UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year
ended December 31, 2001 or
( ) TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 33-24728C
CAPITOL BANCORP LTD.
(Exact name of registrant as specified in its Charter)
MICHIGAN 38-2761672
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
ONE BUSINESS & TRADE CENTER
200 WASHINGTON SQUARE NORTH
LANSING, MICHIGAN 48933
(Address of principal executive offices)
Registrant's telephone number, including area code: (517) 487-6555
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
8.50% CUMULATIVE TRUST PREFERRED SECURITIES, $10 LIQUIDATION AMOUNT
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO[ ]
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked price of
stock, as of a specified date within 60 days prior to the date of filing:
$80,865,249 as of February 15, 2002.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: 7,903,135 as of
February 15, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
See Cross-Reference Sheet
CAPITOL BANCORP LTD.
Form 10-K
Fiscal Year Ended: December 31, 2001
CROSS REFERENCE SHEET
ITEM OF FORM 10-K INCORPORATION BY REFERENCE FROM:
- ----------------- --------------------------------
PART I
Item 1, Business Pages 6-10, 17-20, 20-23, 30-31 and 40, Financial
Information Section of Annual Report
Item 2, Properties Pages 38-39, Financial Information Section of Annual
Report; Page 11, Proxy Statement; and certain
individual pages, Marketing Section of Annual Report
PART II
Item 5, Market for Registrant's Pages 2-4, 39-40, 41-42 and 47-48, Financial Information
Common Equity and Related Section of Annual Report
Stockholder Matters
Item 6, Selected Financial Data Page 2, Financial Information Section of Annual Report
Item 7, Management's Discussion Pages 5-24, Financial Information Section of Annual Report
and Analysis of Financial Condition
and Results of Operations
Item 7a, Quantitative and Qualitative Pages 5 and 20-23, Financial Information Section of Annual
Disclosures About Market Risk Report; Pages 15-19, Registration Statement
Item 8, Financial Statements and Pages 2 and 25-51, Financial Information Section of Annual
Supplementary Data Report
PART III
Item 10, Directors and Executive Officers Pages 2-3, Proxy Statement
of the Registrant
Item 11, Executive Compensation Pages 5-10, Proxy Statement
Item 12, Security Ownership of Certain Beneficial Pages 2-4, Proxy Statement
Owners and Management
Item 13, Certain Relationships and Related Page 11, Proxy Statement
Transactions
PART IV
Item 14, Exhibits, Financial Statement Schedules Pages 25-51, Financial Information Section of Annual Report
and Reports on Form 8-K
KEY:
"Annual Report" means the 2001 Annual Report of the Registrant provided
to Stockholders and the Commission pursuant to Rule
14a-3(b). Capitol's 2001 Annual Report consists of two
documents: a Financial Information Section and a
Marketing Section.
"Proxy Statement" means the Proxy Statement of the Registrant on Schedule
14A filed pursuant to Rule 14a-101.
"Registration Statement" means Registrant's Registration Statement on Form S-4
(Amendment No. 4) dated February 12, 2002.
Note: The page number references herein are based on the paper version of
the referenced documents. Accordingly, those page number references
may differ from the electronically filed versions of those documents.
-2-
CAPITOL BANCORP LTD.
2001 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. Business.............................................................4
ITEM 2. Properties..........................................................14
ITEM 3. Legal Proceedings...................................................15
ITEM 4. Submission of Matters to a Vote of Security Holders.................15
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters...............................................16
ITEM 6. Selected Financial Data.............................................16
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................16
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk..........16
ITEM 8. Financial Statements and Supplementary Data.........................17
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..........................................17
PART III
ITEM 10. Directors and Executive Officers of the Registrant..................18
ITEM 11. Executive Compensation..............................................18
ITEM 12. Security Ownership of Certain Beneficial Owners and Management......18
ITEM 13. Certain Relationships and Related Transactions......................18
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....19
-3-
PART I
ITEM 1, BUSINESS.
a. General development of business:
Incorporated by reference from Pages 6-10 under the captions "The Business
of Capitol and its Banks", and "Capitol's Structure", and Pages 30-31, Financial
Information Section of Annual Report, under the caption "Note A--Nature of
Operations, Basis of Presentation and Principles of Consolidation".
b. Financial information about industry segments:
Incorporated by reference from Pages 30-31, Financial Information Section
of Annual Report, under the caption "Note A--Nature of Operations, Basis of
Presentation and Principles of Consolidation".
c. Narrative description of business:
Incorporated by reference from Pages 6-10 under the captions "The Business
of Capitol and its Banks", and "Capitol's Structure", Pages 30-31, Financial
Information Section of Annual Report, under the caption "Note A--Nature of
Operations, Basis of Presentation and Principles of Consolidation", and Pages
20-23, Financial Information Section of Annual Report, under the caption "Trends
Affecting Operations" and Pages 17-20, Financial Information Section of Annual
Report, under the caption "Liquidity, Capital Resources and Capital Adequacy".
At December 31, 2001, Capitol and its subsidiaries employed 634 full time
equivalent employees.
In 1997, the Registrant formed Capitol Trust I, a Delaware statutory
business trust. Capitol Trust I's business and affairs are conducted by its
property trustee, a Delaware trustee, and three individual administrative
trustees who are employees and officers of the Registrant. Capitol Trust I
exists for the sole purpose of issuing and selling its preferred securities and
common securities, using the proceeds from the sale of those securities to
acquire subordinated debentures issued by the Registrant and certain related
services. During 2001, the Registrant formed Capitol Trust II and Capitol
Statutory Trust III, in conjunction with private placements of trust-preferred
securities, which are structured similar to Capitol Trust I. Additional
information regarding trust-preferred securities is incorporated by reference
from Page 40, Financial Information Section of Annual Report, under the caption
"Note I--Trust-Preferred Securities".
The following tables (Tables A to G, inclusive), present certain
statistical information regarding Capitol's business.
-4-
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY (TABLE A)
CAPITOL BANCORP LIMITED
Net interest income, the primary component of earnings, represents the
difference between interest income on interest-earning assets and interest
expense on interest-bearing liabilities. Net interest income depends upon the
volume of interest-earning assets and interest-bearing liabilities and the rates
earned or paid on them. This table shows the daily average balances for the
major asset and liability categories and the actual related interest income and
expense (in $1,000s) and average yield/cost for the years ended December 31,
2001, 2000 and 1999.
2001 2000
----------------------------------- --------------------------------
Interest (1) Interest (1)
Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost
------- ------- ---------- ------- ------- ----------
ASSETS
Federal funds sold $ 82,237 $ 3,186 3.87% $ 63,664 $ 3,985 6.26%
Interest-bearing deposits with banks 16,335 322 1.97% 13,681 820 5.99%
Investment securities:
U.S. Treasury, government agencies and other 46,962 2,804 5.97% 79,092 4,645 5.87%
States and political subdivisions 1,572 66 4.20% 1,605 80 4.98%
Loans held for resale 42,894 3,002 7.00% 11,081 1,044 9.42%
Portfolio loans (2) 1,560,337 144,417 9.26% 1,213,192 121,737 10.03%
----------- --------- ------ ---------- -------- ------
Total interest-earning
assets/interest income 1,750,337 153,797 8.79% 1,382,315 132,311 9.57%
Allowance for loan losses (deduct) (20,337) (14,866)
Cash and due from banks 73,573 54,581
Premises and equipment, net 16,910 14,490
Other assets 40,434 36,096
----------- -----------
Total assets $ 1,860,917 $ 1,472,616
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings deposits $ 51,801 1,558 3.01% $ 45,251 1,758 3.88%
Time deposits under $100,000 356,338 20,533 5.76% 328,605 21,162 6.44%
Time deposits of $100,000 or more 478,497 27,388 5.72% 367,751 21,657 5.89%
Other interest-bearing deposits 479,314 16,176 3.37% 353,956 15,679 4.43%
Debt obligations 68,510 4,422 6.45% 45,249 3,506 7.75%
----------- --------- ------ ---------- -------- ------
Total interest-bearing
liabilities/interest expense 1,434,460 70,077 4.89% 1,140,812 63,762 5.59%
Trust-preferred securities 34,112 3,215 9.42% 24,244 2,150 8.87%
----------- --------- ------ ---------- -------- ------
1,468,572 73,292 4.99% 1,165,056 65,912 5.66%
Noninterest-bearing demand deposits 236,048 176,804
Accrued interest on deposits and
other liabilities 47,009 25,512
Minority interests in consolidated subsidiaries 38,886 46,956
Stockholders' equity 70,402 58,288
----------- -----------
Total liabilities and
stockholders' equity $ 1,860,917 $ 1,472,616
=========== --------- =========== --------
Net interest income $ 80,505 $ 66,399
========= ========
Interest Rate Spread (3) 3.80% 3.91%
====== ======
Net Yield on Interest-Earning Assets (4) 4.60% 4.80%
====== ======
Ratio of Average Interest-Earning
Assets to Interest-Bearing Liabilities 1.19 X 1.19 X
============= =============
1999
-------------------------------------
Interest (1)
Average Income/ Average
Balance Expense Yield/Cost
---------- ------- -----
ASSETS
Federal funds sold $ 87,002 $ 4,272 4.91%
Interest-bearing deposits with banks 9,295 544 5.85%
Investment securities:
U.S. Treasury, government agencies and other 83,065 4,779 5.75%
States and political subdivisions 1,607 73 4.54%
Loans held for resale 17,781 1,364 7.67%
Portfolio loans (2) 872,481 82,570 9.46%
----------- ------- -----
Total interest-earning
assets/interest income 1,071,231 93,602 8.74%
Allowance for loan losses (deduct) (10,391)
Cash and due from banks 43,815
Premises and equipment, net 12,725
Other assets 26,332
-----------
Total assets $ 1,143,712
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings deposits $ 42,828 1,547 3.61%
Time deposits under $100,000 285,683 15,744 5.51%
Time deposits of $100,000 or more 252,713 13,434 5.32%
Other interest-bearing deposits 277,309 11,290 4.07%
Debt obligations 29,959 2,072 6.92%
---------- ------- -----
Total interest-bearing
liabilities/interest expense 888,492 44,087 4.96%
Trust-preferred securities 24,274 2,150 8.86%
---------- ------- -----
912,766 46,237 5.07%
Noninterest-bearing demand deposits 130,457
Accrued interest on deposits and
other liabilities 9,483
Minority interests in consolidated subsidiaries 40,276
Stockholders' equity 50,730
-----------
Total liabilities and
stockholders' equity $ 1,143,712
=========== -------
Net interest income $47,365
=======
Interest Rate Spread (3) 3.67%
=====
Net Yield on Interest-Earning Assets (4) 4.42%
=====
Ratio of Average Interest-Earning
Assets to Interest-Bearing Liabilities 1.17 X
=========
(1) Average yield/cost is determined by dividing the actual interest
income/expense by the daily average balance of the asset or liability
category.
(2) Average balance of loans includes non-accrual loans.
(3) Interest rate spread represents the average yield on interest-earning
assets less the average cost of interest-bearing liabilities.
(4) Net yield is based on net interest income as a percentage of average total
interest-earning assets.
-5-
CHANGES IN NET INTEREST INCOME (TABLE B)
CAPITOL BANCORP LIMITED
The table below summarizes the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected Capitol's net interest income (in $1,000s). The change
in interest attributable to volume is calculated by multiplying the annual
change in volume by the prior year's rate. The change in interest attributable
to rate is calculated by multiplying the annual change in rate by the prior
year's average balance. Any variance attributable jointly to volume and rate
changes has been allocated to each category based on the percentage of each to
the total change in both categories.
2001 compared to 2000 2000 compared to 1999
---------------------------------- --------------------------------
Volume Rate Net Total Volume Rate Net Total
------ ---- --------- ------ ---- ---------
Increase (decrease) in interest income:
Federal funds sold $ 970 $ (1,769) $ (799) $ (1,301) $ 1,014 $ (287)
Interest-bearing deposits with banks 135 (633) (498) 263 13 276
Investment securities:
U.S. Treasury, government agencies and other (1,917) 76 (1,841) (232) 98 (134)
States and political subdivisions (2) (12) (14) -- 7 7
Loans held for resale 2,290 (332) 1,958 (587) 267 (320)
Portfolio loans 32,707 (10,027) 22,680 33,928 5,239 39,167
-------- -------- -------- -------- ------- --------
Total 34,183 (12,697) 21,486 32,071 6,638 38,709
Increase (decrease) in interest expense deposits:
Savings deposits 232 (432) (200) 90 121 211
Time deposits under $100,000 1,702 (2,331) (629) 2,553 2,865 5,418
Time deposits of $100,000 or more 6,354 (623) 5,731 6,648 1,575 8,223
Other interest-bearing deposits 4,762 (4,265) 497 3,329 1,060 4,389
Debt obligations 1,575 (659) 916 1,160 274 1,434
Trust-preferred securities 923 142 1,065 (3) 3 --
-------- -------- -------- -------- ------- --------
Total 15,548 (8,168) 7,380 13,777 5,898 19,675
-------- -------- -------- -------- ------- --------
Increase (decrease) in net
interest income $ 18,635 $ (4,529) $ 14,106 $ 18,294 $ 740 $ 19,034
======== ======== ======== ======== ======= ========
-6-
INVESTMENT PORTFOLIO (TABLE C)
CAPITOL BANCORP LIMITED
The table below shows amortized cost and estimated market value of investment
securities as of December 31, 2001, 2000 and 1999 (in $1,000s):
2001 2000 1999
-------------------- -------------------- --------------------
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
-------- -------- -------- -------- -------- --------
U.S. Treasury $ 3,704 $ 3,757 $ 5,086 $ 5,101 $100,211 $ 98,860
Government agencies 30,253 30,429 55,514 55,334
States and political subdivisions 1,402 1,412 1,604 1,606 2,537 2,515
Corporate bonds 251 251 602 600
Other investments 539 539
-------- -------- -------- -------- -------- --------
35,359 35,598 62,455 62,292 103,889 102,514
Other securities:
Federal Reserve Bank stock 394 394 394 394 266 266
Federal Home Loan Bank stock 4,716 4,716 3,583 3,583 2,862 2,862
Corporate stock 895 895 907 907 1,003 1,003
Other investments 2,084 2,084 1,750 1,750 500 500
-------- -------- -------- -------- -------- --------
Total other securities 8,089 8,089 6,634 6,634 4,631 4,631
-------- -------- -------- -------- -------- --------
Total investment securities $ 43,448 $ 43,687 $ 69,089 $ 68,926 $108,520 $107,145
======== ======== ======== ======== ======== ========
The table below shows the amortized cost, relative maturities and weighted
average yields of investment securities at December 31, 2001 (in $1,000s):
U.S. Treasury and States and Political
Government Agencies Subdivisions
--------------------------------- --------------------------------
Estimated Weighted Estimated Weighted Total Total
Amortized Market Average Amortized Market Average Amortized Estimated
Cost Value Yield Cost Value Yield Cost Market Value
---- ----- ----- ---- ----- ----- ---- ------------
Maturity:
Due in one year or less $ 6,204 $ 6,320 5.76% $ 1,001 $ 1,008 4.30% $ 7,205 $ 7,328
Due after one year but within
five years 21,935 22,074 4.97% 21,935 22,074
Due after five years but within
ten years 2,970 2,954 5.64% 101 104 5.40% 3,071 3,058
Due after ten years 2,848 2,838 6.83% 300 300 2.45% 3,148 3,138
Without stated maturities 8,089 8,089
------- ------- ------- ------- ------- -------
Total $33,957 $34,186 $ 1,402 $ 1,412 $43,448 $43,687
======= ======= ======= ======= ======= =======
* Investment securities which do not have stated maturities (corporate stock,
Federal Reserve Bank and Federal Home Loan Bank stock) do not have stated
yields or rates of return and such rates of return vary from time to time.
Following is a summary of the weighted average maturities of investment
securities (exclusive of securities without stated maturities) at December 31,
2001:
U.S. Treasury securities 1 year
U.S. Agencies 5 years 4 months
States and political subdivisions 3 years 1 month
-7-
LOAN PORTFOLIO AND SUMMARY OF OTHER REAL ESTATE OWNED (TABLE D)
CAPITOL BANCORP LIMITED
Portfolio loans outstanding as of December 31 are shown below (in $1,000s):
2001 2000 1999
------------------- ------------------- -------------------
Commercial - real estate $1,154,757 66.57% $ 865,382 63.83% $ 627,029 59.76%
Commercial - other 380,694 21.95% 308,354 22.74% 247,531 23.59%
---------- ------ ---------- ------ ---------- ------
Total commercial loans 1,535,451 88.52% 1,173,736 86.57% 874,560 83.35%
Real estate mortgage 121,676 7.01% 113,324 8.36% 96,000 9.15%
Installment 77,462 4.47% 68,738 5.07% 78,644 7.50%
---------- ------ ---------- ------ ---------- ------
Total portfolio loans $1,734,589 100.00% $1,355,798 100.00% $1,049,204 100.00%
========== ====== ========== ====== ========== ======
1998 1997
------------------- -------------------
Commercial - real estate $ 417,296 57.62% $ 262,157 52.14%
Commercial - other 173,055 23.89% 133,781 26.61%
---------- ------ ---------- ------
Total commercial loans 590,351 81.51% 395,938 78.75%
Real estate mortgage 80,808 11.16% 66,630 13.25%
Installment 53,121 7.33% 40,187 7.99%
---------- ------ ---------- ------
Total portfolio loans $ 724,280 100.00% $ 502,755 100.00%
========== ====== ========== ======
The table below summarizes (in $1,000s) the remaining maturity of portfolio
loans outstanding at December 31, 2001 according to scheduled repayments of
principal.
Fixed Variable
Rate Rate Total
---------- ---------- ----------
Aggregate maturities of portfolio loan balances
which are due in one year or less: $ 326,619 $ 360,830 $ 687,449
After one year but within five years 700,424 206,674 907,098
After five years 32,668 95,332 128,000
Nonaccrual loans 12,042 12,042
---------- ---------- ----------
Total $1,071,753 $ 662,836 $1,734,589
========== ========== ==========
The following summarizes, in general, Capitol's various loan classifications:
Commercial - real estate
Comprised of a broad mix of business use and multi-family housing
properties, including office, retail, warehouse and light industrial uses.
A typical loan size approximates $500,000 and, at December 31, 2001,
approximately 31% of such properties were owner-occupied and approximately
11% of the commercial real estate total consisted of a combination of
multi-family and residential rental income properties.
Commercial - other
Includes a range of business credit products, current asset lines of credit
and equipment term loans. These products bear higher inherent economic risk
than other types of lending activities. A typical loan size approximates
$250,000, and multiple account relationships serve to reduce such risks.
Real Estate Mortgage
Includes single family residential loans held for permanent portfolio, and
home equity lines of credit. Risks are nominal, borne out by loss
experience, housing economic data and loan-to-value percentages.
Installment
Includes a broad range of consumer credit products, secured by automobiles,
boats, etc., with typical consumer credit risks.
All loans are subject to underwriting procedures commensurate with the loan
size, nature of collateral, industry trends, risks and experience factors.
Appropriate collateral is required for most loans, as is documented evidence of
debt repayment sources.
-8-
TABLE D, CONTINUED
CAPITOL BANCORP LIMITED
The aggregate amount of nonperforming portfolio loans is summarized below as of
December 31 (in $1,000's). Nonperforming loans comprise of (a) loans accounted
for on a nonaccrual basis, and (b) loans contractually past due 90 days or more
as to principal and interest payments (but not included in nonaccrual loans in
(a) above) and consist primarily of commercial real estate loans. See Note D of
the Notes to Consolidated Financial Statements for additional information
regarding nonperforming loans.
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
Nonperforming loans:
Nonaccrual loans: Commercial $11,220 $ 4,082 $ 2,709 $ 2,608 $ 2,570
Real estate 356 163 103 199 59
Installment 466 171 100 185 59
------- ------- ------- ------- -------
Total nonaccrual loans 12,042 4,416 2,912 2,992 2,688
Past due loans: Commercial 4,290 1,656 834 3,963 897
Real estate 787 534 196 183 401
Installment 119 151 182 104 25
------- ------- ------- ------- -------
Total past due loans 5,196 2,341 1,212 4,250 1,323
------- ------- ------- ------- -------
Total nonperforming loans $17,238 $ 6,757 $ 4,124 $ 7,242 $ 4,011
======= ======= ======= ======= =======
Nonperforming loans as a percentage
of total portfolio loans 0.99% 0.50% 0.39% 1.00% 0.80%
======= ======= ======= ======= =======
Nonperforming loans as a percentage
of total assets 0.84% 0.41% 0.32% 0.71% 0.58%
======= ======= ======= ======= =======
Allowance for loan losses as a
percentage of nonperforming loans 134.81% 258.24% 306.47% 121.75% 155.30%
======= ======= ======= ======= =======
The table below summarizes activity in other real estate owned (in $1,000s) for
the year ended December 31:
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
Other real estate owned at January 1 $ 3,094 $ 3,614 $ 541 $ 165 $ 313
Properties acquired in restructure
of loans or in lieu of foreclosure 860 324 3,426 612
Properties sold (233) (717) (376) (161) (128)
Payments received from borrowers or
tenants, credited to carrying amount (3) (75) (10)
Other changes, net (674) (127) 23 (10)
------- ------- ------- ------- -------
Other real estate owned at December 31 $ 3,044 $ 3,094 $ 3,614 $ 541 $ 165
======= ======= ======= ======= =======
Of the other real estate owned at December 31, 2001, one property, with a
carrying value of $1.9 million is partially guaranteed by an agency of the
federal government. Other real estate owned is valued at the lower of cost or
fair value (net of estimated selling cost) at the date of transfer/acquisition.
Management performs a periodic analysis of estimated fair values to determine
potential impairment of other real estate owned.
-9-
SUMMARY OF LOAN LOSS EXPERIENCE (TABLE E)
CAPITOL BANCORP LIMITED
The table below summarizes changes in the allowance for loan losses and related
portfolio data and ratios for the year ended December 31 (in $1,000's):
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Allowance for loan losses at January 1 $ 17,449 $ 12,639 $ 8,817 $ 6,229 $ 4,578
Loans charged-off:
Commercial 2,280 2,850 1,201 1,165 551
Real estate 143 204 9 117
Installment 506 117 97 131 49
---------- ---------- ---------- ---------- ----------
Total charge-offs 2,929 3,171 1,298 1,305 717
Recoveries:
Commercial 485 734 391 336 288
Real estate 37 13 6 4 18
Installment 29 18 13 30 13
---------- ---------- ---------- ---------- ----------
Total recoveries 551 765 410 370 319
---------- ---------- ---------- ---------- ----------
Net charge-offs 2,378 2,406 888 935 398
Additions to allowance charged to expense 8,167 7,216 4,710 3,523 2,049
---------- ---------- ---------- ---------- ----------
Allowance for loan losses at December 31 $ 23,238 $ 17,449 $ 12,639 $ 8,817 $ 6,229
========== ========== ========== ========== ==========
Total portfolio loans outstanding at December 31 $1,734,589 $1,355,798 $1,049,204 $ 724,280 $ 502,755
========== ========== ========== ========== ==========
Ratio of allowance for loan losses to
portfolio loans outstanding 1.34% 1.29% 1.20% 1.22% 1.24%
========== ========== ========== ========== ==========
Average total portfolio loans for the year $1,560,337 $1,213,192 $ 872,481 $ 605,923 $ 425,664
========== ========== ========== ========== ==========
Ratio of net charge-offs to average
portfolio loans outstanding 0.15% 0.20% 0.10% 0.15% 0.09%
========== ========== ========== ========== ==========
See Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations, for additional information regarding the allowance for
loan losses and description of factors which influence management's judgement in
determining the amounts of additions to the allowance.
-10-
TABLE E, CONTINUED
CAPITOL BANCORP LIMITED
The amount of the allowance for loan losses allocated in the following table (in
$1,000's) as of December 31, 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:
2001 2000 1999
-------------------- ------------------- ------------------
Percentage Percentage Percentage
Amount of Loans Amount of Loans Amount of Loans
------ -------- ------ -------- ------ --------
Commercial $ 20,570 1.19% $ 16,096 1.19% $ 5,965 0.57%
Real estate mortgage 1,630 0.09% 285 0.02% 165 0.02%
Installment 1,038 0.06% 1,068 0.08% 385 0.04%
Unallocated -- -- 6,124 0.58%
---------- ---------- ----------
Total allowance for loan losses $ 23,238 1.34% $ 17,449 1.29% $ 12,639 1.20%
========== ====== ========== ===== ========== =====
Total portfolio loans outstanding $1,734,589 $1,355,798 $1,049,204
========== =========== ==========
1998 1997
------------------ -------------------
Percentage Percentage
Amount of Loans Amount of Loans
------ -------- ------ --------
Commercial $ 4,501 0.62% $ 2,875 0.57%
Real estate mortgage 127 0.02% 103 0.02%
Installment 262 0.04% 185 0.04%
Unallocated 3,927 0.54% 3,066 0.61%
---------- ----------
Total allowance for loan losses $ 8,817 1.22% $ 6,229 1.24%
========== ===== ========== =====
Total portfolio loans outstanding $ 724,280 $ 502,755
========== ==========
-11-
AVERAGE DEPOSITS (TABLE F)
CAPITOL BANCORP LIMITED
The table below summarizes the average balances of deposits (in $1,000s) and the
average rates of interest for the years ended December 31, 2001, 2000 and 1999:
2001 2000 1999
----------------- ------------------ ------------------
Average Average Average
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
Noninterest-bearing demand deposits $ 236,048 $ 176,804 $ 130,457
Savings deposits 51,801 3.01% 45,251 3.88% 42,828 3.61%
Time deposits under $100,000 356,338 5.76% 328,605 6.44% 285,683 5.51%
Time deposits of $100,000 or more 478,497 5.72% 367,751 5.89% 252,713 5.32%
Other interest-bearing deposits 479,314 3.37% 353,956 4.43% 277,309 4.07%
---------- ---------- ----------
Total deposits $1,601,998 $1,272,367 $ 988,990
========== ========== ==========
The table below shows the amount of time certificates of deposit issued in
amounts of $100,000 or more, by time remaining until maturity, which were
outstanding at December 31, 2001 (in $1,000s):
Three months or less $158,093
Three months to six months 121,079
Six months to twelve months 134,398
Over 12 months 96,700
--------
Total $510,270
========
-12-
FINANCIAL RATIOS (TABLE G)
CAPITOL BANCORP LIMITED
Year Ended December 31
----------------------
2001 2000 1999
---- ---- ----
Net income as a percentage of:
Average stockholders' equity 15.22% 13.78% 10.66%
Average total assets 0.58% 0.55% 0.47%
Capital ratios:
Average stockholders' equity as a
percentage of average total assets 3.78% 3.96% 4.44%
Average total equity (stockholders' equity and
minority interests in consolidated subsidiaries)
as a percentage of average total assets 5.87% 7.15% 7.96%
Average total capital funds (stockholders'
equity, minority interests in consolidated
subsidiaries and trust-preferred securities)
as a percentage of average total assets 7.71% 8.79% 10.08%
Dividend payout ratio (cash dividends per share
as a percentage of net income per share):
Basic 28.99% 31.58% 42.86%
Diluted 29.63% 31.86% 43.37%
-13-
ITEM 2, PROPERTIES.
Substantially all of the office locations are leased. Each of Capitol's
banks operates from a single location, except Capitol National Bank (which has
one branch location in Okemos, Michigan) and Red Rock Community Bank (which has
two locations in Las Vegas, Nevada). The addresses of each bank's main office
are shown in the Marketing Section of Annual Report, which are incorporated
herein by reference, from the following captioned pages therein:
Ann Arbor Commerce Bank Macomb Community Bank
Arrowhead Community Bank Mesa Bank
Bank of Tucson Muskegon Commerce Bank
Black Mountain Community Bank Oakland Commerce Bank
Brighton Commerce Bank Paragon Bank & Trust
Camelback Community Bank Portage Commerce Bank
Capitol National Bank Red Rock Community Bank
Desert Community Bank Southern Arizona Community Bank
Detroit Commerce Bank Sunrise Bank of Albuquerque
East Valley Community Bank Sunrise Bank of Arizona
Elkhart Community Bank Sunrise Bank of San Diego
Goshen Community Bank Valley First Community Bank
Grand Haven Bank Yuma Community Bank
Kent Commerce Bank
Ann Arbor Commerce Bank, in 1998, and Portage Commerce Bank, in 1997,
relocated their main offices to substantially larger leased facilities
(approximately 18,000 and 10,000 square feet, respectively) in response to asset
growth and to better serve customers.
Most of the other bank subsidiaries' facilities are generally small (i.e.,
less than 10,000 square feet), first floor offices with convenient access to
parking.
Some of the banks have drive-up customer service. The banks are typically
located in or near high traffic centers of commerce in their respective
communities. Customer service is enhanced through utilization of ATMs to process
some customer-initiated transactions and some of the banks also make available a
courier service to pick up transactions at customers' locations.
