Capitol Bancorp (CBCRQ) 8-K Financial statements and exhibits

EXHIBIT 99.1

	Capitol Bancorp Center 200 Washington Square North Lansing, MI 48933
	2777 East Camelback Road
	Suite 375
	Phoenix, AZ 85016
	www.capitolbancorp.com
	Analyst Contact:	Michael M. Moran
		Chief of Capital Markets
		877-884-5662
	Media Contact:	Joal Redmond
		Corporate Communications
		602-977-3797

CAPITOL BANCORP LIMITED REPORTS RECORD SECOND QUARTER
EARNINGS OF $6.9 MILLION, UP21% YEAR-OVER-YEAR, AS EARNINGS PER
SHARE REACH NEW RECORD AT $0.47 PER SHARE

LANSING, Mich., and PHOENIX, Ariz.: July 23, 2004:Today, Capitol Bancorp Limited (NYSE:CBC) reported record second quarter 2004 earnings exceeding $6.9 million, up 21 percent from the same period in 2003. Earnings per share (EPS) of $0.47 on a diluted basis, also a quarterly record, represent a 4 percent increase over the $0.45 reported in the second quarter of 2003. Total assets approximating $3 billion represent a 19 percent increase on an annualized basis, while total portfolio loans in excess of $2.5 billion and deposits of nearly $2.5 billion reflect 24 percent and 16 percent increases, respectively, on an annualized basis.

Capitol Bancorp’s Chairman and CEO Joseph D. Reid, cited strong organic loan growth and core earnings strength as key drivers behind the Corporation’s return to its earning pace. “We are encouraged by the results of this quarter,” said Reid. “Loan demand remains steady as evidenced by the annualized 28 percent linked-quarter growth, while a stable margin and solid revenue expansion fueled our record performance. In addition, at the start of the quarter we welcomed our first affiliate community bank in North Carolina with the acquisition of First Carolina State Bank. Even when adjusting for the inclusion of First Carolina’s approximate $51 million loan portfolio, Capitol’s organic loan growth of approximately $114 million on a linked-quarter basis represents annualized growth in excess of 19 percent.”

Reid added that the Corporation’s total capital levels approximated $380 million at the end of the quarter, which will be used to support ongoing expansion plans. Such expansion includes the anticipated opening of Capitol’s 32^nd affiliate community bank in Point Loma, California in the third quarter.

Record Quarterly Earnings Performance

Consolidated earnings reached another record quarterly level for Capitol at approximately $6.9 million, up 21 percent compared to the $5.7 million recorded in the second quarter of 2003. Net

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operating revenues also reached record levels, increasing approximately 14 percent to $37.7 million as compared to the same period in 2003. Earnings per share (EPS) increased 4 percent from $0.45 to a record $0.47 on a diluted basis and were up 7 percent, $0.49 versus $0.46, as reported for basic computations. The Corporation’s outstanding share base increased 15 percent year-over-year, from approximately 12.6 million shares to 14.5 million shares, reflecting affiliate consolidations of minority interests in accordance with Capitol’s historical operating model and the acquisition of First Carolina State Bank.

Record Six Month Operating Results

Despite a soft first quarter attributable in large part to stronger than expected organic loan growth at the beginning of the year, coupled with strategic initiatives designed to strengthen Capitol’s balance sheet and asset quality position, earnings exceeded $11.3 million for the first half of 2004, up slightly compared to the then record $11 million generated in the corresponding 2003 six-month period.

While the first six months of 2004 reflect a 63 percent increase in the provision for loan losses to just more than $6 million (with approximately $3.5 million recorded in the first quarter), record net operating revenues of $72.1 million (versus $64.7 million totaled in the first half of 2003) contributed to Capitol’s respectable first half performance.

Balance Sheet

Capitol’s equity-to-asset ratio exceeded 7.9 percent at June 30, 2004 versus 6.9 percent at June 30, 2003. The capital-to-asset ratio increased to a healthy 12.6 percent from 10.5 percent a year ago, as total capital funds exceeded $377 million on the Corporation’s approximately $3 billion consolidated balance sheet.

The Corporation’s allowance for loan losses (as a percentage of total portfolio loans) at June 30, 2004 was maintained at 1.40 percent, consistent with the 1.40 percent at year-end and in line with the 1.42 percent for the like period in 2003.

Capitol also reported that consolidated net charge-offs continued to reflect an improving trend, measuring 0.20 percent on an annualized basis for the recent quarter versus the 0.31 percent and 0.46 percent reported in the first quarter of 2004 and second quarter of 2003, respectively. The Corporation’s coverage ratio remained a healthy 133 percent at June 30, 2004.

