Capitol Bancorp (CBCRQ) 8-K Capitol Bancorp Announces Record Fourth Quarter and Full Year Earnings

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 ANNOUNCES RECORD FOURTH QUARTER
AND FULL YEAR EARNINGS

LANSING, Mich., and PHOENIX, Ariz.: January 27, 2005: Today, Capitol Bancorp Limited (NYSE:CBC) reported record fourth quarter earnings of nearly $8 million, representing a 26 percent increase over the $6.3 million recorded in the fourth quarter of 2003. Record basic and diluted earnings per share (EPS) for the quarter of $0.55 and $0.52, respectively, represent a 17 percent and 16 percent increase as compared to last year’s fourth quarter figures of $0.47 and $0.45. For the year, Capitol reported record earnings approximating $27 million in 2004, a 14 percent increase over 2003’s then record $23.4 million bottom line. Record basic and diluted EPS for 2004 were $1.88 and $1.79 respectively.

Capitol Bancorp’s balance sheet experienced solid double-digit growth during 2004. Total assets approximated $3.1 billion at December 31, 2004, reflecting a 13 percent increase for the year. Total deposits increased 10 percent year-over-year to $2.5 billion, while total portfolio loans approximating $2.7 billion grew 20 percent, from approximately $2.2 billion at year-end 2003.

Commenting on these achievements, Capitol Bancorp’s Chairman and CEO, Joseph D. Reid, said, “We are once again pleased with the performance of Capitol Bancorp in what continues to be a challenging operating environment. Reporting record earnings and solid EPS increases in a year that witnessed Capitol marshalling resources and building balance sheet strength to support future growth, is gratifying. We remained true to our strategy of disciplined growth, adding two affiliates to our network of community banks during the year, and increased our capital base in preparation for accelerated development activities in 2005 and beyond.”

During 2004, Capitol added its fourth bank in California, Point Loma Community Bank, and entered the Southeast region of the U.S. with the acquisition of First Carolina State Bank in Rocky Mount, North Carolina, bringing the total number of community banks to 32 in the Capitol network. Capitol added its 33^rd community bank in early 2005.

Reid said that 2004 was a year of positioning for the Corporation as significant steps were taken to advance the company toward its goal of having Capitol affiliated community banks in every

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major region in the U.S. “We appointed three additional regional presidents to lead development work in regions where we did not have a presence,” he added.

Record Quarterly Earnings Performance

Consolidated earnings reached another record quarterly level for Capitol, nearly $8 million, up 26 percent compared to the fourth quarter of 2003. Even with an expanded share count at the Corporation, tied to ongoing growth initiatives, Capitol reported a 16 percent increase in diluted EPS to a record $0.52.

Net operating revenues totaled a record $40.3 million for the fourth quarter, an increase of 14 percent versus 2003’s comparable period. A solid net interest margin, bolstered by an enhanced earnings-asset mix and continued development of lower-cost core deposits, helped more than offset softness in the mortgage banking arena and increased costs attributable to Capitol’s nationwide bank development efforts. Total assets of $3.1 billion at December 31, 2004 represent a 13 percent increase compared to year-end 2003’s $2.7 billion, while portfolio loans and deposits registered double-digit increases at 20 percent and 10 percent, respectively.

Record Operating Results for 2004

Net operating revenues reached a record $151 million for 2004, which represents a 12 percent increase over 2003’s net operating revenues of approximately $135 million. Record earnings of $27 million for 2004 reflect 14 percent growth when compared to the $23.4 million of earnings generated in 2003. Despite a nearly 29 percent increase in the annual loan loss provision, due to Capitol’s solid portfolio growth and its focus on balance sheet strength, and some losses attributable to Capitol’s securities portfolio re-positioning earlier in the year, the Corporation reported basic EPS of $1.88 and diluted EPS of $1.79 for the year, both records and modest increases over 2003’s levels of $1.86 and $1.77, respectively.