The principal offices of Capitol are located within the same building as
Capitol National Bank in Lansing, Michigan. Those headquarters include
administrative, operations, accounting, and executive staff. Data processing
centers are located in Lansing, Michigan and Tempe, Arizona.
Sun Community Bancorp Limited's principal offices are within the same
building as Camelback Community Bank in Phoenix, Arizona.
Certain of the office locations are leased from related parties.
Incorporated by reference from Pages 38-39, Financial Information Section of
Annual Report, under the caption "Note F--Premises and Equipment" and Page 11,
Proxy Statement, third paragraph thereunder under the caption "Certain
Relationships and Related Transactions".
Management believes Capitol's and its subsidiaries' offices to be in good
and adequate condition and adequately covered by insurance.
-14-
ITEM 3, LEGAL PROCEEDINGS.
As of December 31, 2001, there were no material pending legal proceedings
to which Capitol or its subsidiaries is a party or to which any of its property
was subject, except for proceedings which arise in the ordinary course of
business. In the opinion of management, pending legal proceedings will not have
a material effect on the consolidated financial position or results of
operations of Capitol.
ITEM 4, SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of 2001, no matters were submitted to a vote by
security holders.
At December 31, 2001 a proposed share exchange transaction was pending. In
November 2001, the boards of directors of Capitol and Sun Community Bancorp
Limited entered into a proposed plan of share exchange. The proposed plan of
share exchange is subject to the approval of the shareholders of both Capitol
and Sun. The proposed share exchange, if consummated, would result in Capitol
issuing .734 shares of its previously unissued common stock for each common
share of Sun's common stock held by shareholders other than Capitol. Capitol
estimates that it would issue approximately 2.7 million shares of its common
stock and 850,000 stock options if the share exchange is completed as proposed.
Special shareholders' meetings for Capitol and Sun are scheduled to be held in
late March 2002. If approved by shareholders, the proposed share exchange is
anticipated to be completed effective March 31, 2002.
-15-
PART II
ITEM 5, MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
A. Market Information:
Incorporated by reference from Page 3, Financial Information Section
of Annual Report, under the caption "Information Regarding Capitol's Common
Stock", Pages 41-42 under the caption "Note J--Common Stock, Warrants and
Stock Options" and Page 4, under the caption "Shareholder Information".
B. Holders:
Incorporated by reference from first sentence of third paragraph on
Page 3, Financial Information Section of Annual Report, under the caption
"Information Regarding Capitol's Common Stock".
C. Dividends:
Incorporated by reference from Page 2, Financial Information Section
of Annual Report, under the caption "Quarterly Results of Operations" and
subcaption "Cash dividends paid per share", Pages 47-48, Financial
Information Section of Annual Report, under the caption "Note P--Dividend
Limitations of Subsidiaries and Other Capital Requirements" and the first
paragraph commencing on Page 40, Financial Information Section of Annual
Report, under the caption "Note H--Debt Obligations".
ITEM 6, SELECTED FINANCIAL DATA.
Incorporated by reference from Page 2, Financial Information Section of
Annual Report, under the caption "Selected Consolidated Financial Data" under
the column heading "As of and for the Year Ended December 31, 2001, 2000, 1999,
1998 and 1997".
ITEM 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Incorporated by reference from Pages 6-24, Financial Information Section of
Annual Report, under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Page 5, Financial Information
Section of Annual Report, under the caption "Forward Looking Statements".
ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Incorporated by reference from Pages 20-23, Financial Information Section
of Annual Report, under the caption "Trends Affecting Operations" and Page 5,
Financial Information Section of Annual Report, under the caption "Forward
Looking Statements". Incorporated by reference from Pages 15-19, from
Registrant's Registration Statement on Form S-4 (Amendment No. 4) under the
caption "Risk Factors".
-16-
ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14 (under subcaption "A. Exhibits") of this Form 10-K for specific
description of financial statements incorporated by reference from Financial
Information Section of Annual Report.
Incorporated by reference from Page 2, Financial Information Section of
Annual Report, under the caption "Quarterly Results of Operations".
ITEM 9, CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-17-
PART III
ITEM 10, DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference from Pages 2-3, Proxy Statement, under the
caption "Election of Directors".
Executive officers of Capitol are as follows:
Name and Year First Became
Principal Positions Age An Officer
------------------- --- ----------
Joseph D. Reid 59 1988
Chairman, President and Chief Executive Officer*
David O'Leary 71 1988
Secretary
Paul R. Ballard 52 1990
Executive Vice President**
Robert C. Carr 62 1988
Executive Vice President and Treasurer**
David J. Dutton 51 2000
Executive Vice President and Chief Information
Officer***
Cristin Reid English 33 1997
Executive Vice President*
Lee W. Hendrickson 46 1991
Executive Vice President and Chief Financial Officer*
Michael M. Moran 42 2000
Executive Vice President
David K. Powers 56 1990
Executive Vice President
William E. Rheaume 60 1998
Executive Vice President and Senior Counsel
Bruce A. Thomas 44 1998
Executive Vice President
Brian K. English 36 2001
General Counsel
Carl C. Farrar 52 1998
Senior Vice President
John C. Smythe 55 1983
Senior Vice President
Marie D. Walker 42 1990
Senior Vice President and Controller
Linda D. Pavona 50 1991
Senior Vice President
* Also serves in similar capacity at Sun Community Bancorp Limited, Indiana
Community Bancorp Limited, Nevada Community Bancorp Limited, Sunrise
Capital Corporation and First California Northern Bancorp (consolidated
subsidiaries of Capitol).
** Also serves as an executive officer of Indiana Community Bancorp Limited (a
consolidated subsidiary of Capitol).
*** Also serves in similar capacity at Sun Community Bancorp Limited (a
consolidated subsidiary of Capitol).
ITEM 11, EXECUTIVE COMPENSATION.
Incorporated by reference from Pages 5-7, under the caption "Compensation
Committee Report on Executive Compensation", and Pages 8-10, Proxy Statement.
ITEM 12, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from Page 1, Proxy Statement, under the caption
"Voting Securities and Principal Holders Thereof", Pages 2-4, Proxy Statement,
under the caption "Election of Directors" and Page 4, Proxy Statement, second
paragraph under the caption "Meetings of the Board of Directors".
ITEM 13, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference from Page 11, Proxy Statement, under the caption
"Certain Relationships and Related Transactions".
-18-
PART IV
ITEM 14, EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
A. Exhibits:
The following consolidated financial statements of Capitol Bancorp
Limited and subsidiaries and report of independent auditors included on
Pages 25-51 of the Financial Information Section of Annual Report of the
Registrant to its stockholders for the year ended December 31, 2001, are
incorporated by reference in Item 8:
Report of Independent Auditors.
Consolidated balance sheets--December 31, 2001 and 2000.
Consolidated statements of income--Years ended December 31, 2001, 2000
and 1999.
Consolidated statements of changes in stockholders' equity--Years
ended December 31, 2001, 2000 and 1999.
Consolidated statements of cash flows--Years ended December 31, 2001,
2000 and 1999.
Notes to consolidated financial statements.
All financial statements and schedules have been incorporated by
reference from the Annual Report or are included in Management's Discussion
and Analysis of Financial Condition and Results of Operations. No schedules
are included here because they are either not required, not applicable or
the required information is contained elsewhere.
B. Reports on Form 8-K:
During the fourth quarter of 2001, one report on Form 8-K was filed on
November 19, 2001 by the Registrant, reporting the proposed share exchange
between Registrant and Sun Community Bancorp Limited.
-19-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CAPITOL BANCORP LTD.
Registrant
By: /s/ Joseph D. Reid By: /s/ Lee W. Hendrickson
------------------------------ -----------------------------------
Joseph D. Reid Lee W. Hendrickson
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant as
Directors of the Corporation on March 15, 2002.
/s/ Joseph D. Reid /s/ Robert C. Carr
- ------------------------------------- -----------------------------------------
Joseph D. Reid, Chairman, President, Robert C. Carr, Executive Vice President,
Chief Executive Officer and Director Treasurer and Director
/s/ David O'Leary /s/ Michael L. Kasten
- ------------------------------------ -----------------------------------------
David O'Leary, Secretary and Director Michael L. Kasten, Vice Chairman and
Director
/s/ Paul R. Ballard /s/ Louis G. Allen
- ------------------------------------- -----------------------------------------
Paul R. Ballard, Executive Louis G. Allen, Director
Vice President and Director
/s/ David L. Becker /s/ Douglas E. Crist
- ------------------------------------- -----------------------------------------
David L. Becker, Director Douglas E. Crist, Director
/s/ Gary A. Falkenberg
- ------------------------------------- -----------------------------------------
James C. Epolito, Director Gary A. Falkenberg, Director
/s/ Joel I. Ferguson /s/ Kathleen A. Gaskin
- ------------------------------------- -----------------------------------------
Joel I. Ferguson, Director Kathleen A. Gaskin, Director
/s/ H. Nicholas Genova /s/ L. Douglas Johns
- ------------------------------------- -----------------------------------------
H. Nicholas Genova, Director L. Douglas Johns, Director
/s/ John S. Lewis /s/ Leonard Maas
- ------------------------------------ -----------------------------------------
John S. Lewis, Director Leonard Maas, Director
/s/ Lyle W. Miller /s/ Cristin Reid English
- ------------------------------------- -----------------------------------------
Lyle W. Miller, Director Cristin Reid English, Executive
Vice President and Director
-20-
EXHIBIT INDEX
PAGE NUMBER OR
INCORPORATED BY
EXHIBIT NO. DESCRIPTION REFERENCE FROM:
- ----------- ----------- ---------------
3 Articles of Incorporation and
Bylaws (1)
4 Instruments Defining the Rights
of Security Holders:
(a) Common Stock Certificate (1)
(b) Indenture dated December 18, 1997 (14)
(c) Subordinated Debenture (14)
(d) Amended and Restated Trust Agreement
dated December 18, 1997 (14)
(e) Preferred Security Certificate dated
December 18, 1997 (14)
(f) Preferred Securities Guarantee Agreement
of Capitol Trust I dated December 18, 1997 (14)
(g) Agreement as to Expenses and Liabilities
of Capitol Trust I (14)
(h) Capitol Bancorp Ltd. 2000 Incentive
Stock Plan
10 Material Contracts:
(a) Joseph D. Reid Employment
Agreement (as amended effective
January 1, 1989) (2)
(b) Profit Sharing/401(k) Plan
(as amended and restated April 1, 1995) (13)
(b1) First and Second Amendments to Profit Sharing/
401(k) Plan (15)
(b2) Third, Fourth and Fifth Amendments to Profit
Sharing/401(k) Plan (17)
(b3) Sixth, Seventh, Eighth and Ninth Amendments
to Profit Sharing/401(k) Plan
(b4) Tenth, Eleventh, Twelfth, Thirteenth,
Fourteenth and Fifteenth Amendments to
Profit Sharing/401(K) Plan (18)
(c) Lease Agreement with Business &
Trade Center, Ltd. (11)
(d) Employee Stock Ownership Plan
(as amended and restated February 10, 1994) (12)
(d1) Second and Third Amendments to Employee
Stock Ownership Plan (15)
(d2) Fourth Amendment to Employee Stock
Ownership Plan (17)
(d3) Fifth Amendment to Employee Stock
Ownership Plan (18)
(e) Employment Agreements with
Robert C. Carr, John C. Smythe,
and Charles J. McDonald (2)
-21-
PAGE NUMBER OR
INCORPORATED BY
EXHIBIT NO. DESCRIPTION REFERENCE FROM:
- ----------- ----------- ---------------
10 Material Contracts--continued:
(f) Executive Supplemental Income
Agreements with Robert C. Carr,
Paul R. Ballard, Richard G. Dorner,
James R. Kaye, Scott G. Kling,
John D. Groothuis, David K. Powers,
John C. Smythe and Charles J. McDonald (13)
(g) Amendment to Employment Agreement
of Joseph D. Reid, dated October 2, 1989 (3)
(h) Consolidation Agreement between
the Corporation and Portage
Commerce Bank (4)
(i) Amendment to Employment Agreement
of Joseph D. Reid, dated
January 30, 1990 (5)
(j) Employment Agreements with
Paul R. Ballard and Richard G.
Dorner (6)
(k) Employment Agreement with
David K. Powers (7)
(l) Definitive Exchange Agreement and
Closing Memorandum between the
Registrant and United Savings
Bank, FSB (8)
(m) Employment Agreement with James
R. Kaye (9)
(n) Definitive Exchange Agreement
between the Registrant and
Financial Center Corporation (10)
(o) Employment Agreement by and between Sun
Community Bancorp Limited and Joseph D.
Reid. (Exhibit 10.1 of Sun Community
Bancorp Limited) (16)
(p) Employment Agreement by and between Sun
Community Bancorp Limited and John S.
Lewis. (Exhibit 10.7 of Sun Community
Bancorp Limited) (16)
(q) Anti-dilution Agreement by and between Sun
Community Bancorp Limited and Capitol
Bancorp Ltd. (Exhibit 10.10 of Sun
Community Bancorp Limited) (16)
(r) Plan of Share Exchange dated November
16, 2001 between and among Capitol
Bancorp Ltd and Sun Community Bancorp
Limited (19)
13 Annual Report to Security Holders
-22-
PAGE NUMBER OR
INCORPORATED BY
EXHIBIT NO. DESCRIPTION REFERENCE FROM:
- ----------- ----------- ---------------
21 Subsidiaries of the Registrant
23 Consent of BDO Seidman, LLP
KEY:
(1) Form S-18, Reg. No. 33-24728C, filed September 15, 1988.
(2) Form S-1, Reg. No. 33-30492, filed August 14, 1989.
(3) Amendment No. 1 to Form S-1, Reg. No. 33-31323, filed November 20, 1989.
(4) Form S-1, Reg. No. 33-31323, filed September 29, 1989.
(5) Originally filed as exhibit to Form 10-K for year ended December 31, 1989,
filed March 30, 1990; refiled as exhibit to Form 10-KSB for year ended
December 31, 1995, filed March 14, 1996, due to time limit for
incorporation by reference pursuant to Regulation SB Item 10(f).
(6) Originally filed as exhibit to Form 10-K for year ended December 31, 1990,
filed March 6, 1991; refiled as exhibit to Form 10-KSB for year ended
December 31, 1995, filed March 14, 1996, due to time limit for
incorporation by reference pursuant to Regulation SB Item 10(f).
(7) Form 10-K for year ended December 31, 1991, filed February 28, 1992.
(8) Form 8-K dated July 15, 1992, as amended under Form 8 on September 14,
1992.
(9) Form 10-KSB for year ended December 31, 1992, filed February 25, 1993.
(10) Form S-4, Reg. No. 33-73474, filed December 27, 1993.
(11) Form 10-KSB for year ended December 31, 1993, filed March 14, 1994.
(12) Form 10-KSB for year ended December 31, 1994, filed March 15, 1995.
(13) Form 10-KSB for the year ended December 31, 1995, filed March 14, 1996.
(14) Post Effective Amendment No.1 to Form S-3, Reg. No. 333-41215 and
333-41215-01 filed February 9, 1998.
(15) Form 10-K for year ended December 31, 1998, filed March 17, 1999.
(16) Amendment No. 2 to the Registration Statement on Form S-1 of Sun Community
Bancorp Limited (Registration No. 333-76719) dated June 15, 1999.
(17) Form 10-K for year ended December 31, 1999, filed March 27, 2000.
(18) Form 10-K for year ended December 31, 2000, filed March 23, 2001.
(19) Amendment No. 4 to the Registration Statement on Form S-4 Reg. No.
333-73624 filed February 12, 2002.
-23-
[LOGO] CAPITOL BANCORP LIMITED
FINANCIAL INFORMATION SECTION
OF
2001 ANNUAL REPORT TO SHAREHOLDERS
One Business & Trade Center
200 Washington Square North
Lansing, MI 48933
(517) 487-6555
TABLE OF CONTENTS
Selected Consolidated Financial Data...........................................2
Information Regarding Capitol's Common Stock...................................3
Availability of Form 10-K and Certain Other Reports............................3
Other Corporate and Shareholder Information....................................4
Responsibility For Financial Statements........................................5
Cautionary Statement Regarding Forward-Looking Statements......................5
Management's Discussion and Analysis of Financial Condition
and Results of Operations:
The Business of Capitol and Its Banks.....................................6
Capitol's Structure.......................................................7
Recent Developments.......................................................9
Banking Technology at Capitol............................................10
2001 Financial Overview..................................................10
Changes in Consolidated Financial Position...............................10
Consolidated Results of Operations.......................................15
Liquidity, Capital Resources and Capital Adequacy........................17
Trends Affecting Operations..............................................20
New Accounting Standards.................................................23
Report of Independent Auditors................................................25
Consolidated Financial Statements:
Consolidated Balance Sheets..............................................26
Consolidated Statements of Income........................................27
Consolidated Statements of Changes in Stockholders' Equity...............28
Consolidated Statements of Cash Flows....................................29
Notes to Consolidated Financial Statements...............................30
1
SELECTED CONSOLIDATED FINANCIAL DATA
(in $1,000s, except per share data)
As of and for the Year Ended December 31
-----------------------------------------------------------------
2001(1) 2000(2) 1999(3) 1998(4) 1997(5)
---------- ---------- ---------- ---------- ----------
For the year:
Interest income $ 153,797 $ 132,311 $ 93,602 $ 69,668 $ 49,549
Interest expense 73,292 65,912 46,237 36,670 24,852
Net interest income 80,505 66,399 47,365 32,998 24,697
Provision for loan losses 8,167 7,216 4,710 3,523 2,049
Noninterest income 9,585 6,137 4,714 3,558 2,157
Noninterest expense 64,136 52,846 40,257 26,325 16,721
Income before cumulative effect of change
in accounting principle 10,718 8,035 5,606(6) 4,628 5,557
Net income 10,718 8,035 5,409 4,628 5,557
Net income per share:
Basic 1.38 1.14 .84 .74 .91
Diluted 1.35 1.13 .83 .72 .88
Cash dividends paid per share .40 .36 .36 .33 .30
At end of year:
Total assets $2,044,006 $1,630,076 $1,305,987 $1,024,444 $ 690,556
Total earning assets 1,920,621 1,517,350 1,227,976 953,315 641,561
Portfolio loans 1,734,589 1,355,798 1,049,204 724,280 502,755
Deposits 1,740,385 1,400,899 1,112,793 890,890 604,407
Debt obligations 89,911 58,150 47,400 23,600
Trust-preferred securities 48,621 24,327 24,291 24,255 24,126
Minority interests in consolidated subsidiaries 70,673 62,575 54,593 27,576 11,020
Stockholders' equity 80,172 70,404 54,668 49,292 45,032
Quarterly Results of Operations
----------------------------------------------------
Total for Fourth Third Second First
the Year Quarter Quarter Quarter Quarter
---------- ---------- ---------- ---------- ----------
Year ended December 31, 2001:(1)
Interest income $ 153,797 $ 38,031 $ 39,058 $ 38,894 $ 37,814
Interest expense 73,292 16,398 18,350 19,181 19,363
Net interest income 80,505 21,633 20,708 19,713 18,451
Provision for loan losses 8,167 2,530 2,316 1,697 1,624
Net income 10,718 2,963 2,772 2,600 2,383
Net income per share:
Basic 1.38 .38 .35 .33 .31
Diluted 1.35 .37 .35 .33 .31
Cash dividends paid per share .40 .10 .10 .10 .10
Year ended December 31, 2000:(2)
Interest income $ 132,311 $ 36,830 $ 34,651 $ 32,041 $ 28,789
Interest expense 65,912 18,743 17,461 15,684 14,024
Net interest income 66,399 18,087 17,190 16,357 14,765
Provision for loan losses 7,216 2,220 1,630 2,004 1,362
Net income 8,035 2,307 2,080 1,930 1,718
Net income per share:
Basic 1.14 .32 .29 .27 .25
Diluted 1.13 .32 .29 .27 .25
Cash dividends paid per share .36 .09 .09 .09 .09
(1) Includes Sunrise Bank of San Diego (located in San Diego, California),
effective January 2001, majority-owned by Sunrise Capital Corporation (a
majority-owned subsidiary of Sun Community Bancorp Limited).
(2) Includes Black Mountain Community Bank effective March 2000 (located in
Henderson, Nevada and majority-owned by Nevada Community Bancorp Limited),
Sunrise Bank of Albuquerque effective April 2000 (located in Albuquerque,
New Mexico and majority-owned by Sunrise Capital Corporation), Arrowhead
Community Bank effective September 2000 (located in Glendale, Arizona and
majority-owned by Sun Community Bancorp Limited), Goshen Community Bank
effective September 2000 (located in Goshen, Indiana and majority-owned by
Indiana Community Bancorp Limited) and Yuma Community Bank effective
December 2000 (located in Yuma, Arizona and majority-owned by Sun Community
Bancorp Limited).
(3) Includes East Valley Community Bank effective June 1999 (located in
Chandler, Arizona and majority-owned by Sun Community Bancorp Limited);
Desert Community Bank (August 1999) and Red Rock Community Bank (November
1999), both located in Las Vegas, Nevada and majority-owned by Nevada
Community Bancorp Limited (formed in 1999 and majority-owned by Sun); and
Elkhart Community Bank effective September 1999 (located in Elkhart,
Indiana) and majority-owned by Indiana Community Bancorp Limited (formed in
1999 and majority-owned by Capitol).
(4) Includes Kent Commerce Bank effective January 1998 and Detroit Commerce
Bank effective December 1998, both located in Michigan and majority-owned
by Capitol and, in Arizona, Camelback Community Bank (effective May 1998),
Southern Arizona Community Bank (effective August 1998), Mesa Bank
(effective October 1998) and Sunrise Bank of Arizona (effective December
1998), majority-owned DE NOVO bank subsidiaries of Sun Community Bancorp
Limited.
(5) Includes Brighton Commerce Bank, effective January 1997, and Muskegon
Commerce Bank, effective December 1997, which are majority-owned by
Capitol. Also includes Valley First Community Bank, effective June 1997.
(6) Implementation of a new accounting standard requiring the write-off of
previously capitalized start-up costs resulted in a one-time charge of
$197,000 (net of income tax effect) or $.03 per share effective January 1,
1999.
2
INFORMATION REGARDING CAPITOL'S COMMON STOCK
Capitol's common stock is traded on the National Market Tier of The Nasdaq Stock
Market(SM) under the symbol "CBCL". Market quotations regarding the range of
high and low sales prices of Capitol's common stock, which reflect inter-dealer
prices without retail mark-up, mark-down or commissions, were as follows:
2001 2000
------------------ --------------------
Low High Low High
------ ------- ------- -------
Quarter Ended:
March 31 $ 9.688 $14.250 $ 8.063 $16.938
June 30 12.000 15.660 10.750 13.875
September 30 12.250 17.500 9.625 12.375
December 31 12.800 15.200 8.750 13.375
During 2001 and 2000, Capitol paid quarterly cash dividends of $0.10 per share
and $0.09 per share, respectively.
As of February 15, 2002, there were 3,258 beneficial holders of Capitol's common
stock, based on information supplied to Capitol from its stock transfer agent
and other sources. At that date, 7,903,135 shares of common stock were
outstanding. Capitol's stock transfer agent is UMB Bank, n.a., 928 Grand Ave.,
P.O. Box 410064, Kansas City, Missouri 64141-0064 (telephone 800/884-4225).
Capitol has a Shareholder Investment Program which offers a variety of
convenient features including dividend reinvestment, certain fee-free
transactions, certificate safekeeping and other benefits. For a copy of the
program prospectus, informational brochure and enrollment materials, contact UMB
Bank, n.a. at 800/884-4225 or Capitol at 517/487-6555.
In addition to Capitol's common stock, trust-preferred securities of Capitol
Trust I (a subsidiary of Capitol) are also traded on the National Market Tier of
The Nasdaq Stock Market(SM) under the symbol "CBCLP". Those trust-preferred
securities consist of 2,530,000, 8.5% cumulative preferred securities, with a
liquidation amount of $10 per preferred security. The trust-preferred securities
are guaranteed by Capitol and mature in 2027, are callable after 2002 and may be
extended to 2036 if certain conditions are met.
AVAILABILITY OF FORM 10-K AND CERTAIN OTHER REPORTS
A copy of Capitol's 2001 report on Form 10-K, without exhibits, is available to
holders of its common stock or trust-preferred securities without charge, upon
written request. Form 10-K includes certain statistical and other information
regarding Capitol and its business. Requests to obtain Form 10-K should be
addressed to Investor Relations, Capitol Bancorp Limited, One Business & Trade
Center, 200 Washington Square North, Lansing, Michigan 48933.
Form 10-K, and certain other periodic reports, are filed with the Securities and
Exchange Commission (SEC). The SEC maintains an internet web site that contains
reports, proxy and information statements and other information regarding
companies which file electronically (which includes Capitol). The SEC's web site
address is HTTP:\\WWW.SEC.GOV. Capitol's filings with the SEC can also be
accessed through Capitol's web site, HTTP:\\WWW.CAPITOLBANCORP.COM.
3
OTHER CORPORATE INFORMATION
CORPORATE OFFICE
One Business and Trade Center
200 Washington Square North
Lansing, Michigan 48933
517/487-6555
www.capitolbancorp.com
INDEPENDENT AUDITORS
BDO Seidman, LLP, Grand Rapids, Michigan
SHAREHOLDER INFORMATION
ANNUAL MEETING
Capitol's Annual Meeting will be held on Thursday, May 2, 2002 at 4:00 p.m. at
the Lansing Center, located at 333 E. Michigan Avenue, Lansing, Michigan.
COMMON STOCK TRADING INFORMATION
Capitol's common stock trades on the National Market Tier of the Nasdaq Stock
Market(SM) under the trading symbol CBCL.
The following brokerage firms make a market in the common stock of Capitol:
Robert W. Baird & Co., Inc. - Milwaukee, Wisconsin
First Union Securities - Richmond, Virginia
Keefe, Bruyette & Woods, Inc. - New York, New York
NDB Capital Markets - New York, New York
Raymond James & Associates, Inc. - St. Petersburg, Florida
Spear Leeds & Kellogg - New York, New York
Stifel Nicolaus & Company, Inc. - St. Louis, Missouri
U.S. Bancorp Piper Jaffray - Minneapolis, Minnesota
COMMON STOCK TRANSFER AGENT
UMB Bank, n.a.
928 Grand Avenue
P.O. Box 410064
Kansas City, Missouri 64141-0064
800/884-4225
SHAREHOLDER INVESTMENT PROGRAM
Capitol offers an easy and affordable way to invest in Capitol's common stock
through the Shareholder Investment Program. The program's benefits include
reinvestment of dividends in additional common stock, direct deposit of
dividends, ability to purchase as little as $50 in common stock as frequently as
once a month, and the option to make transfers or gifts of Capitol's common
stock to another person. Participation in the program is voluntary and all
shareholders are eligible. Purchases under the program are not currently subject
to any brokerage fees or commissions. For further information regarding
Capitol's Shareholder Investment Program or a copy of its prospectus,
informational brochure and enrollment materials, contact UMB Bank, n.a. at
800/884-4225 or Capitol at 517/487-6555.
TRUST-PREFERRED SECURITIES TRADING INFORMATION
Preferred securities of Capitol Trust I (a subsidiary of Capitol) trade on the
Nasdaq Stock Market(SM) under the trading symbol "CBCLP".
TRUST-PREFERRED SECURITIES TRUSTEE
Bank One Investment Management Group - Chicago, Illinois
4
RESPONSIBILITY FOR FINANCIAL STATEMENTS
Capitol's management is responsible for the preparation of the consolidated
financial statements and all other information appearing in this annual report.
The financial statements have been prepared in accordance with generally
accepted accounting principles and prevailing practices within the financial
institution industry.
Capitol's management is also responsible for establishing and maintaining the
internal control structure of Capitol, its banks and its bank development
subsidiaries. The general objectives of the internal control structure are to
provide management with reasonable assurance that assets are safeguarded against
loss from unauthorized use or disposition, and that transactions are completed
in accordance with generally accepted accounting principles. In fulfilling this
objective, management has various control procedures in place which include
review and approval of transactions, a code of ethical conduct for employees,
internal auditing and an annual audit of Capitol's consolidated financial
statements performed by a qualified independent audit firm. Management believes
the internal control structure of Capitol to be adequate and that there are no
material weaknesses in internal control.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this annual report that are not historical
facts are forward-looking statements. Those forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act of 1995, are subject
to known and unknown risks, uncertainties and other factors which may cause the
actual future results, performance or achievements of Capitol and/or its
subsidiaries and other operating units to differ materially from those
contemplated in such forward-looking statements. The words "intend", "expect",
"project", "estimate", "predict", "anticipate", "should", "will", "may",
"believe", and similar expressions also identify forward-looking statements.