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CAPITOL BANCORP LIMITED
SUMMARY OF SELECTED FINANCIAL DATA
(in $1,000s, except share and per share data)

	Three Months Ended				Six Months Ended
	June 30				June 30
	2004		2003		2004		2003
Condensed statements of operations:
Interest income	$	43,434	$	41,087	$	84,883	$	81,073
Interest expense		11,486		13,121		22,705		26,120
Net interest income		31,948		27,966		62,178		54,953
Provision for loan losses		2,536		1,826		6,044		3,716
Noninterest income		5,756		5,217		9,894		9,746
Noninterest expense		24,764		21,953		48,690		43,109
Income before federal income taxes		10,644		8,905		17,588		17,162
Net income	$	6,911	$	5,694	$	11,327	$	11,007
Per share data:
Net income - basic	$	0.49	$	0.46	$	0.81	$	0.92
Net income - diluted		0.47		0.45		0.77		0.89
Book value at end of period		16.39		14.31		16.39		14.31
Common stock closing price at end of period	$	26.01	$	27.10	$	26.01	$	27.10
Common shares outstanding at end of period		14,505,000		12,567,000		14,505,000		12,567,000
Number of shares used to compute:
Basic earnings per share		14,099,000		12,347,000		13,947,000		12,024,000
Diluted earnings per share		14,804,000		12,771,000		14,711,000		12,409,000

	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter
	2004			2004			2003			2003			2003
Condensed statements of financial position:
Total assets	$	2,991,830		$	2,867,800		$	2,737,062		$	2,650,690		$	2,614,376
Portfolio loans		2,511,505			2,346,978			2,247,440			2,136,860			2,083,985
Deposits		2,470,365			2,375,851			2,288,664			2,262,838			2,243,139
Stockholders’ equity		237,786			222,916			218,897			205,458			179,856
Total capital	$	377,053		$	365,316		$	340,659		$	287,530		$	273,892
Key performance ratios:
Return on average assets		0.94	%		0.64	%		0.94	%		0.92	%		0.88	%
Return on average equity		11.91	%		7.97	%		12.19	%		12.56	%		13.23	%
Net interest margin		4.73	%		4.71	%		4.93	%		4.87	%		4.71	%
Efficiency ratio		65.68	%		69.62	%		63.80	%		64.21	%		66.16	%
Asset quality ratios:
Allowance for loan losses / portfolio loans		1.40	%		1.41	%		1.40	%		1.43	%		1.42	%
Total nonperforming loans / portfolio loans		1.06	%		0.94	%		1.20	%		1.48	%		1.28	%
Total nonperforming assets / total assets		1.00	%		1.01	%		1.14	%		1.34	%		1.22	%
Net charge-offs (annualized) / average portfolio loans		0.20	%		0.31	%		0.43	%		0.35	%		0.46	%
Allowance for loan losses / nonperforming loans		132.59	%		149.37	%		116.87	%		96.16	%		110.24	%
Capital ratios:
Stockholders’ equity / total assets		7.95	%		7.77	%		8.00	%		7.75	%		6.88	%
Total capital / total assets		12.60	%		12.74	%		12.45	%		10.85	%		10.48	%

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include expressions such as “expects”, “intends”, “believes” and “should” which are not necessarily statements of belief as to the expected outcomes of future events. Actual results could materially differ from those presented due to a variety of internal and external factors. Actual results could materially differ from those contained in, or implied by, such statements. Capitol Bancorp Limited undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

Supplemental analyses follow providing additional detail regarding Capitol’s financial position, results of operations, asset quality and other supplemental data.

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CAPITOL BANCORP LIMITED
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)

