP FAS 157-2) did not have a material effect on CDBL IV's results of operations or financial position. Fair value disclosures are set forth in Note D to the condensed interim financial statements.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations, to further enhance the accounting and financial reporting related to business combinations. Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, (3) requires that acquisition-related and restructuring costs be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The effects of CDBL IV's adoption of Statement No. 141(R) had no impact upon implementation and its subsequent impact will depend upon the extent and magnitude of acquisitions in the future.

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent's equity, (2) the amount of consolidated net income (loss) attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 became effective for CDBL IV on January 1, 2009 and the accompanying condensed consolidated financial statements reflect implementation of the new accounting standard as if it occurred as of the beginning of the periods presented.

On April 9, 2009, the FASB issued three FASB Staff Positions (FSP), which become effective for second quarter reporting, with earlier implementation permitted for the first calendar quarter of 2009. CDBL IV elected to implement the new guidance effective January 1, 2009.

FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance for debt securities to make it more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in financial statements. Implementation of this new guidance did not have a material effect on CDBL IV's consolidated financial statements. The expanded interim disclosures about investment securities are set forth in Note B to the condensed consolidated financial statements.

A2-13

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited)

FSP FAS 157-4 amends prior fair value guidance to aid in determining fair value when the volume and level of activity for an asset or liability have significantly decreased and identifying transactions that are not orderly. This new guidance is intended to clarify that significant adjustments to quoted prices may be necessary to estimate fair value when there has been a significant decrease in the volume and activity for the asset/liability in relation to normal market activity. Fair value is the price that would be received to sell an asset (or paid to transfer a liability) in an orderly transaction (that is, not a forced liquidation or distressed sale) between willing market participants under current market conditions. CDBL IV's implementation of FSP FAS 157-4 and related disclosures are set forth in Note D to the condensed consolidated financial statements.

In March 2008 the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. This new guidance revises the presentation and disclosure of derivatives and hedging activities, became effective for CDBL IV on January 1, 2009 and did not have a material impact on CDBL IV's condensed consolidated financial statements upon implementation.

In February 2008, the FASB issued FSB FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The new guidance clarifies transfers and certain transactions' accounting subject to the provisions of FAS 140 and becomes effective January 1, 2009. This new guidance did not have a material impact on CDBL IV's consolidated financial position or results of operations upon implementation.

In May 2009, the FASB issued Statement No. 165, Subsequent Events. This new guidance requires the disclosure of the date through which an entity has evaluated subsequent events and became effective June 30, 2009. This new guidance did not have a material impact on the Corporation's financial statements. For purposes of the Corporation's June 30, 2009 condensed consolidated financial statements, management has reviewed subsequent events through the time of filing these condensed consolidated financial statements with the Securities and Exchange Commission on August 12 , 2009.

The FASB has also recently issued several proposals to amend, supersede or interpret existing accounting standards which may impact CDBL IV's financial statements at a later date, such as a proposed amendment to Statement No. 128, Earnings per Share, among other things.

CDBL IV's management has not completed its analysis of this new guidance (as proposed, where applicable) although it anticipates the potential impact (if finalized, where applicable) would not be material to CDBL IV's consolidated financial statements.

A2-14

Years ended December 31, 2008, 2007 and 2006

A2-15

	Page
Report of Independent Registered Public Accounting Firm	A2-17
Consolidated Balance Sheets	A2-18
Consolidated Statements of Operations	A2-19
Consolidated Statements of Changes in Stockholders' Equity	A2-20
Consolidated Statements of Cash Flows	A2-21
Notes to Consolidated Financial Statements	A2-22 – A2-43

A2-16

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheets of Capitol Development Bancorp Limited IV and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2008. 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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capitol Development Bancorp Limited IV and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

(July 7, 2009 as to the retrospective adoption of

June 2, 2009

Financial Accounting Standards Statement No. 160 as described

in Note B to the consolidated financial statements)

A2-17

	December 31
	2008			2007
	(as adjusted)			(as adjusted)
ASSETS
Cash and due from banks	$	4,286,151		$	3,498,766
Money-market and interest-bearing deposits		13,769,498			540,948
Federal funds sold		5,862,000			2,060,000
Cash and cash equivalents		23,917,649			6,099,714
Loans held for sale		667,901			1,498,000
Investment securities held for long-term investment, carried at amortized cost which approximates fair value—Note C		869,200			671,800
Portfolio loans, less allowance for loan losses of
$3,535,000 in 2008 and $2,504,000 in 2007—Note D		189,658,176			153,776,897
Premises and equipment—Note F		2,157,804			2,659,722
Accrued interest income		863,973			795,093
Goodwill—Note B		210,000
Other intangibles—Note G		1,445,757			1,285,804
Other real estate owned		537,065			194,206
Other assets		8,631,825			5,956,936

TOTAL ASSETS	$	228,959,350		$	172,938,172

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	10,547,718		$	8,614,619
Interest-bearing—Note H		171,870,431			119,749,834
Total deposits		182,418,149			128,364,453
Debt obligations—Note I		21,032,548			17,651,000
Accrued interest on deposits and other liabilities		9,124,515			7,061,847
Total liabilities		212,575,212			153,077,300

EQUITY—Notes J and P:
CDBL IV stockholders' equity:
Common stock, no par value, 51,000 shares authorized; 15,243 shares issued and outstanding		15,938,000			15,243,000
Retained-earnings deficit		(11,224,296	)		(7,499,939	)
Total CDBL IV stockholders' equity		4,713,704			7,743,061
Noncontrolling interests		11,670,434			12,117,811
Total equity		16,384,138			19,860,872

TOTAL LIABILITIES AND EQUITY	$	228,959,350		$	172,938,172

A2-18

	Year Ended December 31
	2008			2007			2006
	(as adjusted)			(as adjusted)			(as adjusted)
Interest income:
Portfolio loans (including fees)	$	12,449,984		$	9,714,397		$	2,029,247
Loans held for sale		45,969			26,655			11,140
Federal funds sold		256,298			480,854			476,263
Money market and interest-bearing deposits		31,055			13,980			188,171
Other		43,905			15,933			243
Total interest income		12,827,211			10,251,819			2,705,064
Interest expense:
Deposits		6,117,056			4,334,907			654,036
Debt obligations and other		1,017,457			371,281			76,379
Total interest expense		7,134,513			4,706,188			730,415
Net interest income		5,692,698			5,545,631			1,974,649
Provision for loan losses—Note D		2,509,026			1,849,919			930,000
Net interest income after provision for loan losses		3,183,672			3,695,712			1,044,649
Noninterest income:
Trust income and wealth-management revenue		4,960,086			4,045,500			2,274,440
Service charges on deposit accounts		183,813			65,720			9,992
Fees from origination of non-portfolio residential mortgage loans		282,238			195,455			147,691
Fees from syndication and placement of non- portfolio commercial loans		13,705			5,372
Fees from servicing government-guaranteed loans		191,762			190,015
Gain on sales of government-guaranteed loans		160,228			243,624
Other		670,478			401,151			296,139
Total noninterest income		6,462,310			5,146,837			2,728,262
Noninterest expense:
Salaries and employee benefits		10,342,533			10,880,591			5,311,322
Occupancy		926,163			784,397			411,766
Equipment rent, depreciation and maintenance		595,980			555,162			316,853
Preopening and start-up costs								2,122,335
Other—Note L		5,021,740			4,073,007			2,778,095
Total noninterest expense		16,886,416			16,293,157			10,940,371
Loss before income tax benefit		(7,240,434	)		(7,450,608	)		(7,167,460	)
Income tax benefit—Note M		(2,578,700	)		(2,442,700	)		(2,611,000	)
NET LOSS		(4,661,734	)		(5,007,908	)		(4,556,460	)
Less net losses attributable to noncontrolling interests		937,377			939,472			1,462,887

NET LOSS ATTRIBUTABLE TO
CDBL IV	$	(3,724,357	)	$	(4,068,436	)	$	(3,093,573	)

NET LOSS PER SHARE
ATTRIBUTABLE TO CDBL IV	$	(244.33	)	$	(266.91	)	$	(203.74	)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

A2-19

	Capitol Development Bancorp Limited IV Stockholders' Equity								As Adjusted
	Common Stock		Retained- Earnings Deficit			Total CDBL IV Stockholders' Equity			Noncontrolling Interests			Total Equity

Balances at January 1, 2006	$	13,253,000	$	(337,930	)	$	12,915,070		$	-0-		$	12,915,070

Noncontrolling interests' investment in formation of subsidiaries										14,520,170			14,520,170

Issuance of 1,990 shares of common common stock for cash consideration of $1,000 per share		1,990,000					1,990,000						1,990,000

Net loss for 2006				(3,093,573	)		(3,093,573	)		(1,462,887	)		(4,556,460	)

BALANCES AT DECEMBER 31, 2006		15,243,000		(3,431,503	)		11,811,497			13,057,283			24,868,780

Net loss for 2007				(4,068,436	)		(4,068,436	)		(939,472	)		(5,007,908	)

BALANCES AT DECEMBER 31, 2007		15,243,000		(7,499,939	)		7,743,061			12,117,811			19,860,872

Noncontrolling interests' investment in formation of subsidiaries										490,000			490,000

Cash capital contribution from majority stockholder—Note E		695,000					695,000						695,000

Net loss for 2008				(3,724,357	)		(3,724,357	)		(937,377	)		(4,661,734	)

BALANCES AT DECEMBER 31, 2008	$	15,938,000	$	(11,224,296	)	$	4,713,704		$	11,670,434		$	16,384,138

A2-20

	Year Ended December 31
	2008			2007			2006
	(as adjusted)			(as adjusted)			(as adjusted)
OPERATING ACTIVITIES
Net loss	$	(4,661,734	)	$	(5,007,908	)	$	(4,556,460	)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for loan losses		2,509,026			1,849,919			930,000
Depreciation of premises and equipment		604,552			544,625			286,612
Amortization of intangibles		289,452			59,196
Loss on sale of premises and equipment		14,320			22,074			2,077
Loss on sales of other real estate owned		241,358
Gain on sales of government-guaranteed loans		(160,228	)		(243,624	)
Deferred income tax credit		(2,593,700	)		(2,443,700	)		(2,611,000	)
Originations and purchases of loans held for sale		(15,018,365	)		(10,116,163	)		(2,627,215	)
Proceeds from sales of loans held for sale		15,848,464			9,428,163			1,817,215
Increase in accrued interest income and other assets		(809,474	)		(2,166,476	)		(589,623	)
Increase in accrued interest expense on deposits and other liabilities		2,062,668			4,818,538			2,242,109

NET CASH USED BY OPERATING ACTIVITIES		(1,673,661	)		(3,254,356	)		(5,106,285	)

INVESTING ACTIVITIES
Proceeds from calls, prepayments and maturities of investment securities		247,100
Purchase of securities held for long-term investment		(444,500	)		(659,800	)		(12,000	)
Net increase in portfolio loans		(39,693,248	)		(93,874,047	)		(62,633,351	)
Proceeds from sales of other real estate owned		878,954
Purchases of premises and equipment		(116,954	)		(655,875	)		(2,859,235	)

NET CASH USED BY INVESTING ACTIVITIES		(39,128,648	)		(95,189,722	)		(65,504,586	)

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings accounts		10,287,934			19,205,746			17,995,101
Net increase in certificates of deposit		43,765,762			57,893,061			33,270,545
Net borrowings from debt obligations		3,381,548			14,776,000			2,875,000
Resources provided by minority interests		490,000						14,520,170
Net proceeds from issuance of common stock								1,990,000
Capital contribution from majority stockholder		695,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		58,620,244			91,874,807			70,650,816
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		17,817,935			(6,569,271	)		39,945
Cash and cash equivalents at beginning of period		6,099,714			12,668,985			12,629,040

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	23,917,649		$	6,099,714		$	12,668,985

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	7,186,808		$	4,436,799		$	524,715
Transfers of loans to other real estate owned		1,463,171			194,206

A2-21

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

Capitol Development Bancorp Limited IV (the "Corporation" or "CDBL IV") is a bank development company. At December 31, 2008, it had five majority-owned subsidiaries, Sunrise Bank of Atlanta (51% owned), which commenced operations in June 2006, in Atlanta, Georgia; Bank of Valdosta (56% owned), which commenced operations in June 2006, in Valdosta, Georgia; Evansville Commerce Bank (51% owned), which commenced operations in May 2006, in Evansville, Indiana; Asian Bank of Arizona (51% owned), which commenced operations in April 2006, in Phoenix, Arizona (collectively, the “Banks”); and Capitol Wealth Incorporated (100% owned), which commenced operations in January 2006, in Charlotte, North Carolina.

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

The Corporation is engaged in a two business activities—banking and wealth management services. The Banks provide a full range of banking services to individuals, businesses and other customers located in its community. 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.

Capitol Wealth Incorporated provides a variety of wealth management services through a single advisory relationship to assist clients, their families and their businesses in meeting their wealth management needs. Through these relationships, clients have access to a complete suite of wealth products, including investment management, brokerage, insurance, trusts and estate and tax planning, which are currently offered throughout Capitol's national network of community banks.

A2-22

Investment Securities: Investment securities available for sale (none at December 31, 2008 and 2007) are carried at fair value with unrealized gains and losses reported as a separate component of stockholders' equity, net of tax effect (accumulated other comprehensive income). All other investment securities are classified as held for long-term investment and are carried at amortized cost. 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.

A2-23

transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the bank does not maintain effective control over the transferred asset through an agreement to repurchase it before its maturity. Transfers of financial assets are generally limited to commercial loans sold, which were insignificant for the periods presented, and the sale of residential mortgage loans into the secondary market, the extent of which is disclosed in the statements of cash flows.

Goodwill and Other Intangibles: Goodwill is reviewed annually by management for impairment by comparing estimated entity fair value to net assets of the entity. This review is performed at the applicable subsidiary reporting-unit level which has recorded goodwill resulting from acquisitions. Impairment adjustments of goodwill (none through December 31, 2008) are charged against earnings, when determined. Other intangibles, which generally consist of acquired customer lists, are amortized over varying periods of 10 years or less.

Other Real Estate Owned: Other real estate owned 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.

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

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

A2-24

Net Loss Per Share Attributable to CDBL IV: Net loss per share attributable to CDBL IV is based on the weighted average number of common shares outstanding (15,243 shares in 2008 and 2007; 15,184 shares in 2006). There were no common stock equivalents or other forms of dilutive instruments for the periods presented.

A2-25

that acquisition-related and restructuring costs be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The effects of the Corporation's adoption of Statement No. 141(R) will depend upon the extent and magnitude of acquisitions after December 31, 2008.

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent's equity, (2) the amount of consolidated net income (loss) attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 applies to years beginning on or after December 15, 2008. This new guidance has been retrospectively adopted and the accompanying consolidated financial statements have been adjusted to reflect its implementation as of the beginning of the periods presented.

In February 2008, the FASB issued FSB FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The new guidance clarifies transfers and certain transactions' accounting subject to the provisions of FAS 140 and becomes effective January 1, 2009. Management does not expect this new guidance to have a material impact on the Corporation's financial position or results of operations upon implementation.

A2-26

·	Proposed amendment to Statement No. 128, Earnings per Share; and
·	FASB FSP to require recalculation of leveraged leases if the timing of tax benefits affect cash flows.

Investment securities held for long-term investment at December 31, 2008 and 2007 consisted of Federal Home Loan Bank stock. Such investments are restricted and may only be resold to or redeemed by the issuer.

Portfolio loans consisted of the following at December 31:

	2008			2007
Loans secured by real estate:
Commercial	$	74,768,316		$	55,338,889
Residential (including multi-family)		48,608,925			35,564,556
Construction, land development and other land		41,212,216			37,916,490
Total loans secured by real estate		164,589,457			128,819,935
Commercial and other business-purpose loans		24,441,533			20,499,610
Consumer		3,230,273			3,226,264
Other		931,913			3,735,088
Total portfolio loans		193,193,176			156,280,897
Less allowance for loan losses		(3,535,000	)		(2,504,000	)
Net portfolio loans	$	189,658,176		$	153,776,897

Transactions in the allowance for loan losses are summarized below:

	2008			2007
Balance at beginning of period	$	2,504,000		$	930,000
Provision charged to operations		2,509,026			1,849,919
Loans charged off (deduction)		(1,699,012	)		(333,149	)
Recoveries		220,986			57,230

Balance at December 31	$	3,535,000		$	2,504,000

A2-27

Nonperforming loans (i.e., loans which are 90 days or more past due and loans on nonaccrual status) as of December 31, 2008 and 2007 are summarized below:

	December 31
	2008		2007
Nonaccrual loans:
Loans secured by real estate:
Residential (including multi-family)	$	116,000	$	300,000
Construction, land development and other land		1,891,000		80,000
Total loans secured by real estate		2,007,000		380,000
Commercial and other business-purpose loans		318,000		14,000
Total nonaccrual loans		2,325,000		394,000
Past due (>90 days) loans		--		--

Total nonperforming loans	$	2,325,000	$	394,000

If nonperforming loans had performed in accordance with their contractual terms during 2008, additional interest income of $198,000 would have been recorded. At December 31, 2008, there were no material amounts of loans which were restructured or otherwise renegotiated as a concession to troubled borrowers.