Important factors which may cause actual results to differ from those
contemplated in such forward-looking statements include, but are not limited to:
(i) the results of Capitol's efforts to implement its business strategy, (ii)
changes in interest rates, (iii) legislation or regulatory requirements
adversely impacting Capitol's banking business and/or expansion strategy, (iv)
adverse changes in business conditions or inflation, (v) general economic
conditions, either nationally or regionally, which are less favorable than
expected and that result in, among other things, a deterioration in credit
quality and/or loan performance and collectability, (vi) competitive pressures
among financial institutions, (vii) changes in securities markets, (viii)
actions of competitors of Capitol's banks and Capitol's ability to respond to
such actions, (ix) the cost of capital, which may depend in part on Capitol's
asset quality, prospects and outlook, (x) changes in governmental regulation,
tax rates and similar matters, (xi) changes in management, and (xii) other risks
detailed in Capitol's other filings with the Securities and Exchange Commission.
If one or more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect, actual outcomes may vary materially from those
indicated. All subsequent written or oral forward-looking statements
attributable to Capitol or persons acting on its behalf are expressly qualified
in their entirety by the foregoing factors. Investors and other interested
parties are cautioned not to place undue reliance on such statements, which
speak as of the date of such statements. Capitol undertakes no obligation to
release publicly any revisions to these forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of unanticipated events.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Most of this section discusses items of importance regarding Capitol's financial
statements which appear elsewhere in this report. In order to obtain a full
understanding of this discussion, it is important to read it with those
financial statements. However, before discussing the financial statements and
related highlights, an introductory section includes some important background
information about the business of Capitol and its banks, Capitol's structure and
recent developments.
THE BUSINESS OF CAPITOL AND ITS BANKS
Capitol defines itself as a BANK DEVELOPMENT COMPANY. In the highly regulated
business of banking, it is viewed by governmental agencies as a bank holding
company. Capitol views bank DEVELOPMENT as a much more dynamic activity than the
seemingly passive regulatory label for bank HOLDING companies.
Bank development at Capitol is the business of mentoring, monitoring and
managing its investments in community banks. Bank development is also the
activity of adding new banks through start-up, or DE NOVO, formation or through
other affiliation efforts, such as exploring acquisitions of existing banks.
Capitol's banks have similar characteristics:
* Each bank has an on-site president and management team, as local
decision makers.
* Each bank has a local board of directors which has actual authority
over the bank.
* Each bank generally operates from only one office location.
* Each bank can fully meet customers' needs anywhere, anytime through
bankers-on-call, courier services, Internet and telephone banking and
other delivery methods.
* Each bank has access to an efficient back-room processing facility and
leading-edge technology through shared financial and operating
resources.
Capitol's banks seek the profitable customer relationships which are often
displaced through mergers, mass marketing and megabanks with an impersonal
approach to handling customers. Capitol's banks are focused on commercial
banking activities, emphasizing business customers, although they also offer a
complete array of financial products and services.
Each bank has a separate charter. A bank charter is similar to articles of
incorporation and enables each bank to exist as a distinct legal entity. Most of
these banks are state-chartered, which means they are organized under a
particular state's banking laws. All of the banks are FDIC-insured, and some are
members of the Federal Reserve System. Banks are highly regulated by state and
federal agencies. Because each bank has its own charter, each bank is examined
by both state and federal agencies as a separate and distinct legal entity for
safety, soundness and compliance with banking laws and regulations.
At December 31, 2001, Capitol consisted of 27 community banks, operating in 6
states.
6
Capitol's bank development philosophy is one of "SHARED VISION", which
encompasses a commitment to community banking emphasizing local leadership and
investment, with the shared resources of efficient management. Capitol provides
these shared resources to its banks, including common data processing systems,
centralized item processing, loan review, internal audit, credit administration,
accounting and risk management.
CAPITOL'S STRUCTURE
The organizational structure of Capitol is complex. It is a mixture of banks
which Capitol owns directly and others which are owned indirectly through
subsidiary bank development companies. Additionally, Capitol's direct and
indirect ownership percentages of these entities differ.
To simplify the overall organizational structure, Capitol's bank development
activity may be viewed on these levels:
Capitol Bancorp Limited
(Bank Development Company)
|
|
+-----------+------------+
| |
| |
Great Lakes Region Southwestern Region
Bank Development Bank Development
Great Lakes regional bank development currently consists of activity in the
states of Michigan and Indiana. Capitol's 11 Michigan banks range in age from
three years to 19 years. Their size varies from $34 million in assets to $271
million. These banks are all located in dynamic markets across the lower
peninsula of Michigan in a band about 180 miles wide and 75 miles north and
south from that line, in Michigan's most populous and active economic region. Of
these banks, 9 were begun as start-up operations and 2 were added via
acquisitions:
Michigan Bank Development
|
|
+---------------------------+---------------------------+
| |
| |
East Michigan Banks West Michigan Banks
| |
| |
Capitol National Bank | Macomb Community Bank Portage Commerce Bank | Muskegon Commerce Bank
(Lansing -- 1982) --+-- (Clinton Township -- 1996) (Portage -- 1988) --+-- (Muskegon -- 1997)
100% owned | 100% owned 100% owned | 100% owned
| |
Ann Arbor Commerce Bank | Brighton Commerce Bank Paragon Bank & Trust | Kent Commerce Bank
(Ann Arbor -- 1990) --+-- (Brighton -- 1997) (Holland -- 1994) --+--(Grand Rapids -- 1998)
100% owned | 100% owned 100% owned | 100% owned
| |
Oakland Commerce Bank | Detroit Commerce Bank Grand Haven Bank |
(Farmington Hills -- 1992) | (Detroit -- 1998) (Grand Haven -- 1995) |
100% owned) --+-- 93% owned 100% owned --+
Indiana Community Bancorp is 52% owned by Capitol and was formed in 1999 to
focus on developing banks in Indiana. Total assets of Indiana Community Bancorp
were about $65 million at year-end 2001 ($33 million at year-end 2000):
Indiana Community Bancorp Limited
52% owned by Capitol
|
|
+-----------+------------+
| |
| |
Elkhart Community Bank Goshen Community Bank
(Elkhart -- 1999) (Goshen -- 2000)
51% ownership by ICBL 51% ownership by ICBL
Sun Community Bancorp has become a particularly significant part of Capitol's
overall bank development strategy. Headquartered in Phoenix, Arizona, it is a
public company which is carrying out all of its current bank development
activities in the southwestern region of the United States.
7
At year-end 2001, its consolidated assets were $780 million ($527 million at
year-end 2000). It is also comprised of a combination of directly-owned banks
and bank development subsidiaries:
Sun Community Bancorp Limited
(Southwestern Region Bank Development)
50% owned by Capitol Bancorp
|
|
+----------------------------------+---------------------------------------+
| | |
| | |
Arizona bank development Nevada bank development through Sunrise Capital Corporation, multi-
through 8 majority- Nevada Community Bancorp state bank development emphasizing
owned community banks Limited and its 3 majority- specialized lending (SBA) through 3
owned community banks majority-owned community banks
In November 2001, Capitol and Sun entered into a plan of share exchange whereby,
if approved by Capitol's and Sun's shareholders (at meetings scheduled for March
2002), Capitol would acquire all of Sun's shares of common stock not currently
owned by Capitol. If approved, it is anticipated to be consummated on or about
March 31, 2002 (see Note S of the Notes to Consolidated Financial Statements).
The current group of Sun's banks comprising bank development in Arizona follows:
Arizona Bank Development
(direct subsidiaries of
Sun Community Bancorp Limited)
|
|
Bank of Tucson | Valley First
(Tucson -- 1996) --------+-------- Community Bank
100% ownership by Sun | (Scottsdale -- 1997)
| 100% ownership by Sun
|
Mesa Bank | Camelback
(Mesa -- 1998) --------+-------- Community Bank
100% ownership by Sun | (Phoenix -- 1998)
| 100% ownership by Sun
|
Southern Arizona | East Valley
Community Bank --------+-------- Community Bank
(Tucson -- 1998) | (Chandler -- 1999)
100% ownership by Sun | 85% ownership by Sun
|
Arrowhead | Yuma
Community Bank --------+-------- Community Bank
(Glendale -- 2000) | (Yuma -- 2000)
87% ownership by Sun | 51% ownership by Sun
These banks are young. The most mature bank of the group, Bank of Tucson,
completed its 60th month of operation in June 2001. The youngest bank, Yuma
Community Bank, opened in December 2000. These banks range in size from about
$23 million in assets to $121 million at year-end 2001. Five of the banks are
located in or near greater Phoenix and two are located in Tucson.
Bank development activities in Nevada are carried out through Nevada Community
Bancorp Limited, which is 54% owned by Sun, and was formed in 1999:
Nevada Community Bancorp Limited
54% owned by Sun
|
|
+---------------------------+------------------------------+
| | |
| | |
Black Mountain Desert Community Bank Red Rock Community Bank
Community Bank (Las Vegas -- 1999) (Las Vegas -- 1999)
(Henderson -- 2000) 51% ownership by NCBL 51% ownership by NCBL
51% ownership by NCBL
8
Nevada's consolidated total assets approximated $193 million at year-end 2001
($106 million at year-end 2000). A fourth Las Vegas area bank was added in
February 2002.
Sunrise Capital Corporation was formed in 1999, is approximately 71% owned by
Sun and had consolidated total assets of $137 million at year-end 2001. It is
focused on developing banks in several states with a slightly different emphasis
on commercial lending than the other bank affiliates of Capitol and Sun. Its
three banks focus on offering loan products structured through and partially
guaranteed by the U.S. Small Business Administration (SBA), in addition to the
full array of typical bank products and services:
Sunrise Capital Corporation
SBA Bank Development
(Approx. 71% owned by Sun)
|
|
+-----------------------------+------------------------------+
| | |
| | |
Sunrise Bank of Arizona Sunrise Bank of Albuquerque Sunrise Bank of San Diego
Phoenix, Arizona Albuquerque, New Mexico San Diego, California
(1998) (2000) (2001)
100% ownership by SCC 87% ownership by SCC 64% ownership by SCC
All of the banks and subsidiary bank development companies are combined, or
consolidated, for financial reporting purposes because Capitol has ownership
control of them either directly or indirectly. Current accounting rules require
consolidated reporting when one entity has majority voting control of another.
The reporting entity is the parent organization and entities which are
majority-owned by the parent are subsidiaries. In the circumstances of Capitol,
this parent and subsidiary relationship applies also to second and third tier
subsidiaries which have consolidated subsidiaries of their own.
The accounting rules in this area inhibit an understanding of the consolidated
financial statements. For example, consolidated balance sheets include all of
the combined entities' assets and liabilities. On the other hand, the
consolidated income statement includes all of the combined entities, but net
income only to the extent of the parent's ownership percentage.
RECENT DEVELOPMENTS
Because of the number of banks and bank development companies added in recent
periods, comparing financial results for those and prior periods is difficult.
In 2001, one new bank was added. In 2000, a total of five new banks were added
to the consolidated group. In 1999, four new banks were added. In 1998, there
were six new banks added to the group.
In early 2001, Capitol's board of directors decided to reduce the annual number
of new bank start-ups in contrast to the preceding three years. This decision
was based, in part, on the objective of reducing the impact of start-up costs
and early-period operating losses which tend to negatively impact consolidated
earnings.
At December 31, 2001, applications were pending for permission to form two new
banks in early 2002, one in California and one in Nevada. Both of these new
banks (Napa Community Bank and Bank of Las Vegas) opened in early 2002.
9
As previously noted, a share exchange proposal was pending as of December 31,
2001 which, if approved by Capitol's and Sun's shareholders, would result in Sun
becoming a wholly-owned subsidiary of Capitol. If the share exchange is
completed, then Capitol will fully include Sun's results of operations in its
operating results for periods after the effective date of the share exchange.
Capitol's rate of earnings per share will be diluted temporarily following the
proposed share exchange; however, this effect is not expected to be material in
2003.
BANKING TECHNOLOGY AT CAPITOL
The use of high technology banking systems is key to the delivery of accurate
and timely customer service. Capitol currently operates two data processing
sites, located in Lansing, Michigan and Tempe, Arizona. The Lansing site handles
item processing for the banks located in the Great Lakes region, while the Tempe
data center processes all activity for the banks located in the Southwest. Both
sites use mainframe computers and software which are nearly identical. While
physically separate, both sites function under common management.
2001 FINANCIAL OVERVIEW
Capitol completed 2001 with total assets exceeding $2 billion, an increase of
25% over year-end 2000's level of $1.6 billion.
Net income for 2001 exceeded $10.7 million, about 33% more than 2000's net
income of $8.0 million.
CHANGES IN CONSOLIDATED FINANCIAL POSITION
Total assets have grown significantly to $2 billion near the end of 2001 from $1
billion at the end of 1998. This rapid asset growth is the result of adding new
banks and the ongoing growth and evolution of Capitol's more mature banks.
TOTAL ASSETS
($ millions)
1997 1998 1999 2000 2001
---- ----- ----- ----- -----
691 1,024 1,306 1,630 2,044
At year-end 2001, total assets of the five banks formed in 2000 approximated
$172 million ($67 million at December 31, 2000). Banks formed in 1999 reported
total assets of $217 million at the end of 2001, an increase of $79 million
during the year. Total assets of the six banks which became three years old in
2001 grew 27% during the past year to $339 million. The three banks formed in
1997 continued strong asset growth of 15% in 2001, achieving total assets of
$203 million. The most mature group of banks, those formed before 1997, reported
total assets of $1.1 billion at year-end 2001, an increase of about 13% for the
year.
10
The total assets and revenues of each bank, the consolidated totals and
ownership percentages are summarized below as of year-end 2001 and 2000 (in
$1,000s):
Percentage Ownership By Total Assets Total Revenues
----------------------------- -------------------------- --------------------------
Capitol 2nd Tier 3rd Tier 2001 2000 2001 2000
------- -------- -------- ----------- ----------- ----------- -----------
Ann Arbor Commerce Bank 100% $ 271,116 $ 242,180 $ 23,372 $ 21,434
Brighton Commerce Bank 100% 70,530 62,431 5,608 5,327
Capitol National Bank 100% 173,177 148,385 13,196 13,110
Detroit Commerce Bank 93% 33,768 30,269 2,620 2,410
Grand Haven Bank 100% 98,740 76,644 7,822 7,039
Kent Commerce Bank 100% 66,873 45,288 4,763 3,927
Macomb Community Bank 100% 97,113 100,597 8,364 9,298
Muskegon Commerce Bank 100% 74,284 61,867 6,305 5,411
Oakland Commerce Bank 100% 115,249 97,099 8,681 8,737
Paragon Bank & Trust 100% 93,667 79,504 8,270 8,099
Portage Commerce Bank 100% 127,884 128,802 11,134 11,969
Indiana Community Bancorp Limited (ICBL): 52%
Elkhart Community Bank 51% 35,939 24,259 2,481 1,533
Goshen Community Bank 51% 28,681 8,402 1,215 99
----------- ----------- ----------- -----------
Consolidated ICBL 65,205 33,231 3,713 1,679
Sun Community Bancorp Limited (SCBL): 50%
Arrowhead Community Bank 87% 33,658 8,091 1,804 154
Bank of Tucson 100% 121,075 98,285 10,516 9,479
Camelback Community Bank 100% 67,210 49,364 5,161 3,853
East Valley Community Bank 85% 39,591 34,392 3,261 1,776
Mesa Bank 100% 52,308 36,529 4,277 3,230
Southern Arizona Community Bank 100% 55,423 40,156 4,107 3,340
Valley First Community Bank 100% 58,625 53,081 4,694 4,707
Yuma Community Bank 51% 23,202 5,064 1,244 22
Nevada Community Bancorp Limited (NCBL): 54%
Black Mountain Community Bank 51% 50,909 26,060 3,259 1,095
Desert Community Bank 51% 56,844 35,511 4,341 2,905
Red Rock Community Bank 51% 84,971 44,193 5,659 3,171
----------- ----------- ----------- -----------
Consolidated NCBL 193,212 106,155 13,258 7,180
Sunrise Capital Corporation (SCC): 71%
Sunrise Bank of Albuquerque 87% 35,984 19,762 2,851 944
Sunrise Bank of Arizona 100% 63,141 63,930 6,466 5,451
Sunrise Bank of San Diego 64% 37,912 2,658
----------- ----------- ----------- -----------
Consolidated SCC 137,232 84,908 11,975 6,429
----------- ----------- ----------- -----------
Consolidated SCBL 780,161 526,833 60,091 41,016
Other, net (23,868) 9,931 (747) (72)
----------- ----------- ----------- -----------
Consolidated totals $ 2,044,006 $ 1,630,076 $ 163,382 $ 138,448
=========== =========== =========== ===========
Most of the consolidated assets consist of loans. Portfolio loans approximated
$1.7 billion at year-end 2001, or about 85% of total consolidated assets, an
increase from 83% at year-end 2000.
TOTAL LOANS
($ millions)
1997 1998 1999 2000 2001
---- ---- ----- ----- -----
503 724 1,049 1,356 1,735
11
The banks emphasize commercial loans, consistent with their focus on serving
small to mid-sized business customers. The majority of commercial loans are
secured by real estate. Commercial loans comprise $1.5 billion or about 89% of
total portfolio loans at year-end 2001, a slight increase from the 87% ratio at
the end of 2000. Loan growth in 2001 was significant--$379 million, or a growth
rate of 28%--and closely paralleled the growth rate experienced in 2000.
The banks maintain an allowance for loan losses to absorb estimated losses in
the loan portfolio at the balance sheet date. At December 31, 2001, the
allowance for loan losses approximated $23.2 million or 1.34% of portfolio
loans, compared to $17.4 million or 1.29% at the end of 2000. The allowance
ratio was increased in 2001 in response to higher levels of nonperforming loans
and potential problem loans. The following table summarizes portfolio loans, the
allowance for loan losses and its ratio, and nonperforming loans (in $1,000s):
Allowance as a
Allowance for Nonperforming % of Total
Total Portfolio Loans Loan Losses Loans Portfolio Loans
----------------------- ------------------ ---------------- ---------------
2001 2000 2001 2000 2001 2000 2001 2000
---------- ---------- ------- ------- ------- ------ ----- -----
Ann Arbor Commerce Bank $ 233,920 $ 208,114 $ 3,219 $ 2,810 $ 1,960 $ 799 1.38% 1.35%
Brighton Commerce Bank 60,984 53,886 732 602 227 1.20% 1.12%
Capitol National Bank 144,485 130,384 1,983 1,757 465 805 1.37% 1.35%
Detroit Commerce Bank 29,243 21,081 351 245 539 1 1.20% 1.16%
Grand Haven Bank 89,989 67,419 1,212 861 1,234 474 1.35% 1.28%
Kent Commerce Bank 63,782 40,346 766 444 55 73 1.20% 1.10%
Macomb Community Bank 79,844 86,886 1,088 964 1,431 1.36% 1.11%
Muskegon Commerce Bank 70,151 55,431 842 617 123 125 1.20% 1.11%
Oakland Commerce Bank 81,711 79,598 1,063 971 406 515 1.30% 1.22%
Paragon Bank & Trust 81,430 64,820 1,018 807 586 507 1.25% 1.24%
Portage Commerce Bank 109,393 112,674 1,550 1,496 2,845 1,651 1.42% 1.33%
Indiana Community Bancorp Limited (ICBL):
Elkhart Community Bank 31,492 17,968 473 270 222 1.50% 1.50%
Goshen Community Bank 22,966 2,383 345 36 1.50% 1.51%
---------- ---------- ------- ------- ------- ------
Consolidated ICBL 54,458 20,351 818 306 222 -0-
Sun Community Bancorp Limited (SCBL):
Arrowhead Community Bank 30,430 4,724 457 71 1.50% 1.50%
Bank of Tucson 88,218 75,359 1,224 1,023 407 1.39% 1.36%
Camelback Community Bank 56,555 37,822 743 483 334 1.31% 1.28%
East Valley Community Bank 27,402 25,937 423 357 432 1.54% 1.38%
Mesa Bank 45,672 28,930 594 374 542 27 1.30% 1.29%
Southern Arizona Community Bank 50,879 36,135 662 434 298 1.30% 1.20%
Valley First Community Bank 41,851 42,759 670 663 1,018 306 1.60% 1.55%
Yuma Community Bank 18,539 800 285 13 1.54% 1.62%
Nevada Community Bancorp Limited (NCBL):
Black Mountain Community Bank 40,111 17,052 602 257 240 241 1.50% 1.51%
Desert Community Bank 50,361 29,426 806 441 989 1,089 1.60% 1.50%
Red Rock Community Bank 67,117 38,666 1,008 586 942 1.50% 1.52%
---------- ---------- ------- ------- ------- ------
Consolidated NCBL 157,589 85,144 2,416 1,284 2,171 1,330
Sunrise Capital Corporation (SCC):
Sunrise Bank of Albuquerque 28,061 16,259 379 238 614 1.35% 1.46%
Sunrise Bank of Arizona 55,730 59,465 753 650 1,329 35 1.35% 1.09%
Sunrise Bank of San Diego 32,910 455 1.38%
---------- ---------- ------- ------- ------- ------
Consolidated SCC 116,701 75,833 1,587 888 1,943 144
---------- ---------- ------- ------- ------- ------
Consolidated SCBL 638,736 422,344 8,660 5,440 7,145 1,807
Other, net 1,363 1,474 (465) (21) 109
---------- ---------- ------- ------- ------- ------ ---- ----
Consolidated totals $1,734,589 $1,355,798 $23,238 $17,449 $17,238 $6,757 1.34% 1.29%
========== ========== ======= ======= ======= ====== ==== ====
12
Nonperforming loans, which consist of loans more than 90 days past due and loans
on nonaccrual status, approximated $17.2 million at year-end 2001, compared to
$6.8 million at the end of 2000, an increase of approximately $10.4 million.
Most of these loans at December 31, 2001 are a small number of loans in various
stages of resolution which management believes to be adequately collateralized
or otherwise appropriately considered in its determination of the adequacy of
the allowance for loan losses.
In addition to the identification of nonperforming loans involving borrowers
with payment performance difficulties (i.e., nonaccrual loans and loans past-due
90 days or more), management utilizes an internal loan review process to
identify other potential problem loans which may warrant additional monitoring
or other attention. This loan review process is a continuous activity which
periodically updates internal loan classifications. At inception, all loans are
individually assigned a classification which grade the credits on a risk basis,
based on the type and discounted value of collateral, financial strength of the
borrower and guarantors and other factors such as nature of the borrowers'
business climate, local economic conditions and other subjective factors. The
loan classification process is fluid and subjective.
Potential problem loans include loans which are generally performing as agreed,
however, because of loan review's and/or lending staff's risk assessment,
increased monitoring is deemed appropriate. In addition, some loans are
identified for monitoring because of specific performance issues or other risk
factors requiring closer management and development of specific remedial action
plans.
Loan review activities were augmented in September 2001 in response to continued
and worsening general conditions of the United States economy, in part due to
the terrorist attacks in New York, Pennsylvania and the Nation's Capitol. With
deterioration of general economic conditions prior to September 11, 2001--the
events on that date and subsequently--management undertook an even more thorough
and critical review of all loans and related loan classifications.
At December 31, 2001, potential problem loans (including nonperforming loans)
approximated $75.4 million or about 4% of total consolidated portfolio loans.
Such totals doubled in 2001, in part, as a result of management's ongoing and
augmented loan review activities. It is important to note that these potential
problem loans do not necessarily have significant loss exposure (nor are they
necessarily deemed `impaired'), but rather are identified by management in this
manner to aid in loan administration and risk management. Management believes
these loans to be adequately considered in its evaluation of the adequacy of the
allowance for loan losses. Management believes, however, that current general
economic conditions may result in higher levels of future loan losses, in
comparison to previous years.
Although nonperforming and other potential problem loans have increased, loan
loss experience through December 31, 2001 has been less than industry statistics
and at low percentage based on average loans outstanding. Management's
assessment of these loans as of December 31, 2001 suggests future loss
experience will parallel past experience.
13
How financial institutions establish their allowance for loan losses is an
important and critical accounting policy and process. The allowance for loan
losses is maintained at a level believed adequate by management to absorb
potential losses inherent in the loan portfolio at the balance sheet date. It is
analyzed quarterly by each bank. The adequacy of the allowance is an estimate
based on management's evaluation of the loan portfolio (including volume, amount
and composition, potential impairment of individual loans and concentration of
credit), past loss experience, current economic conditions, loan commitments
outstanding, regulatory requirements and other factors.
Standard-setting bodies, regulatory agencies and the SEC (Securities and
Exchange Commission) have, on an industry-wide basis, separately issued
proposals and other guidance in 2001 and 2000 on how the allowance for loan
losses should be estimated and documented. Estimation of requirements for the
allowance for loan losses is an inherently subjective process which involves
significant judgement by management of many variables potentially impacting
borrowers' ability to repay loans and the estimated values of underlying loan
collateral.
New banks, as a condition of charter approval, are required to maintain an
allowance ratio of not less than 1% for their first three years of operations.
Because they are new banks with new and unseasoned loans and no prior loss
history, 1% is often used as a starting point for the allowance, particularly in
the earliest years of operation. As some of the younger banks now have more
seasoned loan portfolios and the 1% regulatory requirement represents only an
absolute minimum, loan loss allowance ratios were increased in 2001 based on
management's estimates of loss potential inherent in the loan portfolios at the
balance sheet date.
In addition to the recorded allowance, some Michigan and Indiana bank
subsidiaries have loans which are enrolled in state-sponsored programs which
provide supplemental loss protection through earmarked deposits kept at the
participating banks by the applicable state agency. Loans in this program
totaled $35 million in 2001 and $34 million in 2000 and the amount of the loss
reserves available for those loans approximated $1.4 million in 2001 and $1.6
million in 2000.
The state agency administering the Michigan program has announced plans to
terminate the program in 2002. Upon termination of the program, loans previously
enrolled in the program and related reserves would continue until the underlying
loans are repaid, but no new loans would be enrolled in the program. While this
program has been important to Capitol's Michigan banks, termination of the
program is not expected to have a material adverse affect on those banks'
lending activities in the future. The termination of the program may adversely
affect the future availability of credit for those borrowers who otherwise would
have been eligible for enrollment in the program.
14
CONSOLIDATED RESULTS OF OPERATIONS
Revenue growth has been significant. In 2001, total revenues approximated $163.4
million, an 18% increase over the 2000 revenue level of $138.4 million. The
primary revenue source is interest income from loans. Net interest income is the
difference between total interest income on loans and other earning assets and
interest expense on deposits and borrowings. The following graphs summarize
growth in total revenue (which includes noninterest income revenues like some
fees and service charges) and net interest income:
TOTAL REVENUES
($ millions)
1997 1998 1999 2000 2001
---- ---- ----- ----- -----
51.7 73.2 98.3 138.4 163.4
NET INTEREST INCOME
($ millions)
1997 1998 1999 2000 2001
---- ---- ----- ----- -----
24.7 33.0 47.4 66.4 80.5
Most of the 2001 revenues, $90 million or about 55%, came from the most mature
banks--those formed prior to 1997. Banks formed in 1999, 1998 and 1997 reported
2001 revenues of $60 million or 37% of the consolidated total. The youngest
banks, those formed in 2001 and 2000, generated 2001 revenues totaling $13
million or about 8% of total consolidated revenues.
Noninterest income increased about 56% in 2001 and 30% in 2000. These increases
resulted from higher levels of service-charge revenue associated with growth in
the number of accounts and banks. Revenues from origination of non-portfolio
residential mortgages increased significantly in both 2001 and 2000 due to
higher loan volume in periods of low interest rates.
Growth in the categories of interest income and interest expense as well as
noninterest income and noninterest expense, is the result of the addition of new
banks during the periods presented and the ongoing growth of Capitol's more
mature banks. Growth in interest expense is mainly due to higher levels of
interest-bearing funds which fund growth at each of the banks. Net interest
margin, however, decreased in 2001, mainly due to interest rate decreases
impacting interest income at a rate faster than decreases in interest rates paid
on deposits.
The largest component of noninterest expense is salaries and employee benefits,
which has increased significantly due to the larger number of banks and bank
development subsidiaries.
