Capitol Bancorp (CBCRQ) 8-K Capitol Bancorp Limited Reports Record Third Quarter Earnings and an Increase of 23 Percent

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

FOR IMMEDIATE DISTRIBUTION:

CAPITOL BANCORP LIMITED REPORTS RECORD THIRD QUARTER EARNINGS
AND AN INCREASE OF 23 PERCENT

LANSING, Mich., and PHOENIX, Ariz.: October 21, 2004: Today, Capitol Bancorp Limited (NYSE:CBC) reported record third quarter 2004 earnings exceeding $7.4 million, a 23 percent increase over earnings reported in the third quarter of 2003, while record earnings per share (EPS) of $0.50 on a diluted basis represent a 14 percent increase versus the $0.44 reported in the third quarter of 2003. Total assets exceeded $3 billion for the first time in the Corporation’s history, increasing 15 percent year-over-year, with total portfolio loans of $2.6 billion up 22 percent over the third quarter of 2003. Deposits, which are now in excess of $2.5 billion, were up 11 percent compared to the same period a year ago.

Commenting on Capitol Bancorp’s performance, Joseph D. Reid, chairman and CEO, said the Corporation’s record quarter is a result of continued solid loan and asset growth year-over-year. “We’ve maintained a strong margin in a challenging rate environment and continue to be very disciplined executing our growth strategies. Earnings per share were up 14 percent despite an 8 percent increase in the share base.” Reid noted that the Corporation’s uniquede novo development business model continues to gain traction within the investment community and that, in August, Capitol added its 32nd affiliate, Point Loma Community Bank (its 4th California bank).

“I’m most pleased with our total capital levels which are up 34 percent year-over-year and are fueling ongoing development activities. Additionally, over the past six months, we have added strong management teams in several regions of the country as a precursor to further our “coast to coast” bank development strategy.”

Record Quarterly Earnings Performance

Consolidated earnings reached another record quarterly level for Capitol at $7.4 million, up 23 percent compared to the third quarter of 2003, as improved operating leverage served to offset both a pragmatic 23 percent increase in the quarterly loan loss provision, coupled with a modest increase in the Corporation’s total shares outstanding.

Page 1 of 8

An increase of 10 percent in net operating revenues, compared to the third quarter of 2003, set a quarterly record of $38.5 million. Even with an 8 percent increase in Capitol’s outstanding share base year-over-year, from approximately 13.7 million to 14.7 million shares, the Corporation reported a 14 percent increase in diluted EPS to a record $0.50 per share.

Record Nine Month Operating Results

For the nine months ended September 30, 2004, record net operating revenues approximating $111 million, represent an 11 percent increase as compared to the approximately $100 million recorded in the comparable nine-month period of 2003. 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 of more than $18.7 million for 2004 reflect 10 percent growth when compared to the $17 million generated in the corresponding 2003 period.

Portfolio loans grew 22 percent from $2.1 billion to more than $2.6 billion during the past twelve months and asset growth was up 15 percent from $2.6 billion to over $3 billion for the same period.

Balance Sheet

Capitol’s equity-to-asset ratio grew to 8 percent at September 30, 2004 from 7.8 percent at September 30, 2003. The total capital-to-asset ratio increased to 12.6 percent from 10.8 percent a year ago, as total capital funds approximated $387 million on the Corporation’s record-level $3 billion consolidated balance sheet.

Annualized consolidated net charge-offs of 0.26 percent for the third quarter of 2004 demonstrate improvement from the 0.35 percent recorded in the same period in 2003 and are in line with the Corporation’s experience through the first nine months of this year. Capitol’s allowance for loan losses ratio as a percentage of portfolio loans was increased slightly to 1.42 percent at September 30, 2004 versus 1.40 percent at June 30, 2004, in concert with a marginal increase in nonperforming loans. The Corporation’s allowance coverage ratio of nonperforming loans exceeded 128 percent at September 30, 2004.