	December 31
	2008		2007
Impaired loans:
Loans which have an allowance requirement	$	689,000	$	394,000
Loans which do not have an allowance requirement		1,209,000

Total impaired loans	$	1,898,000	$	394,000

Allowance for loan losses related to impaired loans	$	108,000	$	59,000

Impaired loans which do not have an allowance requirement include collateral-dependent loans for which direct write-downs have been made (when necessary) and, accordingly, no allowance requirement or allocation is necessary. During 2008, the average recorded investment in impaired loans approximated $1.3 million. Interest income is recorded on impaired loans if not on nonaccrual status, or may be recorded on a cash basis in some circumstances, if such payments are not credited to principal. In 2008, no interest income was recorded on impaired loans.

A2-28

	December 31, 2008					December 31, 2007
	Amount		Percentage of Total Portfolio Loans			Amount		Percentage of Total Portfolio Loans

Loans secured by real estate:
Commercial	$	1,215,000		0.63	%	$	786,000		0.50	%
Residential (including multi-family)		862,000		0.45			738,000		0.47
Construction, land development and other land		814,000		0.42			523,000		0.34
Total loans secured by real estate		2,891,000		1.50			2,047,000		1.31
Commercial and other business-purpose loans		597,000		0.30			404,000		0.26
Consumer		34,000		0.02			39,000		0.02
Other		13,000		0.01			14,000		0.01

Total allowance for loan losses	$	3,535,000		1.83	%	$	2,504,000		1.60	%

In the ordinary course of business, the Banks make loans to officers and directors of the Corporation and its subsidiaries including their immediate families and companies in which they are principal owners. At December 31, 2008 total loans to these persons approximated $7,840,000 ($7,373,000 as of December 31, 2007). During 2008, $5,311,000 of new loans were made to these persons and repayments totaled $4,844,000. 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 and those deposits as of December 31, 2008 and 2007 approximated $8.4 million and $7.1 million, respectively. 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 $1,256,000, $1,318,000 and $760,000 in 2008, 2007 and 2006, respectively.

During 2008, Capitol made cash capital contributions of $650,000 and $45,000 to assist Bank of Valdosta and Evansville Commerce Bank, respectively, in meeting interim regulatory capital ratio requirements. Such additional investment in the respective banks by the Corporation did not alter the Corporation's ownership percentage of the respective banks, however, it creates a future claim on the respective banks' equity in the event of a share exchange transaction or other future capital event.

A2-29

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

	2008			2007
Leasehold improvements	$	1,367,585		$	1,359,517
Equipment, furniture and software		2,192,592			2,107,087
		3,560,177			3,466,604
Less accumulated depreciation		(1,402,373	)		(806,882	)

	$	2,157,804		$	2,659,722

The subsidiaries rent office space under operating leases. Rent expense under these lease agreements approximated $704,000, $604,000 and $335,000 in 2008, 2007 and 2006, respectively, net of sublease income of $10,000 and $7,000 in 2008 and 2007, respectively (none in 2006).

At December 31, 2008 future minimum rental payments under operating leases that have initial or remaining noncancelable lease terms in excess on one year were as follows:

2009	$	527,000
2010		532,000
2011		526,000
2012		456,000
2013 and thereafter		68,000

Total	$	2,109,000

NOTE G—INTANGIBLE ASSETS

Major classes of intangible assets consisted of the following at December 31:

	2008							2007
	Gross Carrying Amount		Accumulated Amortization			Total		Gross Carrying Amount		Accumulated Amortization			Total

Customer lists	$	1,669,405	$	(270,523	)	$	1,398,882	$	1,220,000	$	(43,571	)	$	1,176,429
Noncompete agreements		125,000		(78,125	)		46,875		125,000		(15,625	)		109,375

	$	1,794,405	$	(348,648	)	$	1,445,757	$	1,345,000	$	(59,196	)	$	1,285,804

All intangible assets are currently being amortized. As of December 31, 2008, future estimated amortization expense for each of the succeeding five years follows:

2009	$	252,000
2010		205,000
2011		205,000
2012		205,000
2013		205,000

A2-30

The aggregate amount of time deposits of $100,000 or more approximated $48.7 million and $45.0 million as of December 31, 2008 and 2007, respectively.

NOTE H—DEPOSITS

At December 31, 2008, the scheduled maturities of time deposits were as follows:

2009	$	120,347,000
2010		12,001,000
2011	2,077,000
2012	152,000
2013	353,000

Total	$	134,930,000

NOTE I—DEBT OBLIGATIONS

Debt obligations consisted of the following at December 31:

	2008		2007
Borrowings from Federal Home Loan Banks	$	13,407,548	$	12,600,000
Federal funds purchased		2,000,000		1,426,000
Notes payable to Capitol		5,625,000		3,625,000

	$	21,032,548	$	17,651,000

Federal funds transactions are generally entered into for a one-day period. Borrowings from the Federal Home Loan Banks (FHLB) represent advances secured by certain portfolio residential real estate mortgage loans and other eligible collateral. Such FHLB advances become due at varying dates and bear interest at market short-term rates (approximately 3.51% at December 31, 2008). At December 31, 2008, assets pledged to secure these credit facilities approximated $14.7 million and unused lines of credit under these facilities approximated $1.3 million.

Notes payable to Capitol are due on demand and bear interest from 6.75% to 9.0%, payable monthly.

At December 31, 2008, scheduled debt maturities of debt obligations were as follows:

2009	$	11,025,000
2010		5,000,000
2011		3,000,000
2012		1,900,000
2013		107,548

Total	$	21,032,548

A2-31

NOTE J—STOCKHOLDERS' EQUITY

The Corporation's common stock consists of two classes outstanding at December 31, 2008 and 2007:

Class A		1,000
Class B		14,243

Total shares issued and outstanding		15,243

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 March 31, 2009, into Class A common stock of the Corporation on a share-for-share basis.

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

NOTE K—EMPLOYEE RETIREMENT PLAN

Eligible employees 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 $198,000, $170,000 and $59,000 in 2008, 2007 and 2006, respectively.

NOTE L—OTHER NONINTEREST EXPENSE

The more significant elements of other noninterest expense consisted of the following:

	2008		2007		2006
Brokerage	$	841,776	$	664,642	$	428,466
Contracted data processing and administrative services		1,278,475		1,327,412		772,077
Amortization of intangibles		289,452		59,196
Loss on sale of other real estate owned		241,358
Advertising		251,885		246,345		133,498
Professional fees		199,135		130,022		180,328
Travel, lodging and meals		388,585		388,709		202,563
Other		1,531,074		1,256,681		1,061,163

	$	5,021,740	$	4,073,007	$	2,778,095

A2-32

The credit for income taxes consisted of the following components:

NOTE M—INCOME TAXES

	2008			2007			2006
Federal:
Current expense	$	(15,000	)	$	(1,000	)
Deferred credit		2,381,000			2,214,000		$	2,281,000
		2,366,000			2,213,000			2,281,000
State deferred credit		212,700			229,700			330,000

	$	2,578,700		$	2,442,700		$	2,611,000

Net federal deferred income tax assets, included as a component of other assets, consisted of the following at December 31:

	2008			2007
Allowance for loan losses	$	1,202,000		$	851,000
Net operating loss carryforwards		5,369,000			3,230,000
Organizational costs		814,000			789,000
Other, net		(336,000	)		(202,000	)

	$	7,049,000		$	4,668,000

Net state deferred income tax assets, included as a component of other assets, consisted of the following at December 31:

	2008			2007
Allowance for loan losses	$	242,500		$	172,100
Net operating loss carryforwards		445,500			289,000
Organizational costs		119,500			129,000
Other, net		(35,100	)		(30,400	)

	$	772,400		$	559,700

In conjunction with its annual review, management concluded that there were no significant uncertain tax positions requiring recognition in the financial statements. The evaluation was performed for the tax years of 2005, 2006, 2007 and 2008, the tax years which remain subject to examination by major tax jurisdictions and was updated as of December 31, 2008.

A2-33

NOTE M—INCOME TAXES—Continued

NOTE N—FAIR VALUE

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

A2-34

NOTE N—FAIR VALUE—Continued

Level 3: Significant unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of the Corporation's valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Investment securities available for sale: Securities available for sale are recorded at fair value on a recurring basis (none at December 31, 2008). Fair value measurement is based on quoted prices, when available. If quoted prices are not available, fair values are measured using independent pricing models, as Level 2 values.

There were no assets and liabilities measured at fair value on a recurring basis as of December 31, 2008.

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2008, other than mortgage loans held for sale, were as follows:

	Total		Significant Other Observable Inputs (Level 2)

Impaired loans (1)	$	371,000	$	371,000

(1)	Represents carrying value and related write-downs for which adjustments are based on the appraised value of the collateral.

A2-35

NOTE N—FAIR VALUE—Continued

Carrying values and estimated fair values of financial instruments for FAS No. 107 disclosure purposes were as follows at December 31 (in $1,000s):

	2008						2007
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	23,918		$	23,918		$	6,100		$	6,100
Loans held for sale		667			667			1,498			1,498
Investment securities held for long-term investment		870			870			672			672
Portfolio loans:
Loans secured by real estate:
Commercial		74,768			76,354			55,339			55,596
Residential (including multi-family)		48,608			48,796			35,565			35,734
Construction, land development and other land		41,213			40,155			37,916			38,075
Total loans secured by real estate		164,589			165,305			128,820			129,405
Commercial and other business-purpose loans		24,443			24,147			20,500			20,519
Consumer		3,230			3,213			3,226			3,216
Other		932			691			3,735			3,734
Total portfolio loans		193,194			193,356			156,280			156,874
Less allowance for loan losses		(3,535	)		(3,535	)		(2,504	)		(2,504	)
Net portfolio loans		189,659			189,821			153,776			154,370

Financial Liabilities:
Deposits:
Noninterest-bearing		10,547			10,547			8,615			8,615
Interest-bearing:
Demand accounts		36,941			36,941			28,586			28,586
Time certificates of less than $100,000		86,258			86,452			46,139			46,202
Time certificates of $100,000 or more		48,672			48,770			45,024			45,077
Total interest-bearing		171,871			172,163			119,749			119,865
Total deposits		182,418			182,710			128,364			128,480
Debt obligations		21,033			20,974			17,651			17,618

Estimated fair values of financial assets and liabilities in the preceding table 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). For example, the estimated fair values of portfolio loans, time deposits and debt obligations were determined through discounted cash flow computations. 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.

A2-36

NOTE N—FAIR VALUE—Continued

Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Accordingly, the fair value measurements for loans included in the preceding table above are unlikely to represent the instruments' liquidation values.

NOTE O—COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, loan commitments are made to accommodate the financial needs of bank customers. Loan commitments include stand-by letters of credit, lines of credit, and other commitments for commercial, installment and mortgage loans. Stand-by letters of credit, when issued, commit the Banks to make payments on behalf of customers if certain specified future events occur and are used infrequently by the Banks (none at December 31, 2008 and 2007). Other loan commitments outstanding consist of unused lines of credit and approved, but unfunded, specific loan commitments ($19.6 million and $28.1 million at December 31, 2008 and 2007, respectively). These loan commitments (stand-by letters of credit and unfunded loans) generally expire within one year and are reviewed periodically for continuance or renewal.

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, 2008 and 2007 was $100,000.

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

NOTE P—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL REQUIREMENTS

A2-37

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

Management believes, as of December 31, 2008, 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 Corporation's consolidated regulatory capital position:

	December 31
	2008			2007

Tier 1 capital to average total assets:
Minimum required amount	$	³ 9,311		$	³ 13,286
Actual amount	$	14,728		$	21,789
Ratio		6.37	%		12.97	%

Tier 1 capital to risk-weighted assets:
Minimum required amount(1)	$	³ 7,381		$	³ 6,357
Actual amount	$	14,728		$	21,789
Ratio		7.98	%		13.71	%

Combined Tier 1 and Tier 2 capital to risk- weighted assets:
Minimum required amount(2)	$	³ 14,762		$	³ 12,713
Amount required to meet “Well-Capitalized” category(3)	$	³ 18,453		$	³ 15,892
Actual amount	$	17,050		$	23,782
Ratio		9.24	%		14.96	%

(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.

A2-38

NOTE Q—PARENT COMPANY FINANCIAL INFORMATION

	December 31
	2008		2007
ASSETS
Money market funds on deposit with affiliated banks	$	373,653	$	163,948
Investments in subsidiaries		9,319,323		10,613,917
Other assets		666,778		606,446

TOTAL ASSETS	$	10,359,754	$	11,384,311

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities	$	21,050	$	16,250
Debt obligations		5,625,000		3,625,000
Stockholders' equity attributable to CDBL IV		4,713,704		7,743,061

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	10,359,754	$	11,384,311

	Year Ended December 31
	2008			2007			2006
Interest income	$	13,628		$	7,283		$	188,168
Expenses:
Interest		384,889			164,262			75,849
Salary and employee benefits		1,398,000			1,618,000			300,000
Other		30,502			(16,288	)		519,434
Total expenses		1,813,391			1,765,974			895,283
Loss before equity in net losses of consolidated subsidiaries and federal income taxes		(1,799,763	)		(1,758,691	)		(707,115	)
Equity in undistributed net losses of consolidated subsidiaries		1,989,594			2,676,745			2,609,458
Loss before federal income tax credit		(3,789,357	)		(4,435,436	)		(3,316,573	)
Federal income tax credit		(65,000	)		(367,000	)		(223,000	)

NET LOSS ATTRIBUTABLE TO CDBL IV	$	(3,724,357	)	$	(4,068,436	)	$	(3,093,573	)

A2-39

NOTE Q—PARENT COMPANY FINANCIAL INFORMATION—Continued

NOTE R—SEGMENT INFORMATION

	Year Ended December 31
	2008			2007			2006
OPERATING ACTIVITIES
Net loss	$	(3,724,357	)	$	(4,068,436	)	$	(3,093,573	)
Adjustments to reconcile net loss to net cash used by operating activities:
Equity in undistributed net losses of subsidiaries		1,989,594			2,676,745			2,609,458
Depreciation of premises and equipment		4,668			1,167
Deferred federal income tax credit		(65,000	)		(367,000	)		(223,000	)
Decrease in other assets					15,002			99,227
Increase in accounts payable, accrued expenses and other liabilities		4,800			8,750			6,300
NET CASH USED BY OPERATING ACTIVITIES		(1,790,295	)		(1,733,772	)		(601,588	)

INVESTING ACTIVITIES
Net cash investments in subsidiaries		(695,000	)					(15,738,119	)
Purchase of premises and equipment					(6,613	)
NET CASH USED BY INVESTING ACTIVITIES		(695,000	)		(6,613	)		(15,738,119	)

FINANCING ACTIVITIES
Proceeds from debt obligations		2,000,000			1,625,000			2,000,000
Net proceeds from issuance of common stock								1,990,000
Capital contribution from majority shareholders		695,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,695,000			1,625,000			3,990,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		209,705			(115,385	)		(12,349,707	)
Cash and cash equivalents at beginning of year		163,948			279,333			12,629,040

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	373,653		$	163,948		$	279,333

Reportable segments have been determined based upon the Corporation's results of operations of its two business activities, Banking Services and Wealth Management Services. The Banks have been combined under the Banking Services reportable segment as the nature of their products and services and type of customers are similar. Capitol Wealth Incorporated is reported under the Wealth Management Services segment.

The financial information of the Corporation's segments has been compiled utilizing the accounting policies described in Note B. Total business segment results differ from total consolidated results due to other activities including general corporate activities and intercompany eliminations which reflect activities among the businesses that are eliminated upon consolidation.