	Three Months Ended					Six Months Ended
	June 30					June 30
	2004		2003			2004			2003
INTEREST INCOME:
Portfolio loans (including fees)	$	42,038	$	39,049		$	82,068		$	77,434
Loans held for resale		602		900			1,025			1,662
Taxable investment securities		266		613			796			1,044
Federal funds sold		354		407			646			691
Other		174		118			348			242
Total interest income		43,434		41,087			84,883			81,073
INTEREST EXPENSE:
Deposits		8,925		11,007			17,715			22,009
Debt obligations and other		2,561		2,114			4,990			4,111
Total interest expense		11,486		13,121			22,705			26,120
Net interest income		31,948		27,966			62,178			54,953
PROVISION FOR LOAN LOSSES		2,536		1,826			6,044			3,716
Net interest income after provision for loan losses		29,412		26,140			56,134			51,237
NONINTEREST INCOME:
Service charges on deposit accounts		1,162		1,045			2,245			2,116
Trust fee income		858		641			1,739			1,163
Fees from origination of non-portfolio residential mortgage loans		1,625		2,590			2,897			4,827
Realized gains (losses) on sales of investment securities available for sale		211		(3	)		(233	)		0
Other		1,900		944			3,246			1,640
Total noninterest income		5,756		5,217			9,894			9,746
NONINTEREST EXPENSE:
Salaries and employee benefits		16,202		14,144			31,589			27,571
Occupancy		2,122		1,788			4,255			3,661
Equipment rent, depreciation and maintenance		1,574		1,190			2,941			2,355
Other		4,866		4,831			9,905			9,522
Total noninterest expense		24,764		21,953			48,690			43,109
Income before federal income taxes and minority interest		10,404		9,404			17,338			17,874
Federal income taxes		3,733		3,211			6,261			6,155
Income before minority interest		6,671		6,193			11,077			11,719
Minority interest in net losses (income) of consolidated subsidiaries		240		(499	)		250			(712	)
NET INCOME	$	6,911	$	5,694		$	11,327		$	11,007
NET INCOME PER SHARE
Basic	$	0.49	$	0.46		$	0.81		$	0.92
Diluted	$	0.47	$	0.45		$	0.77		$	0.89

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CAPITOL BANCORP LIMITED
Consolidated Balance Sheets

	(Unaudited)
	June 30			December 31
	2004			2003
	(in thousands)
ASSETS
Cash and due from banks	$	162,904		$	145,896
Money market and interest-bearing deposits		6,248			13,570
Federal funds sold		143,562			124,157
Cash and cash equivalents		312,714			283,623
Loans held for resale		41,922			43,001
Investment securities:
Available for sale, carried at market value		32,989			83,386
Held for long-term investment, carried at amortized cost which approximates market value		14,075			9,821
Total investment securities		47,064			93,207
Portfolio loans:
Commercial		2,283,735			2,033,097
Real estate mortgage		155,585			143,343
Installment		72,185			71,000
Total portfolio loans		2,511,505			2,247,440
Less allowance for loan losses		(35,137	)		(31,404	)
Net portfolio loans		2,476,368			2,216,036
Premises and equipment		30,343			24,793
Accrued interest income		9,646			9,533
Goodwill and other intangibles		40,196			34,449
Other assets		33,577			32,420
TOTAL ASSETS	$	2,991,830		$	2,737,062
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	481,523		$	435,599
Interest-bearing		1,988,842			1,853,065
Total deposits		2,470,365			2,288,664
Debt obligations:
Notes payable		128,894			92,774
Subordinated debentures		100,798			90,816
Total debt obligations		229,692			183,590
Accrued interest on deposits and other liabilities		15,518			14,965
Total liabilities		2,715,575			2,487,219
Minority interests in consolidated subsidiaries		38,469			30,946
STOCKHOLDERS’ EQUITY:
Common stock, no par value, 25,000,000 shares authorized; issued and outstanding: 2004 - 14,504,669 shares		192,510			180,957
2003 - 14,027,982 shares
Retained earnings		50,066			43,135
Market value adjustment (net of tax effect) for investment securities available for sale (accumulated other comprehensive income)		(61	)		(200	)
		242,515			223,892
Less unearned compensation regarding restricted stock and other		(4,729	)		(4,995	)
Total stockholders’ equity		237,786			218,897
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,991,830		$	2,737,062

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CAPITOL BANCORP LIMITED
Allowance for Loan Losses and Asset Quality Data

ALLOWANCE FOR LOAN LOSSES ACTIVITY:

	2004			2003
	(in thousands)
Allowance for loan losses at January 1	$	31,404		$	28,953
Allowance for loan losses of acquired bank subsidiary		724
Loans charged-off:
Commercial		(3,469	)		(3,396	)
Real estate mortgage		(99	)		(21	)
Installment		(140	)		(241	)
Total charge-offs		(3,708	)		(3,658	)
Recoveries:
Commercial		631			411
Real estate mortgage		11			—
Installment		31			67
Total recoveries		673			478
Net charge-offs		(3,035	)		(3,180	)
Additions to allowance charged to expense		6,044			3,716
Allowance for loan losses at June 30	$	35,137		$	29,489
Average total portfolio loans for period ended June 30	$	2,374,923		$	2,050,204
Ratio of net charge-offs (annualized) to average portfolio loans outstanding		0.26	%		0.31	%