###

Page 2 of 8

CAPITOL BANCORP LIMITED
SUMMARY OF SELECTED FINANCIAL DATA
(in thousands, except share and per share data)

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2004		2003		2004		2003
Condensed statements of operations:
Interest income	$	45,877	$	41,484	$	130,760	$	122,557
Interest expense		11,943		12,065		34,648		38,185
Net interest income		33,934		29,419		96,112		84,372
Provision for loan losses		3,553		2,892		9,597		6,608
Noninterest income		4,541		5,441		14,435		15,187
Noninterest expense		24,182		22,384		72,872		65,493
Income before federal income taxes		11,300		9,454		28,888		26,616
Net income	$	7,439	$	6,049	$	18,766	$	17,056
Per share data:
Net income — basic	$	0.52	$	0.46	$	1.33	$	1.38
Net income — diluted		0.50		0.44		1.27		1.33
Book value at end of period		16.69		15.05		16.69		15.05
Common stock closing price at end of period	$	29.34	$	26.75	$	29.34	$	26.75
Common shares outstanding at end of period		14,739,000		13,656,000		14,739,000		13,656,000
Number of shares used to compute:
Basic earnings per share		14,312,000		13,050,000		14,069,000		12,328,000
Diluted earnings per share		14,994,000		13,807,000		14,760,000		12,866,000

	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
	2004			2004			2004			2003			2003
Condensed statements of financial position:
Total assets	$	3,058,425		$	2,991,830		$	2,867,800		$	2,737,062		$	2,650,690
Portfolio loans		2,608,701			2,511,505			2,346,978			2,247,440			2,136,860
Deposits		2,517,104			2,470,365			2,375,851			2,288,664			2,262,838
Stockholders’ equity		246,010			237,786			222,916			218,897			205,458
Total capital	$	386,590		$	377,053		$	365,316		$	340,659		$	287,530
Key performance ratios:
Return on average assets		0.98	%		0.94	%		0.64	%		0.94	%		0.92	%
Return on average equity		12.26	%		11.91	%		7.97	%		12.19	%		12.56	%
Net interest margin		4.87	%		4.73	%		4.71	%		4.93	%		4.87	%
Efficiency ratio		62.85	%		65.68	%		69.62	%		63.80	%		64.21	%
Asset quality ratios:
Allowance for loan losses / portfolio loans		1.42	%		1.40	%		1.41	%		1.40	%		1.43	%
Total nonperforming loans / portfolio loans		1.10	%		1.06	%		0.94	%		1.20	%		1.48	%
Total nonperforming assets / total assets		1.06	%		1.00	%		1.01	%		1.14	%		1.34	%
Net charge-offs (annualized) / average portfolio loans		0.26	%		0.20	%		0.31	%		0.43	%		0.35	%
Allowance for loan losses / nonperforming loans		128.57	%		132.59	%		149.37	%		116.87	%		96.16	%
Capital ratios:
Stockholders’ equity / total assets		8.04	%		7.95	%		7.77	%		8.00	%		7.75	%
Total capital / total assets		12.64	%		12.60	%		12.74	%		12.45	%		10.85	%

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.

Page 3 of 8

CAPITOL BANCORP LIMITED
Consolidated Statements of Income (Unaudited)
For the Three Months and Nine Months Ended September 30, 2004 and 2003
(in thousands, except per share data)