A2-40

NOTE R—SEGMENT INFORMATION—Continued

Results of operations and total assets by segment for each of the three years ended December 31 are as follows (in $1,000s):

	2008 (as adjusted)
	Banking Services			Wealth Management Services			Other			Total

Net interest income (expense)	$	6,064					$	(371	)	$	5,693
Provision for loan losses		2,509									2,509
Net interest income after provision for loan losses		3,555						(371	)		3,184
Noninterest income:
Trust income and wealth-management revenue				$	4,960						4,960
Other		1,022			480						1,502
Total noninterest income		1,022			5,440						6,462
Noninterest expense:
Salaries and employee benefits		3,635			5,309			1,398			10,342
Occupancy		620			306						926
Equipment rent, depreciation and maintenance		493			98			5			596
Other		2,902			2,094			26			5,022
Total noninterest expense		7,650			7,807			1,429			16,886
Loss before income tax benefit		(3,073	)		(2,367	)		(1,800	)		(7,240	)
Income tax benefit		(1,177	)		(1,337	)		(65	)		(2,579	)
NET LOSS		(1,896	)		(1,030	)		(1,735	)		(4,661	)
Less net losses attributable to noncontrolling interests		925			12						937

NET LOSS ATTRIBUTABLE TO CDBL IV	$	(971	)	$	(1,018	)	$	(1,735	)	$	(3,724	)

Total assets at December 31	$	222,549		$	5,370		$	1,040		$	228,959

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A2-41

NOTE R—SEGMENT INFORMATION—Continued

	2007 (as adjusted)
	Banking Services			Wealth Management Services			Other			Total

Net interest income (expense)	$	5,703					$	(157	)	$	5,546
Provision for loan losses		1,850									1,850
Net interest income after provision for loan losses		3,853						(157	)		3,696
Noninterest income:
Trust income and wealth-management revenue				$	4,046						4,046
Other		800			301						1,101
Total noninterest income		800			4,347						5,147
Noninterest expense:
Salaries and employee benefits		4,446			4,817			1,618			10,881
Occupancy		567			217						784
Equipment rent, depreciation and maintenance		468			77			10			555
Other		2,361			1,738			(26	)		4,073
Total noninterest expense		7,842			6,849			1,602			16,293
Loss before income tax benefit		(3,189	)		(2,502	)		(1,759	)		(7,450	)
Income tax benefit		(1,233	)		(843	)		(367	)		(2,443	)
NET LOSS		(1,956	)		(1,659	)		(1,392	)		(5,007	)
Less net losses attributable to noncontrolling interests		939									939

NET LOSS ATTRIBUTABLE TO CDBL IV	$	(1,017	)	$	(1,659	)	$	(1,392	)	$	(4,068	)

Total assets at December 31	$	168,343		$	4,468		$	770		$	173,581

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A2-42

NOTE R—SEGMENT INFORMATION—Continued

	2006 (as adjusted)
	Banking Services			Wealth Management Services			Other			Total

Net interest income	$	1,862					$	112		$	1,974
Provision for loan losses		930									930
Net interest income after provision for loan losses		932						112			1,044
Noninterest income:
Trust income and wealth-management revenue				$	2,274						2,274
Other		328			126						454
Total noninterest income		328			2,400						2,728
Noninterest expense:
Salaries and employee benefits		2,225			2,786			300			5,311
Occupancy		297			115						412
Equipment rent, depreciation and maintenance		261			48			8			317
Other		3,412			977			511			4,900
Total noninterest expense		6,195			3,926			819			10,940
Loss before income tax benefit		(4,935	)		(1,526	)		(707	)		(7,168	)
Income tax benefit		(1,874	)		(514	)		(223	)		(2,611	)
NET LOSS		(3,061	)		(1,012	)		(484	)		(4,557	)
Less net losses attributable to noncontrolling interests		1,463									1,463

NET INCOME (LOSS) ATTRIBUTABLE TO CDBL IV	$	(1,598	)	$	(1,012	)	$	(484	)	$	(3,094	)

Total assets at December 31	$	79,637		$	1,088		$	528		$	81,253

NOTE S—SUBSEQUENT EVENT

On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis-point special assessment on each insured depository institution's assets minus Tier 1 capital as of June 30, subject to a maximum amount based on 10 basis-points applied to the institution's assessment base for the second quarter of 2009. The amount of the special assessment for the Corporation's bank subsidiaries is estimated to approximate $101,000. The special assessment is payable September 30, 2009 and the FDIC has announced that an additional special assessment of up to 5 basis-points later in 2009 is probable, but the amount is uncertain.

A2-43

APPENDIX A-3

FINANCIAL INFORMATION REGARDING CAPITOL DEVELOPMENT BANCORP LIMITED V

Management's discussion and analysis of financial condition and results of operations	A3-2
Condensed interim consolidated financial statements as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 (unaudited)	A3-5
Audited consolidated financial statements as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006	A3-17

A3-1

Management's Discussion and Analysis of Financial Condition

Capitol Development Bancorp Limited V ("CDBL V") is a bank-development company engaged in commercial banking activities through its subsidiaries (collectively, the “Banks”), Bank of Everett (located in Everett, Washington) which is 51% owned, Bank of Maumee (located in Maumee, Ohio) which is 51% owned, 1st Commerce Bank (located in North Las Vegas, Nevada) which is 51% owned, Ohio Commerce Bank (located in Beachwood, Ohio) which is 51% owned, Bank of Feather River (located in Yuba City, California) which is 51% owned and Adams Dairy Bank (located in Blue Springs, Missouri) which is 51% owned. CDBL V'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 $274.3 million at June 30, 2009, a slight decrease from $278.5 million at December 31, 2008. Total assets approximated $149.9 million at year-end 2007. Increased assets in 2008 and 2007 resulted mainly from higher levels of portfolio loans at the Banks, funded by growth in deposits. Asset growth slowed in early 2009.

Total portfolio loans approximated $229.5 million at June 30, 2009 compared to $213.5 million at December 31, 2008 ($125.8 million at December 31, 2007).

The allowance for loan losses at June 30, 2009 approximated $5.2 million or 2.24% of total portfolio loans, compared to the December 31, 2008 ratio of 1.7% (1.5% at December 31, 2007).

The allowance for loan losses, which is considered a critical accounting policy of CDBL V, 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.

Accounting for income taxes is considered a critical accounting policy of CDBL V and requires significant estimates and management judgments. At December 31, 2008 and June 30, 2009, it had a deferred tax asset approximating $5.8 million. The deferred tax asset is composed primarily of net operating loss carryforwards and temporary differences relating to the allowance for loan losses and start-up expenses of the Banks. If it is determined that realization of the deferred tax asset is in doubt, a valuation reserve is required to reduce the deferred tax asset to the amount which is more-likely-than-not realizable. No valuation reserve has been deemed necessary by management, inasmuch as it is believed that it is more-likely-than-not that the deferred tax asset will be realized. Such conclusion is based on Capitol's prior experience with de novo banks which incur operating losses and large provisions for loan losses in their most early periods of operation and ultimately become profitable. If the Banks do not ultimately become profitable in the manner anticipated, a valuation allowance against the deferred tax asset may be necessary in the future which would adversely affect CDBL V's results of operations in that period.

Total deposits approximated $219.4 million at June 30, 2009 and $224 million at December 31, 2008 ($109.7 million at December 31, 2007). The interim 2009 decrease resulted from lower levels of time deposits at the Banks. The increase in deposits in 2008 related to the Banks' early-period growth.

The Banks seek to obtain noninterest-bearing deposits as a means to reduce their cost of funds. Noninterest-bearing deposits approximated $33.7 million at June 30, 2009 or about 15.3% of total deposits, a decrease of approximately $15 million from December 31, 2008 compared to an increase of $29.1 million during 2008. Noninterest-bearing deposits can fluctuate significantly from day to day, depending upon customer account activity.

CDBL V stockholders' equity approximated $8 million at June 30, 2009 or approximately 2.91% of total assets. Total equity approximated $28.1 million and $30 million at June 30, 2009 and December 31, 2008, respectively, or 10.25% and 10.8% of total assets. Capital adequacy is discussed elsewhere in this narrative.

A3-2

The net loss attributable to CDBL V for the six months ended June 30, 2009 approximated $1.1 million, compared with approximately $1.5 million in the corresponding 2008 period. The net loss attributable for CDBL V for the year ended December 31, 2008 approximated $2.8 million, compared with $2.2 million for 2007 and $1.3 million in 2006. The net losses related 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, 2009 approximated $6.8 million, compared with $5.6 million for the six-month 2008 period. Total interest income for the year ended December 31, 2008 approximated $12.1 million, compared with $6.7 million in 2007 and $1.1 million in 2006. The increases in interest income relate primarily to higher levels of portfolio loans and other earning assets associated with the Banks' growth.

Total interest expense approximated $2.7 million for the six months ended June 30, 2009 and for the corresponding 2008 period. For the year ended December 31, 2008, total interest expense approximated $5.8 million ($2.5 million at December 31, 2007 and $291,000 at December 31, 2006). Increases in interest expense correlate with growth in interest-bearing deposits during the periods.

Net interest income approximated $4.1 million for the six months ended June 30, 2009, compared with $2.9 million for the 2008 corresponding period. Net interest income for the year ended December 31, 2008 approximated $6.3 million, compared with $4.2 million in 2007 and $763,000 in 2006. Increases in net interest income during the periods resulted from the Banks' growth.

The provision for loan losses was $1.7 million for the six months ended June 30, 2009, compared with $2 million in the corresponding 2008 period. The provision for loan losses was $3.5 million for the year ended December 31, 2008 ($1.6 million in 2007 and $308,000 in 2006). 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.

Total noninterest income approximated $452,000 for the six months ended June 30, 2009, compared with $430,000 for the corresponding 2008 period. Noninterest income for the year ended December 31, 2008 approximated $856,000 ($250,000 in 2007 and $110,000 in 2006). Noninterest income in 2008 increased significantly due to fees from origination of non-portfolio residential mortgage loans, services charges on deposit accounts and gain on sales of government-guaranteed loans. These revenue sources may fluctuate due to interest rates, real estate values, and the variability of loan purchasers and related pricing of potential sales of government loans which can influence the decision on whether loans will be sold.

Total noninterest expense approximated $5.8 million for the six months ended June 30, 2009, compared with $5.6 million for the corresponding 2008 period. For the year ended December 31, 2008, total noninterest expense approximated $11.2 million, compared with $8.7 million in 2007 and $4.2 million in 2006. The significant increases in total noninterest expense each year were the result of the start-up and early period growth of the Banks. A major component of noninterest expense is salaries and employee benefits.

Cash and cash equivalents approximated $32.1 million at June 30, 2009, $55.7 million at December 31, 2008 and $19 million at December 31, 2007. 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, 2009 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 CDBL V, 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, CDBL V and its Banks meet or exceed regulatory capital requirements to which they are subject.

A3-3

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A3-4

CAPITOL DEVELOPMENT BANCORP LIMITED V

Condensed Interim Consolidated Financial Statements

A3-5

See notes to condensed interim consolidated financial statements.

	June 30, 2009 (Unaudited)			December 31, 2008
				(as adjusted)
ASSETS
Cash and due from banks	$	7,194,091		$	6,080,814
Money-market funds and interest-bearing deposits		21,293,191			44,561,750
Federal funds sold		3,658,482			5,023,013
Cash and cash equivalents		32,145,764			55,665,577
Loans held for sale		4,951,932			1,411,965
Investment securities—Note B:
Available for sale, carried at fair value		320,265			398,914
Held for long-term investment, carried at
amortized cost which approximates fair value		969,700			566,700
Total investment securities		1,289,965			965,614
Portfolio loans, less allowance for loan losses of
$5,150,000 in 2009 and $3,671,000 in 2008		224,388,164			209,823,275
Premises and equipment		2,745,359			2,888,994
Accrued interest income		1,037,011			745,713
Other real estate owned		555,000			555,000
Other assets		7,192,262			6,445,557

TOTAL ASSETS	$	274,305,457		$	278,501,695

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	33,684,406		$	48,186,667
Interest-bearing		185,696,659			175,858,944
Total deposits		219,381,065			224,045,611
Debt obligations		25,580,000			23,580,000
Accrued interest on deposits and other liabilities		1,224,292			827,627
Total liabilities		246,185,357			248,453,238

EQUITY:
CDBL V stockholders' equity:
Common stock, no par value,
51,000 shares authorized;
15,518 shares issued and outstanding		15,443,000			15,443,000
Retained-earnings deficit		(7,458,140	)		(6,315,630	)
Fair value adjustment (net of tax effect) for investment
securities available for sale (accumulated other
comprehensive income)		144			1,859
Total CDBL V stockholders' equity		7,985,004			9,129,229
Noncontrolling interests in consolidated subsidiaries		20,135,096			20,919,228
Total equity		28,120,100			30,048,457

TOTAL LIABILITIES AND EQUITY	$	274,305,457		$	278,501,695

A3-6

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

See notes to condensed interim consolidated financial statements.

	Six Months Ended June 30
	2009			2008
				(as adjusted)
Interest income:
Portfolio loans (including fees)	$	6,557,489		$	5,354,613
Loans held for sale		101,234			19,557
Taxable investment securities		4,105			4,898
Federal funds sold		6,626			218,504
Money market and interest bearing deposits		94,149			3,954
Other		3,935			6,543
Total interest income		6,767,538			5,608,069
Interest expense:
Deposits		2,046,389			2,180,844
Debt obligations and other		638,455			524,894
Total interest expense		2,684,844			2,705,738
Net interest income		4,082,694			2,902,331
Provision for loan losses		1,658,701			1,950,331
Net interest income after provision
for loan losses		2,423,993			952,000

Noninterest income:
Service charges on deposit accounts		138,680			76,947
Fees from origination of non-portfolio residential
mortgage loans		135,865			100,889
Fees from syndication and placement of non-
portfolio commercial loans		44,906			74,708
Gain on sales of other non-portfolio commercial loans		16,150			11,249
Gain on sales of government-guaranteed loans		35,033			130,995
Other		80,924			35,419
Total noninterest income		451,558			430,207

Noninterest expense:
Salaries and employee benefits		2,646,009			2,718,726
Occupancy		488,682			437,491
Equipment rent, depreciation and maintenance		295,573			265,101
Preopening and start-up costs					402,194
Other		2,365,229			1,824,504
Total noninterest expense		5,795,493			5,648,016
Loss before income tax benefit		(2,919,942	)		(4,265,809	)
Income tax benefit		(993,300	)		(1,562,500	)
NET LOSS		(1,926,642	)		(2,703,309	)
Less net losses attributable to noncontrolling interests		784,132			1,177,838

NET LOSS ATTRIBUTABLE TO CDBL V	$	(1,142,510	)	$	(1,525,471	)

NET LOSS PER SHARE ATTRIBUTABLE TO
CDBL V—Note C	$	(73.62	)	$	(98.30	)

A3-7

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

See notes to condensed interim consolidated financial statements.

	Capitol Development Bancorp Limited V Stockholders’ Equity
	Common Stock		Retained- Earnings Deficit			Accumulated Other Comprehensive Income (Loss)			Total CDBL V Stockholders’ Equity			Noncontrolling Interests			Total Equity

Six Months Ended June 30, 2008
Balances at January 1, 2008	$	15,443,000	$	(3,481,528	)	$	39		$	11,961,511		$	19,054,221		$	31,015,732

Noncontrolling interests'
investment in formation
of subsidiary													3,920,000			3,920,000

Components of comprehensive
loss:
Net loss for the 2008 period				(1,525,471	)					(1,525,471	)		(1,177,838	)		(2,703,309	)
Fair value adjustment for
investment securities
available for sale (net of
tax effect)							(1,275	)		(1,275	)					(1,275	)
Comprehensive loss
for the 2008 period										(1,526,746	)					(2,704,584	)

BALANCES AT JUNE 30, 2008	$	15,443,000	$	(5,006,999	)	$	(1,236	)	$	10,434,765		$	21,796,383		$	32,231,148

Six Months Ended June 30, 2009
Balances at January 1, 2009	$	15,443,000	$	(6,315,630	)	$	1,859		$	9,129,229		$	20,919,228		$	30,048,457

Components of comprehensive
loss:
Net loss for the 2009 period				(1,142,510	)					(1,142,510	)		(784,131	)		(1,926,641	)
Fair value adjustment for
investment securities
available for sale (net of
tax effect)							(1,715	)		(1,715	)					(1,715	)
Comprehensive loss
for the 2009 period										(1,144,225	)					(1,928,356	)

BALANCES AT JUNE 30, 2009	$	15,443,000	$	(7,458,140	)	$	144		$	7,985,004		$	20,135,097		$	28,120,101

A3-8

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

See notes to condensed interim consolidated financial statements.

	Six Months Ended June 30
	2009			2008
				(as adjusted)
OPERATING ACTIVITIES
Net loss for the period	$	(1,926,642	)	$	(2,703,309	)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for loan losses		1,658,701			1,950,331
Depreciation of premises and equipment		305,113			284,315
Net amortization of investment security
premiums		1,051			214
Loss on sale of premises and equipment		1,367			3,413
Gain on sales of government-guaranteed loans		(35,033	)		(130,995	)
Originations and purchases of loans held for sale		(32,066,069	)		(8,384,710	)
Proceeds from sales of loans held for sale		28,526,102			7,095,460
Increase in accrued interest income and other assets		(1,037,120	)		(2,186,375	)
Increase (decrease) in accrued interest expense on deposits and
other liabilities		396,665			(172,366	)

NET CASH USED BY OPERATING ACTIVITIES		(4,175,865	)		(4,244,022	)

INVESTING ACTIVITIES
Proceeds from calls, prepayments and maturities of investment
securities		75,000			500,000
Purchase of securities available for sale					(572,500	)
Purchase of securities held for long-term investment		(403,000	)		(372,100	)
Net increase in portfolio loans		(16,188,557	)		(63,876,964	)
Proceeds from sales of premises and equipment		4,619
Purchases of premises and equipment		(167,464	)		(378,646	)
NET CASH USED BY INVESTING ACTIVITIES		16,679,402			64,700,210

FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW accounts
and savings accounts		(1,377,590	)		16,470,972
Net increase (decrease) in certificates of deposit		(3,286,956	)		40,695,288
Net borrowings from debt obligations		2,000,000			12,500,000
Resources provided by noncontrolling interests					3,920,000

NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES		(2,664,546	)		73,586,260

INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS		(23,519,813	)		4,642,028
Cash and cash equivalents at beginning of period		55,665,577			19,118,339

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	32,145,764		$	23,760,367

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	2,827,553		$	2,533,574

A3-9

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

The accompanying condensed consolidated financial statements of Capitol Development Bancorp Limited V ("CDBL V") 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 CDBL V considers necessary for a fair presentation of the interim periods.