15
The following table summarizes net income for each of the banks, and on a
consolidated basis, the related rates of return on average equity and assets,
where applicable (in $1,000s):
Net Income Return on Average Equity Return on Average Assets
---------------------------- -------------------------- -------------------------
2001 2000 1999 2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
Ann Arbor Commerce Bank $ 4,200 $ 3,508 $ 2,730 22.02% 21.43% 19.15% 1.64% 1.55% 1.35%
Brighton Commerce Bank 597 534 455 10.55% 10.22% 10.33% 0.90% 0.90% 0.91%
Capitol National Bank 2,647 2,319 2,162 22.04% 22.08% 21.76% 1.66% 1.63% 1.66%
Detroit Commerce Bank (187) 10 (341) 0.37% 0.03%
Grand Haven Bank 1,060 1,084 955 15.39% 19.20% 18.99% 1.21% 1.46% 1.34%
Kent Commerce Bank 113 130 (61) 2.03% 3.21% 0.20% 0.30%
Macomb Community Bank 1,145 1,212 712 12.33% 14.41% 10.25% 1.08% 1.14% 0.83%
Muskegon Commerce Bank 816 689 189 12.73% 15.14% 5.97% 1.17% 1.23% 0.49%
Oakland Commerce Bank 1,328 1,027 1,010 16.62% 13.78% 14.58% 1.27% 1.08% 1.03%
Paragon Bank & Trust 231 431 352 3.23% 6.72% 5.47% 0.26% 0.50% 0.42%
Portage Commerce Bank 1,556 1,552 1,775 15.62% 16.76% 21.40% 1.21% 1.21% 1.54%
Indiana Community Bancorp Limited (ICBL):
Elkhart Community Bank 14 (229) (223) 0.30% 0.04%
Goshen Community Bank (413) (216)
------- ------- -------
Consolidated ICBL (265) (299) (131)
Sun Community Bancorp Limited (SCBL):
Arrowhead Community Bank (386) (419)
Bank of Tucson 2,095 2,149 1,086 22.64% 27.69% 16.63% 1.89% 2.33% 1.48%
Camelback Community Bank 534 297 (520) 10.80% 8.22% 0.93% 0.74%
East Valley Community Bank 18 (532) (673) 0.58% 0.05%
Mesa Bank 386 268 (207) 8.53% 6.77% 0.87% 0.85%
Southern Arizona Community Bank 320 169 (546) 7.42% 4.44% 0.67% 0.47%
Valley First Community Bank 328 88 36 5.94% 1.82% 0.87% 0.61% 0.18% 0.10%
Yuma Community Bank (438) (176)
Nevada Community Bancorp Limited (NCBL):
Black Mountain Community Bank 12 (468) 0.27% 0.03%
Desert Community Bank 35 (180) (358) 0.76% 0.07%
Red Rock Community Bank 635 190 (269) 7.64% 2.45% 0.96% 0.62%
------- ------- -------
Consolidated NCBL 181 (483) (469)
Sunrise Capital Corporation (SCC):
Sunrise Bank of Albuquerque 28 (386) 0.77% 0.09%
Sunrise Bank of Arizona 830 206 (634) 15.24% 4.64% 1.27% 0.43%
Sunrise Bank of San Diego (806)
------- ------- -------
Consolidated SCC (88) (243) (634)
------- ------- -------
Consolidated SCBL 2,290 807 (1,593)
Other, net (5,980) (5,222) (2,221)
------- ------- ------- ----- ----- ----- ----- ----- -----
Consolidated totals $10,718 $ 8,035 $ 5,409 15.22% 13.78% 10.66% 0.58% 0.55% 0.47%
======= ======= ======= ===== ===== ===== ===== ===== =====
Provisions for loan losses also increased significantly during recent years,
commensurate with the growth in both the number of banks and loans and trends in
asset quality and loan charge-offs.
During 1999, a new accounting standard required the write-off of previously
capitalized start-up costs, which is discussed in a later section of this
narrative. It was reflected as a cumulative effect of a change in accounting
principle in the consolidated statement of income, and amounted to $.03 per
share.
NET INCOME
($ Millions)
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
5.6 4.6 5.4 8.0 10.7
16
LIQUIDITY, CAPITAL RESOURCES AND CAPITAL ADEQUACY
Asset liquidity for financial institutions typically consists of cash and cash
equivalents, investment securities available for sale and loans held for resale.
These categories totaled $262 million at year-end 2001, or about 13% of total
assets. This compares to $226 million or 14% of total assets at year-end 2000.
Liquidity is important for financial institutions because of their need to meet
loan funding commitments, depositor withdrawal requests and various other
commitments discussed in the accompanying notes to consolidated financial
statements.
Liquidity varies significantly daily, based on customer activity. The change in
the liquidity ratio, from 14% in 2000 to 13% in 2001, is the result of more
assets being deployed into loans, consistent with the strategy of maximizing
interest income. Rates of interest income on liquid assets are typically less
than rates the banks achieve from commercial loans.
Most of the investment securities portfolio is classified as available for sale,
although the banks generally have not sold investments to meet liquidity needs.
Also, to the extent warranted, the banks may sell loans from time to time.
The primary source of funds for the banks is deposits. The banks emphasize
interest-bearing time deposits as part of their funding strategy. The banks also
seek noninterest-bearing deposits, or checking accounts, which reduce the banks'
cost of funds. Noninterest-bearing deposits were about 16% of total deposits at
year-end 2001 (about 15% at year-end 2000) and increased $64 million, or 30%,
during the year.
TOTAL DEPOSITS
($ millions)
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
604 891 1,113 1,401 1,740
In recent periods, many banks have experienced some competitive challenges in
obtaining additional deposits to fuel growth. Capitol's banks have had similar
experiences in their individual markets. As depositors have wider access to the
Internet and other real-time interest rate monitoring resources, deposit pricing
has become more competitive. Deposit growth is achievable, but at a higher
price, shrinking net interest margins. The banks do not generally rely on
brokered deposits as a key funding source (approximately $143 million at
year-end 2001).
To supplement their funding sources, some of the banks have lines of credit from
the Federal Home Loan Bank system. At year-end 2001, a total of $63 million ($40
million at year-end 2000) was borrowed under those facilities and additional
borrowing availability approximated $15 million. Some of the banks also have
smaller lines of credit with their correspondent banks. Borrowings under these
facilities are generally at short-term market rates of interest and, although
the repayment dates can be extended, are generally outstanding for brief periods
of time.
17
Capitol has credit facilities aggregating $35 million from an unaffiliated bank.
At year-end 2001, a total of $14.1 million ($18.2 million at year-end 2000) was
borrowed under this facility. Borrowings under this credit facility were reduced
in 2001 and 2000 through use of available corporate funds within the
consolidated group.
A significant source of capital has been investments provided by minority
shareholders in the subsidiaries which are consolidated for financial reporting
purposes. Total minority interests in consolidated subsidiaries amounted to
$70.7 million at year-end 2001, an increase of $8.1 million from the $62.6
million level at year-end 2000. The increases in minority interests in 2001
resulted mainly from Sun's consolidating the ownership of three of its
majority-owned banks, by issuing new shares of Sun's common stock at a premium
over the underlying book value of the minority interests' shares of the bank.
Three of the majority-owned banks became 100% owned in 2000. When these banks
neared their 36th month of operation, Capitol offered the minority owners an
opportunity to exchange their bank shares for shares of Capitol. The exchange
ratio was based on 150% of the banks' adjusted book value. Brighton Commerce
Bank's share exchange transaction was completed effective January 31, 2000.
Share exchange transactions for Kent Commerce Bank and Muskegon Commerce Bank
were completed effective December 31, 2000. As a result of the share exchanges,
the minority owners of those three banks became shareholders of Capitol. About
626,000 shares of Capitol's common stock were issued in these transactions.
In 2001, three of Sun's majority-owned banks (Camelback Community Bank, Southern
Arizona Community Bank and Mesa Bank) became wholly-owned by Sun, resulting from
share exchange transactions with those banks' minority shareholders. Those share
exchange transactions were structured similarly to Capitol's prior share
exchange transactions.
While it is likely that similar share exchange transactions, as a harvest
strategy to gain full ownership of some bank subsidiaries, may occur in the
future, any such transactions depend upon whether Capitol (or one of its
subsidiary bank holding companies) offers such an exchange and whether minority
shareholders vote in favor of it on a transaction-by-transaction basis.
Total stockholders' equity approximated $80.2 million at year-end 2001, an
increase of $9.8 million for the year. The 2001 increase in stockholders' equity
includes earnings (less dividends paid) and proceeds from the issuance of common
stock. The book value per share of common stock was $10.24 at year-end 2001,
compared with $9.18 at year-end 2000. Cash dividends of $0.40 were paid in 2001,
compared to $.36 in 2000 and 1999. Future payment of dividends is subject to
approval by Capitol's board of directors, future operating performance and
management's assessment of the consolidated organization's capital adequacy.
Capitol's capital structure consists of these primary elements:
* Trust-preferred securities,
* Minority interests in consolidated subsidiaries, and
* Stockholders' equity.
18
TOTAL CAPITALIZATION
($ millions)
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
80.2 101.1 133.6 157.3 199.5
In March 2001, Capitol completed a private placement of 130,000 shares of common
stock at $11.50 per share and 32,500 warrants (each such warrant permitting the
holder to purchase one share of common stock at $11.50 per share prior to the
expiration date of the warrant, March 2003). Proceeds from the offering
approximated $1.5 million and were used for debt retirement and additional
investment in bank development activities.
In July 2001, Capitol participated in two private placements of pooled
trust-preferred securities. One is a variable rate security totaling $15 million
and the second is a fixed-rate security of $10 million. Both have similar terms
(due in 2031) and, subject to certain provisions, may be repaid early. Net
proceeds from these transactions approximated $24 million and were used for debt
repayment, bank development and other corporate purposes. These securities,
along with Capitol Trust I (a $25 million public offering of trust-preferred
securities in 1997), are treated as elements of capital for regulatory purposes.
Total capitalization at year-end 2001 amounted to $199.5 million or 9.8% of
total assets. This compares to $157.3 million or 9.7% at year-end 2000.
Capitol and each of its banks and bank development subsidiaries are subject to a
complex series of regulatory rules and requirements which require specific
levels of capital adequacy at both the bank level and on a consolidated basis.
Under those rules and regulations, banks are categorized as WELL CAPITALIZED,
ADEQUATELY CAPITALIZED or INADEQUATELY CAPITALIZED using several ratio
measurements, including a risk-weighting approach to assets and financial
commitments. Banks falling into the INADEQUATELY CAPITALIZED category are
subject to the prompt corrective action provisions of the FDIC Improvement Act,
which can result in significant regulatory agency intervention and other adverse
action. Although it is permissible to maintain capital adequacy at the
ADEQUATELY CAPITALIZED level, Capitol operates with the objective of its banks
meeting the WELL CAPITALIZED standard. The well capitalized banks benefit from
lower FDIC deposit insurance costs and less restrictive limitations on some
banking activities.
New banks, as a condition of regulatory charter approval, are required to
maintain higher ratios of capital adequacy. Generally, they are required to keep
a ratio of capital-to-total-assets of not less than 8% during their first three
years of operation.
In the opinion of management, all of the affiliated banks met the criteria to be
classified as WELL CAPITALIZED at year-end 2001.
19
TRENDS AFFECTING OPERATIONS
The most significant trends which can impact the financial condition and results
of operations of financial institutions are changes in market rates of interest
and changes in general economic conditions.
Changes in interest rates, either up or down, have an impact on net interest
income (plus or minus), depending on the direction and timing of such changes.
At any point in time, there is an imbalance between interest rate-sensitive
assets and interest rate-sensitive liabilities. This means that when interest
rates change, the timing and magnitude of the effect of such interest rate
changes can alter the relationship between asset yields and the cost of funds.
This timing difference between interest rate-sensitive assets and interest
rate-sensitive liabilities is characterized as a "gap" which is quantified by
the distribution of rate-sensitive amounts within various time periods in which
they reprice or mature. The following table summarizes the consolidated
financial position in relation to "gap" at December 31, 2001 (in $1,000s):
Interest Rate Sensitivity
---------------------------------------------------
0 to 3 4 to 12 1 to 5 Over 5
Months Months Years Years Total
---------- ---------- ---------- ---------- ----------
ASSETS
Federal funds sold $ 68,859 $ 68,859
Interest-bearing bank deposits 10,999 10,999
Loans held for resale 62,487 62,487
Investment securities 2,598 $ 4,607 $ 21,935 $ 14,547 43,687
Portfolio loans:
Commercial 720,649 166,944 626,090 21,768 1,535,451
Real estate mortgage 57,992 12,530 40,380 10,774 121,676
Installment 14,206 16,108 46,555 593 77,462
Non-earning assets 123,385
---------- ---------- ---------- ---------- ----------
Total assets $ 937,790 $ 200,189 $ 734,960 $ 47,682 $2,044,006
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Time deposits over $100,000 $ 158,093 $ 255,477 $ 96,700 $ 510,270
Time deposits under $100,000 86,146 185,249 65,277 $ 8 336,680
All other interest-bearing deposits 494,101 124,107 2,634 620,842
---------- ---------- ---------- ---------- ----------
Total interest-bearing deposits 738,340 564,833 164,611 8 1,467,792
Debt obligations 20,587 14,500 17,824 37,000 89,911
Noninterest-bearing liabilities 286,837
Trust-preferred securities 14,555 34,066 48,621
Minority interests in consolidated subsidiaries 70,673
Stockholders' equity 80,172
---------- ---------- ---------- ---------- ----------
Total liabilities and stockholders' equity $ 773,482 $ 579,333 $ 182,435 $ 71,074 $2,044,006
========== ========== ========== ========== ==========
Interest rate sensitive period gap $ 164,308 $ (379,144) $ 552,525 $ (23,392)
========== ========== ========== ==========
Interest rate sensitive cumulative gap $ 164,308 $ (214,836) $ 337,689 $ 314,297
========== ========== ========== ==========
Period rate sensitive assets/period rate
sensitive liabilities 1.21 .35 4.03 .67
Cumulative rate sensitive assets/cumulative
rate sensitive liabilities 1.21 .84 1.22 1.20
Cumulative gap to total assets 8.04% (10.51)% 16.52% 15.38%
20
The "gap" changes daily based upon changes in the underlying assets and
liabilities at the banks. Analyzing exposure to interest rate risk is prone to
imprecision because the "gap" is constantly changing, the "gap" differs at each
of the banks, and it is difficult to predict the timing, amount and direction of
future changes in market interest rates and the potential corresponding effect
on customer behavior.
The banks endeavor to manage and monitor interest rate risk in concert with
market conditions and risk parameters. Management strives to maintain a
reasonably balanced position of interest rate-sensitive assets and liabilities.
The banks have not engaged in speculative positions, for example, through the
use of derivatives, in anticipation of interest rate movements. In periods of
relatively lower interest rates, the banks emphasize variable rate loans and
time deposits to the extent possible in a competitive environment; however,
competitive influences often result in making fixed rate loans, although the
banks seek to limit the duration of such loans. Similarly, low interest rates
generally make competition more intense for deposits, since loan demand will
typically increase during periods of lower rates and, accordingly, result in
higher interest costs on deposits as competitors bid-up rates, adversely
impacting interest margins. Future interest rates and the impact on earnings are
difficult to predict. In addition to interest rate risk relating to
interest-bearing assets and liabilities, changes in interest rates also can
impact future transaction volume of loans and deposits at the banks. For
activities which are influenced by levels of interest rates for transaction
volume (for example, origination of residential mortgage loans), pricing margins
and demand can become impacted significantly by changes in interest rates.
As a means of monitoring and managing exposure to interest rate risk, management
uses a computerized simulation model which is intended to estimate pro forma
effects of changes in interest rates. Using the simulation model, the following
table illustrates, on a consolidated basis, changes which would occur in annual
levels of interest income, interest expense and net interest income (in $1,000s)
assuming both one hundred and two hundred basis point ("bp") parallel increases
and decreases in interest rates:
Pro Forma Pro Forma Effect of Pro Forma Effect of
Assuming No Interest Rate Increases Interest Rate Decreases
Change in ----------------------- -----------------------
Interest Rates +100 bp +200 bp -100 bp -200 bp
-------------- -------- -------- -------- --------
Interest income $131,442 $140,789 $150,135 $122,096 $112,825
Interest expense 42,410 46,826 51,242 37,998 33,702
-------- -------- -------- -------- --------
Net interest income $ 89,032 $ 93,963 $ 98,893 $ 84,098 $ 79,123
======== ======== ======== ======== ========
The pro forma analysis above is intended to quantify theoretical changes in
interest income based on stated assumptions. The pro forma analysis excludes the
effect of numerous other variables such as borrowers' ability to repay loans,
the ability of banks to obtain deposits in a radically changed interest-rate
environment and how management would revise its asset and liability management
priorities in concert with rate changes.
During 2001, the Open Market Committee of the Federal Reserve Board decreased
interbank interest rates 11 times, which was an unprecedented action to reduce
rates 475 basis points within a year. While the pro forma analysis above is
intended to estimate the impact of an immediate 100 and 200 basis point change
in rates, actual results will be different. Those results will differ
21
(and may be materially different) because a sudden rate change in market rates
does not result in an instantaneous parallel shift in rates on loans and
deposits at banks. Further, any financial model intended to estimate the impact
of interest rate changes will not necessarily incorporate other variables,
including management's efforts to manage its asset and liability interest rate
sensitivity, nor customer behavior.
General economic conditions also have a significant impact on both the results
of operations and the financial condition of financial institutions. Local
economic conditions, and to some extent national economic conditions, have a
significant impact on levels of loan demand as well as the ability of borrowers
to repay loans and the availability of funds for customers to make deposits. In
2000 and 1999, economic conditions continued to be favorable.
2001 marked the end of the longest peacetime economic expansion in U.S. history.
The terrorist acts of September 11, 2001, our Nation's subsequent war on
terrorism, the diagnosis of economic recession in the U.S., worldwide economic
and political instability, recent major business bankruptcies and their related
high-profile questionable accounting and financial reporting practices, raise
significant concerns over the near-term and longer-horizons for economic and
political uncertainty. The number of variables which have the potential for
having a dramatic impact, individually or collectively, is an environment not
heretofore witnessed by the United States or the world. Capitol's management
remains cautiously optimistic about the future of our economy, the business of
its banks and their customers and the health and strength of its service
providers. However, management is resolute in its view that, even though there
are some positive indications of an improving economy, the environment will NOT
be BUSINESS AS USUAL anytime soon.
While the events of September 11th were clearly horrific to the thousands of
people with a direct loss of family members and business colleagues, we consider
our company to be minimally impacted at this time. However, we note the loss of
business colleagues we worked with in 2001 and are deeply saddened by their
families' losses. Our loss of those colleagues, some of whom were very key to
the banking industry, creates a void which cannot be easily filled. Nonetheless,
Capitol's management looks forward to the rebuilding of those businesses and
working with the professionals subsequently taking on the key commerce
activities which is the hallmark of this Nation's freedoms and free enterprise
system.
Continuing consolidation of the banking industry on a national basis, and in the
markets of Capitol's banks, has presented opportunities for growth. As a result
of consolidation of the banking industry, coupled with the closure of branch
locations by larger institutions and the conversion of customer relationships
into perceived `commodities' by the larger banks, many customer relationships
have been displaced, generating opportunities for development by Capitol's
banks. For many retail customers, banking services have become a commodity in an
environment that is dominated by larger mega-bank or mass-merchandising
institutions. For the professional, entrepreneur and other customers seeking a
more service-oriented, customized banking relationship, Capitol's banks fill
that need through their focus on single-location banks with full, local
decision-making authority. As the banks focus on service delivery and keeping
their size at a manageable level, only a modest market share of deposits and
loan activity is necessary to achieve profitability and investor-oriented
earnings performance.
22
Start-up banks generally incur operating losses during their early periods of
operations. Recently-formed start-up banks will detract from consolidated
earnings performance and additional start-up banks formed in 2002 and beyond
will similarly negatively impact short-term profitability. On a consolidated
basis, such operating losses reduce net income by the pro rata share of
Capitol's ownership percentage in those banks. When those banks become
profitable, their operating results will contribute to consolidated earnings to
the extent of Capitol's ownership percentage.
Commercial banks continue to be subject to significant regulatory requirements
which impact current and future operations. In addition to the extent of
regulatory interaction with financial institutions, extensive rules and
regulations governing lending activities, deposit gathering and capital adequacy
(to name a few), translate into a significant cost burden of financial
institution regulation. Such costs include the significant amount of management
time and expense which is incurred in maintaining compliance and developing
systems for compliance with those rules and regulations as well as the cost of
examinations, audits and other compliance activities. The future of financial
institution regulation, and its costs, is uncertain and difficult to predict.
Premiums for FDIC insurance have historically been a significant cost of doing
business as financial institutions, but in the most recent years, deposit
insurance premiums have been maintained at a stable and modest level. Future
deposit insurance premium levels are difficult to predict inasmuch as deposit
insurance premiums will be determined based on general economic conditions, the
relative health of the banking and financial institution industry and other
unpredictable factors. It is reasonable to expect that deposit insurance
premiums may increase at some point in the future.
NEW ACCOUNTING STANDARDS
Financial Accounting Standards Board (FASB) Statement No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, requires all derivatives to be
recognized in financial statements and to be measured at fair value. Gains and
losses resulting from changes in fair value are included in income, or in
comprehensive income, depending on whether the instrument qualifies for hedge
accounting and the type of hedging instrument involved. This new standard became
effective January 1, 2001 and had no effect on Capitol's consolidated financial
statements.
In 2001, the Securities and Exchange Commission, American Institute of Certified
Public Accountants and Federal Financial Institutions Examination Council each
issued new guidance (some of which remains to be finalized) on accounting for
allowances for loan losses. While the new guidance does not change prior
accounting rules in this area, it provides additional clarification and guidance
on how the calculation, adequacy and approval of the allowances should be
documented by management.
In July 2001, the FASB issued Statement No. 141, BUSINESS COMBINATIONS, and No.
142, GOODWILL AND OTHER INTANGIBLE ASSETS. Statement No. 141 requires that all
business combinations be accounted for under a prior standard of purchase
accounting, eliminating the so-called pooling-method which was used to account
for some business combinations. Statement No. 141 requires that the purchase
method be used for business combinations initiated after June 30, 2001. This new
standard is not expected to have a material effect on Capitol's consolidated
financial statements.
23
Statement No. 142 requires that goodwill no longer be amortized and charged
against earnings, but instead be reviewed for impairment. Amortization of
goodwill ceases upon adoption of the Statement which, for most companies, will
be January 1, 2002. This new standard requires that goodwill be reviewed
periodically for impairment and, accordingly, impairment adjustments of goodwill
be charged against earnings, when determined. Capitol's previous business
combinations (generally, acquisitions of minority interests) have been accounted
for using the purchase method. As of December 31, 2001, the net carrying amount
of goodwill (excess of cost over net assets of acquired subsidiaries)
approximated $8.5 million and other intangible assets were insignificant. Upon
implementation, this new standard is not expected to have a material effect on
Capitol's consolidated financial statements, other than the elimination of
goodwill amortization ($979,000 in 2001) in future periods.
The FASB has also recently issued Statement No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS, and No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL
OF LONG-LIVED ASSETS. Management has not completed its review of these new
standards; however, implementation of the new guidance is not expected to have a
material effect on Capitol's consolidated financial statements.
Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES,
requires start-up costs and organizational costs to be charged to expense when
incurred. The initial application of the statement required a cumulative effect
adjustment for those companies that had previously capitalized start-up and
organizational costs and became effective in 1999. Implementation of this
standard has been reflected as a cumulative effect of an accounting change as of
January 1, 1999, resulting in a one-time charge of $.03 per share in the
consolidated statement of income.
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 Capitol's financial statements in future periods.
24
Board of Directors and Stockholders
Capitol Bancorp Ltd.
We have audited the accompanying consolidated balance sheets of Capitol Bancorp
Ltd. and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted
in the United States of America. 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 examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Capitol Bancorp Ltd.
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America.
/s/ BDO Seidman, LLP
Grand Rapids, Michigan
January 31, 2002
25
CONSOLIDATED BALANCE SHEETS
- December 31 -
2001 2000
----------- -----------
(in $1,000s)
ASSETS
Cash and due from banks $ 83,833 $ 71,480
Interest-bearing deposits with banks 10,999 17,027
Federal funds sold 68,859 54,277
----------- -----------
Cash and cash equivalents 163,691 142,784
Loans held for resale 62,487 21,322
Investment securities--Note C:
Available for sale 35,598 62,292
Held for long-term investment, including restricted
securities (at amortized cost which approximates
market value) 8,089 6,634
----------- -----------
Total investment securities 43,687 68,926
Portfolio loans, less allowance for loan losses of $23,238 in 2001
and $17,449 in 2000--Note D 1,711,351 1,338,349
Premises and equipment--Note F 16,441 14,651
Accrued interest income 9,471 9,778
Excess of cost over net assets of acquired subsidiaries 8,527 6,348
Other assets 28,351 27,918
----------- -----------
TOTAL ASSETS $ 2,044,006 $ 1,630,076
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 272,593 $ 209,023
Interest-bearing--Note G 1,467,792 1,191,876
----------- -----------
Total deposits 1,740,385 1,400,899
Debt obligations--Note H 89,911 58,150
Accrued interest expense and other liabilities 14,244 13,721
----------- -----------
Total liabilities 1,844,540 1,472,770
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN
THE CORPORATION'S SUBORDINATED DEBENTURES
(Trust-Preferred Securities)--Note I 48,621 24,327
MINORITY INTERESTS IN CONSOLIDATED
SUBSIDIARIES--Note A 70,673 62,575
STOCKHOLDERS' EQUITY--Notes H, J and P:
Common stock, no par value, 25,000,000 shares authorized;
issued and outstanding:
2001--7,829,178 shares
2000--7,673,363 shares 67,692 65,939
Retained earnings 14,173 6,569
Market value adjustment (net of tax effect) for investment securities
available for sale (accumulated other comprehensive income) 158 (108)
----------- -----------
82,023 72,400
Less note receivable from exercise of stock options and unallocated
ESOP shares--Notes J and K (1,851) (1,996)
----------- -----------
Total stockholders' equity 80,172 70,404
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,044,006 $ 1,630,076
=========== ===========
See notes to consolidated financial statements.