Balance Sheet

Capitol’s equity-to-asset ratio approximated 8.2 percent at the end of 2004 as compared to 8 percent at year-end 2003. The total capital-to-asset ratio was 12.7 percent, up from approximately 12.4 percent a year ago, as total capital funds approached $400 million on the Corporation’s $3.1 billion consolidated balance sheet.

Asset quality remained strong at December 31, 2004. Nonperforming loans, on a percentage basis, decreased at year-end 2004 to 1.06 percent of portfolio loans from 1.20 percent in 2003. Annualized consolidated net charge-offs of 0.39 percent for the fourth quarter of 2004 demonstrate improvement from the 0.43 percent recorded in the fourth quarter of last year, and for the year were 0.29 percent versus 0.35 percent during 2003. The allowance for loan losses at December 31, 2004 held steady at 1.40 percent of portfolio loans.

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

	Three Months Ended									Year Ended
	December 31									December 31
	2004			2003						2004			2003
Condensed statements of operations:
Interest income	$	48,329		$	41,859					$	179,089		$	164,416
Interest expense		12,848			11,305						47,496			49,490
Net interest income		35,481			30,554						131,593			114,926
Provision for loan losses		3,111			3,253						12,708			9,861
Noninterest income		4,817			4,900						19,252			20,087
Noninterest expense		26,094			22,183						97,787			86,952
Income before income taxes		11,348			10,075						41,415			37,415
Net income	$	7,950		$	6,324					$	26,716		$	23,380
Per share data:
Net income — basic	$	0.55		$	0.47					$	1.88		$	1.86
Net income — diluted		0.52			0.45						1.79			1.77
Book value at end of period		17.00			15.60						17.00			15.60
Common stock closing price at end of period	$	35.22		$	28.40					$	35.22		$	28.40
Common shares outstanding at end of period		14,829,000			14,028,000						14,829,000			14,028,000
Number of shares used to compute:
Basic earnings per share		14,522,000			13,415,000						14,183,000			12,602,000
Diluted earnings per share		15,368,000			14,201,000						14,891,000			13,175,000
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter			4th Quarter
		2004			2004			2004			2004			2003
Condensed statements of financial position:
Total assets	$	3,091,418		$	3,058,425		$	2,991,830		$	2,867,800		$	2,737,062
Portfolio loans		2,692,904			2,608,701			2,511,505			2,346,978			2,247,440
Deposits		2,510,072			2,517,104			2,470,365			2,375,851			2,288,664
Stockholders’ equity		252,159			246,010			237,786			222,916			218,897
Total capital	$	392,524		$	386,590		$	377,053		$	365,316		$	340,659
Key performance ratios:
Return on average assets		1.03	%		0.98	%		0.94	%		0.64	%		0.94	%
Return on average equity		12.55	%		12.26	%		11.91	%		7.97	%		12.19	%
Net interest margin		4.95	%		4.87	%		4.73	%		4.71	%		4.93	%
Efficiency ratio		64.75	%		61.78	%		64.61	%		68.56	%		62.57	%
Asset quality ratios:
Allowance for loan losses / portfolio loans		1.40	%		1.42	%		1.40	%		1.41	%		1.40	%
Total nonperforming loans / portfolio loans		1.06	%		1.10	%		1.06	%		0.94	%		1.20	%
Total nonperforming assets / total assets		1.05	%		1.06	%		1.00	%		1.01	%		1.14	%
Net charge-offs (annualized) / average portfolio loans		0.39	%		0.26	%		0.20	%		0.31	%		0.43	%
Allowance for loan losses / nonperforming loans		131.97	%		128.57	%		132.59	%		149.37	%		116.87	%
Capital ratios:
Stockholders’ equity / total assets		8.16	%		8.04	%		7.95	%		7.77	%		8.00	%
Total capital / total assets		12.70	%		12.64	%		12.60	%		12.74	%		12.45	%

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 results of operations, financial position, asset quality and other supplemental data.