The consolidated financial statements include the accounts of CDBL V and its majority-owned subsidiaries after elimination of intercompany accounts and transactions and giving effect to applicable noncontrolling interests.

The results of operations for the six-month period ended June 30, 2009 are not necessarily indicative of the results to be expected for the year ending December 31, 2009.

Investment securities consisted of the following (in $1,000s):

	June 30, 2009				December 31, 2008
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Available for sale:
United States government agency securities	$	320	$	320	$	396	$	399

Held for long-term investment:
Federal Home Loan Bank stock		970		970		567		567
		970		970		567		567

	$	1,290	$	1,290	$	963	$	966

Investments in Federal Home Loan Bank stock are restricted and may only be resold to, or redeemed by, the issuer.

Gross unrealized gains on investment securities available for sale were $3,000 at December 31, 2008 (none at June 30, 2009).

Gross realized gains and losses from sales and maturities of investment securities were insignificant for the periods presented.

Scheduled maturities of investment securities held as of June 30, 2009 were as follows (in $1,000s):

	Amortized Cost		Estimated Fair Value

Due in one year or less	$	250	$	250
After ten years		70		70
Securities held for long-term investment, without standard maturities		970		970
	$	1,290	$	1,290

A3-10

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

NOTE C—NET LOSS PER SHARE ATTRIBUTABLE TO CDBL V

Net loss per share attributable to CDBL V is based on the weighted average number of common shares outstanding (15,518 shares). There were no common stock equivalents or other forms of dilutive instruments outstanding during the periods presented.

FAS No. 157 establishes a hierarchy that prioritizes the use of fair value inputs used in valuation methodologies into the following three levels:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 3: Significant unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of CDBL V's valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Loans: CDBL V does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of the collateral.

Other real estate owned: At the time of foreclosure, foreclosed properties are adjusted to fair value less estimated costs to sell upon transfer from portfolio loans to other real estate owned, establishing a new accounting basis. CDBL V subsequently adjusts fair value on other real estate owned on a nonrecurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value.

The balances of assets and liabilities measured at fair value on a recurring basis as of June 30, 2009 were as follows (in $1,000s):

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale:
United State government agency securities	$	320	$	320

A3-11

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2008 were as follows (in $1,000's):

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale:
United State government agency securities	$	399	$	399

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2009 were as follows (in $1,000s):

	Total		Significant Unobservable Inputs (Level 3)

Impaired loans (1)	$	768	$	768

Other real estate owned (1)	$	555	$	555

(1)	Represents carrying value and related write-downs for which adjustments are based on the appraised value of the applicable collateral or foreclosed property or other estimates of fair value.

The balances of assets and liabilities, other than mortgage loans held for sale, measured at fair value on a nonrecurring basis as of December 31, 2008 were immaterial.

CDBL V began applying the fair value measurement and disclosure provisions of FAS No. 157 effective January 1, 2009 to nonfinancial assets and liabilities measured on a nonrecurring basis; which did not have a material effect on CDBL V's consolidated financial position upon implementation. CDBL V measures the fair value of the following on a nonrecurring basis: (1) long-lived assets and (2) foreclosed assets.

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A3-12

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Carrying values and estimated fair values of financial instruments for FAS No. 107 disclosure purposes were as follows (in $1,000s):

	June 30, 2009						December 31, 2008
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	32,146		$	32,146		$	55,666		$	55,666
Loans held for sale		4,952			4,952			1,412			1,412
Investment securities:
Available for sale		320			320			399			399
Held for long-term investment		970			970			567			567
Total investment securities		1,290			1,290			966			966
Portfolio loans:
Loans secured by real estate:
Commercial		97,788			97,965			87,691			87,731
Residential (including multi-family)		43,497			43,196			39,443			40,091
Construction, land development and other land		32,205			31,742			30,990			31,394
Total loans secured by real estate		173,490			172,903			158,124			159,216
Commercial and other business-purpose loans		39,555			39,177			40,641			40,750
Consumer		3,762			3,782			5,271			5,294
Other		12,731			12,714			9,458			9,375
Total portfolio loans		229,538			228,576			213,494			214,635
Less allowance for loan losses		(5,150	)		(5,150	)		(3,671	)		(3,671	)
Net portfolio loans		224,388			223,426			209,823			210,964

Financial Liabilities:
Deposits:
Noninterest-bearing		33,684			33,684			48,187			48,187
Interest-bearing:
Demand accounts		62,394			62,320			49,269			49,269
Time certificates of less than $100,000		59,879			60,034			79,312			79,488
Time certificates of $100,000 or more		63,424			63,571			47,278			47,372
Total interest-bearing		185,697			185,925			175,859			176,129
Total deposits		219,381			219,609			224,046			224,316
Debt obligations		25,580			25,577			23,580			23,565

Given current market conditions, a portion of the loan portfolio is not readily marketable and market prices do not exist. CDBL V has not attempted to market the loan portfolio to potential buyers, if any exist, to determine the fair value of those instruments in accordance with the definition in FAS No. 157. Since negotiated prices in illiquid markets depend upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Accordingly, the fair value measurements for loans included in the table above are unlikely to represent the instruments' liquidation values.

A3-13

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements, which provides a definition of fair value for accounting purposes, establishes a framework for measuring fair value and expands related financial statement disclosures. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which deferred the effective date of SFAS No. 157 until January 1, 2009 for nonfinancial assets and nonfinancial liabilities except those items recognized or disclosed at fair value on an annual or on a more frequently recurring basis. The implementation of previously deferred aspects of Statement No. 157 in 2009 (as permitted by FSP FAS 157-2) did not have a material effect on CDBL V's results of operations or financial position. Fair value disclosures are set forth in Note D to the condensed interim financial statements.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations, to further enhance the accounting and financial reporting related to business combinations. Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, (3) requires that acquisition-related and restructuring costs be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The effects of CDBL V's adoption of Statement No. 141(R) had no impact upon implementation and its subsequent impact will depend upon the extent and magnitude of acquisitions in the future.

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent's equity, (2) the amount of consolidated net income (loss) attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 became effective for CDBL V on January 1, 2009 and the accompanying condensed consolidated financial statements reflect implementation of the new accounting standard as if it occurred as of the beginning of the periods presented.

On April 9, 2009, the FASB issued three FASB Staff Positions (FSP), which become effective for second quarter reporting, with earlier implementation permitted for the first calendar quarter of 2009. CDBL V elected to implement the new guidance effective January 1, 2009.

FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance for debt securities to make it more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in financial statements. Implementation of this new guidance did not have a material effect on CDBL V's consolidated financial statements. The expanded interim disclosures about investment securities are set forth in Note B to the condensed consolidated financial statements.

A3-14

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

FSP FAS 157-4 amends prior fair value guidance to aid in determining fair value when the volume and level of activity for an asset or liability have significantly decreased and identifying transactions that are not orderly. This new guidance is intended to clarify that significant adjustments to quoted prices may be necessary to estimate fair value when there has been a significant decrease in the volume and activity for the asset/liability in relation to normal market activity. Fair value is the price that would be received to sell an asset (or paid to transfer a liability) in an orderly transaction (that is, not a forced liquidation or distressed sale) between willing market participants under current market conditions. CDBL V's implementation of FSP FAS 157-4 and related disclosures are set forth in Note D to the condensed consolidated financial statements.

In March 2008 the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. This new guidance revises the presentation and disclosure of derivatives and hedging activities, became effective for CDBL V on January 1, 2009 and did not have a material impact on CDBL V's condensed consolidated financial statements upon implementation.

In February 2008, the FASB issued FSB FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The new guidance clarifies transfers and certain transactions' accounting subject to the provisions of FAS 140 and becomes effective January 1, 2009. This new guidance did not have a material impact on CDBL V's consolidated financial position or results of operations upon implementation.

The FASB has also recently issued several proposals to amend, supersede or interpret existing accounting standards which may impact CDBL V's financial statements at a later date, such as a proposed amendment to Statement No. 128, Earnings per Share, among other things.

CDBL V's management has not completed its analysis of this new guidance (as proposed, where applicable) although it anticipates the potential impact (if finalized, where applicable) would not be material to CDBL V's consolidated financial statements.

A3-15

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Management has reviewed subsequent events through the time of filing these condensed consolidated financial statements with the Securities and Exchange Commission on August 12 , 2009.

NOTE F—SUBSEQUENT EVENTS

In July 2009, a definitive agreement was entered into to sell CDBL V's interest in 1st Commerce Bank subject to regulatory approval and other contingencies. Sale proceeds of this divestiture are estimated to approximate $4.1 million.

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A3-16

Periods ended December 31, 2008, 2007 and 2006

A3-17

	Page
Report of Independent Registered Public Accounting Firm	A3-19
Consolidated Balance Sheets	A3-20
Consolidated Statements of Operations	A3-21
Consolidated Statements of Changes in Stockholders' Equity	A3-22
Consolidated Statements of Cash Flows	A3-23
Notes to Consolidated Financial Statements	A3-24 – A3-43

A3-18

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheets of Capitol Development Bancorp Limited V and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years ended December 31, 2008 and 2007, and the period from June 1, 2006 (date of inception) to December 31, 2006. 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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capitol Development Bancorp Limited V and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the three years ended December 31, 2008 and 2007, and the period from June 1, 2006 (date of inception) to December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

(July 7, 2009 as to the retrospective adoption of

June 2, 2009

Financial Accounting Standards Statement No. 160 as described

in Note B to the consolidated financial statements)

A3-19

	December 31
	2008			2007
	(as adjusted)			(as adjusted)
ASSETS
Cash and due from banks	$	6,080,814		$	4,157,557
Money-market and interest-bearing deposits		44,561,750			202,064
Federal funds sold		5,023,013			14,758,718
Cash and cash equivalents		55,665,577			19,118,339
Loans held for sale		1,411,965
Investment securities available for sale, carried at fair value—Note C		398,914			249,922
Investment securities held for long-term investment carried at amortized cost which approximates fair value—Note C		566,700			25,700
Total investment securities		965,614			275,622
Portfolio loans, less allowance for loan losses of
$3,671,000 in 2008 and $1,917,000 in 2007—Note D		209,823,275			123,838,740
Premises and equipment—Note F		2,888,994			2,803,473
Accrued interest income		745,713			487,696
Other real estate owned		555,000
Other assets		6,445,557			3,379,684

TOTAL ASSETS	$	278,501,695		$	149,903,554

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	48,186,667		$	19,072,786
Interest-bearing—Note G		175,858,944			90,646,476
Total deposits		224,045,611			109,719,262
Debt obligations—Note H		23,580,000			8,080,000
Accrued interest on deposits and other liabilities		827,627			1,088,560
Total liabilities		248,453,238			118,887,822

EQUITY—Notes I and O:
CDBL V stockholders' equity:
Common stock, no par value, 51,000 shares authorized; 15,518 shares issued and outstanding		15,443,000			15,443,000
Retained-earnings deficit		(6,315,630	)		(3,481,528	)
Fair value adjustment (net of tax effect) for investment securities available for sale (accumulated other comprehensive income)		1,859			39
Total CDBL V stockholders' equity		9,129,229			11,961,511
Noncontrolling interests		20,919,228			19,054,221
Total equity		30,048,457			31,015,732

TOTAL LIABILITIES AND EQUITY	$	278,501,695		$	149,903,554

A3-20

	Year Ended December 31						Period Ended December 31,
	2008			2007			2006
	(as adjusted)			(as adjusted)			(as adjusted)
Interest income:
Portfolio loans (including fees)	$	11,640,408		$	5,481,397		$	375,287
Loans held for sale		44,170
Taxable investment securities		10,186			12,603
Federal funds sold		331,439			1,167,821			512,489
Money-market and interest-bearing deposits		76,347			17,091			162,275
Other		16,311			9,965			3,473
Total interest income		12,118,861			6,688,877			1,053,524
Interest expense:
Deposits		4,698,202			2,140,621			228,751
Debt obligations and other		1,144,654			351,191			62,232
Total interest expense		5,842,856			2,491,812			290,983
Net interest income		6,276,005			4,197,065			762,541
Provision for loan losses—Note D		3,505,112			1,609,000			308,000
Net interest income after provision for loan losses		2,770,893			2,588,065			454,541
Noninterest income:
Service charges on deposit accounts		221,779			28,609			679
Fees from origination of non-portfolio residential mortgage loans		218,142			74,150			10,402
Fees from syndication and placement of non-portfolio commercial loans		95,310			90,984
Fees from servicing government-guaranteed loans		22,704
Gain on sales of government-guaranteed loans		183,552			16,104
Other		114,918			40,231			98,695
Total noninterest income		856,405			250,078			109,776
Noninterest expense:
Salaries and employee benefits		5,718,269			4,621,337			1,364,034
Occupancy		928,602			674,770			175,278
Equipment rent, depreciation and maintenance		546,662			421,150			105,974
Preopening and start-up costs		292,220			631,147			1,750,602
Other—Note K		3,695,140			2,374,550			770,875
Total noninterest expense		11,180,893			8,722,954			4,166,763
Loss before income tax benefit		(7,553,595	)		(5,884,811	)		(3,602,446	)
Income tax benefit—Note L		(2,664,500	)		(1,945,300	)		(1,218,000	)
NET LOSS		(4,889,095	)		(3,939,511	)		(2,384,446	)
Less net losses attributable to noncontrolling interests		2,054,993			1,778,643			1,063,786

NET LOSS ATTRIBUTABLE TO CDBL V	$	(2,834,102	)	$	(2,160,868	)	$	(1,320,660	)

NET LOSS PER SHARE
ATTRIBUTABLE TO CDBL V—Note C	$	(182.63	)	$	(139.25	)	$	(85.11	)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

A3-21

	Capitol Development Bancorp Limited V Stockholders' Equity											As Adjusted
	Common Stock		Retained- Earnings Deficit			Accumulated Other Comprehensive Income (Loss)			Total CDBL V Stockholders' Equity			Noncontrolling Interests			Total Equity

Balances at June 1, 2006, beginning of period	$	-0-	$	-0-		$	-0-		$	-0-		$	-0-		$	-0-

Noncontrolling interests' investment in formation of banks													17,976,650			17,976,650

Issuance of 15,518 shares of common stock for cash consideration of $1,000 per share net of offering expenses		15,443,000								15,443,000			15,443,000			15,443,000

Components of comprehensive loss:
Net loss for the 2006 period				(1,320,660	)					(1,320,660	)		(1,063,786	)		(2,384,446	)
Fair value adjustment for investment securities available for sale (net of income tax effect)							(202	)		(202	)					(202	)
Comprehensive loss for the 2006 period										(1,320,862	)					(2,384,648	)

BALANCES AT DECEMBER 31, 2006		15,443,000		(1,320,660	)		(202	)		14,122,138			16,912,864			31,035,002

Noncontrolling interests' investment in formation of banks													3,920,000			3,920,000

Components of comprehensive loss:
Net loss for 2007				(2,160,868	)					(2,160,868	)		(1,778,643	)		(3,939,511	)
Fair value adjustment for investment securities available for sale (net of income tax effect)							241			241						241
Comprehensive loss for 2007										(2,160,627	)					(3,939,270	)

BALANCES AT DECEMBER 31, 2007		15,443,000		(3,481,528	)		39			11,961,511			19,054,221			31,015,732

Noncontrolling interests' investment in formation of banks													3,920,000			3,920,000

Components of comprehensive loss:
Net loss for 2008				(2,834,102	)					(2,834,102	)		(2,054,993	)		(4,889,095	)
Fair value adjustment for investment securities available for sale (net of income tax effect)							1,820			1,820						1,820
Comprehensive loss for 2008										(2,832,282	)					(4,887,275	)

BALANCES AT DECEMBER 31, 2008	$	15,443,000	$	(6,315,630	)	$	1,859		$	9,129,229		$	20,919,228		$	30,048,457

A3-22

	Year Ended December 31						Period Ended December 31
	2008			2007			2006
	(as adjusted)			(as adjusted)			(as adjusted)
OPERATING ACTIVITIES
Net loss for the period	$	(4,889,095	)	$	(3,939,511	)	$	(2,384,446	)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for loan losses		3,505,112			1,609,000			308,000
Depreciation of premises and equipment		591,687			430,552			89,757
Net amortization (accretion) of investment security premiums (discounts)		1,265			(3,541	)		(98	)
Loss on sale of premises and equipment		3,414			2,872
Gain on sales of government-guaranteed loans		(183,552	)		(16,104	)
Deferred income taxes credit		(2,664,500	)		(1,945,300	)		(1,218,000	)
Originations and purchases of loans held for sale		(15,606,270	)
Proceeds from sales of loans held for sale		14,194,305
Decrease (increase) in accrued interest income and other assets		(661,827	)		51,326			(755,426	)
Increase (decrease) in accrued interest expense on deposits and other liabilities		(260,933	)		968,996			119,564

NET CASH USED BY OPERATING ACTIVITIES		(5,970,394	)		(2,841,710	)		(3,840,649	)

INVESTING ACTIVITIES
Proceeds from calls, prepayments and maturities of investment securities		500,000			317,550
Purchase of securities available for sale		(647,500	)					(246,224	)
Purchase of securities held for long-term investment		(539,500	)		(25,700	)		(317,550	)
Net increase in portfolio loans		(89,861,095	)		(103,817,149	)		(21,922,487	)
Proceeds from sales of premises and equipment					8,785
Purchase of premises and equipment		(680,622	)		(1,575,393	)		(1,760,046	)

NET CASH USED BY INVESTING ACTIVITIES		(91,228,717	)		(105,091,907	)		(24,246,307	)

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings accounts		45,885,992			31,692,168			19,877,094
Net increase in certificates of deposit		68,440,357			53,286,964			4,863,036
Net borrowings from debt obligations		15,500,000			4,000,000			4,080,000
Resources provided by noncontrolling interests		3,920,000			3,920,000			17,976,650
Net proceeds from issuance of common stock								15,443,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		133,746,349			92,899,132			62,239,780
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		36,547,238			(15,034,485	)		34,152,824
Cash and cash equivalents at beginning of period		19,118,339			34,152,824			-0-

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	55,665,577		$	19,118,339		$	34,152,824

Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	5,598,527		$	2,285,126		$	261,684
Transfers of loans to other real estate owned		555,000

A3-23

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

Capitol Development Bancorp Limited V (the "Corporation" or "CDBL V") is a bank development company. At December 31, 2008, it had six majority-owned bank subsidiaries (collectively, the "Banks"), Bank of Everett (51% owned), which commenced operations in July 2006, in Everett, Washington; Bank of Maumee (51%-owned) which commenced operations in September 2006 in Maumee, Ohio; 1st Commerce Bank (51% owned), which commenced operations in October 2006 in North Las Vegas, Nevada; Ohio Commerce Bank (51% owned), which commenced operations in November 2006 in Beachwood, Ohio; Bank of Feather River (51% owned), which commenced operations in November 2007 in Yuba City, California; and Adams Dairy Bank (51% owned), which commenced operations in January 2008 in Blue Springs, Missouri.