26
CONSOLIDATED STATEMENTS OF INCOME
- Year Ended December 31 -
2001 2000 1999
--------- --------- ---------
(in $1,000s, except per share data)
Interest income:
Portfolio loans (including fees) $ 144,417 $ 121,737 $ 82,570
Loans held for resale 3,002 1,044 1,364
Taxable investment securities 2,201 4,353 4,589
Federal funds sold 3,186 3,985 4,272
Other 991 1,192 807
--------- --------- ---------
Total interest income 153,797 132,311 93,602
Interest expense:
Deposits 65,655 60,256 41,928
Debt obligations and other 7,637 5,656 4,309
--------- --------- ---------
Total interest expense 73,292 65,912 46,237
--------- --------- ---------
Net interest income 80,505 66,399 47,365
Provision for loan losses--Note D 8,167 7,216 4,710
--------- --------- ---------
Net interest income after provision for loan losses 72,338 59,183 42,655
Noninterest income:
Service charges on deposit accounts 3,251 2,070 1,574
Trust fee income 1,839 1,077 760
Fees from origination of non-portfolio residential
mortgage loans 3,165 1,543 1,373
Other 1,330 1,447 1,007
--------- --------- ---------
Total noninterest income 9,585 6,137 4,714
Noninterest expense:
Salaries and employee benefits 37,970 28,995 21,212
Occupancy 5,772 4,681 3,561
Equipment rent, depreciation and maintenance 4,646 4,113 3,988
Other 15,748 15,057 11,496
--------- --------- ---------
Total noninterest expense 64,136 52,846 40,257
--------- --------- ---------
Income before minority interest, federal income taxes and cumulative
effect of change in accounting principle 17,787 12,474 7,112
Federal income taxes--Note L 5,824 4,289 3,213
--------- --------- ---------
Income before minority interest and cumulative effect of change in
accounting principle 11,963 8,185 3,899
Minority interest in net losses (income) of consolidated subsidiaries (1,245) (150) 1,707
--------- --------- ---------
Income before cumulative effect of change in accounting principle 10,718 8,035 5,606
Cumulative effect of change in accounting principle ($.03 per
share)--Note B (197)
--------- --------- ---------
NET INCOME $ 10,718 $ 8,035 $ 5,409
========= ========= =========
NET INCOME PER SHARE--Note M:
Basic $ 1.38 $ 1.14 $ 0.84
========= ========= =========
Diluted $ 1.35 $ 1.13 $ 0.83
========= ========= =========
See notes to consolidated financial statements
27
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN $1,000S)
Note
Receivable
from Exercise
Accumulated of Stock
Other Options and
Common Retained Comprehensive Unallocated
Stock Earnings Income ESOP Shares Total
-------- -------- -------- ----------- --------
Balances at January 1, 1999 $ 51,868 $ (2,019) $ 168 $ (725) $ 49,292
Issuance of 199,865 shares of common stock
upon exercise of stock options 1,786 (1,561) 225
Issuance of 224,770 shares of common stock to
acquire minority interest in bank subsidiary 2,994 2,994
Allocation of shares to ESOP participants' accounts 145 145
Cash dividends paid ($.36 per share) (2,322) (2,322)
Components of comprehensive income:
Net income for 1999 5,409 5,409
Market value adjustment for investment
securities available for sale (net of tax effect) (1,075) (1,075)
--------
Total comprehensive income for 1999 4,334
-------- -------- -------- -------- --------
BALANCES AT DECEMBER 31, 1999 56,648 1,068 (907) (2,141) 54,668
Issuance of 10,734 shares of common stock upon
exercise of stock options 83 83
Issuance of 626,325 shares of common stock to
acquire minority interest in bank subsidiaries 6,278 6,278
Proceeds from issuance of 266,783 shares of
common stock and 53,352 warrants 2,930 2,930
Allocation of shares to ESOP participants' accounts 145 145
Cash dividends paid ($.36 per share) (2,534) (2,534)
Components of comprehensive income:
Net income for 2000 8,035 8,035
Market value adjustment for investment
securities available for sale (net of tax effect) 799 799
--------
Total comprehensive income for 2000 8,834
-------- -------- -------- -------- --------
BALANCES AT DECEMBER 31, 2000 65,939 6,569 (108) (1,996) 70,404
Proceeds from the sale of 130,000 shares of
common stock and 32,500 warrants to
purchase common stock 1,495 1,495
Issuance of 7,465 shares of common stock
upon exercise of warrants 82 82
Issuance of 18,350 shares of common stock
upon exercise of stock options 176 176
Allocation of shares to ESOP participants' accounts 145 145
Cash dividends paid ($.40 per share) (3,114) (3,114)
Components of comprehensive income:
Net income for 2001 10,718 10,718
Market value adjustment for investment
securities available for sale (net of tax effect) 266 266
--------
Total comprehensive income for 2001 10,984
-------- -------- -------- -------- --------
BALANCES AT DECEMBER 31, 2001 $ 67,692 $ 14,173 $ 158 $ (1,851) $ 80,172
======== ======== ======== ======== ========
See notes to consolidated financial statements
28
CONSOLIDATED STATEMENTS OF CASH FLOWS
- Year Ended December 31 -
2001 2000 1999
--------- --------- ---------
(in $1,000s)
OPERATING ACTIVITIES
Net income $ 10,718 $ 8,035 $ 5,409
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 8,167 7,216 4,710
Depreciation of premises and equipment 3,340 3,178 2,913
Amortization of goodwill 979 561 318
Net accretion of investment security discounts (94) (104) (107)
Loss (gain) on sales of premises and equipment 100 11 (25)
Minority interest in net income (losses) of
consolidated subsidiaries 1,245 150 (1,707)
Deferred income taxes (1,345) (1,312) (2,070)
Cumulative effect of change in accounting principle 197
Originations and purchases of loans held for resale (651,149) (251,157) (306,292)
Proceeds from sales of loans held for resale 609,984 238,913 334,003
Increase in accrued interest income and other assets (1,883) (9,178) (8,950)
Increase in accrued interest expense and other liabilities 523 1,479 3,411
--------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (19,415) (2,208) 31,810
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 500 3,156 3,000
Proceeds from calls and maturities of investment securities
available for sale 67,393 71,882 82,020
Purchases of investment securities available for sale (42,159) (35,503) (107,224)
Net increase in portfolio loans (381,169) (309,000) (325,812)
Proceeds from sales of premises and equipment 306 22 665
Purchases of premises and equipment (5,536) (3,466) (6,303)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (360,665) (272,909) (353,654)
FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts
and savings accounts 542,864 125,178 119,437
Net increase (decrease) in certificates of deposit (203,378) 162,928 102,466
Net proceeds from debt obligations 31,761 10,750 23,800
Net proceeds from issuance of trust-preferred securities 24,248
Resources provided by minority interests 6,853 14,262 31,718
Net proceeds from issuance of common stock 1,753 3,011 6
Cash dividends paid (3,114) (2,534) (2,322)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 400,987 313,595 275,105
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 20,907 38,478 (46,739)
Cash and cash equivalents at beginning of year 142,784 104,306 151,045
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 163,691 $ 142,784 $ 104,306
========= ========= =========
See notes to consolidated financial statements
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE A--NATURE OF OPERATIONS, BASIS OF PRESENTATION AND PRINCIPLES OF
CONSOLIDATION
Capitol Bancorp Ltd. (Capitol or the "Corporation") is a multibank holding
company. Consolidated subsidiaries consist of the following:
Percentage
Owned at
December 31, Year Formed
Affiliate Location 2001 or Acquired
- ------------------------------------- -------------------------- ------------ -----------
Ann Arbor Commerce Bank Ann Arbor, Michigan 100% 1990
Brighton Commerce Bank Brighton, Michigan 100% 1997
Capitol National Bank Lansing, Michigan 100% 1982
Detroit Commerce Bank Detroit, Michigan 93% 1998
Grand Haven Bank Grand Haven, Michigan 100% 1995
Kent Commerce Bank Grand Rapids, Michigan 100% 1998
Macomb Community Bank Clinton Township, Michigan 100% 1996
Muskegon Commerce Bank Muskegon, Michigan 100% 1997
Oakland Commerce Bank Farmington Hills, Michigan 100% 1992
Paragon Bank & Trust Holland, Michigan 100% 1994
Portage Commerce Bank Portage, Michigan 100% 1988
Indiana Community Bancorp Limited: 52% 1999
Elkhart Community Bank Elkhart, Indiana 1999
Goshen Community Bank Goshen, Indiana 2000
Sun Community Bancorp Limited: 50% 1997
Arrowhead Community Bank Glendale, Arizona 2000
Bank of Tucson Tucson, Arizona 1996
Camelback Community Bank Phoenix, Arizona 1998
East Valley Community Bank Chandler, Arizona 1999
Mesa Bank Mesa, Arizona 1998
Southern Arizona Community Bank Tucson, Arizona 1998
Valley First Community Bank Scottsdale, Arizona 1997
Yuma Community Bank Yuma, Arizona 2000
Nevada Community Bancorp Limited: 1999
Black Mountain Community Bank Henderson, Nevada 2000
Desert Community Bank Las Vegas, Nevada 1999
Red Rock Community Bank Las Vegas, Nevada 1999
Sunrise Capital Corporation: 1999
Sunrise Bank of Albuquerque Albuquerque, New Mexico 2000
Sunrise Bank of Arizona Phoenix, Arizona 1998
Sunrise Bank of San Diego San Diego, California 2001
First California Northern Bancorp Napa, California 2001
Consolidated subsidiaries of Sun are majority-owned by Sun (ranging from 51% to
100%). Sun is the majority owner of Nevada Community Bancorp and Sunrise Capital
Corporation which each have majority-owned bank subsidiaries. Sun became a
public company in 1999 through an initial public offering of common stock
approximating $25 million, of which Capitol invested $13 million. At December
31, 2001, a proposed share exchange was pending whereby, if approved by
shareholders, Capitol would acquire the shares of Sun it does not currently own
(see Note S).
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE A--NATURE OF OPERATIONS, BASIS OF PRESENTATION AND PRINCIPLES OF
CONSOLIDATION--CONTINUED
Capitol and its subsidiaries are engaged in a single business activity--banking.
The bank affiliates provide a full range of banking services to individuals,
businesses and other customers located in their respective communities. Each of
the banks generally operate from a single location and 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. In addition, trust and
investment services are offered through Paragon Bank & Trust. The principal
markets for the banks' financial services are the communities in which they are
located and the areas immediately surrounding those communities. In addition to
commercial banking units, mortgage banking activities are offered through Amera
Mortgage Corporation, a 49% owned affiliate.
Each bank is viewed by management as being a separately identifiable business or
segment from the perspective of monitoring performance and allocation of
financial resources. Although the banks operate independently and are managed
and monitored separately, each bank is substantially similar in terms of
business focus, type of customers, products and services. Further, each of the
banks and the Corporation are subject to substantially similar laws and
regulations unique to the banking industry. Accordingly, the Corporation's
consolidated financial statements reflect the presentation of segment
information on an aggregated basis.
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 minority interests.
Banks formed during 1999, 2000 and 2001 are included in the consolidated
financial statements for periods after joining the consolidated group. Certain
2000 and 1999 amounts have been reclassified to conform to the 2001
presentation.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES: The preparation of consolidated financial statements in conformity
with generally accepted accounting principles 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.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on hand,
amounts due from banks (interest-bearing and noninterest-bearing) and federal
funds sold. Generally, federal funds transactions are entered into for a one-day
period.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
LOANS HELD FOR RESALE: Loans held for resale represent residential real estate
mortgage loans held for sale into the secondary market. Loans held for resale
are stated at the aggregate lower of cost or market. Fees from the origination
of loans held for resale are recognized in the period the loans are originated.
INVESTMENT SECURITIES: Investment securities available for sale (generally most
debt investment securities of Capitol's banks) are carried at market 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 market value (see Note C).
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 areas. Consistent with the banks' emphasis on business
lending, there are concentrations of credit in loans secured by commercial real
estate, equipment and other business assets. The maximum potential credit risk
to Capitol, without regard to underlying collateral and guarantees, is the total
of loans and loan commitments outstanding. Management reduces Capitol's 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 an
estimate 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.
INTEREST AND FEES ON LOANS: Interest income on loans is recognized based upon
the principal balance of loans outstanding. Fees from origination of portfolio
loans generally approximate the direct costs of successful loan originations.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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, which relates primarily to equipment and furniture with estimated
useful lives of approximately five years, is computed principally by the
straight-line method. Buildings are generally depreciated on a straight-line
basis with estimated useful lives of approximately 40 years. Leasehold
improvements are generally depreciated over the respective lease term.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED SUBSIDIARIES: Goodwill is amortized
on a straight-line basis over various periods not to exceed 15 years. Management
periodically reviews long-lived assets, including associated goodwill, for
potential impairment based upon projected undiscounted net cash flows, when
applicable, and the related amortization periods. Amortization of goodwill will
cease January 1, 2002 (see "New Accounting Standards" below).
OTHER REAL ESTATE: Other real estate (included as a component of other assets,
and at December 31, 2001 and 2000 approximated $3,044,000 and $3,094,000,
respectively) 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
impairment.
STOCK-BASED COMPENSATION: No stock-based compensation expense is recorded upon
granting of stock options because such stock options are accounted for under the
provisions of Accounting Principles Board (APB) Opinion 25 (and related
interpretations) and are granted at an exercise price equal to the market price
of common stock at grant date. Pro forma disclosure of alternative accounting
recognition is made in Note J.
TRUST ASSETS AND RELATED INCOME: Customer property, other than funds on deposit,
held in a fiduciary or agency capacity by Capitol's banks is not included in the
consolidated balance sheet because it is not an asset of the banks or Capitol.
Trust fee income is recorded on the accrual method.
FEDERAL INCOME TAXES: Capitol and subsidiaries owned 80% or more by Capitol file
a consolidated federal income tax return. 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. 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.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
COMPREHENSIVE INCOME: Comprehensive income is the sum of net income and certain
other items which are charged or credited to stockholders' equity. For the
periods presented, Capitol's only element of comprehensive income other than net
income was the net change in the market value adjustment for investment
securities available for sale. Accordingly, the elements and total of
comprehensive income are shown within the statement of changes in stockholders'
equity presented herein.
COSTS OF START-UP ACTIVITIES: In 1998, the American Institute of CPAs issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which requires start-up costs and organizational costs to be charged to expense
when incurred. In the circumstances of Capitol and its banks, this new
accounting standard applied to previously capitalized preopening and other
start-up costs of its bank subsidiaries which, net of amortization, approximated
$1,149,000 at December 31, 1998. Implementation of this standard was reflected
as a cumulative effect of an accounting change at January 1, 1999 (net of impact
of minority interests and income tax effect), approximating $197,000 ($.03 per
share).
NEW ACCOUNTING STANDARDS: Financial Accounting Standards Board (FASB) Statement
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, requires
all derivatives to be recognized in financial statements and to be measured at
fair value. Gains and losses resulting from changes in fair value are included
in income, or in comprehensive income, depending on whether the instrument
qualifies for hedge accounting and the type of hedging instrument involved. This
new standard became effective January 1, 2001 and had no effect on Capitol's
consolidated financial statements.
In 2001, the Securities and Exchange Commission, American Institute of Certified
Public Accountants and Federal Financial Institutions Examination Council each
issued new guidance (some of which remains to be finalized) on accounting for
allowances for loan losses. While the new guidance does not change prior
accounting rules in this area, it provides additional clarification and guidance
on how the calculation, adequacy and approval of the allowances should be
documented by management.
In July 2001, the FASB issued Statement No. 141, BUSINESS COMBINATIONS, and No.
142, GOODWILL AND OTHER INTANGIBLE ASSETS. Statement No. 141 requires that all
business combinations be accounted for under a prior standard of purchase
accounting, eliminating the so-called pooling-method which was used to account
for some business combinations. Statement No. 141 requires that the purchase
method be used for business combinations initiated after June 30, 2001. This new
standard is not expected to have a material effect on Capitol's consolidated
financial statements.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE B--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Statement No. 142 requires that goodwill no longer be amortized and charged
against earnings, but instead be reviewed for impairment. Amortization of
goodwill ceases upon adoption of the Statement which, for most companies, will
be January 1, 2002. This new standard requires that goodwill be reviewed
periodically for impairment and, accordingly, impairment adjustments of goodwill
be charged against earnings, when determined. Capitol's previous business
combinations (generally, acquisitions of minority interests) have been accounted
for using the purchase method. As of December 31, 2001, the net carrying amount
of goodwill (excess of cost over net assets of acquired subsidiaries)
approximated $8.5 million and other intangible assets were insignificant. Upon
implementation, this new standard is not expected to have a material effect on
Capitol's consolidated financial statements, other than the elimination of
goodwill amortization ($979,000 in 2001) in future periods.
The FASB has also recently issued Statement No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS, and No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL
OF LONG-LIVED ASSETS. Management has not completed its review of these new
standards; however, implementation of the new guidance is not expected to have a
material effect on Capitol's consolidated financial statements.
NOTE C--INVESTMENT SECURITIES
Investment securities consisted of the following at December 31 (in $1,000s):
2001 2000
--------------------- ----------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
------- ------- ------- -------
Available for sale:
United States Treasury securities $ 3,704 $ 3,757 $ 5,086 $ 5,101
United States government agency securities 30,253 30,429 55,514 55,334
States and political subdivisions 1,402 1,412 1,604 1,606
Other -- -- 251 251
------- ------- ------- -------
35,359 35,598 62,455 62,292
Held for long-term investment:
Federal Reserve Bank stock 394 394 394 394
Federal Home Loan Bank stock 4,716 4,716 3,583 3,583
Corporate stock 895 895 907 907
Other 2,084 2,084 1,750 1,750
------- ------- ------- -------
8,089 8,089 6,634 6,634
------- ------- ------- -------
$43,448 $43,687 $69,089 $68,926
======= ======= ======= =======
At December 31, 2001, securities with a market value approximating $14.1 million
were pledged to secure public and trust deposits and for other purposes as
required by law. Investments in Federal Reserve Bank stock and Federal Home Loan
Bank stock are restricted and may only be resold to or redeemed by the issuer.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE C--INVESTMENT SECURITIES--CONTINUED
Gross unrealized gains and losses on investment securities available for sale
were as follows at December 31 (in $1,000s):
2001 2000
--------------- ---------------
Gains Losses Gains Losses
---- ---- ---- ----
United States Treasury securities $ 53 $ -- $ 21 $ 6
United States government agency securities 252 76 40 220
States and political subdivisions 10 -- 2
---- ---- ---- ----
$315 $ 76 $ 63 $226
==== ==== ==== ====
Gross realized gains and losses from sales and maturities of investment
securities were insignificant for each of the periods presented.
Scheduled maturities of investment securities held as of December 31, 2001 were
as follows (in $1,000s):
Estimated
Amortized Market
Cost Value
------- -------
Due in one year or less $ 7,205 $ 7,328
After one year, through five years 21,935 22,074
After five years, through ten years 3,071 3,058
After ten years 3,148 3,138
Securities held for long-term investment,
without stated maturities 8,089 8,089
------- -------
$43,448 $43,687
======= =======
NOTE D--LOANS
Portfolio loans consisted of the following at December 31 (in $1,000s):
2001 2000
----------- -----------
Commercial $ 1,535,451 $ 1,173,736
Real estate mortgage 121,676 113,324
Installment 77,462 68,738
----------- -----------
Total portfolio loans 1,734,589 1,355,798
Less allowance for loan losses (23,238) (17,449)
----------- -----------
Net portfolio loans $ 1,711,351 $ 1,338,349
=========== ===========
Transactions in the allowance for loan losses are summarized below (in $1,000s):
2001 2000 1999
-------- -------- --------
Balance at January 1 $ 17,449 $ 12,639 $ 8,817
Provision charged to operations 8,167 7,216 4,710
Loans charged off (deduction) (2,929) (3,171) (1,298)
Recoveries 551 765 410
-------- -------- --------
Balance at December 31 $ 23,238 $ 17,449 $ 12,639
======== ======== ========
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE D--LOANS--CONTINUED
Impaired loans (i.e., loans for which there is a reasonable probability that
borrowers would be unable to repay all principal and interest due under the
contractual terms of the loan documents) were not material. Nonperforming loans
(i.e., loans which are 90 days or more past due and loans on nonaccrual status)
are summarized below (in $1,000s):
December 31
-------------------
2001 2000
------- -------
Nonaccrual loans:
Commercial $11,220 $ 4,082
Real estate 356 163
Installment 466 171
------- -------
Total nonaccrual loans 12,042 4,416
Past due (>90 days) loans:
Commercial 4,290 1,656
Real estate 787 534
Installment 119 151
------- -------
Total past due loans 5,196 2,341
------- -------
Total nonperforming loans $17,238 $ 6,757
======= =======
If nonperforming loans had performed in accordance with their contractual terms
during the year, additional interest income of $694,000, $315,000 and $635,000
would have been recorded in 2001, 2000 and 1999, respectively. Interest income
recognized on loans in nonaccrual status in 2001, 2000 and 1999 operations
approximated $513,000, $205,000 and $33,000, respectively. At December 31, 2001,
there were no material amounts of loans which were restructured or otherwise
renegotiated as a concession to troubled borrowers.
The amounts of the allowance for loan losses allocated in the following table
(in $1,000s) 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, 2001 December 31, 2000
------------------ ------------------
Percentage Percentage
of Total of Total
Portfolio Portfolio
Amount Loans Amount Loans
------ ----- ------ -----
Commercial $20,570 1.19% $16,096 1.19%
Real estate mortgage 1,630 0.09 285 0.02
Installment 1,038 0.06 1,068 0.08
------- ---- ------- ----
Total allowance for loan losses $23,238 1.34% $17,449 1.29%
======= ==== ======= ====
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE D--LOANS--CONTINUED
Certain commercial loans in Michigan and Indiana are enrolled in state-sponsored
loan programs. Under those programs, the governmental unit shares loss exposure
on such loans by funding reserves, which are placed as deposits at the banks.
Loans participating in these programs and related reserves approximated
$35,414,000 and $1,355,000, respectively, at December 31, 2001 ($33,513,000 and
$1,609,000, respectively, at December 31, 2000). Such reserve amounts are
separate and excluded from the allowance for loan losses. The Michigan agency
has announced its plans to terminate the loan program in 2002. When the Michigan
program is terminated, loans previously enrolled in the program and related
reserves will continue until those loans are repaid.
NOTE E--RELATED PARTIES TRANSACTIONS
In the ordinary course of business, Capitol's banking subsidiaries make loans to
officers and directors of Capitol and its subsidiaries including their immediate
families and companies in which they are principal owners. At December 31, 2001
and 2000, total loans to these persons were $80.9 million and $66.1 million,
respectively. During 2001, $66.8 million of new loans were made to these persons
and repayments totaled $52 million. Such loans are made at the banking
subsidiaries' normal credit terms.
Officers and directors of Capitol (and their associates, family and/or
affiliates) are also depositors of the banking subsidiaries. Such deposits are
similarly made at the banks' normal terms as to interest rate, term and deposit
insurance.
NOTE F--PREMISES AND EQUIPMENT
Major classes of premises and equipment consisted of the following at December
31 (in $1,000s):
2001 2000
-------- --------
Land, buildings and improvements $ 6,274 $ 3,965
Leasehold improvements 6,659 5,962
Equipment and furniture 15,014 13,649
-------- --------
27,947 23,576
Less accumulated depreciation (11,506) (8,925)
-------- --------
$ 16,441 $ 14,651
======== ========
Capitol and certain subsidiaries rent office space under operating leases. Rent
expense (net of sublease income) under these lease agreements approximated
$3,652,000, $3,064,000 and $2,402,000 (including rent expense of $1,138,000,
$1,034,000 and $900,000 under leases with related parties) in 2001, 2000 and
1999, respectively.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE F--PREMISES AND EQUIPMENT--CONTINUED
At December 31, 2001, future minimum rental payments under operating leases that
have initial or remaining noncancelable lease terms in excess of one year were
as follows (in $1,000s):
$ 3,639
2002 3,431
2003 3,266
2004 3,094
2005 2,943
2006 5,242
2007 and thereafter -------
$21,615
=======
NOTE G--DEPOSITS
The aggregate amount of time deposits of $100,000 or more approximated $510.3
million and $405.2 million as of December 31, 2001 and 2000, respectively.
At December 31, 2001, the scheduled maturities of such time deposits were as
follows (in $1,000s):
$413,570
2002 67,926
2003 11,726
2004 10,755
2005 6,293
2006 and thereafter --------
$510,270
========
Interest paid approximates amounts charged to operations on an accrual basis for
the periods presented.
NOTE H--DEBT OBLIGATIONS
Debt obligations consisted of the following at December 31 (in $1,000s):
2001 2000
------- -------
Borrowings from Federal Home Loan Bank $63,211 $40,000
Notes payable to unaffiliated bank 14,100 18,150
Federal funds purchased 12,600
------- -------
$89,911 $58,150
======= =======
Borrowings from Federal Home Loan Bank (FHLB) represent advances secured by
certain portfolio residential real estate mortgage loans and other eligible
collateral. Such advances become due at varying dates and bear interest at
market short-term rates (approximately 4.58% at December 31, 2001). At December
31, 2001, unused lines of credit under these facilities approximated $15.1
million.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE H--DEBT OBLIGATIONS--CONTINUED
Notes payable to unaffiliated bank represents borrowings under a fixed rate
(8.97%) term loan and a line of credit. Up to $20 million can be borrowed
pursuant to a one-year revolving credit agreement which bears interest at a
variable rate (4.75% at December 31, 2001), payable monthly. No amounts were
drawn on the line of credit at December 31, 2001. The credit facility is
reviewed annually for continuance and requires Capitol, among other things, to
maintain certain minimum levels of capital, rates of return on assets and other
ratios or requirements and is secured by the common stock of certain bank
subsidiaries. For the periods presented, interest paid on all debt obligations
approximate amounts charged to expense.
At December 31, 2001, scheduled debt maturities were as follows (in $1,000s):
2002 $35,087
2003 16,824
2004 1,000
2007 and thereafter 37,000
-------
$89,911
=======
In addition to the foregoing, Capitol has guaranteed some obligations of its
subsidiaries (see Note O).
NOTE I--TRUST-PREFERRED SECURITIES
Trust-preferred securities represent interests in subordinated debentures of
Capitol which are summarized as follows:
Net Carrying Amount
at December 31
Current Aggregate --------------------
Interest Scheduled Liquidation (in $1,000s)
Description Rate Maturity Amount 2001 2000
- ----------- ---- -------- ------ ---- ----
Capitol Trust I 8.50% fixed 2027 $25,300 $24,363 $24,327
Capitol Trust II 10.25% fixed 2031 10,000 9,703
Capitol Statutory Trust III 5.85% variable 2031 15,000 14,555
------- ------- -------
$50,300 $48,621 $24,327
======= ======= =======
Securities of Capitol Trust I were issued in a 1997 public offering. Capitol
Trust II and Capitol Statutory Trust III were formed in 2001 in conjunction with
private placements of pooled trust-preferred securities. Each of these
securities have similar terms and, subject to certain provisions, may be called
by the issuer five years after issuance. The liquidation amount of these
securities is guaranteed by Capitol.
Interest paid to the Trusts by Capitol (which is recorded as interest expense in
its consolidated financial statements) is distributed by the Trusts to the
holders of the trust-preferred securities. Under certain conditions, Capitol may
defer payment of interest on the subordinated debentures for periods of up to
five years.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE I--TRUST-PREFERRED SECURITIES--CONTINUED
Because these Trusts are subsidiaries (due to Capitol's ownership of the common
interests of the Trusts), they are consolidated for financial reporting
purposes. The amount of outstanding trust-preferred securities (net of issuance
costs which are being amortized over the life of the securities) is classified
between liabilities and equity in Capitol's consolidated balance sheet. Under
current regulatory guidelines, such trust-preferred securities are included as
capital for purposes of meeting certain ratio requirements.
NOTE J--COMMON STOCK, WARRANTS AND STOCK OPTIONS
At December 31, 2001, approximately 78,000 warrants for the purchase of common
stock were outstanding. Each warrant permits the holder to purchase a share of
Capitol's common stock at exercise prices ranging from $11.00 to $11.50 and
expire in 2003.
Stock options have been granted to certain officers and directors which provide
for the purchase of shares of common stock. Generally, stock options are granted
at an exercise price equal to the fair value of common stock on the grant date.
Of the stock options granted in 2000, 563,435 vest over a three-year period; the
remainder are fully vested and currently exercisable. All such stock options
expire seven years after the date granted.
Under the terms of an employment agreement with a certain director and executive
officer of Capitol, options granted thereunder shall be increased when the
Corporation issues additional shares so that such options granted equal 15% of
outstanding shares prior to exercise. In 1999, Capitol negotiated a reduction of
the executive officer's benefit from 15% to 10%. In exchange for the reduced
benefit to the executive officer, Capitol agreed to a one-time exercise of
previously granted stock options with an aggregate exercise price of $1.6
million funded by a note receivable of $1.9 million from the executive officer.
The note bears interest at a fixed rate over its ten-year term. As part of the
terms of this agreement, the executive officer's compensation will be increased
in an amount equal to the interest due on the note receivable. Under certain
circumstances, such as death of the executive officer, the note will be
forgiven. The death benefit is covered by company-owned life insurance.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE J--COMMON STOCK, WARRANTS AND STOCK OPTIONS--CONTINUED
Stock option activity is summarized as follows:
Weighted
Number Average
of Stock Options Exercise Exercise
Outstanding Price Range Price
--------- ---------------- -------
Outstanding at January 1, 1999 617,714 $ 4.92 to $25.10 $12.48
Granted in 1999 74,113 12.63 to 13.48 13.07
Exercised in 1999 (199,865) 4.92 to 8.75 7.80
--------- ---------------- ------
Outstanding at December 31, 1999 491,962 4.92 to 25.10 14.51
Granted in 2000 722,934 9.88 to 12.50 10.86
Exercised in 2000 (10,734) 4.92 to 7.72 6.48
--------- ---------------- ------
Outstanding at December 31, 2000 1,204,162 4.92 to 25.10 12.39
Granted in 2001 17,311 11.50 to 14.48 11.95
Exercised in 2001 (18,350) 4.92 to 11.00 7.18
--------- ---------------- ------
Outstanding at December 31, 2001 1,203,123 $ 4.92 to $25.10 $12.46
As of December 31, 2001, stock options outstanding had a weighted average
remaining contractual life of 4.4 years. As of that date, 1,083,787 stock
options with an exercise price of $15.00 or less had a weighted average exercise
price of $11.13 and a weighted average remaining contractual life of 4.6 years;
119,336 stock options with an exercise price of more than $15.00 had a weighted
average exercise price of $24.53 and a weighted average remaining contractual
life of 3 years.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", establishes a fair value method of accounting for stock options
whereby compensation expense is recognized based on the computed fair value of
the options on the grant date. However, as permitted by Statement No. 123,
Capitol accounts for its stock options under APB 25 and, therefore, does not
recognize compensation expense. By electing this alternative, certain pro forma
disclosures of the expense recognition provisions of Statement No. 123 are
required, which are as follows:
2001 2000 1999
-------- -------- --------
Fair value assumptions:
Risk-free interest rate 5.0% 7.0% 6.5%
Dividend yield 2.8% 3.0% 2.0%
Stock price volatility .39 .83 .53
Expected option life 7 years 7 years 7 years
Aggregate estimated fair value of
options granted (in thousands) $95 $4,932 $764
Pro forma net income (in thousands) $9,809 $6,471 $4,905
Pro forma net income per diluted share $1.24 $.91 $.76
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE K--EMPLOYEE RETIREMENT PLANS
Capitol has a contributory employee retirement savings 401(k) plan which covers
substantially all full-time employees of Capitol and certain subsidiaries over
age 21. The Plan provides for employer contributions in amounts determined
annually by Capitol's board of directors. Eligible employees make voluntary
contributions to the Plan. Contributions to the Plan, which are an employer
match (50%, subject to certain limitations) for employee contributions, charged
to expense for the years ended December 31, 2001, 2000 and 1999 were $691,000,
$475,000 and $310,000, respectively.
Capitol also has a defined contribution employee stock ownership plan (ESOP)
which covers substantially all employees of Capitol and certain subsidiaries.
Certain common stock purchases by the ESOP were financed by long-term debt. ESOP
contributions charged to expense in 2001, 2000 and 1999 approximated $525,000,
$180,000 and $217,000 (including ESOP note payable interest of $37,000, $49,000
and $62,000), respectively. Shares of common stock held by the ESOP which have
not yet been allocated to participants' accounts are shown as a reduction of
stockholders' equity. As of December 31, 2001, the ESOP held approximately
200,000 shares of Capitol's common stock which have been allocated to
participants' accounts and 26,000 shares of common stock with an approximate
fair value of $350,000 which have not yet been allocated to participants'
accounts.