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CAPITOL BANCORP LTD.
Consolidated Statements of Income
(in thousands, except per share data)

	Year Ended December 31
	(Unaudited)
	2004			2003			2002
INTEREST INCOME:
Portfolio loans (including fees)	$	173,376		$	157,114		$	149,785
Loans held for resale		2,150			3,299			2,674
Taxable investment securities		1,331			749			1,422
Federal funds sold		1,620			1,344			1,376
Other		612			1,910			1,197
Total interest income		179,089			164,416			156,454
INTEREST EXPENSE:
Deposits		36,695			41,260			47,848
Debt obligations and other		10,801			8,230			8,012
Total interest expense		47,496			49,490			55,860
Net interest income		131,593			114,926			100,594
PROVISION FOR LOAN LOSSES		12,708			9,861			12,676
Net interest income after provision for loan losses		118,885			105,065			87,918
NONINTEREST INCOME:
Service charges on deposit accounts		4,381			4,319			4,020
Trust fee income		3,456			2,614			2,434
Fees from origination of non-portfolio residential mortgage loans		5,581			8,710			6,837
Realized gains (losses) on sale of investment securities available for sale		(603	)		4			24
Other		6,437			4,440			1,667
Total noninterest income		19,252			20,087			14,982
NONINTEREST EXPENSE:
Salaries and employee benefits		63,281			55,264			47,454
Occupancy		8,791			7,723			6,528
Equipment rent, depreciation and maintenance		5,494			4,847			4,544
Other		20,221			19,118			18,012
Total noninterest expense		97,787			86,952			76,538
Income before income taxes and minority interest		40,350			38,200			26,362
Income taxes		14,699			14,035			9,314
Income before minority interest		25,651			24,165			17,048
Minority interest in net losses (income) of consolidated subsidiaries		1,065			(785	)		(395	)
NET INCOME	$	26,716		$	23,380		$	16,653
NET INCOME PER SHARE
Basic	$	1.88		$	1.86		$	1.64
Diluted	$	1.79		$	1.77		$	1.57

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

	December 31
	(Unaudited)
	2004			2003
ASSETS
Cash and due from banks	$	123,969		$	145,896
Money market and interest-bearing deposits		10,745			13,570
Federal funds sold		96,390			124,157
Cash and cash equivalents		231,104			283,623
Loans held for resale		43,143			43,001
Investment securities:
Available for sale, carried at market value		28,172			83,386
Held for long-term investment, carried at amortized cost which approximates market value		14,191			9,821
Total investment securities		42,363			93,207
Portfolio loans:
Commercial		2,444,492			2,033,097
Real estate mortgage		177,204			143,343
Installment		71,208			71,000
Total portfolio loans		2,692,904			2,247,440
Less allowance for loan losses		(37,572	)		(31,404	)
Net portfolio loans		2,655,332			2,216,036
Premises and equipment		32,661			24,793
Accrued interest income		10,447			9,533
Goodwill and other intangibles		41,943			34,449
Other assets		34,425			32,420
TOTAL ASSETS	$	3,091,418		$	2,737,062
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	503,902		$	435,599
Interest-bearing		2,006,170			1,853,065
Total deposits		2,510,072			2,288,664
Debt obligations:
Notes payable		172,534			92,774
Subordinated debentures		100,845			90,816
Total debt obligations		273,379			183,590
Accrued interest on deposits and other liabilities		16,288			14,965
Total liabilities		2,799,739			2,487,219
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES		39,520			30,946
STOCKHOLDERS’ EQUITY:
Common stock, no par value, 25,000,000 shares authorized; issued and outstanding: 2004 - 14,828,750 shares		196,271			180,957
2003 - 14,027,982 shares
Retained earnings		60,476			43,135
Market value adjustment (net of tax effect) for investment securities available for sale (accumulated other comprehensive income)		(36	)		(200	)
		256,711			223,892
Less unearned compensation regarding restricted stock and other		(4,552	)		(4,995	)
Total stockholders’ equity		252,159			218,897
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,091,418		$	2,737,062