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

The Corporation and the 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.

A3-24

Investment Securities: Investment securities available for sale are carried at fair value with unrealized gains and losses reported as a separate component of stockholders' equity, net of tax effect (accumulated other comprehensive income). All other investment securities are classified as held for long-term investment and are carried at amortized cost. 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.

A3-25

Interest and Fees on Loans: Interest income on loans is recognized based upon the principal balance of loans outstanding. Direct costs of successful originations of portfolio loans generally exceed fees from loan originations (net deferred costs approximated $361,000 at December 31, 2008).

Other Real Estate Owned: Other real estate owned is comprised of 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.

Net Loss Per Share Attributable to CDBL V: Net loss per share attributable to CDBL V is based on the weighted average number of common shares outstanding (15,518 shares). There were no common stock equivalents or other forms of dilutive instruments for the periods presented.

A3-26

Comprehensive Loss: Comprehensive loss is the sum of net loss and certain other items which are charged or credited to stockholders' equity. For the periods presented, the Corporation's only element of comprehensive loss other than net loss was the change in fair value adjustment for investment securities available for sale. Accordingly, the elements and total of comprehensive loss are shown with the statement of changes in stockholders' equity presented herein.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations, to further enhance the accounting and financial reporting related to business combinations. Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, (3) requires that acquisition-related and restructuring costs be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The effects of the Corporation's adoption of Statement No. 141(R) will depend upon the extent and magnitude of acquisitions after December 31, 2008.

A3-27

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent's equity, (2) the amount of consolidated net income (loss) attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 applies to years beginning on or after December 15, 2008. This new guidance has been retrospectively adopted and the accompanying consolidated financial statements have been adjusted to reflect its implementation as of the beginning of the periods presented.

In February 2008, the FASB issued FSB FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The new guidance clarifies transfers and certain transactions' accounting subject to the provisions of FAS 140 and becomes effective January 1, 2009. Management does not expect this new guidance to have a material impact on the Corporation's financial position or results of operations upon implementation.

·	Proposed amendment to Statement No. 128, Earnings per Share; and
·	FASB FSP to require recalculation of leveraged leases if the timing of tax benefits affect cash flows.

A3-28

At December 31, 2008 and 2007, investment securities available for sale consisted of United States government agency securities with an amortized cost of $396,098 and $249,862, respectively, and estimated fair value of $398,914 and $249,922, respectively, scheduled to mature within three years. As of December 31, 2008 and 2007, gross unrealized gain on these securities was $2,816 and $60, respectively.

Investment securities held for long-term investment consisted of Federal Home Loan Bank stock at December 31, 2008 and 2007. Such investment is restricted and may only be resold to or redeemed by the issuer.

Portfolio loans consisted of the following at December 31:

	2008			2007
Loans secured by real estate:
Commercial	$	87,690,764		$	45,200,733
Residential (including multi-family)		39,443,010			17,681,093
Construction, land development and other land		30,990,128			25,883,635
Total loans secured by real estate		158,123,902			88,765,461
Commercial and other business-purpose loans		40,640,718			29,952,956
Consumer		5,271,079			1,169,801
Other		9,458,576			5,878,522
Total portfolio loans		213,494,275			125,755,740
Less allowance for loan losses		(3,671,000	)		(1,917,000	)
Net portfolio loans	$	209,823,275		$	123,838,740

Transactions in the allowance for loan losses are summarized below:

	2008			2007		2006
Balance at beginning of period	$	1,917,000		$	308,000	$	-0-
Provision charged to operations		3,505,112			1,609,000		308,000
Loans charged off (deduction)		(1,751,112	)		--		--
Recoveries		--			--		--

Balance at December 31	$	3,671,000		$	1,917,000	$	308,000

A3-29

Nonperforming loans (i.e., loans which are 90 days or more past due and loans on nonaccrual status) as of December 31, 2008 (none as of December 31, 2007) are summarized below:

Nonaccrual loans:
Loans secured by commercial real estate	$	895,000
Commercial and other business-purpose loans		129,000
Total nonaccrual loans		1,024,000
Past due (>90 days) loans and accruing interest:
Commercial and other business-purpose loans		105,000
Total nonperforming loans	$	1,129,000

If nonperforming loans had performed in accordance with their contractual terms during 2008, additional interest income of $160,000 would have been recorded. At December 31, 2008, there were no material amounts of loans which were restructured or otherwise renegotiated as a concession to troubled borrowers.

Impaired loans:
Loans which have an allowance requirement	$	122,000
Loans which do not have an allowance requirement		902,000
Total impaired loans	$	1,024,000

Allowance for loan losses related to impaired loans	$	29,000

Impaired loans which do not have an allowance requirement include collateral-dependent loans for which direct write-downs have been made (when necessary) and, accordingly, no allowance requirement or allocation is necessary. During 2008, the average recorded investment in impaired loans approximated $1.1 million. Interest income is recorded on impaired loans if not on nonaccrual status, or may be recorded on a cash basis in some circumstances, if such payments are not credited to principal. In 2008, no interest income was recorded on impaired loans.

A3-30

	December 31, 2008					December 31, 2007
	Amount		Percentage of Total Portfolio Loans			Amount		Percentage of Total Portfolio Loans

Loans secured by real estate:
Commercial	$	1,253,000		0.59	%	$	635,000		0.51	%
Residential (including multi-family)		560,000		0.26			241,000		0.19
Construction, land development and other land		630,000		0.30			355,000		0.28
Total loans secured by real estate		2,443,000		1.15			1,231,000		0.98
Commercial and other business-purpose loans		1,014,000		0.47			585,000		0.46
Consumer		84,000		0.04			20,000		0.02
Other		130,000		0.06			81,000		0.06

Total allowance for loan losses	$	3,671,000		1.72	%	$	1,917,000		1.52	%

In the ordinary course of business, the Banks make loans to officers and directors of the Corporation and its subsidiary including their immediate families and companies in which they are principal owners. At December 31, 2008 total loans to these persons approximated $12,241,000 ($5,788,000 at December 31, 2007). During 2008, $13,671,000 of new loans were made to these persons and repayments totaled $7,218,000. 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 and those deposits, as of December 31, 2008 and 2007, approximated $15.3 million and $14.4 million, respectively. 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 $1,728,000, $1,139,000 and $301,000 in 2008, 2007 and 2006, respectively.

A3-31

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

	2008			2007
Leasehold improvements	$	1,875,465		$	1,628,979
Equipment, furniture and software		2,123,140			1,692,552
		3,998,605			3,321,531
Less accumulated depreciation		(1,109,611	)		(518,058	)

	$	2,888,994		$	2,803,473

The Banks rent office space under operating leases. Rent expense under these lease agreements approximated $596,000, $458,000 and $105,000 in 2008, 2007 and 2006, respectively.

At December 31, 2008 future minimum rental payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year were as follows:

2009	$	675,000
2010		729,000
2011		744,000
2012		599,000
2013		486,000
2014 and thereafter		1,904,000

Total	$	5,137,000

NOTE G—DEPOSITS

The aggregate amount of time deposits of $100,000 or more approximated $47.3 million and $23.1 million as of December 31, 2008 and 2007, respectively.

At December 31, 2008, the scheduled maturities of time deposits were as follows:

2009	$	111,156,000
2010		13,301,000
2011		1,510,000
2012		433,000
2013		187,000
2014		3,000

	$	126,590,000

A3-32

Debt obligations consisted of the following at December 31:

NOTE H—DEBT OBLIGATIONS

	2008		2007
Borrowings from Federal Home Loan Banks	$	10,500,000	$	--
Notes payable to Capitol		13,080,000		8,080,000

	$	23,580,000	$	8,080,000

Borrowings from Federal Home Loan Banks (FHLB) represent advances secured by certain portfolio residential real estate mortgage loans and other eligible collateral. Such FHLB advances become due at varying dates and bear interest at market short-term rates (approximately 3.20% at December 31, 2008). At December 31, 2008, assets pledged to secure these credit facilities approximated $11.2 million and unused lines of credit under these facilities approximated $677,000. Borrowings include $4.0 million contractually due in 2018, which are callable at the lender's option prior to maturity.

Notes payable to Capitol are due on demand and bear interest from 6.75% to 9.00%, payable monthly.

At December 31, 2008, scheduled debt maturities of debt obligations were as follows:

2009	$	13,080,000
2010		4,000,000
2011		1,500,000
2013		1,000,000
2014 and thereafter		4,000,000

Total	$	23,580,000

NOTE I—STOCKHOLDERS' EQUITY

The Corporation's common stock consists of two classes outstanding at December 31, 2008 and 2007:

Class A			1,000
Class B			14,518

Total shares issued and outstanding			15,518

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 March 22, 2010, into Class A common stock of the Corporation on a share-for-share basis.

A3-33

NOTE I—STOCKHOLDERS' EQUITY—Continued

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

NOTE J—EMPLOYEE RETIREMENT PLAN

Eligible employees 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 $135,000, $87,000 and $6,000 in 2008, 2007 and 2006, respectively.

NOTE K—OTHER NONINTEREST EXPENSE

The more significant elements of other noninterest expense consisted of the following:

	2008		2007		2006
Contracted data processing and administrative services	$	1,742,657	$	1,150,942	$	307,389
Bank services (ATMs, telephone banking and Internet banking)		160,235		106,181		24,198
Advertising		179,338		134,846		20,395
Travel, lodging and meals		131,003		90,576		44,977
FDIC insurance premiums and other regulatory fees		190,331		59,059		2,597
Paper, printing and supplies		194,813		134,059		89,489
Taxes other than income taxes		298,771		273,651		12,317
Other		797,992		425,236		269,513

	$	3,695,140	$	2,374,550	$	770,875

NOTE L—INCOME TAXES

The credit for income taxes consisted of the following components:

	2008		2007		2006
Federal:
Current expense	$	-0-	$	-0-	$	-0-
Deferred credit		2,501,000		1,841,000		1,218,000
State deferred credit		163,500		104,300

	$	2,664,500	$	1,945,300	$	1,218,000

A3-34

NOTE L—INCOME TAXES—Continued

Net federal deferred income tax assets, included as a component of other assets, consisted of the following at December 31:

	2008			2007
Allowance for loan losses	$	1,249,000		$	652,000
Net operating loss carryforwards		3,820,000			1,721,000
Organizational costs		833,000			758,000
Other, net		(342,000	)		(72,000	)

	$	5,560,000		$	3,059,000

Net state deferred income tax assets, included as a component of other assets, consisted of the following at December 31:

	2008			2007
Allowance for loan losses	$	66,200		$	20,300
Net operating loss carryforwards		120,200			16,100
Organizational costs		89,800			67,600
Other, net		(8,400	)		300

	$	267,800		$	104,300

The Corporation and the Banks have net operating loss carryforwards, which may reduce income taxes payable in future periods. Such carryforwards for federal income tax purposes approximated $11,230,000 at December 31, 2008, $1,267,000 of which expires in 2026, $3,874,000 of which expires in 2027 and $6,089,000 of which expires in 2028. The Corporation and the Banks also have net operating loss carryforwards for state income tax purposes of approximately $1,276,000, $152,000 of which expires in 2017, $653,000 of which expires in 2018 and $471,000 of which expires in 2028. Management believes that, based on its tax planning strategies and estimate of future taxable income, it is more likely than not the Corporation will generate sufficient taxable income to fully utilize the net deferred tax assets.

In conjunction with its annual review, management concluded that there were no significant uncertain tax positions requiring recognition in the financial statements. The evaluation was performed for the tax years of 2006, 2007 an 2008, the tax years which remain subject to examination by major tax jurisdictions and was updated as of December 31, 2008.

A3-35

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

NOTE M—FAIR VALUE

Level 3: Significant unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A3-36

The following is a description of the Corporation's valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2008 were as follows:

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale	$	398,914	$	398,914

The balances of assets and liabilities, other than mortgage loans held for sale, measured at fair value on a nonrecurring basis as of December 31, 2008 were immaterial.

A3-37

Carrying values and estimated fair values of financial instruments for FAS No. 107 disclosure purposes were as follows at December 31 (in $1,000s):

	2008						2007
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	55,666		$	55,666		$	19,118		$	19,118
Loans held for sale		1,412			1,412
Investment securities:
Available for sale		399			399			250			250
Held for long-term investment		567			567			26			26
Total investment securities		966			966			276			276
Portfolio loans:
Loans secured by real estate:
Commercial		87,691			87,731			45,201			45,316
Residential (including multi-family)		39,443			40,091			17,681			17,734
Construction, land development and other land		30,990			31,394			25,884			26,010
Total loans secured by real estate		158,124			159,216			88,766			89,060
Commercial and other business-purpose loans		40,641			40,750			29,942			30,141
Consumer		5,271			5,294			1,170			1,174
Other		9,458			9,375			5,878			5,877
Total portfolio loans		213,494			214,635			125,756			126,252
Less allowance for loan losses		(3,671	)		(3,671	)		(1,917	)		(1,917	)
Net portfolio loans		209,823			210,964			123,839			124,335

Financial Liabilities:
Deposits:
Noninterest-bearing		48,187			48,187			19,073			19,073
Interest-bearing:
Demand accounts		49,269			49,269			32,496			32,496
Time certificates of less than $100,000		79,312			79,488			35,086			35,078
Time certificates of $100,000 or more		47,278			47,372			23,064			23,086
Total interest-bearing		175,859			176,129			90,646			90,660
Total deposits		224,046			224,316			109,719			109,733
Debt obligations		23,580			23,565			8,080			8,080

Estimated fair values of financial assets and liabilities in the preceding table 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). For example, the estimated fair values of portfolio loans, time deposits and debt obligations were determined through discounted cash flow computations. 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.

A3-38

NOTE N—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 ($72,000 and $92,000 at December 31, 2008 and 2007, respectively). Other loan commitments outstanding consist of unused lines of credit and approved, but unfunded, specific loan commitments ($57.0 million and $44.9 million at December 31, 2008 and 2007, respectively). These loan commitments (stand-by letters of credit and unfunded loans) generally expire within one year and are reviewed periodically for continuance or renewal.

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, 2008 and 2007 was $150,000 and $75,000, respectively.

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

NOTE O—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL REQUIREMENTS

A3-39

NOTE O—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL

REQUIREMENTS—Continued

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.

As of December 31, 2008, 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, 2008, that the Corporation and the Banks meet all capital adequacy requirements to which the entities are subject.

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A3-40

NOTE O—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL

REQUIREMENTS—Continued

The following table summarizes the amounts (in thousands) and related ratios of the Corporation's consolidated regulatory capital position as of December 31:

	2008			2007
Tier 1 capital to average total assets:
Minimum required amount	$	³ 21,400		$	³ 10,797
Actual amount	$	30,046		$	31,015
Ratio		11.23	%		22.98	%

Tier 1 capital to risk-weighted assets:	��
Minimum required amount(1)	$	³ 8,629		$	³ 5,409
Actual amount	$	30,046		$	31,015
Ratio		13.93	%		22.94	%

Combined Tier 1 and Tier 2 capital to risk- weighted assets:
Minimum required amount(2)	$	³ 17,258		$	³ 10,817
Amount required to meet "Well-Capitalized” category(3)	$	³ 21,573		$	³ 13,521
Actual amount	$	32,755		$	32,708
Ratio		15.18	%		24.19	%

(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.