NOTE L--INCOME TAXES
Federal income taxes consist of the following components (in $1,000s):
2001 2000 1999
------- ------- -------
Current $ 7,169 $ 5,601 $ 4,813
Deferred credit (1,345) (1,312) (2,070)
------- ------- -------
$ 5,824 $ 4,289 $ 2,743
======= ======= =======
Federal income taxes paid in 2001, 2000 and 1999 approximated $8.4 million, $5.1
million and $5.1 million, respectively.
Differences between federal income tax expense recorded and amounts computed
using the statutory tax rate are reconciled below (in $1,000s):
2001 2000 1999
------- ------- -------
Federal income tax computed at
statutory rate of 34% $ 6,048 $ 4,241 $ 2,419
Tax effect of:
Amortization of goodwill 333 180 117
Minority interest (641) (77) 879
Cumulative effect of change in
accounting principle (470)
Other 84 (55) (202)
------- ------- -------
$ 5,824 $ 4,289 $ 2,743
======= ======= =======
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE L--INCOME TAXES--CONTINUED
Net deferred income tax assets consisted of the following at December 31 (in
$1,000s):
2001 2000
------- -------
Allowance for loan losses $ 6,540 $ 5,056
Net operating losses of subsidiaries 1,154 1,598
Deferred compensation 1,190 1,068
Market value adjustment for investment
securities available for sale (81) 56
Other, net 562 379
------- -------
$ 9,365 $ 8,157
======= =======
Certain consolidated subsidiaries have net operating loss carryforwards which
may reduce income taxes payable in future periods. Such carryforwards
approximate $3.4 million at December 31, 2001, have been recognized for
financial reporting purposes and expire at the following dates and amounts (in
$1,000s):
2019 $ 448
2020 1,201
2021 1,745
------
$3,394
======
NOTE M--NET INCOME PER SHARE
The computations of basic and diluted net income per share were as follows (in
1,000s, except per share amounts):
2001 2000 1999
------- ------- -------
Numerator--net income $10,718 $ 8,035 $ 5,409
======= ======= =======
Denominator:
Weighted average number of shares outstanding
(denominator for basic earnings per share) 7,784 7,065 6,455
Effect of dilutive securities:
Warrants 15 2
Stock options 136 45 35
------- ------- -------
Potential dilution 151 47 35
------- ------- -------
Denominator for diluted earnings per share--weighted
average number of shares and potential dilution 7,935 7,112 6,490
======= ======= =======
Number of antidilutive stock options excluded from
diluted earnings per share computation 159 347 119
======= ======= =======
Additional disclosures regarding stock options are set forth in Note J.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE N--ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying values and estimated fair values of financial instruments were as
follows at December 31 (in $1,000s):
2001 2000
-------------------------- --------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
----------- ----------- ----------- -----------
Financial Assets:
Cash and cash equivalents $ 163,691 $ 163,691 $ 142,784 $ 142,784
Loans held for resale 62,487 62,487 21,322 21,322
Investment securities:
Available for sale 35,598 35,598 62,292 62,292
Held for long-term investment 8,089 8,089 6,634 6,634
----------- ----------- ----------- -----------
43,687 43,687 68,926 68,926
Portfolio loans:
Fixed rate 1,071,753 1,070,097 1,020,234 1,021,378
Variable rate 662,836 661,154 335,564 336,499
----------- ----------- ----------- -----------
Total portfolio loans 1,734,589 1,731,251 1,355,798 1,357,877
Less allowance for loan losses (23,238) (23,238) (17,449) (17,449)
----------- ----------- ----------- -----------
Net portfolio loans 1,711,351 1,708,013 1,338,349 1,340,428
Financial Liabilities:
Deposits:
Noninterest-bearing 272,593 272,593 209,023 209,023
Interest-bearing:
Demand accounts 620,842 620,468 428,648 430,126
Time certificates of less
than $100,000 336,680 336,729 358,010 358,175
Time certificates of
$100,000 or more 510,270 511,350 405,218 405,753
----------- ----------- ----------- -----------
Total interest-bearing 1,467,792 1,468,547 1,191,876 1,194,054
----------- ----------- ----------- -----------
Total deposits 1,740,385 1,741,140 1,400,899 1,403,077
Debt obligations 89,911 89,892 58,150 57,342
Trust-preferred securities 48,621 50,300 24,327 25,300
Estimated fair values of financial assets and liabilities 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). 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.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
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 bank to make
payments on behalf of customers if certain specified future events occur and are
used infrequently by the banks ($19.2 million and $12.0 million outstanding at
December 31, 2001 and 2000, respectively). Other loan commitments outstanding
consist of unused lines of credit and approved, but unfunded, specific loan
commitments ($398.9 million and $283.8 million at December 31, 2001 and 2000,
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. Such loan commitments are also included in management's evaluation
of the adequacy of the allowance for loan losses.
The banking subsidiaries are required to maintain average reserve balances in
the form of cash on hand and balances due from the Federal Reserve Bank and
correspondent banks. The amount of reserve balances required as of December 31,
2001 and 2000 were $2.4 million and $5.1 million, respectively.
Deposits at each of the banks are insured up to the maximum amount covered by
FDIC insurance. Some of the banks have municipal government deposits which are
guaranteed by Capitol ($41 million at December 31, 2001).
Capitol has guaranteed up to $7.5 million of secured borrowings by Amera
Mortgage Corporation, a 49%-owned affiliate.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE P--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 Capitol
(and other bank shareholders, as applicable) without prior approval from
regulatory authorities. Substantially all of the remaining net assets of the
subsidiaries are restricted as to payments to Capitol.
Each bank and Capitol are subject to certain other capital requirements. 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 Capitol'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 judgements 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 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.
As of December 31, 2001, 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, 2001, that Capitol and the banks meet
all capital adequacy requirements to which the entities are subject.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE P--DIVIDEND LIMITATIONS OF SUBSIDIARIES AND OTHER CAPITAL
REQUIREMENTS--CONTINUED
The following table summarizes the amounts (in $1,000s) and related ratios of
the individually significant subsidiaries (assets of $130 million or more) and
consolidated regulatory capital position as of December 31, 2001 and 2000:
Sun
Ann Arbor Capitol Community
Commerce National Bancorp
Bank Bank Limited Consolidated
---- ---- ------- ------------
December 31, 2001
- -----------------
Tier 1 capital to average total assets:
Minimum required amount =>$10,860 =>$ 6,723 =>$ 26,701 =>$ 74,096
Actual amount $20,970 $13,155 $ 94,271 $189,555
Ratio 7.72% 7.83% 14.12% 10.23%
Tier 1 capital to risk-weighted assets:
Minimum required amount(1) =>$ 9,165 =>$ 5,848 =>$ 27,586 =>$ 71,970
Actual amount $20,970 $13,155 $ 94,271 $189,555
Ratio 9.15% 9.00% 13.67% 10.54%
Combined Tier 1 and Tier 2 capital to risk-weighted assets:
Minimum required amount(2) =>$18,329 =>$11,696 =>$ 55,171 =>$143,941
Amount required to meet `Well-Capitalized' category(3) $22,912 $14,620 $ 68,964 $179,926
Actual amount $23,838 $14,984 $102,892 $213,263
Ratio 10.40% 10.25% 14.92% 11.85%
December 31, 2000
- -----------------
Tier 1 capital to average total assets:
Minimum required amount =>$ 9,409 =>$ 5,691 =>$ 16,606 =>$ 58,651
Actual amount $17,453 $11,130 $ 78,566 $151,036
Ratio 7.42% 7.82% 18.92% 10.30%
Tier 1 capital to risk-weighted assets:
Minimum required amount(1) =>$ 7,789 =>$ 4,975 =>$ 17,719 =>$ 54,508
Actual amount $17,453 $11,130 $ 78,566 $151,036
Ratio 8.96% 8.95% 17.74% 11.10%
Combined Tier 1 and Tier 2 capital to risk-weighted assets:
Minimum required amount(2) =>$15,577 =>$ 9,950 =>$ 35,439 =>$109,016
Amount required to meet `Well-Capitalized' category(3) $19,471 $12,438 $ 44,299 $136,271
Actual amount $19,892 $12,687 $ 84,006 $168,051
Ratio 10.22% 10.20% 18.96% 12.35%
(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.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE Q--PARENT COMPANY FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
- December 31 -
-------- --------
2001 2000
-------- --------
(in $1,000s)
Assets
Cash on deposit with subsidiary banks $ 330 $ 213
Money market funds on deposit with subsidiary banks 571 220
Time deposits with unaffiliated bank 107 100
Investment securities held for long-term investment 269 603
Investments in subsidiaries 140,447 115,466
Notes receivable 1,130 1,363
Investment in and advances to Amera Mortgage Corporation 1,459 1,246
Equipment and furniture, net 662 624
Excess of cost over net assets of acquired subsidiaries 1,818 2,202
Other assets 5,514 3,650
-------- --------
Total assets $152,307 $125,687
======== ========
Liabilities and Stockholders' Equity
Accounts payable, accrued expenses and other liabilities $ 3,732 $ 3,124
Debt obligations payable to affiliates 4,900 8,900
Debt obligations payable to unaffiliated entities 14,100 18,150
Subordinated debentures 49,403 25,109
-------- --------
Total liabilities 72,135 55,283
Stockholders' equity 80,172 70,404
-------- --------
Total liabilities and stockholders' equity $152,307 $125,687
======== ========
CONDENSED STATEMENTS OF INCOME
- Year Ended December 31 -
-------- -------- --------
2001 2000 1999
-------- -------- --------
Income:
Dividends from subsidiaries $ 7,896 $ 7,018 $ 5,650
Intercompany fees 6,130 6,362 5,424
Interest 200 182 290
Other 69 139 34
-------- -------- --------
Total income 14,295 13,701 11,398
Expenses:
Interest 5,102 4,568 3,770
Salaries and employee benefits 4,997 4,154 3,310
Occupancy 399 333 260
Amortization, equipment rent and
depreciation 1,086 1,212 1,520
Other 908 2,942 1,295
-------- -------- --------
Total expenses 12,492 13,209 10,155
-------- -------- --------
1,803 492 1,243
Equity in undistributed net earnings of
consolidated subsidiaries 6,496 5,232 2,880
Federal income taxes (credit) (2,419) (2,311) (1,286)
-------- -------- --------
Net income $ 10,718 $ 8,035 $ 5,409
======== ======== ========
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE Q--PARENT COMPANY FINANCIAL INFORMATION--CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
- Year Ended December 31 -
2001 2000 1999
-------- -------- --------
(in $1,000s)
OPERATING ACTIVITIES
Net income $ 10,718 $ 8,035 $ 5,409
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in undistributed net earnings of subsidiaries (6,496) (5,232) (2,880)
Equity in net loss from Amera Mortgage Corporation 1,277 593
Depreciation and amortization 613 622 535
Decrease (increase) in amounts due from subsidiaries and other
assets (1,061) 6,182 2,157
Increase (decrease) in accounts payable, accrued expenses and other
liabilities 608 161 (29)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,382 11,045 5,785
INVESTING ACTIVITIES
Net cash investments in subsidiaries (18,598) (8,107) (23,397)
Net payments from (advances to) Amera Mortgage Corporation (213) (180) 101
Purchases of investment securities (181)
Proceeds from sales and maturities of securities 334 215
Proceeds from sales of equipment and furniture 1 5 114
Purchases of equipment and furniture (268) (300) (183)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (18,744) (8,367) (23,546)
FINANCING ACTIVITIES
Net borrowings (payments) on debt obligations (8,050) (2,850) 20,300
Net proceeds from issuance of common stock 1,753 3,011 6
Net proceeds from issuance of subordinated debentures 24,248
Cash dividends paid (3,114) (2,534) (2,322)
-------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 14,837 (2,373) 17,984
-------- -------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 475 305 223
Cash and cash equivalents at beginning of year 533 228 5
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,008 $ 533 $ 228
======== ======== ========
NOTE R--ACQUISITION OF MINORITY INTERESTS
During 2000, three banks which were previously majority-owned by Capitol
(Brighton Commerce Bank, Kent Commerce Bank and Muskegon Commerce Bank) became
wholly-owned, resulting from share exchange transactions with the banks'
minority shareholders. Had these acquisitions of minority interests occurred at
the beginning of 2000, consolidated net income would have approximated $7.9
million and diluted earnings per share would have been $1.04.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITOL BANCORP LIMITED
NOTE R--ACQUISITION OF MINORITY INTERESTS--CONTINUED
During 1999, Macomb Community Bank also became wholly-owned through a similar
share exchange transaction with its minority shareholders.
Each of these acquisitions have been accounted for under the purchase method of
accounting. Goodwill arising from these transactions is generally amortized
through December 31, 2001, on a straight-line basis over a period of 15 years
after the acquisition date.
Sun has also entered into similar share exchange transactions with minority
shareholders of its banks (three in 2001 and one in 2000), which have been
accounted for similar to Capitol's share exchange transactions. Sun's share
exchange transactions did not have a material effect on Capitol's consolidated
financial position or results of operations.
NOTE S--PROPOSED ACQUISITION REGARDING SUN COMMUNITY BANCORP
In November 2001, the boards of directors of Capitol and Sun Community Bancorp
Limited entered into a proposed plan of share exchange. The proposed plan of
share exchange is subject to the approval of the shareholders of both Capitol
and Sun. The proposed share exchange, if consummated, would result in Capitol
issuing .734 shares of its previously unissued common stock for each common
share of Sun's common stock held by shareholders other than Capitol. Capitol
estimates that it would issue approximately 2.7 million shares of its common
stock and 850,000 stock options if the share exchange is completed as proposed.
NOTE T--PENDING APPLICATIONS FOR NEW BANKS
At December 31, 2001, applications were pending for the formation of two new
banks, Bank of Las Vegas (to become a majority-owned subsidiary of Nevada
Community Bancorp Limited) and Napa Community Bank (to become a majority-owned
subsidiary of First California Northern Bancorp).
Both of these banks are expected to open in 2002.
51
This page intentionally left blank.
[LOGO]
2001 ANNUAL REPORT
------------------
CAPITOL Bancorp Limited
SUN COMMUNITY Bancorp Limited
NEVADA COMMUNITY Bancorp Limited
SUNRISE CAPITAL Corporation
INDIANA COMMUNITY Bancorp Limited
FIRST CALIFORNIA NORTHERN Bancorp
TO OUR SHAREHOLDERS
In 1988, at the commencement of operations of Capitol Bancorp Limited, total
consolidated assets approximated $44 million. Today, current consolidated assets
exceed $2 billion. For our first year of operation, total consolidated income
was reported at $520,000. Income for 2001 exceeded $10 million. In 1988 we
operated a single bank. Today, our affiliated community bank network includes 29
separate institutions operating in six states. Since 1988, we have successfully
sought community-based capital on more than 50 separate occasions, encouraging
the localization of ownership of our affiliate community banks and rewarding
those investors who have chosen to participate with us in this effort.
In 1988 we believed that a profitable affiliate community banking network could
be built and that each banking institution could serve as a good citizen within
its community. Today this belief has been realized and serves as the cornerstone
of our company. Community banks serve as an important catalyst for dynamic
communities seeking growth and economic stability. Our boards of directors are
composed of successful individuals who serve as major contributors to their
community. They are an integral part of the fabric of the community in which
they reside. Under their direction, each of our community banks exercises local
authority over the important banking decisions which are necessary to ensure a
profitable banking operation. I invite you to review the comments of our bank
presidents enclosed in this report. We are not only pleased with the financial
success of our company, but are also very proud of the efforts toward community
responsibility initiated by each of our bank presidents and their boards of
directors.
The earnings, events and expectations of our company are set forth in the
remainder of this report. As you read, you will not glean a sense of
complacency. Both management and your Board of Directors are committed to
continued refinement of our earnings objectives and continued commitment to our
community bank model which supports both growth and stability.
EARNINGS
We continue to achieve record earnings. Over the past three years, consolidated
earnings have nearly doubled from $5.4 million in 1999 to $10.7 million in 2001.
During the same period, earnings per share have risen from $0.83 per share in
1999 to $1.35 per share in 2001. Net operating revenue, a key banking sector
metric, advanced from $52 million in 1999 to over $90 million in 2001.
Earnings growth continues to be the primary objective of the Corporation. During
the past 5 1/2 years we opened 23 start-up community banks. Each bank, at the
outset, is dilutive to the consolidated earnings stream of the Corporation.
However, these efforts are beginning to bear fruit. Both the geographic
diversity, particularly in higher-growth Southwest U.S. markets, and ongoing
maturation of our bank operations serve to encourage developing earnings
potential.
CAPITOL BANCORP LIMITED
-----------------------
CONSOLIDATED EARNINGS
($ in millions)
1999 2000 2001
---- ---- ----
5.409 8.03 10.72
1
TO OUR SHAREHOLDERS -- CONTINUED
CAPITOL BANCORP LIMITED
-----------------------
EARNINGS PER SHARE
FY 1999 FY 2000 FY 2001
------- ------- -------
$0.83 $1.13 $1.35
CAPITOL BANCORP LIMITED
-----------------------
NET OPERATING REVENUE
($ in millions)
FY 1999 FY 2000 FY 2001
------- ------- -------
52.1 72.51 90.10
EVENTS
DE NOVO DEVELOPMENT
Unlike calendar years 1998, 1999 and 2000, when we opened six, four and five
banks respectively, the year 2001 produced a single DE NOVO bank within our
affiliated group, Sunrise Bank of San Diego. Opened only since January 2001,
this bank exceeded all of our expectations, reporting operating profits for the
fourth quarter of the year. Early 2002 has witnessed the launching of two new
affiliates within our family: Napa Community Bank, in northern California and
Bank of Las Vegas, in Nevada.
ACQUISITIONS
Following our traditional shared ownership practice when launching new
affiliates, 2001 witnessed three of our Southwest-based community banks
approaching their third anniversary date, which is the time that internal
ownership consolidation is considered by the shareholders of the bank. Having
maintained a majority ownership position in these banks, Sun Community Bancorp
Limited entered into separate share exchange agreements with Camelback Community
Bank, Southern Arizona Community Bank and Mesa Bank. Each transaction was
approved by the shareholders of the respective bank, and these three affiliates
are now wholly-owned subsidiaries of Sun. As is true with each of our "bank
development partnerships", the bank name, board composition, individual
strategic plan, and local decision-making has been preserved following the
exchange transaction.
----------
"WE ARE NOT ONLY PLEASED WITH THE FINANCIAL SUCCESS OF OUR COMPANY, BUT ALSO
VERY PROUD OF THE EFFORTS TOWARD COMMUNITY RESPONSIBILITY INITIATED BY EACH OF
OUR BANK PRESIDENTS AND THEIR BOARDS OF DIRECTORS."
----------
PROPOSED SHARE EXCHANGE BETWEEN SUN AND CAPITOL
In November 2001, the Boards of Directors of Sun Community Bancorp Limited and
Capitol Bancorp Limited approved a plan of share exchange which will result in
the delivery of Sun shares to Capitol in exchange for Capitol shares, subject to
approval of both shareholder groups. Separate fairness opinions and shareholder
approval requirements were carefully followed by the Boards of both Sun and
Capitol.
Consolidation of the Capitol-Sun public ownership will serve to increase the
"float" of public stock at Capitol Bancorp, while decreasing the perceived
complexity of our operations from a public investor perspective. Because each of
our affiliates operate on a common platform, share technological systems,
cultivate organic growth and access identical strategic support systems at the
holding company level, this proposed transaction, along with our other internal
"acquisitions", is free from the typical cultural issues which can serve as
potential obstacles to successful integration.
2
ASSET GROWTH
During 2001, our affiliate operations added more than $400 million in organic
asset growth. Consolidated assets increased from $1.6 billion to $2 billion.
Putting this into historical perspective, our Corporation operated for ten years
before we reached $1 billion in consolidated assets in December of 1998. This
second billion dollars of balance sheet growth has been achieved in less than
three years.
OTHER EVENTS
In the course of 2001, numerous other operational matters were addressed by the
corporate team including a system conversion, enhancement of our Internet
banking product and the expansion of investment advisory and wealth management
services.
At the time of this writing, auditor independence is a topic receiving
significant media attention in the wake of at least one major company's debacle.
One clear indicator of a serious problem is an audit firm's potential conflict
of interest, either real or perceived, when the companies they audit engage them
for significant consulting work, especially when consulting fees they receive
exceed the fees paid for auditing. As a public company, we endeavor to ensure
the independence of our auditors, BDO Seidman LLP, by avoiding the potential
conflict which could arise from receiving services unrelated to auditing,
accounting or tax compliance.
----------
"OUR COMMITMENT TO COMMUNITY BANKING
IS THE FOUNDATION OF OUR CORE OPERATION."
----------
EXPECTATIONS
DURING CALENDAR YEAR 2002
Over the course of the current calendar year we expect continued material growth
in our balance sheet. We are focused on continued earnings refinement at a
number of our affiliate banks. This is a major undertaking involving all of us
at Capitol Bancorp Limited.
Less significant this year, but still present as an important part of our
mission, is the exploration of additional DE NOVO bank opportunities. We will
continue to be both prudent and opportunistic in the selection of DE NOVO
initiatives. Further enhancement of services and fully exploiting and capturing
noninterest income opportunities at our existing banks has become a greater
near-term priority.
The effect of the proposed share exchange with Sun Community Bancorp will serve
to enhance our consolidated earnings growth rate over the course of the current
calendar year. Our rate of growth on an earnings-per-share basis will be diluted
temporarily following the share exchange; however, this effect is not expected
to be material in 2003.
CAPITOL BANCORP LIMITED
- -----------------------
Lansing, MI
29 affiliate banks
Banks located in Michigan,
Arizona, Nevada, Indiana,
New Mexico, and California
AS OF DECEMBER 31
- -----------------
Closing Stock Price $13.30
52-Week High $17.50
52-Week Low $ 9.69
2001 Price Change +36.4%
Total Assets over $2 billion
3
TO OUR SHAREHOLDERS-- CONTINUED
----------
"BOTH THE GEOGRAPHIC DIVERSITY, PARTICULARLY IN HIGHER-GROWTH
SOUTHWEST U.S. MARKETS, AND ONGOING MATURATION OF OUR BANK OPERATIONS
SERVE TO ENCOURAGE DEVELOPING EARNINGS POTENTIAL."
----------
LONGER RANGE PROBABILITY (5 YEARS)
Acknowledging that long-range corporate forecasts are typically even less
reliable than long-range weather forecasts, nevertheless, our current corporate
momentum suggests that we will double the size of our balance sheet over this
five year time period. Organic growth is the product of our maturing banks and
is feasible without additional DE NOVO banks. However, during this same period
we do expect to participate in a number of DE NOVO bank development
opportunities.
Our commitment to community banking is the foundation of our core operation.
Decentralization of management, while often presenting corporate challenges,
serves to decentralize risk and risk concentration. We continue to work toward
local branding, initiated by each of our banks individually, in contrast to a
universal standard typical of large financial institutions focused on
transactional, as opposed to relationship, banking. We will continue to
encourage and foster hometown customer loyalty, a financially and socially
rewarding byproduct of relationship banking, local identity, local
decision-making and local ownership.
We invite you to be with us in this effort.
/s/ Joseph D. Reid
JOSEPH D. REID
CHAIRMAN & CHIEF EXECUTIVE OFFICER
4
CAPITOL BANCORP SUN COMMUNITY SUNRISE CAPITAL
LIMITED BANCORP LIMITED CORPORATION
------- --------------- -----------
BOARD OF DIRECTORS BOARD OF DIRECTORS BOARD OF DIRECTORS
LOUIS G. ALLEN MICHAEL J. DEVINE STEVEN K. BLACK
PRIVATE BANKER, RETIRED ATTORNEY AT LAW PRESIDENT, CALIFORNIA REGION
Sunrise Capital Corporation
PAUL R. BALLARD RICHARD N. FLYNN
EXECUTIVE VICE PRESIDENT PRESIDENT MICHAEL J. DEVINE
Capitol Bancorp Limited Flynn & Associates ATTORNEY AT LAW
DAVID L. BECKER MICHAEL F. HANNLEY CRISTIN REID ENGLISH
DIRECTOR PRESIDENT & CHIEF EXECUTIVE OFFICER EXECUTIVE VICE PRESIDENT
Becker Insurance Agency, P.C. Bank of Tucson Capitol Bancorp Limited
ROBERT C. CARR RICHARD IMWALLE WILLIAM D. HINZ, II
EXECUTIVE VICE PRESIDENT & TREASURER PRESIDENT PRESIDENT
Capitol Bancorp Limited University of Arizona Foundation Sunrise Bank of Arizona
DOUGLAS E. CRIST MICHAEL L. KASTEN MICHAEL L. KASTEN
PRESIDENT MANAGING PARTNER MANAGING PARTNER
Developers of SW Florida, Inc. Kasten Investments, L.L.C. Kasten Investments, L.L.C.
JAMES C. EPOLITO JOHN S. LEWIS JOSEPH D. REID
PRESIDENT & CHIEF EXECUTIVE OFFICER PRESIDENT CHAIRMAN & CHIEF EXECUTIVE OFFICER
The Accident Fund Company Sun Community Bancorp Limited Capitol Bancorp Limited
Sun Community Bancorp Limited
CRISTIN REID ENGLISH HUMBERTO S. LOPEZ
EXECUTIVE VICE PRESIDENT PRESIDENT DOUGLAS N. REYNOLDS
Capitol Bancorp Limited HSL Properties, Inc. CHIEF CREDIT OFFICER
Sunrise Bank of Arizona
GARY A. FALKENBERG, D.O. KATHRYN L. MUNRO
PHYSICIAN CHAIRMAN & CHIEF EXECUTIVE OFFICER INDIANA COMMUNITY
Bridge West, L.L.C. BANCORP LIMITED
JOEL I. FERGUSON ---------------
CHAIRMAN JOSEPH D. REID
Ferguson Development, L.L.C. CHAIRMAN & CHIEF EXECUTIVE OFFICER BOARD OF DIRECTORS
Capitol Bancorp Limited
KATHLEEN A. GASKIN Sun Community Bancorp Limited PAUL R. BALLARD
ASSOCIATE BROKER AND STATE APPRAISER EXECUTIVE VICE PRESIDENT
Tomie Raines, Inc. Realtors RONALD K. SABLE Capitol Bancorp Limited
CHIEF EXECUTIVE OFFICER
H. NICHOLAS GENOVA Concord Solutions, L.L.C. ROBERT C. CARR
CHAIRMAN & CHIEF EXECUTIVE OFFICER EXECUTIVE VICE PRESIDENT & TREASURER
Washtenaw News Company, Inc. NEVADA COMMUNITY Capitol Bancorp Limited
BANCORP LIMITED
LEWIS D. JOHNS --------------- J. CHRISTOPHER CHOCOLA
PRESIDENT CHAIRMAN OF THE BOARD
Mid-Michigan Investment Company BOARD OF DIRECTORS CTB, Inc.
MICHAEL L. KASTEN GLENN C. CHRISTENSON MYRL D. NOFZIGER
MANAGING PARTNER EVP, CHIEF FINANCIAL OFFICER AND CAO PRESIDENT
Kasten Investments, L.L.C. Station Casinos, Inc. Hoogenboom Nofziger
JOHN S. LEWIS MICHAEL J. DEVINE JOSEPH D. REID
PRESIDENT ATTORNEY AT LAW CHAIRMAN & CHIEF EXECUTIVE OFFICER
Sun Community Bancorp Limited Capitol Bancorp Limited
CRISTIN REID ENGLISH Sun Community Bancorp Limited
LEONARD MAAS EXECUTIVE VICE PRESIDENT
PRESIDENT Capitol Bancorp Limited LARRY SCHROCK
Gillisse Construction Company PRESIDENT
JOEL I. FERGUSON Deutsch Kase Haus, Inc.
LYLE W. MILLER CHAIRMAN
PRESIDENT Ferguson Development, L.L.C. FIRST CALIFORNIA
Servco, Inc. NORTHERN BANCORP
MICHAEL F. HANNLEY ----------------
DAVID O'LEARY PRESIDENT & CHIEF EXECUTIVE OFFICER
CHAIRMAN Bank of Tucson BOARD OF DIRECTORS
O'Leary Paint Company
MARK A. JAMES CRISTIN REID ENGLISH
JOSEPH D. REID ATTORNEY AT LAW/STATE SENATOR EXECUTIVE VICE PRESIDENT
CHAIRMAN & CHIEF EXECUTIVE OFFICER James, Driggs, Walch, Santoro, Capitol Bancorp Limited
Capitol Bancorp Limited Kearney, Johnson & Thompson
Sun Community Bancorp Limited C. PAUL JOHNSON
LEWIS D. JOHNS PRESIDENT
PRESIDENT Astrale e Terra Winery
Mid-Michigan Investment Company
PAUL J. KRSEK
MICHAEL L. KASTEN PRESIDENT
MANAGING PARTNER Krsek & Andreae
Kasten Investments, L.L.C.
DAVID L. MCSHERRY
LARRY W. KIFER INVESTOR
CHAIRMAN & CHIEF EXECUTIVE OFFICER Northwest Investment Company, L.L.C.
Algiers Hotel
DAVID O'LEARY
HUMBERTO S. LOPEZ CHAIRMAN
PRESIDENT O'Leary Paint Company
HSL Properties, Inc.