	Periods Ended September 30
	Three Month Period						Nine Month Period
	2004			2003			2004			2003
INTEREST INCOME:
Portfolio loans (including fees)	$	44,492		$	39,354		$	126,560		$	116,788
Loans held for resale		504			1,156			1,529			2,818
Taxable investment securities		275			549			1,071			1,593
Federal funds sold		407			306			1,053			997
Other		199			119			547			361
Total interest income		45,877			41,484			130,760			122,557
INTEREST EXPENSE:
Deposits		9,176			9,972			26,891			31,981
Debt obligations and other		2,767			2,093			7,757			6,204
Total interest expense		11,943			12,065			34,648			38,185
Net interest income		33,934			29,419			96,112			84,372
PROVISION FOR LOAN LOSSES		3,553			2,892			9,597			6,608
Net interest income after provision for loan losses		30,381			26,527			86,515			77,764
NONINTEREST INCOME:
Service charges on deposit accounts		1,091			1,112			3,336			3,228
Trust fee income		796			717			2,535			1,880
Fees from origination of non-portfolio residential mortgage loans		1,314			2,629			4,211			7,456
Realized losses on sale of investment securities available for sale		(191	)		(2	)		(424	)		(2	)
Other		1,531			985			4,777			2,625
Total noninterest income		4,541			5,441			14,435			15,187
NONINTEREST EXPENSE:
Salaries and employee benefits		14,493			13,927			46,082			41,498
Occupancy		2,173			1,983			6,428			5,644
Equipment rent, depreciation and maintenance		1,325			1,172			4,266			3,527
Other		6,191			5,302			16,096			14,824
Total noninterest expense		24,182			22,384			72,872			65,493
Income before federal income taxes and minority interest		10,740			9,584			28,078			27,458
Federal income taxes		3,861			3,405			10,122			9,560
Income before minority interest		6,879			6,179			17,956			17,898
Minority interest in net losses (income) of consolidated subsidiaries		560			(130	)		810			(842	)
NET INCOME	$	7,439		$	6,049		$	18,766		$	17,056
NET INCOME PER SHARE
Basic	$	0.52		$	0.46		$	1.33		$	1.38
Diluted	$	0.50		$	0.44		$	1.27		$	1.33

Page 4 of 8

CAPITOL BANCORP LTD.
Consolidated Balance Sheets
As of September 30, 2004 and December 31, 2003
(in thousands, except share data)

	(Unaudited)
	September 30			December 31
	2004			2003
ASSETS
Cash and due from banks	$	157,162		$	145,896
Money market and interest-bearing deposits		10,405			13,570
Federal funds sold		120,785			124,157
Cash and cash equivalents		288,352			283,623
Loans held for resale		35,199			43,001
Investment securities:
Available for sale, carried at market value		32,185			83,386
Held for long-term investment, carried at amortized cost which approximates market value		13,537			9,821
Total investment securities		45,722			93,207
Portfolio loans:
Commercial		2,376,624			2,033,097
Real estate mortgage		159,983			143,343
Installment		72,094			71,000
Total portfolio loans		2,608,701			2,247,440
Less allowance for loan losses		(37,027	)		(31,404	)
Net portfolio loans		2,571,674			2,216,036
Premises and equipment		31,838			24,793
Accrued interest income		10,245			9,533
Goodwill and other intangibles		42,082			34,449
Other assets		33,313			32,420
TOTAL ASSETS	$	3,058,425		$	2,737,062
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	494,626		$	435,599
Interest-bearing		2,022,478			1,853,065
Total deposits		2,517,104			2,288,664
Debt obligations:
Notes payable		137,956			92,774
Subordinated debentures		100,822			90,816
Total debt obligations		238,778			183,590
Accrued interest on deposits and other liabilities		16,775			14,965
Total liabilities		2,772,657			2,487,219
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES		39,758			30,946
STOCKHOLDERS’ EQUITY:
Common stock, no par value, 25,000,000 shares authorized; issued and outstanding:
2004 - 14,738,891 shares		195,325			180,957
2003 - 14,027,982 shares
Retained earnings		55,038			43,135
Market value adjustment (net of tax effect) for investment securities available for sale (accumulated other comprehensive income)		51			(200	)
		250,414			223,892
Less unearned compensation regarding restricted stock and other		(4,404	)		(4,995	)
Total stockholders’ equity		246,010			218,897
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,058,425		$	2,737,062

Page 5 of 8

CAPITOL BANCORP LIMITED
Allowance for Loan Losses and Asset Quality Data

ALLOWANCE FOR LOAN LOSSES ACTIVITY(in thousands):