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A3-41

NOTE P—PARENT COMPANY FINANCIAL INFORMATION

	December 31
	2008		2007
ASSETS
Money market funds on deposit with affiliated banks	$	66,773	$	192,237
Investments in subsidiaries		21,683,585		19,741,023
Other assets		483,321		124,501

TOTAL ASSETS	$	22,233,679	$	20,057,761

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities	$	24,450	$	16,250
Debt obligations		13,080,000		8,080,000
Stockholders' equity attributable to CDBL V		9,129,229		11,961,511

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	22,233,679	$	20,057,761

	Year Ended December 31						Period Ended December 31,
	2008			2007			2006
Interest income	$	6,067		$	14,448		$	140,758
Expenses:
Interest		916,532			351,191			62,229
Salaries and employee benefits		109,974						203,542
Other		35,225			(36,688	)		203,133
Total expenses		1,061,731			314,503			468,904
Loss before equity in net losses of consolidated subsidiaries and federal income taxes		(1,055,664	)		(300,055	)		(328,146	)
Equity in undistributed net losses of consolidated subsidiaries		2,137,438			1,843,813			1,103,514
Loss before federal income taxes		(3,193,102	)		(2,143,868	)		(1,431,660	)
Federal income taxes (credit)		(359,000	)		17,000			(111,000	)

NET LOSS ATTRIBUTABLE TO CDBL V	$	(2,834,102	)	$	(2,160,868	)	$	(1,320,660	)

A3-42

NOTE P—PARENT COMPANY FINANCIAL INFORMATION—Continued

On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis-point special assessment on each insured depository institution's assets minus Tier 1 capital as of June 30, subject to a maximum amount based on 10 basis-points applied to the institution's assessment base for the second quarter of 2009. The amount of the special assessment for the Corporation's bank subsidiaries is estimated to approximate $119,000. The special assessment is payable September 30, 2009 and the FDIC has announced that an additional special assessment of up to 5 basis-points later in 2009 is probable, but the amount is uncertain.

	Year Ended December 31						Period Ended December 31,
	2008			2007			2006
OPERATING ACTIVITIES
Net loss for the period	$	(2,834,102	)	$	(2,160,868	)	$	(1,320,660	)
Adjustments to reconcile net loss to net cash used by operating activities:
Equity in undistributed net losses of subsidiaries		2,137,438			1,843,813			1,103,514
Deferred federal income taxes (credit)		(359,000	)		17,000			(111,000	)
(Increase) decrease in other assets		2,000			46,538			(77,000	)
Increase in accounts payable, accrued expenses and other liabilities		8,200			8,750			7,500
NET CASH USED BY OPERATING ACTIVITIES		(1,045,464	)		(244,767	)		(397,646	)

INVESTING ACTIVITIES
Net cash investments in subsidiaries		(4,080,000	)		(4,080,000	)		(18,608,350	)
NET CASH USED BY INVESTING ACTIVITIES		(4,080,000	)		(4,080,000	)		(18,608,350	)

FINANCING ACTIVITIES
Net proceeds from issuance of common stock								15,443,000
Proceeds from debt obligations		5,000,000			4,000,000			4,080,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		5,000,000			4,000,000			19,523,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(125,464	)		(324,767	)		517,004
Cash and cash equivalents at beginning of period		192,237			517,004			-0-

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	66,773		$	192,237		$	517,004

NOTE Q—SUBSEQUENT EVENT

A3-43

APPENDIX A-4

FINANCIAL INFORMATION REGARDING CAPITOL DEVELOPMENT BANCORP LIMITED VI

Management's discussion and analysis of financial condition and results of operations	A4-2
Condensed interim consolidated financial statements as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 (unaudited)	A4-5
Audited consolidated financial statements as of December 31, 2008 and 2007 and for the periods ended December 31, 2008, 2007 and 2006	A4-16

A4-1

Management's Discussion and Analysis of Financial Condition

Capitol Development Bancorp Limited VI ("CDBL VI") is a bank-development company engaged in commercial banking activities through its subsidiaries (collectively, the “Banks”), Bank of Tacoma (located in Tacoma, Washington) which is 51% owned, Sunrise Community Bank (located in Palm Desert, California) which is 51% owned, Issaquah Community Bank (located in Issaquah, Washington) which is 51% owned, USNY Bank (located in Geneva, New York) which is 51% owned, High Desert Bank (located in Bend, Oregon) which is 55% owned, Bank of Fort Bend (located in Sugar Land, Texas) which is 51% owned and Bank of Las Colinas (located in Irving, Texas) which is 51% owned. CDBL VI'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 $319 million at June 30, 2009, an increase from $269.5 million at December 31, 2008. Total assets approximated $110.4 million at year-end 2007. Increased assets resulted mainly from higher levels of portfolio loans at the Banks, funded by growth in deposits.

Total portfolio loans approximated $245 million at June 30, 2009 compared to $221.2 million at December 31, 2008 ($78.3 million at December 31, 2007).

The allowance for loan losses at June 30, 2009 approximated $4.5 million or 1.83% of total portfolio loans, compared to the December 31, 2008 ratio of 1.65% (1.45% at December 31, 2007).

The allowance for loan losses, which is considered a critical accounting policy of CDBL VI, 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.

Accounting for income taxes is considered a critical accounting policy of CDBL VI and requires significant estimates and management judgments. At December 31, 2008 and June 30, 2009, it had a deferred tax asset approximating $7.4 million. The deferred tax asset is composed primarily of net operating loss carryforwards and temporary differences relating to the allowance for loan losses and start-up expenses of the Banks. If it is determined that realization of the deferred tax asset is in doubt, a valuation reserve is required to reduce the deferred tax asset to the amount which is more-likely-than-not realizable. No valuation reserve has been deemed necessary by management, inasmuch as it is believed that it is more-likely-than-not that the deferred tax asset will be realized. Such conclusion is based on Capitol's prior experience with de novo banks which incur operating losses and large provisions for loan losses in their most early periods of operation and ultimately become profitable. If the Banks do not ultimately become profitable in the manner anticipated, a valuation allowance against the deferred tax asset may be necessary in the future which would adversely affect CDBL VI's results of operations in that period.

Total deposits approximated $271 million at June 30, 2009, an increase of approximately $52.6 million from the $219 million level at December 31, 2008 ($55 million at December 31, 2007) resulting from higher levels of time deposits at the Banks.

The Banks seek to obtain noninterest-bearing deposits as a means to reduce their cost of funds. Noninterest-bearing deposits approximated $53.7 million at June 30, 2009 or about 19.8% of total deposits, an increase of approximately $14.4 million from December 31, 2008 compared to an increase of $28.8 million during 2008. Noninterest-bearing deposits can fluctuate significantly from day to day, depending upon customer account activity.

CDBL VI stockholders' equity approximated $6.3 million at June 30, 2009 or approximately 2.0% of total assets. Total equity approximated $27.3 million and $30.8 million at June 30, 2009 and December 31, 2008, respectively, or 8.6% and 11.4% of total assets. Capital adequacy is discussed elsewhere in this narrative.

A4-2

The net loss attributable to CDBL VI for the six months ended June 30, 2009 approximated $2.0 million, compared with $1.8 million in the corresponding 2008 period. The net loss attributable to CDBL VI for the year ended December 31, 2008 approximated $3.4 million, compared with $4.3 million for 2007 and $597,000 in 2006. 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, 2009 approximated $6.9 million, compared with $4.1 million for the six-month 2008 period. Total interest income for the year ended December 31, 2008 approximated $10 million, compared with $3.5 million in 2007 and $101,000 in 2006. The increases in interest income relate primarily to loan portfolio growth during the periods.

Total interest expense approximated $3.0 million for the six months ended June 30, 2009 and $2.0 million for the corresponding 2008 period. For the year ended December 31, 2008, total interest expense approximated $4.9 million ($957,000 in 2007 and none in 2006). Increases in interest expense correlate with growth in interest-bearing deposits during the periods.

Net interest income approximated $4.0 million for the six months ended June 30, 2009, compared with $2.2 million for the 2008 corresponding period. Net interest income for the year ended December 31, 2008 approximated $5.2 million, compared with $2.5 million in 2007 and $101,000 in 2006. Increases in net interest income relate to portfolio loan growth at the Banks.

The provision for loan losses was $2.9 million for the six months ended June 30, 2009, compared with $1.2 million in the corresponding 2008 period. The provision for loan losses was $2.5 million for the year ended December 31, 2008 ($1.1 million in 2007; none in 2006). The increased provision 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.

Total noninterest income approximated $344,000 for the six months ended June 30, 2009, compared with $254,000 for the corresponding 2008 period. Noninterest income for the year ended December 31, 2008 approximated $445,000 ($127,000 in 2007 and none in 2006). Noninterest income in 2008 increased significantly due to fees from origination of non-portfolio residential mortgage loans and gains on sale of government-guaranteed loans which were not previously significant revenue sources for the Banks. Revenue from origination of non-portfolio residential mortgage loans may fluctuate due to interest rates, real estate value, and the variability of loan purchasers and related pricing of potential sales of government-guaranteed loans which can influence the decision on whether loans will be sold.

Total noninterest expense approximated $6.9 million for the six months ended June 30, 2009, compared with $6.0 million for the corresponding 2008 period. For the year ended December 31, 2008, total noninterest expense approximated $12.3 million, compared with $12.2 million in 2007 and $1 million in 2006. A major component of noninterest expense is salaries and employee benefits which increased in each of the periods. Noninterest expense in 2007 included $3.8 million of start-up and pre-opening costs related to new bank activity as well as early period growth of the Banks.

Cash and cash equivalents approximated $57.7 million at June 30, 2009, $38.1 million at December 31, 2008 and $24.2 million at December 31, 2007. 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, 2009 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 CDBL VI, 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, CDBL VI and its Banks meet or exceed regulatory capital requirements to which they are subject.

A4-3

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A4-4

CAPITOL DEVELOPMENT BANCORP LIMITED VI

Condensed Interim Consolidated Financial Statements

A4-5

See notes to condensed interim consolidated financial statements.

	June 30, 2009 (Unaudited)			December 31, 2008
				(as adjusted)
ASSETS
Cash and due from banks	$	5,660,152		$	7,189,256
Money-market funds and interest-bearing deposits		51,452,782			25,974,201
Federal funds sold		575,000			4,947,000
Cash and cash equivalents		57,687,934			38,110,457
Loans held for sale		4,734,660			417,000
Investment securities—Note B:
Available for sale, carried at fair value		401,906			407,906
Held for long-term investment, carried at
amortized cost which approximates fair value		207,300			16,100
Total investment securities		609,206			424,006
Portfolio loans, less allowance for loan losses of
$4,487,000 in 2009 and $3,639,000 in 2008		240,903,235			217,524,226
Premises and equipment		3,898,446			4,094,951
Accrued interest income		835,342			778,596
Other real estate owned		625,328
Other assets		9,802,494			8,152,120

TOTAL ASSETS	$	319,096,645		$	269,501,356

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	53,703,897		$	39,293,971
Interest-bearing		217,527,799			179,310,216
Total deposits		271,231,696			218,604,187
Debt obligations		19,473,500			19,399,400
Accrued interest on deposits and other liabilities		1,073,760			701,156
Total liabilities		291,778,956			238,704,743

EQUITY:
CDBL VI stockholders’ equity:
Common stock, no par value,
51,000 shares authorized;
16,825 shares issued and outstanding		16,750,000			16,750,000
Retained-earnings deficit		(10,408,838	)		(8,387,316	)
Fair value adjustment (net of tax effect) for investment
securities available for sale (accumulated other
comprehensive income)		961			3,680
Total CDBL VI stockholders’ equity		6,342,123			8,366,364
Noncontrolling interests in consolidated subsidiaries		20,975,566			22,430,249
Total equity		27,317,689			30,796,613

TOTAL LIABILITIES AND EQUITY	$	319,096,645		$	269,501,356

A4-6

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

See notes to condensed interim consolidated financial statements.

	Six Months Ended June 30
	2009			2008
				(as adjusted)
Interest income:
Portfolio loans (including fees)	$	6,805,813		$	3,838,085
Loans held for sale		54,285			9,772
Taxable investment securities		5,544
Federal funds sold		2,712			238,218
Money market and interest bearing deposits		74,139			32,670
Other		444
Total interest income		6,942,937			4,118,745
Interest expense:
Deposits		2,321,395			1,391,977
Debt obligations and other		642,024			564,371
Total interest expense		2,963,419			1,956,348
Net interest income		3,979,518			2,162,397
Provision for loan losses		2,875,763			1,167,000
Net interest income after provision
for loan losses		1,103,755			995,397

Noninterest income:
Service charges on deposit accounts		81,262			33,109
Fees from origination of non-portfolio residential
mortgage loans		182,757			102,017
Fees from syndication and placement of non-
portfolio commercial loans		9,841			561
Fees from servicing of government-guaranteed loans		2,380			68,652
Gain on sales of government-guaranteed loans
Other		67,174			49,385
Total noninterest income		343,414			253,724

Noninterest expense:
Salaries and employee benefits		3,156,797			3,078,223
Occupancy		830,157			689,202
Equipment rent, depreciation and maintenance		348,494			278,158
Preopening and start-up costs					2,102
Other		2,558,126			1,979,004
Total noninterest expense		6,893,574			6,026,689
Loss before income tax benefit		(5,446,405	)		(4,777,568	)
Income tax benefit		(1,970,200	)		(1,712,600	)
NET LOSS		(3,476,205	)		(3,064,968	)
Less net losses attributable to noncontrolling interests		1,454,683			1,303,664

NET LOSS ATTRIBUTABLE TO CDBL VI	$	(2,021,522	)	$	(1,761,304	)

NET LOSS PER SHARE ATTRIBUTABLE
TO CDBL VI—Note C	$	(120.15	)	$	(104.68	)

A4-7

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

See notes to condensed interim consolidated financial statements.

	Capitol Development Bancorp Limited VI Stockholders’ Equity
	Common Stock		Retained- Earnings Deficit			Accumulated Other Comprehensive Income (Loss)			Total CDBL VI Stockholders’ Equity			Noncontrolling Interests			Total Equity

Six Months Ended June 30, 2008
Balances at January 1, 2008	$	16,750,000	$	(4,946,807	)				$	11,803,193		$	24,896,250		$	36,699,443

Net loss for the 2008 period				(1,761,304	)					(1,761,304	)		(1,303,664	)		(3,064,968	)

BALANCES AT JUNE 30, 2008	$	16,750,000	$	6,708,111					$	10,041,889		$	23,592,586		$	33,634,475

Six Months Ended June 30, 2009
Balances at January 1, 2009	$	16,750,000	$	(8,387,316	)	$	3,680		$	8,366,364		$	22,430,249		$	30,796,613

Components of comprehensive
loss:
Net loss for the 2009 period				(2,021,522	)					(2,021,522	)		(1,454,683	)		(3,476,205	)
Fair value adjustment for
investment securities
available for sale (net of
tax effect)							(2,719	)		(2,719	)					(2,719	)
Comprehensive loss
for the 2009 period										(2,024,241	)					(3,478,924	)

BALANCES AT JUNE 30, 2009	$	16,750,000	$	(10,408,838	)	$	961		$	6,342,123		$	20,975,566		$	27,317,689

A4-8

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

See notes to condensed interim consolidated financial statements.

	Six Months Ended June 30
	2009			2008
				(as adjusted)
OPERATING ACTIVITIES
Net loss for the period	$	(3,476,205	)	$	(3,064,968	)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for loan losses		2,875,763			1,167,000
Depreciation of premises and equipment		386,998			335,838
Net amortization of investment security premiums		1,880
Gain on sales of government-guaranteed loans					(68,652	)
Originations and purchases of loans held for sale		(31,141,724	)		(2,479,000	)
Proceeds from sales of loans held for sale		26,824,064			1,960,750
Increase in accrued interest income and other assets		(1,705,719	)		(874,086	)
Increase (decrease) in accrued interest expense on deposits and other liabilities		372,604			(1,390,066	)

NET CASH USED BY OPERATING ACTIVITIES		(5,862,339	)		(4,413,184	)
	��
INVESTING ACTIVITIES
Purchase of securities held for long-term investment		(191,200	)
Net increase in portfolio loans		(26,880,100	)		(76,949,771	)
Proceeds from sales of premises and equipment					117,142
Purchases of premises and equipment		(190,493	)		(1,584,008	)

NET CASH USED BY INVESTING ACTIVITIES		(27,261,793	)		(78,416,637	)

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and
savings accounts		39,572,388			44,589,418
Net increase in certificates of deposit		13,055,121			39,837,169
Net borrowings from debt obligations		74,100			2,000,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		52,701,609			86,426,587

INCREASE IN CASH AND CASH EQUIVALENTS		19,577,477			3,596,766
Cash and cash equivalents at beginning of period		38,110,457			24,202,133

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	57,687,934		$	27,798,899

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	3,068,724		$	1,839,361
Transfers of loans to other real estate owned		625,328

A4-9

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

The accompanying condensed consolidated financial statements of Capitol Development Bancorp Limited VI ("CDBL VI") 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 CDBL VI considers necessary for a fair presentation of the interim periods.

The consolidated financial statements include the accounts of CDBL VI and its majority-owned subsidiaries after elimination of intercompany accounts and transactions and giving effect to applicable noncontrolling interests.