JOSEPH D. REID
THOMAS C. MANGIONE CHAIRMAN & CHIEF EXECUTIVE OFFICER
PRESIDENT & CHIEF OPERATING OFFICER Capitol Bancorp Limited
Nevada Community Bancorp Limited Sun Community Bancorp Limited
JOSEPH D. REID
CHAIRMAN & CHIEF EXECUTIVE OFFICER
Capitol Bancorp Limited
Sun Community Bancorp Limited
EDWARD D. SMITH
PRESIDENT
Smith-Christensen Enterprises
CAPITOL BANCORP
LIMITED
-------
OFFICERS
JOSEPH D. REID
CHAIRMAN & CHIEF EXECUTIVE OFFICER
DAVID O'LEARY
SECRETARY
PAUL R. BALLARD
EXECUTIVE VICE PRESIDENT
ROBERT C. CARR
EXECUTIVE VICE PRESIDENT & TREASURER
DAVID J. DUTTON
EXECUTIVE VICE PRESIDENT
& CHIEF INFORMATION OFFICER
CRISTIN REID ENGLISH
EXECUTIVE VICE PRESIDENT
LEE W. HENDRICKSON
EXECUTIVE VICE PRESIDENT
& CHIEF FINANCIAL OFFICER
CHARLES J. MCDONALD
EXECUTIVE VICE PRESIDENT & CASHIER
MICHAEL M. MORAN
EXECUTIVE VICE PRESIDENT
DAVID K. POWERS
EXECUTIVE VICE PRESIDENT
WILLIAM E. RHEAUME
EXECUTIVE VICE PRESIDENT
& SENIOR COUNSEL
BRUCE A. THOMAS
EXECUTIVE VICE PRESIDENT
BRIAN K. ENGLISH
GENERAL COUNSEL
CARL C. FARRAR
SENIOR VICE PRESIDENT
LINDA D. PAVONA
SENIOR VICE PRESIDENT
JOHN C. SMYTHE
SENIOR VICE PRESIDENT
MARIE D. WALKER
SENIOR VICE PRESIDENT & CONTROLLER
MARC A. DEUR
VICE PRESIDENT
JANET L. HARDIN
VICE PRESIDENT
STEPHANIE A. MAAT
VICE PRESIDENT
5
BOARD OF DIRECTORS [PHOTO OF ANN ARBOR COMMERCE BANK]
DONALD E. BUTCHER ANN ARBOR COMMERCE BANK
COMMERCIAL REAL ESTATE DEVELOPER
2950 State Street South
ROBERT C. CARR Ann Arbor, MI 48104
EXECUTIVE VICE PRESIDENT & TREASURER 734.887.3100
Capitol Bancorp Limited
www.annarborcommerce.com
RICHARD G. DORNER
PRESIDENT & CHIEF EXECUTIVE OFFICER
Ann Arbor Commerce Bank Ann Arbor - innovative, academic, entrepreneurial, caring. Ann Arbor was the
perfect location for a DE NOVO bank in 1990. Reflecting the pulse and composition
JAMES A. FAJEN of the city has been our road map, as Ann Arbor Commerce Bank has become an
ATTORNEY AT LAW integral and respected partner in the community.
Fajen & Miller, P.L.L.C.
* Nonprofit organizations play a vital role in our community. In addition to
JAMES W. FINN supporting them and serving on boards, we developed our Community+Plus
CHAIRMAN & CHIEF EXECUTIVE OFFICER checking account designed specifically for 501(c) 3 organizations. This
Finn's-JM&J Insurance Agency, Inc. account provides special features, including interest on balances of $501
or higher.
H. NICHOLAS GENOVA
CHAIRMAN & CHIEF EXECUTIVE OFFICER * We created an innovative banking package to assist a new jazz program at
Washtenaw News Company, Inc. Community High School. This program is now a model nationally, and the
music teacher was recognized as Teacher of the Year in 1996. Ann Arbor
RICHARD M. GREENE Commerce Bank was recognized on the school's musical CD in recognition of
Richard Green Point Training our support.
MARILYN D. KATZ-PEK * We received a Special Tribute signed by Governor John Engler and other
GENERAL MANAGING PARTNER state officials after we received our fourth consecutive Fast Track Award
Biotechnology Business Consultants from the Washtenaw Development Council.
JAMES C. KEEN * We recognize the importance of teaching children to be wise consumers and
CHIEF EXECUTIVE OFFICER understand credit. In addition to our Simply Savings Account, future plans
Cliff Keen Athletic include methods to help young people learn to save, invest, and handle
credit prudently.
DAVID W. LUTTON
PRESIDENT
Charles Reinhart Company BUILDING LASTING RELATIONSHIPS . . .
CREATING LIFETIME VALUE.
FRITZ SEYFERTH
MANAGEMENT CONSULTANT /s/ RICHARD G. DORNER
Fritz Seyferth & Associates RICHARD G. DORNER
[LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
CARL VAN APPLEDORN
VICE PRESIDENT
Urological Surgery Assoc., P.C.
WARREN E. WRIGHT
CHAIRMAN & PARTNER
Renosol Corporation
OFFICERS
JAMES A. FAJEN
CHAIRMAN OF THE BOARD
ROBERT C. CARR
VICE CHAIRMAN
WARREN E. WRIGHT
SECRETARY
RICHARD G. DORNER
PRESIDENT & CHIEF EXECUTIVE OFFICER
CLIFFORD G. SHELDON
EXECUTIVE VICE PRESIDENT
BRIAN F. PICKNELL
SENIOR VICE PRESIDENT
MARY HAYS
VICE PRESIDENT
RICK H. JAMES
VICE PRESIDENT
LOUISE A. MORSE
VICE PRESIDENT & CASHIER
JOHN NIXON III
VICE PRESIDENT
RICHARD G. TICE
VICE PRESIDENT
JOHN J. WILKINS
VICE PRESIDENT
6
[PHOTO OF ARROWHEAD COMMUNITY BANK] BOARD OF DIRECTORS
ARROWHEAD COMMUNITY BANK PATRICK DAGGETT
CERTIFIED PUBLIC ACCOUNTANT
17235 North 75th Avenue, Suite B100 Daggett & Daggett, LLP
Glendale, AZ 85308
623.776.0800 MICHAEL J. DEVINE
www.arrowheadcommunitybank.com ATTORNEY AT LAW
THOMAS E. GYDER
At Arrowhead Community Bank, we believe "community" is more than just a part of PRESIDENT & GENERAL MANAGER
our name, it is a philosophy we embrace in everything we do. Whether tailoring Wilhelm Automotive Service Centers
bank products to fit specific community needs, or contributing many hours to
local service projects, Arrowhead's commitment to, and participation in, the RICHARD J. HILDE
Glendale-Peoria community has made a significant impact during its short tenure CHIEF EXECUTIVE OFFICER
in the marketplace. EPW, Inc.
* A member of our management team participates on the executive board of New MICHAEL L. KASTEN
Life Center (NLC), a local domestic violence shelter. The staff supports MANAGING PARTNER
NLC's Bowl-A-Thon; collects reusable items from friends and family for Kasten Investments, L.L.C.
donation to the shelter's thrift store; and in December, the Bank served as
a collection point for gifts donated for distribution to the residents of ARLENE KULZER
the shelter. PRESIDENT
Arrowhead Community Bank
* Staff members serve on boards, participate in small business fairs, speak
to local service organizations and schools, and serve as judges in DENNIS E. LANDAUER
allocating funds donated to the Peoria School District for use in MANAGING DIRECTOR
extracurricular projects. American Express Tax & Business Services
* Our community involvement doesn't end with donating time. Arrowhead offers ELAINE P. MAIMON
a service-charge free, interest-bearing checking account to nonprofit CAMPUS CHIEF EXECUTIVE OFFICER AND PROVOST
organizations; and, as in the case of Theater Works, a nonprofit community Arizona State University West
theater group. In addition to the checking account, the Bank reinvested
loan fees charged back into theater programs. JAMES J. MCCUE
AVIATION CONSULTANT
Sherwin Industries
COMMUNITY IS MORE THAN JUST A PART OF OUR NAME . . . TERRANCE C. MEAD
IT IS A PHILOSOPHY WE EMBRACE IN EVERYTHING WE DO. ATTORNEY AT LAW/OWNER
Mead & Associates
/s/ ARLENE KULZER
ARLENE KULZER JOHN C. OGDEN
PRESIDENT [LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
SunCor Development Company
CAROL A. POORE
DIRECTOR OF COMMUNICATION
New West Energy
RICHARD A. SHELTON
EXECUTIVE DIRECTOR
Symphony of the West Valley
OFFICERS
MICHAEL L. KASTEN
CHAIRMAN OF THE BOARD
JOHN C. OGDEN
VICE CHAIRMAN
JOSEPH D. REID
CHIEF EXECUTIVE OFFICER
JAMES J. MCCUE
SECRETARY
ARLENE KULZER
PRESIDENT
ARLENE KULZER
PRESIDENT
DENNIS E. LANDAUER
CHAIRMAN
DIRECTORS' LOAN COMMITTEE
WILLIAM H. SMITH
SENIOR VICE PRESIDENT
URSULA L. JACKSON
VICE PRESIDENT
DEBORAH M. CHARLESWORTH
VICE PRESIDENT
BARRY S. EDWARDS
VICE PRESIDENT
7
BOARD OF DIRECTORS [PHOTO OF BANK OF TUCSON]
BRUCE I. ASH BANK OF TUCSON
VICE PRESIDENT
Paul Ash Management, L.L.C. 4400 East Broadway
Tucson, AZ 85711
SLIVY EDMONDS COTTON 520.321.4500
CHAIRMAN & CHIEF EXECUTIVE OFFICER www.bankoftucson.com
Perpetua, Inc.
MICHAEL J. DEVINE Bank of Tucson employees are making their mark in the Tucson community through
ATTORNEY AT LAW volunteerism, leadership roles, lobbying legislation and fundraising for local
charities. We recognize the importance of our civic responsibilites in running a
BRIAN K. ENGLISH successful community bank. Our strategic vision as a substantial resource for
GENERAL COUNSEL small businesses and nonprofit agencies has received a heart-warming response.
Capitol Bancorp Limited
* The men and women of Bank of Tucson are well respected and influential in
WILLIAM A. ESTES, JR. many civic, government and nonprofit organizations, for their efforts to
PRESIDENT understand both local issues and offer assistance to those in need. They
Tem Corp. also contribute their personal time and resources to community efforts.
Officers represent the Bank proudly on prestigious boards such as the YMCA,
RICHARD N. FLYNN Salvation Army, The Business Development Finance Corporation, the Beacon
PRESIDENT Foundation, and several local hospitals. One employee distinguished herself
Flynn & Associates by personally lobbying for legislation to change laws that would further
enable adults with disabilities to purchase a home of their own.
MICHAEL F. HANNLEY
PRESIDENT & CHIEF EXECUTIVE OFFICER * The Bank also assists the community through unique products like fee
Bank of Tucson rebates and interest-bearing accounts for nonprofits. In addition, the Bank
participates in sponsoring local charitable events. For the fifth
MICHAEL J. HARRIS consecutive year, Bank of Tucson was the title sponsor of the Wildcat Dream
ASSOCIATE BROKER Invitational hosted by NBA star, Steve Kerr. The event, which took place in
Long Realty Company September, raised over $21,000 for youth basketball through a golf
tournament, dinner and auction.
RICHARD F. IMWALLE
PRESIDENT
University of Arizona Foundation IN THE SPIRIT OF GIVING, WE RECEIVE.
MICHAEL L. KASTEN /s/ MICHAEL F. HANNLEY
MANAGING PARTNER MICHAEL F. HANNLEY
Kasten Investments, L.L.C. [LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
BURTON J. KINERK
ATTORNEY AT LAW
Kinerk, Beal, Schmidt & Dyer, P.C.
LYN M. PAPANIKOLAS
REALTOR
Long Realty Company
OFFICERS
RICHARD F. IMWALLE
CHAIRMAN OF THE BOARD
MICHAEL J. DEVINE
VICE CHAIRMAN
RICHARD N. FLYNN
SECRETARY
MICHAEL F. HANNLEY
PRESIDENT & CHIEF EXECUTIVE OFFICER
C. DAVID FOUST
EXECUTIVE VICE PRESIDENT
& CHIEF CREDIT OFFICER
BARBARA A. SADLER
SENIOR VICE PRESIDENT
SANDI L. SMITHE
SENIOR VICE PRESIDENT
CHARLENE F. SHUMAKER
VICE PRESIDENT
8
[PHOTO OF BLACK MOUNTAIN COMMUNITY BANK] BOARD OF DIRECTORS
BLACK MOUNTAIN COMMUNITY BANK PETER M. ATKINSON
PRESIDENT
1700 West Horizon Ridge Parkway, Suite 101 Black Mountain Community Bank
Henderson, NV 89012
702.990.5900 MICHAEL J. DEVINE
www.blackmountaincommunitybank.com ATTORNEY AT LAW
Black Mountain Community Bank has only recently begun operating in the Henderson BETTY A. KINCAID
community, and we are already having a positive impact. We strongly believe in PRESIDENT
giving back to our community while setting a good example for other businesses Southwest Exchange Corp.
to emulate. All of our employees have a strong community spirit, as evidenced by
the following commitments: CHARLES L. LASKY
PRESIDENT
* We are assisting the City of Henderson Redevelopment Agency in creating Lasky Fifarek & Hogan P.C.
loan documents for their new Business Revolving Loan Program, which assists
financially disadvantaged businesses. CLAIRE MACDONALD
VICE PRESIDENT
* Our employees are very involved in the community. As a result of their MacDonald Properties
efforts, seventy-two children have benefited from the generosity of staff
members that have offered their homes as foster parents. Bank employees THOMAS C. MANGIONE
also volunteer time at a nonprofit organization that assists patients as PRESIDENT & CHIEF OPERATING OFFICER
they recover from drug addiction. Nevada Community Bancorp Limited
* For the second consecutive year, our employees and customers funded MICHAEL J. MIXER
Thanksgiving dinners for needy families. At Christmas, through the Angel CORPORATE BROKER
Tree Program, we provided gifts to seniors who are without families. In Colliers International
addition, the Bank delivered gifts to local foster children.
M. COLLEEN O'CALLAGHAN-MIELE
* The Bank was proud to have developed a program to assist a local doctor in VP ASSISTANT PUBLISHER
opening his first office in Las Vegas. The doctor is a pediatric oncologist H.B.C. Publications
who donates office space to the Candlelighters, a nonprofit support
organization for parents of children with cancer. He also donates PHILIP N. RALSTON
significant time at a local medical center treating children who cannot CHIEF FINANCIAL OFFICER AND TREASURER
afford specialized care. ANC. Inc. and Silver Springs, Inc.
JOSEPH D. REID III
IMAGINE . . . BANKING THE WAY YOU REMEMBER. CORPORATE COUNSEL
Capitol Bancorp Limited
/s/ PETER M. ATKINSON
PETER M. ATKINSON CHRISTOPHER G. SAMSON
PRESIDENT [LOGO] PRESIDENT & OWNER
FN Investments Inc
OFFICERS
THOMAS C. MANGIONE
CHAIRMAN OF THE BOARD
& CHIEF EXECUTIVE OFFICER
MICHAEL J. DEVINE
VICE CHAIRMAN
CHARLES L. LASKY
SECRETARY
PETER M. ATKINSON
PRESIDENT
DAVID S. RENNICK
EXECUTIVE VICE PRESIDENT
& CHIEF CREDIT OFFICER
KATHY M. LUCERO
VICE PRESIDENT
RAMON MCBRIDE
VICE PRESIDENT
SHARI A. SMITH
VICE PRESIDENT
9
BOARD OF DIRECTORS [PHOTO OF BRIGHTON COMMERCE BANK]
ROBERT C. CARR BRIGHTON COMMERCE BANK
EXECUTIVE VICE PRESIDENT & TREASURER
Capitol Bancorp Limited 8700 North Second Street
Brighton, MI 48116
JOHN CODERE 810.220.1199
PRESIDENT www.brightoncommerce.com
Brighton Block & Concrete, Inc.
MICHAEL B. CORRIGAN Brighton Commerce Bank, the ONLY local community bank in Brighton, strives to
PRESIDENT assist many local community groups and agencies. This can involve an employee's
Corrigan Oil Company, Inc. time and expertise as well as financial contributions. Some of the local groups
and agencies that have been supported by Brighton Commerce Bank include:
SCOTT C. GRIFFITH
PRESIDENT * The Lions Club - we have provided financial support for their new facility,
Era Griffith Realty the "Lions Den," and for their community efforts to assist all residents of
our county.
WILLIAM LAMARRA
CHAIRMAN & CHIEF EXECUTIVE OFFICER * Community Center of Brighton - the Bank provided assistance with financing
Excelda Manufacturing the construction of the new Center which will be used by the Boy Scouts,
Rotary and other community service groups.
MARK A. LATTERMAN
PRESIDENT * Brighton Center for Performing Arts - a Bank representative has served on
Latterman & Associates, P.C. the Board of Directors for a number of years and was Chairman for the past
two years. The Center provides educational programs as well as
PIET W. LINDHOUT entertainment for the local community.
CHIEF EXECUTIVE OFFICER
Lindhout Associates * Women's Resource Center of Livingston County - annually we provide a
holiday tree in our lobby which provides examples of opportunities to
GARY T. NICKERSON, SR. purchase gifts for local families. Employees also participate in the
PRESIDENT & CHIEF EXECUTIVE OFFICER purchase of these gifts.
Brighton Commerce Bank
* The United Way - since our Bank's inception, 100% of our employees have
CANDICE G. RANDOLPH annually donated time and resources to the United Way campaign in addition
SENIOR VICE PRESIDENT, CASHIER, & SECRETARY to the bank's substantial annual gift.
Brighton Commerce Bank
We are proud of the significant contributions which we have made for the benefit
MITCHELL J. STANLEY of all residents of our community.
PRESIDENT
Mickey Stanley & Associates
PERSONALIZED SERVICE BY LOCAL EXPERIENCED PERSONNEL.
JAMES A. WINCHEL
PRESIDENT /s/ GARY T. NICKERSON, SR.
Colt Park Insurance Agency, Inc. GARY T. NICKERSON, SR.
[LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
OFFICERS
ROBERT C. CARR
CHAIRMAN OF THE BOARD
MICHAEL B. CORRIGAN
VICE CHAIRMAN
GARY T. NICKERSON, SR.
PRESIDENT & CHIEF EXECUTIVE OFFICER
CANDICE G. RANDOLPH
SENIOR VICE PRESIDENT, CASHIER & SECRETARY
JOSEPH M. PETRUCCI
SENIOR VICE PRESIDENT
WILLIAM R. ANDERSON
VICE PRESIDENT
John P. Szydzik
VICE PRESIDENT
10
[PHOTO OF CAMELBACK COMMUNITY BANK] BOARD OF DIRECTORS
CAMELBACK COMMUNITY BANK SHIRLEY A. AGNOS
PRESIDENT
2777 East Camelback Road, Suite 100 Arizona Town Hall
Phoenix, AZ 85016
602.224.5800 CORD ARMSTRONG
www.camelbackbank.com CERTIFIED PUBLIC ACCOUNTANT & MANAGER
Miller Wagner Business Services, Inc.
At Camelback Community Bank we know it takes the efforts of many individuals and MICHAEL J. DEVINE
companies to provide the services necessary to meet the needs of a diverse ATTORNEY AT LAW
community. The Bank's contribution to assuring that the Phoenix area is able to
provide these programs and services include: WINFIELD HOLDEN
PUBLISHER
* Funding loans for nonprofit organizations, specifically: Arizona Highways Magazine
- construction of the Fresh Start Women's Foundation Women's Resource MICHAEL L. KASTEN
Center, designed to meet the needs of women seeking self-sufficiency; MANAGING PARTNER
Kasten Investments, L.L.C.
- construction of the Junior League headquarters office;
GREGORY M. KRUZEL
- rehabilitation of the local Girl Scout council's campsites; and, ATTORNEY AT LAW & PARTNER
Bruan, Becker, Kruzel, P.C.
- construction of a cancer center at a nonprofit, inner-city hospital.
ROBERT LESTER
* Creating a series of classroom presentations for a local grammar school PRESIDENT
called "Banking on the Future." Lesson plans focus on financial literacy Progressive Financial Concepts
and the creation of a classroom account at the Bank.
JOHN S. LEWIS
* Offering the use of our Board room for meetings of nonprofit boards and PRESIDENT
committees. Sun Community Bancorp Limited
* Originating "Investing Heart in our Community," a recognition program for TAMMY A. LINN
teens that rewards their volunteer activities and community service. DIRECTOR/GOVERNOR'S
COMMUNITY POLICY OFFICER
* Financing the acquisition and development of numerous single-family and
multi-family residential properties intended for rehabilitation within the SUSAN C. MULLIGAN
City of Phoenix. CERTIFIED PUBLIC ACCOUNTANT
* Encouraging our employees' involvement in local canned-food drives for the EARL A. PETZNICK
food banks, trimming a holiday tree for the benefit of the Burns and Trauma PRESIDENT & CHIEF EXECUTIVE OFFICER
Association, collecting toys for the Police Department's annual drive and Northside Hay Company
many other activities resulting from involvement on nonprofit boards.
BARBARA J. RALSTON
THE BANK WHERE YOU BELONG. PRESIDENT & CHIEF EXECUTIVE OFFICER
Camelback Community Bank
/s/ BARBARA J. RALSTON
BARBARA J. RALSTON DAN A. ROBLEDO
PRESIDENT & CHIEF EXECUTIVE OFFICER [LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
Lawyer's Title of Arizona, Inc.
JACQUELINE J. STEINER
COMMUNITY VOLUNTEER
OFFICERS
DAN A. ROBLEDO
CHAIRMAN OF THE BOARD
MICHAEL L. KASTEN
VICE CHAIRMAN
SHIRLEY A. AGNOS
SECRETARY
BARBARA J. RALSTON
PRESIDENT & CHIEF EXECUTIVE OFFICER
JOHN ROBERT BOOSMAN
EXECUTIVE VICE PRESIDENT
& CHIEF CREDIT OFFICER
BETTY L. CORNISH
SENIOR VICE PRESIDENT
PATRICK B. WESTMAN
SENIOR VICE PRESIDENT
STEVEN J. BOATRIGHT
VICE PRESIDENT
SONDRA K. KOSKELA
VICE PRESIDENT
WILLIAM F. VONHATTEN
VICE PRESIDENT
11
BOARD OF DIRECTORS [PHOTO OF CAPITOL NATIONAL BANK]
ROBERT C. CARR CAPITOL NATIONAL BANK
EXECUTIVE VICE PRESIDENT & TREASURER
Capitol Bancorp Limited 200 Washington Square North
Lansing, MI 48933
NAN ELIZABETH CASEY 517.484.5080
ATTORNEY AT LAW www.capitolnational.com
Fraser Law Firm
CHARLES J. CLARK Capitol National Bank takes great pride in its many financial and human resource
PRESIDENT contributions that have helped make the Lansing area a great place to live, work
Clark Construction Company and do business.
BRIAN K. ENGLISH Capitol National is a bank with an entrepreneurial spirit led by a local
GENERAL COUNSEL management team and a board of directors comprised of Lansing business leaders
Capitol Bancorp Limited that truly care about service to the community. At Capitol National, we
encourage our management and staff to participate in and, when asked, take on
DAVID FERGUSON leadership roles in local community activities.
PRESIDENT
Ferguson Development * We were the first major contributor to the H.O.P. E. (Helping Other People
Excel) Scholarship Program. The goal is to provide Lansing Community
PATRICK F. HAYES College scholarships to 500 at-risk seventh graders in the Lansing schools
PRESIDENT each year. H.O.P. E. is a crime-prevention and education initiative
F.D. Hayes Electric involving the Lansing Police Department, Lansing School District, Lansing
Community College and Michigan State University.
RICHARD A. HENDERSON
PRESIDENT * Capitol National has been an active participant in a local Home Ownership
Henderson & Associates Program which promotes neighborhood stabilization by assisting renters in
the purchase and reconstruction of the homes they are occupying.
CHRISTOPHER HOLMAN
PUBLISHER * We have been a sponsor of the annual Ingham Regional Healthcare Foundation
Greater Lansing Business Monthly "Festival of Trees" fundraising event benefitting one of our community's
premiere healthcare facilities known for its Thoracic Cardiovascular
L. DOUGLAS JOHNS, JR. Programs.
VICE PRESIDENT
Mid Michigan Investment Company * We have utilized a Small Business Administration program to help finance
the expansion and construction of a new facility for a pre-school business,
KEVIN A. KELLY enabling it to double its enrollment to 200 children while also meeting a
MANAGING DIRECTOR true community need. This school has been a customer of the Bank since
Michigan State Medical Society opening 17 years ago.
MARK A. LATTERMAN It is most gratifying to help develop a stronger community while mutually benefitting
PRESIDENT our customers, and their Bank.
Latterman & Associates, P.C.
CHARLES J. MCDONALD SMALLER BANK. BIGGER SERVICE.(TM)
EXECUTIVE VICE PRESIDENT & CASHIER
Capitol Bancorp Limited /s/ JOHN C. SMYTHE
JOHN C. SMYTHE
JOHN O'LEARY [LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
CO-PRESIDENT
O'Leary Paint Company
PATRICIA A. REYNOLDS
PRESIDENT
Capital Region Community Foundation
JOHN C. SMYTHE
PRESIDENT & CHIEF EXECUTIVE OFFICER
Capitol National Bank
OFFICERS
Robert C. Carr
CHAIRMAN OF THE BOARD
MARK A. LATTERMAN
VICE CHAIRMAN
PATRICK F. HAYES
SECRETARY
JOHN C. SMYTHE
PRESIDENT & CHIEF EXECUTIVE OFFICER
JOHN R. FARQUHAR
SENIOR VICE PRESIDENT
DAVID E. FELDPAUSCH
VICE PRESIDENT
LORI M. GARCIA
VICE PRESIDENT
12
[PHOTO OF DESERT COMMUNITY BANK] BOARD OF DIRECTORS
DESERT COMMUNITY BANK ROBERT J. ANDREWS
DIRECTOR OF FINANCE
3740 South Pecos-McLeod Anchor Gaming
Las Vegas, NV 89121
702.938.0500 MICHAEL J. DEVINE
www.desertcommunity.com ATTORNEY AT LAW
ROSE M. K. DOMINQUEZ
Desert Community Bank is an urban Las Vegas bank. We pride ourselves on being an PRESIDENT
essential part of the community by serving all facets of our economically Discovery Travel
diverse city. We serve area small-businesses and professionals. Our
contributions include: TOM GRIMMETT
OWNER
* Construction/permanent financing to the Women's Development Center, a Grimmett & Company
nonprofit organization that provides affordable housing and other support
services for low-to-moderate income families. GARRY L. HAYES
PRESIDENT
* Construction financing for a 20,000 square-foot industrial warehouse park Law Office of Garry L. Hayes
located in a low-to-moderate income area identified as a redevelopment zone
by the City of Las Vegas. This is the first new construction in our area of JAMES W. HOWARD
town in years. In addition to providing a new look for the neighborhood, PRESIDENT
the industrial park will provide new jobs, services, and ideally, spur Desert Community Bank
economic development in an economically-challenged area.
CHARLES L. LASKY
* Permanent financing for a restaurant, which has provided food and services PRESIDENT
to its constituents in a low-to-moderate income area for over 20 years. The Lasky Fifarek & Hogan P.C.
restaurant is one of only a few full-service restaurants in the area.
THOMAS C. MANGIONE
* Coordinated and directed two one-hour seminars on banking and finance to PRESIDENT & CHIEF OPERATING OFFICER
inner-city youths at the 4th Annual African American Student Achievement Nevada Community Bancorp Limited
Conference held at the University of Nevada, Las Vegas.
GREGORY J. MCKINLEY
* Hands-on mentoring as a financial consultant for the African American VICE PRESIDENT
Student Ambassadors, a group of inner-city youth who excel in academics and Cragin & Pike, Inc.
extracurricular activities.