	Periods Ended September 30
	Three Month Period						Nine Month Period
	2004			2003			2004			2003
Allowance for loan losses at beginning of period	$	35,137		$	29,489		$	31,404		$	28,953
Allowance for loan losses of acquired bank subsidiary								724
Loans charged-off:
Commercial		(1,673	)		(1,809	)		(5,142	)		(5,205	)
Real estate mortgage		(17	)		(26	)		(116	)		(47	)
Installment		(108	)		(251	)		(248	)		(492	)
Total charge-offs		(1,798	)		(2,086	)		(5,506	)		(5,744	)
Recoveries:
Commercial		129			198			761			609
Real estate mortgage		—			—			10			—
Installment		6			20			37			87
Total recoveries		135			218			808			696
Net charge-offs		(1,663	)		(1,868	)		(4,698	)		(5,048	)
Additions to allowance charged to expense		3,553			2,892			9,597			6,608
Allowance for loan losses at September 30	$	37,027		$	30,513		$	37,027		$	30,513
Average total portfolio loans for period ended September 30	$	2,566,005		$	2,110,423		$	2,437,698		$	2,073,478
Ratio of net charge-offs (annualized) to average portfolio loans outstanding		0.26	%		0.35	%		0.26	%		0.32	%

ASSET QUALITY(in thousands):

	Sept 30		Dec 31
	2004		2003
Nonaccrual loans:
Commercial	$	20,258	$	19,852
Real estate		1,291		632
Installment		92		376
Total nonaccrual loans		22,141		20,860
Past due (>90 days) loans:
Commercial		5,291		4,544
Real estate		1,058		1,083
Installment		308		385
Total past due loans		6,657		6,012
Total nonperforming loans	$	28,798	$	26,872
Real estate owned and other repossessed assets		3,618		4,288
Total nonperforming assets	$	32,416	$	31,160

Page 6 of 8

CAPITOL BANCORP LIMITED
Selected Supplemental Data

EPS COMPUTATION COMPONENTS:

	Periods Ended September 30
	Three Month Period				Nine Month Period
	2004		2003		2004		2003
Numerator-net income for the period	$	7,439,000	$	6,049,000	$	18,766,000	$	17,056,000
Denominator:
Weighted average number of common shares outstanding, excluding unvested shares of restricted common stock (denominator for basic earnings per share)		14,311,842		13,050,227		14,069,446		12,328,380
Weighted average number of unvested shares of restricted common stock outstanding		259,300		241,661		263,869		123,018
Effect of other dilutive securities		422,391		515,132		426,651		414,884
Denominator for diluted net income per share-
Weighted average number of common shares and potential dilution		14,993,533		13,807,020		14,759,966		12,866,282
Number of antidilutive stock options excluded from diluted earnings per share computation		—		—		—		205,370

AVERAGE BALANCES(in thousands):

	Periods Ended September 30
	Three Month Period				Nine Month Period
	2004		2003		2004		2003
Portfolio loans	$	2,566,005	$	2,110,423	$	2,437,698	$	2,073,478
Earning assets		2,786,800		2,416,855		2,683,444		2,366,364
Total assets		3,025,341		2,632,533		2,911,750		2,548,732
Deposits		2,498,796		2,250,430		2,412,210		2,178,585
Stockholders’ equity		242,705		192,657		232,470		176,563

Page 7 of 8

About Capitol Bancorp Limited

Capitol Bancorp Limited is a $3 billion community bank development company, with 32 individual bank charters and bank operations in nine states. Capitol Bancorp Limited identifies opportunities for the development of new community banks, raises capital, mentors a community bank through its formative stages and manages its investments in its community banks. Each community bank has full local decision-making authority and is managed by an on-site president under the direction of a local board of directors composed of business leaders from the bank’s community. 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	Point Loma
	Sunrise Bank of San Diego	San Diego
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

Page 8 of 8