The results of operations for the six-month period ended June 30, 2009 are not necessarily indicative of the results to be expected for the year ending December 31, 2009.

Investment securities consisted of the following (in $1,000s):

	June 30, 2009				December 31, 2008
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Available for sale:
United States government agency securities	$	401	$	402	$	402	$	408

Held for long-term investment:
Federal Home Loan Bank stock		207		207		16		16

	$	608	$	609	$	418	$	424

Investments in Federal Home Loan Bank stock are restricted and may only be resold to, or redeemed by, the issuer.

Gross unrealized gains on investment securities available for sale were $1,000 and $6,000 at June 30, 2009 and December 31, 2008, respectively.

Gross realized gains and losses from sales and maturities of investment securities were insignificant for the periods presented.

Scheduled maturities of investment securities held as of June 30, 2009 were as follows (in $1,000s):

	Amortized Cost		Estimated Fair Value

After one year, through five years	$	401	$	402
Securities held for long-term investment, without standard maturities		207		207
	$	608	$	609

A4-10

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

NOTE C—NET LOSS PER SHARE ATTRIBUTABLE TO CDBL VI

Net loss per share attributable to CDBL VI is based on the weighted average number of common shares outstanding (16,825 shares). There were no common stock equivalents or other forms of dilutive instruments outstanding during the periods presented.

FAS No. 157 establishes a hierarchy that prioritizes the use of fair value inputs used in valuation methodologies into the following three levels:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 3: Significant unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of CDBL VI's valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Loans: CDBL VI does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of the collateral.

Other real estate owned: At the time of foreclosure, foreclosed properties are adjusted to fair value less estimated costs to sell upon transfer from portfolio loans to other real estate owned, establishing a new accounting basis. CDBL VI subsequently adjusts fair value on other real estate owned on a nonrecurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value.

The balances of assets and liabilities measured at fair value on a recurring basis as of June 30, 2009 were as follows (in $1,000s):

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale:
United State government agency securities	$	402	$	402

A4-11

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2008 were as follows (in $1,000's):

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale:
United State government agency securities	$	408	$	408

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2009 were as follows (in $1,000s):

	Total		Significant Unobservable Inputs (Level 3)

Impaired loans (1)	$	2,882	$	2,882

Other real estate owned (1)	$	625	$	625

(1)	Represents carrying value and related write-downs for which adjustments are based on the appraised value of the applicable collateral or foreclosed property or other estimates of fair value.

The balances of assets and liabilities, other than mortgage loans held for sale, measured at fair value on a nonrecurring basis as of December 31, 2008 were immaterial.

CDBL VI began applying the fair value measurement and disclosure provisions of FAS No. 157 effective January 1, 2009 to nonfinancial assets and liabilities measured on a nonrecurring basis; which did not have a material effect on CDBL VI's consolidated financial position upon implementation. CDBL VI measures the fair value of the following on a nonrecurring basis: (1) long-lived assets and (2) foreclosed assets.

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A4-12

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Carrying values and estimated fair values of financial instruments for FAS No. 107 disclosure purposes were as follows (in $1,000s):

	June 30, 2009						December 31, 2008
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	57,688		$	57,688		$	38,110		$	38,110
Loans held for sale		4,735			4,735			417			417
Investment securities:
Available for sale		402			402			408			408
Held for long-term investment		207			207			16			16
Total investment securities		609			609			424			424
Portfolio loans:
Loans secured by real estate:
Commercial		98,448			99,057			83,613			83,883
Residential (including multi-family)		36,198			36,037			32,057			32,248
Construction, land development and other land		45,414			41,172			42,427			42,366
Total loans secured by real estate		180,060			176,266			158,097			158,497
Commercial and other business-purpose loans		52,946			52,865			51,934			51,945
Consumer		4,092			4,127			3,759			3,771
Other		8,292			8,213			7,372			7,245
Total portfolio loans		245,390			241,471			221,162			221,458
Less allowance for loan losses		(4,487	)		(4,487	)		(3,639	)		(3,639	)
Net portfolio loans		240,903			236,984			217,523			217,819

Financial Liabilities:
Deposits:
Noninterest-bearing		53,704			53,704			39,294			39,294
Interest-bearing:
Demand accounts		88,119			88,042			62,956			62,956
Time certificates of less than $100,000		47,974			48,038			65,931			66,257
Time certificates of $100,000 or more		81,435			81,565			50,423			50,525
Total interest-bearing		217,528			217,645			179,310			179,738
Total deposits		271,232			271,349			218,604			219,032
Debt obligations		19,474			19,477			19,399			19,399

Given current market conditions, a portion of the loan portfolio is not readily marketable and market prices do not exist. CDBL VI has not attempted to market the loan portfolio to potential buyers, if any exist, to determine the fair value of those instruments in accordance with the definition in FAS No. 157. Since negotiated prices in illiquid markets depend upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Accordingly, the fair value measurements for loans included in the table above are unlikely to represent the instruments' liquidation values.

A4-13

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements, which provides a definition of fair value for accounting purposes, establishes a framework for measuring fair value and expands related financial statement disclosures. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which deferred the effective date of SFAS No. 157 until January 1, 2009 for nonfinancial assets and nonfinancial liabilities except those items recognized or disclosed at fair value on an annual or on a more frequently recurring basis. The implementation of previously deferred aspects of Statement No. 157 in 2009 (as permitted by FSP FAS 157-2) did not have a material effect on CDBL VI's results of operations or financial position. Fair value disclosures are set forth in Note D to the condensed interim financial statements.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations, to further enhance the accounting and financial reporting related to business combinations. Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, (3) requires that acquisition-related and restructuring costs be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The effects of CDBL VI's adoption of Statement No. 141(R) had no impact upon implementation and its subsequent impact will depend upon the extent and magnitude of acquisitions in the future.

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent's equity, (2) the amount of consolidated net income (loss) attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 became effective for CDBL VI on January 1, 2009 and the accompanying condensed consolidated financial statements reflect implementation of the new accounting standard as if it occurred as of the beginning of the periods presented.

On April 9, 2009, the FASB issued three FASB Staff Positions (FSP), which become effective for second quarter reporting, with earlier implementation permitted for the first calendar quarter of 2009. CDBL VI elected to implement the new guidance effective January 1, 2009.

FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance for debt securities to make it more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in financial statements. Implementation of this new guidance did not have a material effect on CDBL VI's consolidated financial statements. The expanded interim disclosures about investment securities are set forth in Note B to the condensed consolidated financial statements.

A4-14

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

FSP FAS 157-4 amends prior fair value guidance to aid in determining fair value when the volume and level of activity for an asset or liability have significantly decreased and identifying transactions that are not orderly. This new guidance is intended to clarify that significant adjustments to quoted prices may be necessary to estimate fair value when there has been a significant decrease in the volume and activity for the asset/liability in relation to normal market activity. Fair value is the price that would be received to sell an asset (or paid to transfer a liability) in an orderly transaction (that is, not a forced liquidation or distressed sale) between willing market participants under current market conditions. CDBL VI's implementation of FSP FAS 157-4 had no material effect on the condensed consolidated financial statements for the period ending June 30, 2009.

In March 2008 the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. This new guidance revises the presentation and disclosure of derivatives and hedging activities, became effective for CDBL VI on January 1, 2009 and did not have a material impact on CDBL VI's condensed consolidated financial statements upon implementation.

In February 2008, the FASB issued FSB FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The new guidance clarifies transfers and certain transactions' accounting subject to the provisions of FAS 140 and becomes effective January 1, 2009. This new guidance did not have a material impact on CDBL VI's consolidated financial position or results of operations upon implementation.

The FASB has also recently issued several proposals to amend, supersede or interpret existing accounting standards which may impact CDBL VI's financial statements at a later date, such as a proposed amendment to Statement No. 128, Earnings per Share, among other things.

CDBL VI's management has not completed its analysis of this new guidance (as proposed, where applicable) although it anticipates the potential impact (if finalized, where applicable) would not be material to CDBL VI's consolidated financial statements.

A4-15

Periods ended December 31, 2008, 2007 and 2006

A4-16

	Page
Report of Independent Registered Public Accounting Firm	A4-18
Consolidated Balance Sheets	A4-19
Consolidated Statements of Operations	A4-20
Consolidated Statements of Changes in Stockholders' Equity	A4-21
Consolidated Statements of Cash Flows	A4-22
Notes to Consolidated Financial Statements	A4-23 – A4-42

A4-17

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheets of Capitol Development Bancorp Limited VI and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years ended December 31, 2008 and 2007, and the period from December 1, 2006 (date of inception) to December 31, 2006. 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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capitol Development Bancorp Limited VI and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the years ended December 31, 2008 and 2007, and the period from December 1, 2006 (date of inception) to December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

(July 7, 2009 as to the retrospective adoption of

June 2, 2009

Financial Accounting Standards Statement No. 160 as described

in Note B to the consolidated financial statements)

A4-18

	December 31
	2008			2007
	(as adjusted)			(as adjusted)
ASSETS
Cash and due from banks	$	7,189,256		$	2,575,670
Money-market and interest-bearing deposits		25,974,201			4,496,463
Federal funds sold		4,947,000			17,130,000
Cash and cash equivalents		38,110,457			24,202,133
Loans held for sale		417,000
Investment securities—Note C:
Available for sale, carried at fair value		407,906
Held for long-term investment carried at
amortized cost which approximates fair value		16,100
Total investment securities		424,006
Portfolio loans, less allowance for loan losses of $3,639,000 in 2008 and $1,136,000 in 2007—Note D		217,524,226			77,194,456
Premises and equipment—Note F		4,094,951			3,153,782
Accrued interest income		778,596			322,875
Other assets		8,152,120			5,546,840

TOTAL ASSETS	$	269,501,356		$	110,420,086

LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	39,293,971		$	10,450,148
Interest-bearing—Note G		179,310,216			44,874,581
Total deposits		218,604,187			55,324,729
Debt obligations—Note H		19,399,400			16,400,000
Accrued interest on deposits and other liabilities		701,156			1,995,914
Total liabilities		238,704,743			73,720,643

EQUITY—Notes I and O:
CDBL VI stockholders' equity:
Common stock, no par value, 51,000 shares authorized; 16,825 shares issued and outstanding		16,750,000			16,750,000
Retained-earnings deficit		(8,387,316	)		(4,946,807	)
Fair value adjustment (net of tax effect) for investment securities available for sale (accumulated other comprehensive income)		3,680
Total CDBL VI stockholders' equity		8,366,364			11,803,193
Noncontrolling interests		22,430,249			24,896,250
Total equity		30,796,613			36,699,443

TOTAL LIABILITIES AND EQUITY	$	269,501,356		$	110,420,086

A4-19

	Year Ended December 31						Period Ended December 31,
	2008			2007			2006
	(as adjusted)			(as adjusted)			(as adjusted)
Interest income:
Portfolio loans (including fees)	$	9,660,820		$	2,557,976
Loans held for sale		11,027
Taxable investment securities		4,396
Federal funds sold		369,406			753,968
Money market and interest bearing deposits		52,729			155,438		$	101,119
Other		143			17,976
Total interest income		10,098,521			3,485,358			101,119
Interest expense:
Deposits		3,709,701			728,134
Debt obligations and other		1,222,298			229,334
Total interest expense		4,931,999			957,468
Net interest income		5,166,522			2,527,890			101,119
Provision for loan losses—Note D		2,545,051			1,136,000
Net interest income after provision for loan losses		2,621,471			1,391,890			101,119
Noninterest income:
Service charges on deposit accounts		87,902			7,705
Fees from origination of non-portfolio residential mortgage loans		121,389			81,542
Fees from syndication and placement of non-portfolio commercial loans		9,618			563
Fees from servicing government-guaranteed loans		2,024
Gain on sales of government-guaranteed loans		95,602			26,484
Other		128,101			10,799
Total noninterest income		444,636			127,093
Noninterest expense:
Salaries and employee benefits		6,317,423			4,779,255			652,464
Occupancy		1,457,455			720,243			16,137
Equipment rent, depreciation and maintenance		594,270			244,797			4,305
Preopening and start-up costs		2,102			3,839,859			5,092
Other—Note K		3,884,567			2,614,833			342,094
Total noninterest expense		12,255,817			12,198,987			1,020,092
Loss before income tax benefit		(9,189,710	)		(10,680,004	)		(918,973	)
Income tax benefit—Note L		(3,283,200	)		(3,812,600	)		(322,000	)
NET LOSS		(5,906,510	)		(6,867,404	)		(596,973	)
Less net losses attributable to noncontrolling interests		2,466,001			2,517,570

NET LOSS ATTRIBUTABLE TO CDBL VI	$	(3,440,509	)	$	(4,349,834	)	$	(596,973	)

NET LOSS PER SHARE ATTRIBUTABLE
TO CDBL VI—Note C	$	(204.49	)	$	(258.53	)	$	(35.48	)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

A4-20

	Capitol Development Bancorp Limited VI Stockholders' Equity									As Adjusted
	Common Stock		Retained- Earnings Deficit			Accumulated Other Comprehensive Income	Total CDBL VI Stockholders' Equity			Noncontrolling Interests			Total

Balances at December 1, 2006, beginning of period	$	-0-	$	-0-			$	-0-					$	-0-

Issuance of 16,825 shares of common stock for cash consideration of $1,000 per share net of offering expenses		16,750,000						16,750,000						16,750,000

Net loss for the 2006 period				(596,973	)			(596,973	)					(596,973	)

BALANCES AT DECEMBER 31, 2006		16,750,000		(596,973	)			16,153,027						16,153,027

Noncontrolling interests' investment in formation of banks										$	27,413,820			27,413,820

Net loss for 2007				(4,349,834	)			(4,349,834	)		(2,517,570	)		(6,867,404	)

BALANCES AT DECEMBER 31, 2007		16,750,000		(4,946,807	)			11,803,193			24,896,250			36,699,443

Components of comprehensive loss:
Net loss for 2008				(3,440,509	)			(3,440,509	)		(2,466,001	)		(5,906,510	)
Fair value adjustment for investment securities available for sale (net of income tax effect)						$ 3,680		3,680						3,680
Comprehensive loss for 2008								(3,436,829	)					(5,902,830	)

BALANCES AT DECEMBER 31, 2008	$	16,750,000	$	(8,387,316	)	$ 3,680	$	8,366,364		$	22,430,249		$	30,796,613

A4-21

	Year Ended December 31						Period Ended December 31,
	2008			2007			2006
	(as adjusted)			(as adjusted)			(as adjusted)
OPERATING ACTIVITIES
Net loss for the period	$	(5,906,510	)	$	(6,867,404	)	$	(596,973	)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for loan losses		2,545,051			1,136,000
Depreciation of premises and equipment		708,970			294,860
Net amortization of investment security discounts		(2,330	)
Deferred income tax credit		(3,283,200	)		(3,812,600	)		(322,000	)
Gain on sales of government guaranteed loans		(95,602	)		(26,484	)
Originations and purchases of loans held for sale		(3,376,000	)
Proceeds from sales of loans held for sale		2,959,000
Decrease (increase) in accrued interest income and other assets		220,303			(1,655,115	)		(80,000	)
Increase (decrease) in accrued interest expense on deposits and other liabilities		(1,294,758	)		1,995,914

NET CASH USED BY OPERATING ACTIVITIES		(7,525,076	)		(8,934,829	)		(998,973	)

INVESTING ACTIVITIES
Proceeds from calls, prepayments and maturities of investment securities		100,000
Purchase of securities available for sale		(500,000	)
Purchase of securities held for long-term investment		(16,100	)
Net increase in portfolio loans		(142,779,219	)		(78,303,972	)
Purchases of premises and equipment		(1,650,139	)		(3,448,642	)

NET CASH USED BY INVESTING ACTIVITIES		(144,845,458	)		(81,752,614	)

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings accounts		68,564,615			33,686,216
Net increase in certificates of deposit		94,714,843			21,638,513
Net borrowings from debt obligations		2,999,400			16,400,000
Resources provided by noncontrolling interests					27,413,820
Net proceeds from issuance of common stock								16,750,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		166,278,858			99,138,549			16,750,000
INCREASE IN CASH AND CASH EQUIVALENTS		13,908,324			8,451,106			15,751,027
Cash and cash equivalents at beginning of period		24,202,133			15,751,027			-0-

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	38,110,457		$	24,202,133		$	15,751,027

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	4,676,248		$	912,115

A4-22

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

Capitol Development Bancorp Limited VI (the "Corporation" or "CDBL VI") is a bank development company. At December 31, 2008, it had seven majority-owned bank subsidiaries (collectively, the “Banks”), Bank of Tacoma (51%) owned, which commenced operations in January 2007 in Tacoma, Washington; Sunrise Community Bank (51% owned), which commenced operations in February 2007 in Palm Desert, California; Issaquah Community Bank (51% owned), which commenced operations in July 2007 in Issaquah, Washington; USNY Bank (51% owned), which commenced operations in July 2007 in Geneva, New York; High Desert Bank (55% owned), which commenced operations in September 2007 in Bend, Oregon; Bank of Fort Bend (51% owned), which commenced operations in December 2007 in Sugar Land, Texas; and Bank of Las Colinas (51% owned), which commenced operations in December 2007 in Irving, Texas.