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CAPITOL BANCORP LIMITED
Allowance for Loan Losses and Asset Quality Data

ALLOWANCE FOR LOAN LOSSES ACTIVITY(in thousands):

	Periods Ended December 31
	Three Month Period						Year Ended
	2004			2003			2004			2003
Allowance for loan losses at beginning of period	$	37,027		$	30,513		$	31,404		$	28,953
Allowance for loan losses of acquired bank subsidiary								724
Loans charged-off:
Commercial		(2,778	)		(2,863	)		(7,960	)		(8,068	)
Real estate mortgage		(20	)		(68	)		(96	)		(115	)
Installment		(84	)		(116	)		(332	)		(608	)
Total charge-offs		(2,882	)		(3,047	)		(8,388	)		(8,791	)
Recoveries:
Commercial		236			668			1,007			1,277
Real estate mortgage		—			13			—			13
Installment		80			4			117			91
Total recoveries		316			685			1,124			1,381
Net charge-offs		(2,566	)		(2,362	)		(7,264	)		(7,410	)
Additions to allowance charged to expense		3,111			3,253			12,708			9,861
Allowance for loan losses at December 31	$	37,572		$	31,404		$	37,572		$	31,404
Average total portfolio loans for period ended December 31	$	2,648,044		$	2,192,150		$	2,492,379		$	2,101,617
Ratio of net charge-offs (annualized) to average portfolio loans outstanding		0.39	%		0.43	%		0.29	%		0.35	%

ASSET QUALITY(in thousands):

	December 31
	2004		2003
Nonaccrual loans:
Commercial	$	20,618	$	19,852
Real estate		2,396		632
Installment		195		376
Total nonaccrual loans		23,209		20,860
Past due (>90 days) loans:
Commercial		3,529		4,544
Real estate		1,382		1,083
Installment		351		385
Total past due loans		5,262		6,012
Total nonperforming loans	$	28,471	$	26,872
Real estate owned and other repossessed assets		3,907		4,288
Total nonperforming assets	$	32,378	$	31,160

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CAPITOL BANCORP LIMITED
Selected Supplemental Data

EPS COMPUTATION COMPONENTS:

	Periods Ended December 31
	Three Month Period				Year Ended
	2004		2003		2004		2003
Numerator—net income for the period	$	7,950,000	$	6,324,000	$	26,716,000	$	23,380,000
Denominator:
Weighted average number of common shares outstanding, excluding unvested shares of restricted common stock (denominator for basic earnings per share)		14,522,000		13,415,000		14,183,000		12,602,000
Weighted average number of unvested shares of restricted common stock outstanding		259,000		263,000		258,000		157,000
Effect of other dilutive securities—stock options		587,000		523,000		450,000		416,000
Denominator for diluted net income per share—
Weighted average number of common shares and potential dilution		15,368,000		14,201,000		14,891,000		13,175,000
Number of antidilutive stock options excluded from diluted earnings per share computation		160,000		—		160,000		337,000

AVERAGE BALANCES(in thousands):

	Periods Ended December 31
	Three Month Period				Year Ended
	2004		2003		2004		2003
Portfolio loans	$	2,648,044	$	2,192,150	$	2,492,379	$	2,101,617
Earning assets		2,869,059		2,477,528		2,733,488		2,391,903
Total assets		3,089,754		2,693,876		2,945,752		2,571,189
Deposits		2,539,806		2,275,751		2,437,417		2,197,197
Stockholders’ equity		253,444		207,511		237,447		180,263

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About Capitol Bancorp Limited
Capitol Bancorp Limited is a $3.1 billion community bank development company, with 33 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
	Bank of Tucson — Nogales LPO Camelback Community Bank	Nogales 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
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
	Bank of Michigan	Farmington Hills
	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
	First Carolina State Bank LPO	Tarboro
In Texas:
	Sunrise Bank — Dallas LPO	Dallas
	Sunrise Bank — Houston LPO	Houston

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