ASSET QUALITY:

	June 30		Dec 31
	2004		2003
	(in thousands)
Nonaccrual loans:
Commercial	$	16,823	$	19,852
Real estate		886		632
Installment		569		376
Total nonaccrual loans		18,278		20,860
Past due (³90 days) loans:
Commercial		6,947		4,544
Real estate		970		1,083
Installment		305		385
Total past due loans		8,222		6,012
Total nonperforming loans	$	26,500	$	26,872
OREO and repossessed assets		3,498		4,288
Total nonperforming assets	$	29,998	$	31,160

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CAPITOL BANCORP LIMITED
Selected Supplemental Data

     EPS COMPUTATION COMPONENTS:

	Three Months Ended				Six Months Ended
	June 30				June 30
	2004		2003		2004		2003
Numerator—net income for the period	$	6,911,000	$	5,694,000	$	11,327,000	$	11,007,000
Denominator:
Weighted average number of common shares outstanding, excluding unvested shares of restricted common stock (denominator for basic earnings per share)		14,098,637		12,347,032		13,946,916		12,024,188
Weighted average number of unvested shares of restricted common stock outstanding		265,133		—		266,179		—
Effect of other dilutive securities		440,280		424,439		497,504		385,295
Denominator for diluted net income per share—
Weighted average number of common shares and potential dilution		14,804,050		12,771,471		14,710,599		12,409,483
Number of antidilutive stock options excluded from diluted earnings per share computation		721,483		100,626		—		100,626

     AVERAGE BALANCES:

	Three Months Ended				Six Months Ended
	June 30				June 30
	2004		2003		2004		2003
	(in thousands)				(in thousands)
Portfolio loans	$	2,440,746	$	2,068,071	$	2,374,923	$	2,050,204
Earning assets		2,703,000		2,376,775		2,633,520		2,331,908
Total assets		2,938,505		2,577,333		2,858,281		2,511,052
Deposits		2,431,996		2,206,526		2,371,041		2,150,588
Stockholders’ equity		232,149		172,164		227,381		168,486

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About Capitol Bancorp Limited

Capitol Bancorp Limited is a $3.0 billion community bank development company, with 31 individual bank charters and bank operations in nine states. Capitol Bancorp Limited identifies opportunities for the development of new community banks, raises capital and mentors a community bank through its formative stages. Each community bank has full local decision-making authority and is managed by an on-site president under the direction of a local board of directors composed of business leaders from the bank’s community. Capitol Bancorp Limited was founded in 1988 and has headquarters in Lansing, Michigan and Phoenix, Arizona.

Capitol Bancorp’s operations include the following banks and loan production offices (LPO):

In Arizona:	Community
Arrowhead Community Bank	Glendale
Bank of Tucson	Tucson
Camelback Community Bank	Phoenix
East Valley Community Bank	Chandler
Mesa Bank	Mesa
Southern Arizona Community Bank	Tucson
Sunrise Bank of Arizona	Phoenix
Valley First Community Bank	Scottsdale
Yuma Community Bank	Yuma
Bank of Tucson – Nogales LPO	Nogales
In California:
Bank of Escondido	Escondido
Napa Community Bank	Napa
Point Loma Community Bank (in organization)	Point Loma
Sunrise Bank of San Diego	San Diego
Sunrise Bank - - Orange County LPO	Irvine
In Georgia:
Sunrise Bank - - Atlanta LPO	Atlanta
In Indiana:
Elkhart Community Bank	Elkhart
Goshen Community Bank	Goshen
In Michigan:
Ann Arbor Commerce Bank	Ann Arbor
Brighton Commerce Bank	Brighton
Capitol National Bank	Lansing
Detroit Commerce Bank	Detroit
Grand Haven Bank	Grand Haven
Kent Commerce Bank	Grand Rapids
Macomb Community Bank	Clinton Township
Muskegon Commerce Bank	Muskegon
Oakland Commerce Bank	Farmington Hills
Paragon Bank & Trust	Holland
Portage Commerce Bank	Portage
In Nevada:
Bank of Las Vegas	Las Vegas
Black Mountain Community Bank	Henderson
Desert Community Bank	Las Vegas
Red Rock Community Bank	Las Vegas
In New Mexico:
Sunrise Bank of Albuquerque	Albuquerque
In North Carolina:
First Carolina State Bank	Rocky Mount
In Texas:
Sunrise Bank - - Dallas LPO	Dallas
Sunrise Bank - - Houston LPO	Houston

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