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

A4-23

Investment Securities: Investment securities available for sale are carried at fair value with unrealized gains and losses reported as a separate component of stockholders' equity, net of tax effect (accumulated other comprehensive income). All other investment securities are classified as held for long-term investment and are carried at amortized cost. 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.

A4-24

Premises and Equipment: Premises and equipment are stated on the basis of cost. Depreciation of equipment and furniture, which have 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.

Other Real Estate Owned: Other real estate owned (none at December 31, 2008 and 2007) is comprised of properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. These properties held for sale are carried at estimated fair value (net of estimated selling cost) at the date acquired and are periodically reviewed for subsequent changes in fair value.

Net Loss Per Share Attributable to CDBL VI: Net loss per share attributable to CDBL VI is based on the weighted average number of common shares outstanding (16,825 shares). There were no common stock equivalents or other forms of dilutive instruments for the periods presented.

A4-25

Comprehensive Loss: Comprehensive loss is the sum of net loss and certain other items which are charged or credited to stockholders' equity. For the periods presented, the Corporation's only element of comprehensive loss other than net loss from operations was the change in the fair value adjustment for investment securities available for sale. Accordingly, the elements and total of comprehensive loss are shown within the statement of changes in stockholders' equity presented herein.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations, to further enhance the accounting and financial reporting related to business combinations. Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, (3) requires that acquisition-related and restructuring costs be recognized separately from the acquisition, generally charged to expense when incurred and (4) determines information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Statement No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The effects of the Corporation's adoption of Statement No. 141(R) will depend upon the extent and magnitude of acquisitions after December 31, 2008.

A4-26

Also in December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, to create accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Statement No. 160 establishes accounting and reporting standards that require (1) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent's equity, (2) the amount of consolidated net income (loss) attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income, (3) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently, (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary to be initially measured at fair value and (5) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 applies to years beginning on or after December 15, 2008. This new guidance has been retrospectively adopted and the accompanying consolidated financial statements have been adjusted to reflect its implementation as of the beginning of the periods presented.

In February 2008, the FASB issued FSB FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The new guidance clarifies transfers and certain transactions' accounting subject to the provisions of FAS 140 and becomes effective January 1, 2009. Management does not expect this new guidance to have a material impact on the Corporation's financial position or results of operations upon implementation.

·	Proposed amendment to Statement No. 128, Earnings per Share; and
·	FASB FSP to require recalculation of leveraged leases if the timing of tax benefits affect cash flows.

A4-27

At December 31, 2008, investment securities available for sale consisted of United States government agency securities with an amortized cost of $402,331 and estimated fair value of $407,906, scheduled to mature in two years (none at December 31, 2007). As of December 31, 2008, the gross unrealized gain on this security was $5,575.

Investment securities held for long-term investment at December 31, 2008 (none at December 31, 2007) consisted of Federal Home Loan Bank stock. Such investments in Federal Home Loan Bank stock are restricted and may only be resold to or redeemed by the issuer.

Portfolio loans consisted of the following at December 31:

	2008			2007
Loans secured by real estate:
Commercial	$	83,612,505		$	25,470,472
Residential (including multi-family)		32,056,589			6,653,520
Construction, land development and other land		42,427,271			19,025,830
Total loans secured by real estate		158,096,365			51,149,822
Commercial and other business-purpose loans		51,934,007			21,251,301
Consumer		3,759,819			1,536,111
Other		7,373,035			4,393,222
Total portfolio loans		221,163,226			78,330,456
Less allowance for loan losses		(3,639,000	)		(1,136,000	)
Net portfolio loans	$	217,524,226		$	77,194,456

Transactions in the allowance for loan losses are summarized below:

	2008			2007
Balance at beginning of period	$	1,136,000		$	-0-
Provision charged to operations		2,545,051			1,136,000
Loans charged off (deduction)		(42,051	)		--
Recoveries		--			--

Balance at December 31	$	3,639,000		$	1,136,000

A4-28

Nonperforming loans (i.e., loans which are 90 days or more past due and loans on nonaccrual status) as of December 31, 2008 (none as of December 31, 2007) are summarized below:

Nonaccrual loans:
Loans secured by real estate:
Construction, land development and other land	$	195,000
Past due (>90 days) loans and accruing interest:
Construction, land development and other land		988,000
Total nonperforming loans	$	1,183,000

If nonperforming loans had performed in accordance with their contractual terms during 2008, additional interest income of $4,000 would have been recorded. At December 31, 2008, there were no material amounts of loans which were restructured or otherwise renegotiated as a concession to troubled borrowers.

Loans are considered impaired when it is probable that all amounts due according to the contractual terms of a loan agreement will not be collected, including contractually scheduled interest and principal payments. Impaired loans, which are included in nonperforming loans, were $195,000 as of December 31, 2008 (none as of December 31, 2007) and did not have an allowance requirement.

Impaired loans which do not have an allowance requirement include collateral-dependent loans for which direct write-downs have been made (when necessary) and, accordingly, no allowance requirement or allocation is necessary. During 2008, the average recorded investment in impaired loans approximated $39,000. Interest income is recorded on impaired loans if not on nonaccrual status, or may be recorded on a cash basis in some circumstances, if such payments are not credited to principal. In 2008, no interest income was recorded on impaired loans.

[The remainder of this page intentionally left blank]

A4-29

	December 31, 2008					December 31, 2007
	Amount		Percentage of Total Portfolio Loans			Amount		Percentage of Total Portfolio Loans

Loans secured by real estate:
Commercial	$	1,301,000		0.59	%	$	338,000		0.43	%
Residential (including multi-family)		441,000		0.20			92,000		0.12
Construction, land development and other land		787,000		0.35			260,000		0.33
Total loans secured by real estate		2,529,000		1.14			690,000		0.88
Commercial and other business-purpose loans		940,000		0.43			369,000		0.47
Consumer		64,000		0.03			26,000		0.03
Other		106,000		0.05			51,000		0.07

Total allowance for loan losses	$	3,639,000		1.65	%	$	1,136,000		1.45	%

In the ordinary course of business, the Banks make loans to officers and directors of the Corporation and its subsidiary including their immediate families and companies in which they are principal owners. At December 31, 2008 total loans to these persons approximated $16,900,000 ($11,418,000 as of December 31, 2007). During 2008, $9,558,000 of new loans were made to these persons and repayments totaled $4,076,000. 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 and those deposits, as of December 31, 2008 and 2007, approximated $17.1 million and $5.4 million, respectively. 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 $2,059,000 and $876,000 in 2008 and 2007, respectively (none in 2006).

A4-30

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

	2008			2007
Leasehold improvements	$	2,513,174		$	1,391,563
Equipment and furniture		2,585,607			2,057,079
		5,098,781			3,448,642
Less accumulated depreciation		(1,003,830	)		(294,860	)

	$	4,094,951		$	3,153,782

The Banks rent office space under operating leases. Rent expense under these lease agreements approximated $948,000, $484,000 and $16,000 in 2008, 2007 and 2006, respectively, net of sublease income of $103,000 and $38,000 in 2008 and 2007, respectively (none in 2006).

At December 31, 2008 future minimum rental payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year were as follows:

2009	$	1,155,000
2010		1,178,000
2011		1,190,000
2012		1,098,000
2013		893,000
2014 and thereafter		1,067,000

Total	$	6,581,000

NOTE G—DEPOSITS

The aggregate amount of time deposits of $100,000 or more approximated $50.4 million and $6.6 million as of December 31, 2008 and 2007, respectively.

At December 31, 2008, the scheduled maturities of time deposits were as follows:

2009	$	101,101,000
2010		12,005,000
2011		2,107,000
2012		698,000
2013		443,000

Total	$	116,354,000

A4-31

Debt obligations consisted of the following at December 31:

NOTE H—DEBT OBLIGATIONS

	2008		2007
Borrowings from Federal Home Loan Bank	$	999,400
Notes payable to Capitol		18,400,000	$	16,400,000

	$	19,399,400	$	16,400,000

Borrowings from the Federal Home Loan Bank (FHLB) represent advances secured by certain portfolio residential real estate mortgage loans and other eligible collateral. Such FHLB advances become due at varying dates and bear interest at market short-term rates (approximately 2.60% at December 31, 2008). At December 31, 2008, assets pledged to secure these credit facilities approximated $6.4 million and unused lines of credit under these facilities approximated $5.4 million.

Notes payable to Capitol are due on demand and bear interest from 6.75% to 9.00%, payable monthly.

At December 31, 2008, scheduled debt maturities of debt obligations were as follows:

2009	$	18,400,000
2011		999,400

Total	$	19,399,400

NOTE I—STOCKHOLDERS' EQUITY

The Corporation's common stock consists of two classes outstanding at December 31, 2008 and 2007:

Class A			1,000
Class B			15,825

Total shares issued and outstanding			16,825

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 September 15, 2010, into Class A common stock of the Corporation on a share-for-share basis.

A4-32

NOTE I—STOCKHOLDERS' EQUITY—Continued

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

NOTE J—EMPLOYEE RETIREMENT PLAN

Eligible employees 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 $188,000 and $63,000 in 2008 and 2007, respectively (none in 2006).

NOTE K—OTHER NONINTEREST EXPENSE

The more significant elements of other noninterest expense consisted of the following:

	2008		2007		2006
Contracted data processing and administrative services	$	2,073,579	$	883,996
Bank services (ATMs, telephone banking and Internet banking)		176,040		80,380
Advertising		169,995		88,841
Travel, lodging and meals		193,389		104,919
FDIC insurance premiums and other regulatory fees		149,662		27,468
Telephone		114,965		48,594
Paper, printing and supplies		255,245		225,115
Other		751,692		1,155,520	$	342,094

	$	3,884,567	$	2,614,833	$	342,094

NOTE L—INCOME TAXES

The credit for income taxes consisted of the following components:

	2008		2007		2006
Federal:
Current expense	$	-0-	$	-0-	$	-0-
Deferred credit		2,994,000		3,471,000		322,000
State deferred credit		289,200		341,600

	$	3,283,200	$	3,812,600	$	322,000

A4-33

NOTE L—INCOME TAXES—Continued

Net federal deferred income tax assets, included as a component of other assets, consisted of the following at December 31:

	2008			2007
Allowance for loan losses	$	1,238,000		$	388,000
Net operating loss carryforwards		4,770,000			2,167,000
Organizational costs		1,183,000			1,270,000
Other, net		(404,000	)		(32,000	)

	$	6,787,000		$	3,793,000

Net state deferred income tax assets, included as a component of other assets, consisted of the following at December 31:

	2008			2007
Allowance for loan losses	$	139,900		$	49,900
Net operating loss carryforwards		390,600			143,800
Organizational costs		136,600			146,800
Other, net		(36,300	)		1,100

	$	630,800		$	341,600

In conjunction with its annual review, management concluded that there were no significant uncertain tax positions requiring recognition in the financial statements. The evaluation was performed for the tax years of 2006, 2007 and 2008, the tax years which remain subject to examination by major tax jurisdictions and was updated as of December 31, 2008.

A4-34

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

NOTE M—FAIR VALUE

Level 3: Significant unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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The following is a description of the Corporation's valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2008 were as follows:

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale	$	407,906	$	407,906

The balances of assets and liabilities, other than mortgage loans held for sale, measured at fair value on a nonrecurring basis as of December 31, 2008 were immaterial.

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Carrying values and estimated fair values of financial instruments for FAS No. 107 disclosure purposes were as follows at December 31 (in $1,000s):

	2008						2007
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	38,110		$	38,110		$	24,202		$	24,202
Loans held for sale		417			417
Investment securities available for sale		408			408
Investment securities held for long-term investment		16			16
Portfolio loans:
Loans secured by real estate:
Commercial		83,613			83,883			25,472			25,521
Residential (including multi-family)		32,057			32,248			6,654			6,665
Construction, land development and other land		42,427			42,366			19,026			19,051
Total loans secured by real estate		158,097			158,497			51,152			51,237
Commercial and other business-purpose loans		51,934			51,945			21,251			21,226
Consumer		3,759			3,771			1,536			1,500
Other		7,372			7,245			4,391			4,386
Total portfolio loans		221,162			221,458			78,330			78,349
Less allowance for loan losses		(3,639	)		(3,639	)		(1,136	)		(1,136	)
Net portfolio loans		217,523			217,819			77,196			77,213

Financial Liabilities:
Deposits:
Noninterest-bearing		39,294			39,294			10,450			10,450
Interest-bearing:
Demand accounts		62,956			62,956			23,236			23,234
Time certificates of less than $100,000		65,931			66,257			15,132			15,160
Time certificates of $100,000 or more		50,423			50,525			6,507			6,509
Total interest-bearing		179,310			179,738			44,875			44,903
Total deposits		218,604			219,032			55,325			55,353
Notes payable		19,399			19,399			16,400			16,400

Estimated fair values of financial assets and liabilities in the preceding table 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). For example, the estimated fair values of portfolio loans, time deposits and debt obligations were determined through discounted cash flow computations. 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.

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NOTE N—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 ($101,000 at December 31, 2008 and none at December 31, 2007). Other loan commitments outstanding consist of unused lines of credit and approved, but unfunded, specific loan commitments ($50.7 million and $36.6 million at December 31, 2008 and 2007, respectively). These loan commitments (stand-by letters of credit and unfunded loans) generally expire within one year and are reviewed periodically for continuance or renewal.

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, 2008 and 2007 was $324,000 and $150,000, respectively.

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

NOTE O—DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL REQUIREMENTS

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

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.

Management believes, as of December 31, 2008, that the Corporation and the Banks meet all capital adequacy requirements to which the entities are subject.

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

The following table summarizes the amounts (in thousands) and related ratios of the Corporation's consolidated regulatory capital position as of December 31:

	2008			2007
Tier 1 capital to average total assets:
Minimum required amount	$	³ 20,533		$	³ 7,301
Actual amount	$	30,793		$	36,699
Ratio		12.00	%		40.21	%

Tier 1 capital to risk-weighted assets:
Minimum required amount(1)	$	³ 8,955		$	³ 3,807
Actual amount	$	30,793		$	36,699
Ratio		13.76	%		38.56	%

Combined Tier 1 and Tier 2 capital to risk-
weighted assets:
Minimum required amount(2)	$	³ 17,909		$	³ 7,615
Amount required to meet "Well-Capitalized”
category(3)	$	³ 22,387		$	³ 9,519
Actual amount	$	33,602		$	37,835
Ratio		15.01	%		39.75	%

(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.

NOTE P—PARENT COMPANY FINANCIAL INFORMATION

	December 31
	2008		2007
ASSETS
Money market funds on deposit with affiliated banks	$	1,280,401	$	496,463
Investments in subsidiaries		23,891,784		26,523,879
Other assets		1,600,479		1,182,851

TOTAL ASSETS	$	26,772,664	$	28,203,193

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities	$	6,300
Debt obligations		18,400,000	$	16,400,000
Stockholders' equity attributable to CDBL VI		8,366,364		11,803,193

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	26,772,664	$	28,203,193

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NOTE P—PARENT COMPANY FINANCIAL INFORMATION—Continued

	Year Ended December 31						Period Ended December 31,
	2008			2007			2006
Interest income	$	15,417		$	155,438		$	101,118
Expenses:
Interest expense		1,217,950			227,025
Salary and employee benefits					1,596,663			652,464
Occupancy					32,450			16,137
Equipment rent and depreciation		3,052			10,063			4,305
Other		19,829			831,770			347,186
Total expenses		1,240,831			2,697,971			1,020,092
Income before equity in net losses of consolidated subsidiaries and federal income taxes		(1,225,414	)		(2,542,533	)		(918,973	)
Equity in undistributed net losses of consolidated subsidiaries		2,632,095			2,662,301
Loss before federal income taxes		(3,857,509	)		(5,204,834	)		(918,973	)
Federal income tax credit		(417,000	)		(855,000	)		(322,000	)

NET LOSS ATTRIBUTABLE TO CDBL VI	$	(3,440,509	)	$	(4,349,834	)	$	(596,973	)

	Year Ended December 31						Period Ended December 31,
	2008			2007			2006
OPERATING ACTIVITIES
Net loss for the period	$	(3,440,509	)	$	(4,349,835	)	$	(596,973	)
Adjustments to reconcile net loss to net cash used by operating activities:
Equity in undistributed net losses of subsidiaries		2,632,095			2,662,301
Depreciation of premises and equipment		3,052			763
Deferred federal income tax credit		(417,000	)		(855,000	)		(322,000	)
Decrease (increase) in other assets					79,999			(80,000	)
Increase in other liabilities		6,300
NET CASH USED BY OPERATING ACTIVITIES		(1,216,062	)		(2,461,771	)		(998,973	)

INVESTING ACTIVITIES
Net cash investments in subsidiaries					(29,186,180	)
Purchases of premises and equipment					(6,613	)
NET CASH USED BY INVESTING ACTIVITIES					(29,192,793	)

FINANCING ACTIVITIES
Net borrowings from debt obligations		2,000,000			16,400,000
Net proceeds from issuance of common stock								16,750,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,000,000			16,400,000			16,750,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		783,938			(15,254,564	)		15,751,027
Cash and cash equivalents at beginning of period		496,463			15,751,027			-0-

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,280,401		$	496,463		$	15,751,027

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