LELAND D. PACE
* Two seminars on personal finance and banking at the 3rd Annual Community MANAGING PARTNER
Economic Seminar, held at the Community College of Southern Nevada. Stewart, Archibald & Barney, LLP
SMALLER BANK. BIGGER SERVICE(TM) JOSEPH D. REID III
CORPORATE COUNSEL
/s/ JAMES W. HOWARD Capitol Bancorp Limited
JAMES W. HOWARD
PRESIDENT [LOGO] JOSEPH D. SODERBERG
PHYSICIAN
Summit Anesthesiology
STEPHEN D. STIVER
PRESIDENT
Stiver Car Care
OFFICERS
THOMAS C. MANGIONE
CHAIRMAN OF THE BOARD
MICHAEL J. DEVINE
VICE CHAIRMAN
CHARLES L. LASKY
SECRETARY
JAMES W. HOWARD
PRESIDENT
AL G. GOURRIER II
EXECUTIVE VICE PRESIDENT
& CHIEF CREDIT OFFICER
RODNEY K. CHANEY
SENIOR VICE PRESIDENT
CHERYL A. FRICKER
VICE PRESIDENT
EILEEN S. HAGLER
VICE PRESIDENT
13
BOARD OF DIRECTORS [PHOTO OF DETROIT COMMERCE BANK]
Ralph J. Burrell DETROIT COMMERCE BANK
PRESIDENT
Symcon 645 Griswold, Suite 70
Detroit, MI 48226
ROBERT C. CARR 313.967.9700
EXECUTIVE VICE PRESIDENT & TREASURER www.detroitcommerce.com
Capitol Bancorp Limited
VIVIAN L. CARPENTER We view community service as a responsibility and the hallmark of our community
PRESIDENT outreach efforts at Detroit Commerce Bank. Our location, in the heart of a large
Atwater Entertainment Associates urban industrial city, provides numerous opportunities to participate in
projects that have a significant impact on its citizens. A partial list includes
DONALD M. DAVIS, JR. participation with the following organizations:
VP HUMAN RESOURCES/SUPPORT SERVICES
Health Alliance Plan * The One Stop Capital Shop (OSCS), a center developed by the Small Business
Administration to provide assistance to small businesses located within
BARBARA B. GATTORN low-to-moderate income areas of the city. The OSCS assists with the
SENIOR ADVISOR TO THE PRESIDENT development of business plans, securing small business loans and counseling
Detroit Regional Chamber by retired business executives. The program evolved from the City of
Detroit's Empowerment Zone designation.
DOUGLAS H. GRAHAM
CHAIRMAN & CHIEF EXECUTIVE OFFICER * We offer a Senior Citizen Checking Account for individuals 62 years of age
Detroit Technology Ventures, L.L.C. or older.
JOHN HIRZEL * Partnership with the Detroit Area Council of Boy Scouts.
CERTIFIED PUBLIC ACCOUNTANT
Hirzel, Jackson and Swaine, P.C. * Staff participation through board affiliation with the Wayne Center, a
nonprofit agency that assists the developmentally-disabled secure medical
MARTHA K. RICHARDSON care and housing.
PRESIDENT
Services Marketing Specialists, Inc. * Participation in the Zoo Walk for the Michigan Humane Society.
BEN SCHWEGMAN * Participation with Northeast Guidance Center, a mental health agency's
PRESIDENT Adopt a Family Program.
Schwegman & Associates, Inc.
* Women's Caring Program, sponsor to provide medical care for children
JAMES F. STAPLETON without health insurance.
PRESIDENT
B & R Consultants SMALLER BANK . . BETTER SERVICE . . . EXPERIENCE THE DIFFERENCE.
LINDA A. WATTERS /s/ LINDA A. WATTERS
PRESIDENT & CHIEF EXECUTIVE OFFICER LINDA A. WATTERS
Detroit Commerce Bank [LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
NEAL ZALENKO
CERTIFIED PUBLIC ACCOUNTANT & PRESIDENT
Zalenko & Associates, P.C.
OFFICERS
ROBERT C. CARR
CHAIRMAN OF THE BOARD
DONALD M. DAVIS
SECRETARY
LINDA A. WATTERS
PRESIDENT & CHIEF EXECUTIVE OFFICER
BRADLEY C. BERRYMAN
VICE PRESIDENT
VALORA L. JACKSON
VICE PRESIDENT
14
[PHOTO OF EAST VALLEY COMMUNITY BANK] BOARD OF DIRECTORS
EAST VALLEY COMMUNITY BANK MICHAEL J. DEVINE
ATTORNEY AT LAW
1940 North Alma School Road
Chandler, AZ 85224 DAVID L. HEUERMANN
480.726.6500 PRESIDENT
www.eastvalleybank.com Axis Mortgage & Investments, L.L.C.
MICHAEL L. KASTEN
Community bankers have a long history of providing community service. The MANAGING PARTNER
officers and staff that make up the team at East Valley Community Bank are proud Kasten Investments, L.L.C.
of their efforts to carry on this tradition. Our location offers us the unique
opportunity to get involved with projects in several communities. Following is a DARRA L. RAYNDON
recap of some of the programs we are currently involved in through board service PRESIDENT & PRINCIPAL
and other volunteer efforts: Rayndon & Longfellow, P.C.
* ICAN (Improving Chandler Area Neighborhoods) is a nonprofit organization GERRY J. SMITH
founded to empower Chandler youth to become productive, self-confident, and PRESIDENT
community-oriented citizens. Bank team members were able to enhance the East Valley Community Bank
ICAN message by providing specialized on site financial classes geared
toward individual age groups. JAMES C. STRATTON
PRESIDENT & CHIEF EXECUTIVE OFFICER
* East Valley Boys and Girls Club that serves several communities, including Boys & Girls Clubs of Scottsdale
Gilbert, through a variety of innovative programs designed to assist youths
struggling to find a place in society. JOSEPH A. TAMERON
CERTIFIED PUBLIC ACCOUNTANT & PARTNER
* Junior Achievement program in Chandler. In addition to the business aspects Skinner, Tameron & Company, LLP
that are taught, the importance of becoming a good corporate citizen are
emphasized. STEPHEN D. TODD
EXECUTIVE VICE PRESIDENT
* Tempe YMCA, which offers numerous activities for local area families. Sun Community Bancorp Limited
The Bank is committed to staying involved in these projects, as well as looking
for additional opportunities to make a difference in the communities we serve. OFFICERS
IN A WORD . . . QUALITY MICHAEL L. KASTEN
CHAIRMAN OF THE BOARD
/s/ GERRY J. SMITH
GERRY J. SMITH MICHAEL J. DEVINE
PRESIDENT [LOGO] VICE CHAIRMAN
JAMES C. STRATTON
SECRETARY
JOSEPH D. REID
CHIEF EXECUTIVE OFFICER
GERRY J. SMITH
PRESIDENT
DAVID D. FORTUNE
EXECUTIVE VICE PRESIDENT & CHIEF CREDIT OFFICER
J. DENNIS KENNEDY
EXECUTIVE VICE PRESIDENT
DAVID M. ANDERSON
VICE PRESIDENT
LAWRENCE NUSBAUM
VICE PRESIDENT
15
BOARD OF DIRECTORS [PHOTO OF ELKHART COMMUNITY BANK]
PAUL R. BALLARD ELKHART COMMUNITY BANK
EXECUTIVE VICE PRESIDENT
Capitol Bancorp Limited 303 South Third Street
Elkhart, IN 46516
NANCY BANKS 574.295.9600
COMMUNITY VOLUNTEER www.elkhartbank.com
R. STEVEN BENNETT Elkhart Community Bank focuses its business on developing relationships with its
PRESIDENT clients and with the community as a whole. We are strong believers in giving
Voyager Products, Inc. back to the City of Elkhart because we realize that ultimately, what is good for
Elkhart is also good for the Bank. We have helped with the following:
KENNETH W. BRINK
TREASURER * Appointed a representative to participate on the board of Aurora Capital
Hart Housing Group, Inc. Group which provides financing for small businesses.
STEVEN L. BROWN * Supported the Elkhart Housing Partnership which benefits low and moderate
PRESIDENT income families by promoting livable and stable neighborhoods and provides
Elkhart Community Bank assistance for affordable housing.
ROBERT C. CARR * Designated two representatives to participate in the 2010 Coalition which
EXECUTIVE VICE PRESIDENT & TREASURER is a group of local business people and government officials acting as a
Capitol Bancorp Limited steering committee toward the betterment and redevelopment of downtown
Elkhart.
ANDREW W. FRECH
CHAIRMAN & CHIEF EXECUTIVE OFFICER * Provided free checking accounts to not-for-profit organizations.
Ancon Construction Company, Inc.
* Supported a representative of the Bank who is First Vice President and
CURTIS T. HILL, JR. President Elect of the Mayor's Commission on the Elco Performing Arts
ATTORNEY AT LAW Center. The Center operates Elkhart's theatre and is a major piece of the
Elkhart County Prosecuting Attorney redevelopment of downtown Elkhart.
RICHARD J. JENSEN * We were honored to be listed on the website of the Indiana Development
REAL ESTATE/RETIRED Finance Authority as a contact bank for their Capital Access Program.
RICHARD L. MAX, SR.
PRESIDENT & GENERAL MANAGER ELKHART'S BANK.
Heart City Enterprises House of Herbs
/s/ STEVEN L. BROWN
MYRL D. NOFZIGER STEVEN L. BROWN
PRESIDENT [LOGO] PRESIDENT
Hoogenboom Nofziger
BRIAN J. SMITH
PRESIDENT
The Heritage Group
OFFICERS
ROBERT C. CARR
CHAIRMAN OF THE BOARD & CHIEF EXECUTIVE OFFICER
MYRL D. NOFZIGER
VICE CHAIRMAN & SECRETARY
STEVEN L. BROWN
PRESIDENT
16
[PHOTO OF GOSHEN COMMUNITY BANK] BOARD OF DIRECTORS
GOSHEN COMMUNITY BANK ROBERT C. CARR
EXECUTIVE VICE PRESIDENT & TREASURER
511 West Lincoln Avenue Capitol Bancorp Limited
Goshen, IN 46526
574.533.2006 DAVID L. CRIPE
www.goshenbank.com DOCTOR OF OPTOMETRY/SENIOR PARTNER
Drs. Cripe & Stephens
Having the word "Community" in our name creates a responsibility to the citizens
of our community. At Goshen Community Bank, we tell our clients and their CAROL M. EBERSOLE
neighbors that we are investing in their future and their community. Our VP OF CORPORATE DEVELOPMENT
employees and directors perform many services to further our relationships: Goshen Health System
* The local United Way agency provides support to our community serving close STEPHEN L. FIDLER
to 18,000 citizens a year from Goshen. Bank representatives serve on PRESIDENT
fundraising, budget, and allocation committees. Kuert Concrete, Inc.
* Employees teach classes for Junior Achievement to elementary children in CHRISTOPHER J. GRAFF
Goshen. These classes introduce children to economics and the importance of PRESIDENT & CHAIRMAN
business in our community. Marque, Inc.
* LaCasa serves low-to-middle income individuals in our community. An RICHARD A. HETLER, JR.
employee of the Bank is a member of the company's board of directors and a VP & GENERAL MANAGER
loan committee that originates loans for first-home buyers. Indiana Wood Products, Inc.
* The Bank supports events for the Goshen Interfaith Hospitality Network, GREGORY A. HOOGENBOOM
Goshen Boys & Girls Club, American Cancer Society, and Riley's Children PRESIDENT
Hospital. For a second year, the Bank helped sponsor the Women's Health Hoogenboom Masonry, Inc.
Fair & Seminar (health screenings and information) and the YWCA's Salute to
Women (gives awards to outstanding women in our community). DOUGLAS A. JOHNSTON
PRESIDENT
* Bank employees "adopted" a family designated by Child Abuse Prevention Goshen Community Bank
Services.
LARRY W. NEWSWANGER
ENTREPRENEUR
WE MAKE PEOPLE SMILE!
MATTHEW J. PLETCHER
/s/ DOUGLAS A. JOHNSTON PARTNER
DOUGLAS A. JOHNSTON Whitcraft & Pletcher, LLP
PRESIDENT [LOGO]
FRED M. RAMSER
ENTREPRENEUR
DENNIS L. SORG
PRESIDENT
Sorg Dodge, Inc.
DOUGLAS A. STANLEY
DENTIST & OWNER
Douglas A. Stanley, DDS
OFFICERS
ROBERT C. CARR
CHAIRMAN & CHIEF EXECUTIVE OFFICER
GREGORY A. HOOGENBOOM
SECRETARY
DOUGLAS A. JOHNSTON
PRESIDENT
CONNIE O. HORVATH
VICE PRESIDENT
LEAH L. STEVENS
VICE PRESIDENT
17
BOARD OF DIRECTORS [PHOTO OF GRAND HAVEN BANK]
PAUL R. BALLARD GRAND HAVEN BANK
EXECUTIVE VICE PRESIDENT
Capitol Bancorp Limited 333 Washington Avenue
Grand Haven, MI 49417
STANLEY L. BOELKINS 616.846.1930
OWNER/APPRAISER www.grandhavenbank.com
Boelkins & Associates
At Grand Haven Bank, we take our responsibility as a community leader seriously.
PETER E. BOLLINE We are proud of our ability to be flexible and extremely responsive in meeting
OWNER the needs of our customers. Our commitment to building a strong, caring place to
Wood Specialties Company live and work takes several forms:
JOHN D. GROOTHUIS * Several Bank employees volunteer their time for the annual United Way "Day
PRESIDENT & CHIEF EXECUTIVE OFFICER of Caring." Working in conjunction with the Prosecutor's office, the
Grand Haven Bank employees assembled victim's packets for distribution throughout the
county.
MARK A. KLEIST
ESQUIRE/TREASURER * Two Bank employees assisted at local elementary schools. Through Junior
Scholten and Fant, P.C. Achievement, time volunteered was spent with 4th and 5th graders teaching
various business concepts by way of discussion, role playing and game time.
STEVEN L. MAAS
VICE PRESIDENT * Assisted First Reformed Church in their purchase of adjacent real estate.
Gillisse Construction Company Acquisition of the property allowed the church to expand its youth ministry
outreach program.
MICHAEL MCKEOUGH
PRESIDENT * Construction of our new banking facility in Grand Haven represented the
McKeough Land Company, Inc. most significant investment in our downtown in several years. The award
winning design has promoted further development within our central business
CALVIN D. MEEUSEN district.
MANAGING PARTNER
Calvin D. Meeusen, * Provided financing for the acquisition of a historical landmark building
Certified Public Accountant near our downtown waterfront. Plans are in process to restore this 100+
year old building to its former glory.
ROBERT J. TRAMERI
CHAIRMAN EMERITUS * The Grand Haven Area Arts Council and The Salvation Army have been
Paragon Bank & Trust recipients of the caring, personal involvement in key local events
supported by the employees of the Bank.
JOHN P. VAN EENENAAM
ATTORNEY AT LAW
Scholten and Fant, P.C. CARING THROUGH INVOLVEMENT.
BERNARD J. WADE /s/ JOHN D. GROOTHUIS
PRESIDENT JOHN D. GROOTHUIS
Advanced Signs, Inc. [LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
GERALD A. WITHERELL
PRESIDENT
Oakes Agency, Inc.
OFFICERS
JOHN P. VAN EENENAAM
CHAIRMAN OF THE BOARD
PETER E. BOLLINE
VICE CHAIRMAN
CALVIN D. MEEUSEN
SECRETARY
JOHN D. GROOTHUIS
PRESIDENT & CHIEF EXECUTIVE OFFICER
SHERRY J. PATTERSON
VICE PRESIDENT
18
[PHOTO OF KENT COMMERCE BANK] BOARD OF DIRECTORS
KENT COMMERCE BANK JAMES M. BADALUCO
VICE PRESIDENT
4050 Lake Drive SE S.J. Wisinski & Company
Grand Rapids, MI 49546
616.974.0200 PAUL R. BALLARD
www.kentcommerce.com EXECUTIVE VICE PRESIDENT
Capitol Bancorp Limited
At Kent Commerce Bank, we are constantly looking for ways to enhance our service
to the community through products and services designed specifically to meet MICHAEL L. BRAUGHTON
our customers' needs. We have: RETIRED VICE PRESIDENT/CHIEF FINANCIAL OFFICER
Davenport Educational System
* Produced the largest increase in SBA loans of ANY bank in West Michigan in
order to assist local companies in starting or expanding their businesses. SHARON M. BUURSMA
EXECUTIVE VICE PRESIDENT
* Introduced an interest-bearing checking account for local nonprofit Spectrum Health
organizations.
KEVIN J. EINFELD
* Partnered with the City of Kentwood, Michigan to jointly provide low-equity PRESIDENT
financing to companies purchasing real estate, equipment or other major BDR, Inc.
fixed assets. This enables businesses to obtain major project financing
when they would otherwise be ineligible. GRANT J. GRUEL
PARTNER
* Developed a tuition assistance program for families with children in local Gruel, Mills, Nims, & Pylman
private schools, whereby school tuition costs can be reduced by maintaining
deposit and loan accounts at our Bank. GARY D. HENSCH
CERTIFIED PUBLIC ACCOUNTANT
Some of our Bank's promotional material contains the phrase, "Kent Commerce Bank Hensch & Bailey,
- -paying a higher rate of attention." That's more than just a slogan, it's how we Certified Public Accountant, P.C.
serve the needs of our community.
TED HUDSON
KENT COMMERCE BANK - PAYING A HIGHER RATE OF ATTENTION. OWNER
Prestige Property, Inc.
/s/ DAVID E. VEEN
DAVID E. VEEN HAROLD A. MARKS
PRESIDENT & CHIEF EXECUTIVE OFFICER [LOGO] PARTNER
Prangley Marks LLP
CALVIN D. MEEUSEN
MANAGING PARTNER
Calvin D. Meeusen,
Certified Public Accountant
VALERIE R. OVERHEUL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Summit Training Source, Inc.
MARY L. URSUL
VICE PRESIDENT
Professionals Direct, Inc.
DAVID E. VEEN
PRESIDENT & CHIEF EXECUTIVE OFFICER
Kent Commerce Bank
MICHAEL C. WALTON
ATTORNEY AT LAW
Rhoades, McKee, Boer, Goodrich & Titta
OFFICERS
MICHAEL C. WALTON
CHAIRMAN OF THE BOARD
PAUL R. BALLARD
VICE CHAIRMAN
KEVIN J. EINFELD
SECRETARY
DAVID E. VEEN
PRESIDENT & CHIEF EXECUTIVE OFFICER
WILLIAM H. YOUNG
SENIOR VICE PRESIDENT
SANDRA L. BLOEM
VICE PRESIDENT
MICHAEL P. BOELENS
VICE PRESIDENT
JOHN J. CODER
VICE PRESIDENT
THOMAS J. KIM
VICE PRESIDENT
19
BOARD OF DIRECTORS [PHOTO OF MACOMB COMMUNITY BANK]
ROBERT C. CARR MACOMB COMMUNITY BANK
EXECUTIVE VICE PRESIDENT & TREASURER
Capitol Bancorp Limited 16000 Hall Road, Suite 102
Clinton Township, MI 48038
TIMOTHY J. CUTTLE 586.228.1600
PRESIDENT & CHIEF EXECUTIVE OFFICER www.macombcommunity.com
Macomb Community Bank
Every bank has the responsibility to support the community it serves. As a
CHRISTINA D'ALESSANDRO community bank, Macomb Community Bank takes this responsibility very seriously.
VICE PRESIDENT We support several community-based organizations and individuals in a variety
Villa Custom Homes of ways. It's important that we help others, help those in need. Our Directors
and employees are committed to this vision. We would like to share some examples
RONALD G. FORSTER of our more recent efforts:
TREASURER
Arkay Manufacturing, Inc. * Provided financial support to the Mt. Clemens General Hospital Foundation
and the Macomb County Osteopathic Society. The Foundation and the
JAMES R. KAYE Osteopathic Society help support the financial needs of Mount Clemens
PRESIDENT & CHIEF EXECUTIVE OFFICER General Hospital, a primary care hospital here in Macomb County.
Oakland Commerce Bank
* Our staff supported the March of Dimes by accepting contributions from many
DAVID F. KEOWN of our customers on their behalf during the holiday season.
BUILDING OFFICIAL
Washington Township * Participated in the "Toys for Tots" program sponsored by the United States
Marine Corps.
DELIA RENDON MARTIN
CO-OWNER * Provided financial support for the second annual "Clinton Township
Martin Enterprises Community Blood Drive." These funds were used to support the various local
activities of the American Red Cross in our community.
VITO MUNACO
OWNER/OPERATOR * Turning Point, which supports programs to assist abused women and children
WEMCO in Macomb County, benefitted from the sales of raffle tickets offering
prizes donated by our Bank.
OFFICERS
* An area physician donates services to patients in need of reconstructive
ROBERT C. CARR surgery. The Bank served as a resource and accepted public donations to
CHAIRMAN OF THE BOARD underwrite the costs associated with medical procedures for individuals
without insurance.
RONALD G. FORSTER
VICE CHAIRMAN WE PUT THE COMMUNITY BACK IN BANKING.
CHRISTINA D'ALESSANDRO /s/ TIMOTHY J. CUTTLE
SECRETARY TIMOTHY J. CUTTLE
[LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
TIMOTHY J. CUTTLE
PRESIDENT & CHIEF EXECUTIVE OFFICER
KENNETH E. BRYANT
VICE PRESIDENT
KENNETH O. FLYNN
VICE PRESIDENT
20
[PHOTO OF MESA BANK] BOARD OF DIRECTORS
MESA BANK NEIL R. BARNA
PRESIDENT & CHIEF EXECUTIVE OFFICER
63 East Main, Suite 100 Mesa Bank
Mesa, AZ 85201
480.649.5100 MICHAEL J. DEVINE
www.mesabankers.com ATTORNEY AT LAW
DEBRA L. DUVALL
Mesa Bank has grown and prospered because the community has recognized the value SUPERINTENDENT
of a financial institution with local management, local decision making and a Mesa Public Schools
strong board of directors. It is important that we give back to our community,
accepting the challenge through participation in many local civic activities BRIAN K. ENGLISH
such as Rotary, United Way and Junior Achievement. Mesa Bank also provides GENERAL COUNSEL
support for other programs, by: Capitol Bancorp Limited
* Sponsoring the City of Mesa "Business Speaks", a program hosted by the ROBERT R. EVANS, SR.
Chamber of Commerce, which focuses on the long-term economic development of PARTNER
our community. Evans Management Company
* Serving on the citizen's committee to update Mesa Public Schools' long-term STEWART A. HOGUE
strategic plan. PRINCIPAL
Salk Management L.L.C.
* Funding nearly 150 residential loans throughout the county, including a
unique modular-home construction program targeting moderate-income MICHAEL L. KASTEN
families. MANAGING PARTNER
Kasten Investments, L.L.C.
* Serving as an instructor in the local Junior Achievement chapter,
supporting concepts and skills that encourage continued education. PHILIP S. KELLIS
PARTNER
* Participating in the organization of the Dwight Patterson Sports Academy Dobson Ranch Inn
which supports the development of youth sports programs.
RUTH L. NESBITT
* Serving on the Mesa Family YMCA Capital Campaign Committee, which raised MESA COMMUNITY VOLUNTEER
funds for the renovation of a fifty year-old facility; also,
WAYNE C. POMEROY
* Mesa Bank provides no-service-fee checking accounts to all registered OWNER
nonprofit agencies in addition to contributing to the Mesa United Way, Pomeroy's Men's Stores
United Food Bank and the Mesa Safety Foundation through charitable giving
programs. JAMES A. SCHMIDT
EXECUTIVE DIRECTOR
We recognize the value in service to our community. Nelson Lambson & Company, PLC
BANKING - WITH A HUMAN TOUCH. DANIEL P. SKINNER
OWNER & MANAGER
/s/ NEIL R. BARNA Lebaron & Carroll LSI, Inc.
NEIL R. BARNA
PRESIDENT & CHIEF EXECUTIVE OFFICER [LOGO] TERRY D. TURK
PRESIDENT
Sun American Mortgage Company
JAMES K. ZAHARIS
PRINCIPAL
The Zaharis Group
OFFICERS
ROBERT R. EVANS, SR.
CHAIRMAN OF THE BOARD
MICHAEL L. KASTEN
VICE CHAIRMAN
NEIL R. BARNA
PRESIDENT & CHIEF EXECUTIVE OFFICER
DAVID D. FORTUNE
EXECUTIVE VICE PRESIDENT, CHIEF CREDIT OFFICER
& SECRETARY
STEPHEN P. HAGGARD
VICE PRESIDENT
DANIEL R. LAUX
VICE PRESIDENT
STEVEN R. MITCHELL
VICE PRESIDENT
SANDRA S. ZAZULA
VICE PRESIDENT
21
BOARD OF DIRECTORS [PHOTO OF MUSKEGON COMMERCE BANK]
RICK E. AMIDON MUSKEGON COMMERCE BANK
PRESIDENT
Baker College of Muskegon 255 Seminole Road
Muskegon, MI 49444
PHILIP J. ANDRIE 231.737.4431
PRESIDENT www.muskegoncommerce.com
Andrie, Inc.
In an era when banks are considered to be too big and too impersonal to be
PAUL R. BALLARD customer friendly, Muskegon Commerce Bank consistently finds new ways to
EXECUTIVE VICE PRESIDENT distinguish itself in the community. In addition to serving on numerous
Capitol Bancorp Limited nonprofit boards and volunteering hundreds of hours of employees' time, we have
earned our reputation as a community-oriented bank by:
WILLIAM C. COOPER
PRESIDENT * Establishing an "in-school bank" for a local inner-city elementary school
Omni Fitness Club where children learn the basics of banking and the discipline of saving
money. For the past four years we have trained sixth grade students to be
THOMS F. DEVOURSNEY "tellers" and assisted them as they processed deposits from their fellow
PRESIDENT students. Collectively we've helped over 500 students learn how to save
Shape Corporation money.
EDGAR W. HUNT * Originating over $10 million in SBA 504 loans that assisted the financial
RETIRED - FORMER PRESIDENT needs of several "non-conforming" customers and resulted in having Senior
First of America Bank- Muskegon Vice President, David Seppala, named as West Michigan SBA Lender of the
Year for 2001. These loans helped create over 200 new jobs in our
CHRISTOPHER L. KELLY community.
SHAREHOLDER
Parmenter O'Toole, P.C. * Having several of our directors actively involved in major fundraisers that
raise approximately $300,000 annually for Muskegon Catholic Central
DANIEL KUZNAR Schools.
OWNER
Quality Tool & Stamping Company, Inc. Together our employees, officers, and directors are proud to serve our customers
and we're gratified to know that our hard work benefits so many people in our
ROBERT J. MCCARTHY community.
PRESIDENT & CHIEF EXECUTIVE OFFICER
Muskegon Commerce Bank BANKING ON OUR COMMUNITY...
CHRIS ANN MCGUIGAN /s/ ROBERT J. MCCARTHY
PRESIDENT & CHIEF EXECUTIVE OFFICER ROBERT J. MCCARTHY
Community Foundation for Muskegon County [LOGO] PRESIDENT & CHIEF EXECUTIVE OFFICER
DAVID W. SEPPALA
SENIOR VICE PRESIDENT
Muskegon Commerce Bank
JAMES STANFORD TYLER
PRESIDENT
Tyler Sales Company, Inc.
OFFICERS
EDGAR W. HUNT
CHAIRMAN OF THE BOARD
JAMES S. TYLER
VICE CHAIRMAN
ROBERT J. MCCARTHY
PRESIDENT, CHIEF EXECUTIVE OFFICER
& SECRETARY
DAVID W. SEPPALA
SENIOR VICE PRESIDENT
DAVID A. CHRISTOPHER
VICE PRESIDENT
TERRI K. SWARTS
VICE PRESIDENT
22
[PHOTO OF OAKLAND COMMERCE BANK] BOARD OF DIRECTORS
OAKLAND COMMERCE BANK MARK A. AIELLO
ATTORNEY AT LAW
31731 Northwestern Highway Foley & Lardner
Farmington Hills, MI 48334
248.855.0550 DONALD A. BOSCO
www.oaklandcommerce.com PRESIDENT
Donald A. Bosco Building, Inc.
At Oakland Commerce Bank, our commitment to serve customers goes beyond the
walls of our bank and extends into the community where we live. We feel that our ROBERT C. CARR
involvement with the people and businesses of Farmington Hills and its EXECUTIVE VICE PRESIDENT & TREASURER
surrounding neighborhoods strengthens not only the economic framework of our Capitol Bancorp Limited
community, but offers an opportunity to strengthen our overall quality of life.
MARK B. CHURELLA
A few of the programs we have supported are: PRESIDENT & CHIEF EXECUTIVE OFFICER
FDI Group
* Construction/permanent financing for a new pediatric care center.
LEON S. COHAN
* Seminars for the employees of some of our local business customers. These COUNSEL TO THE FIRM
classes outlined special financing programs that encourage home ownership. Barris, Scott, Denn & Driker
* A mentoring program with the local high school which provided students a MICHAEL J. DEVINE
look at how a bank works, the ultimate goal providing insight into banking ATTORNEY AT LAW
as a career.
JEFFREY L. HAUSWIRTH
* Constructing loans which would ultimately refurbish and remodel some small CERTIFIED PUBLIC ACCOUNTANT, CVA & PRINCIPAL
businesses in Detroit targeted primarily as job opportunities for Jenkins, Magnus, Volk & Carroll, P.C.
low-to-moderate income families.
JAMES R. KAYE
* The Judson Center. This facility provides food, clothing and residential PRESIDENT & CHIEF EXECUTIVE OFFICER
facilities to area families in need. Oakland Commerce Bank
* International business support programs. Oakland Commerce sponsored IHOR J. KUCZER
representatives of foreign businesses visiting the region who are actively SENIOR VICE PRESIDENT & SECRETARY
looking to invest in our community. The new businesses are interested in a Oakland Commerce Bank
competitive job market with a stable workforce. Additional lending
opportunities and new job offerings in this area will offer the best DAVID F. LAU
solution for helping people help themselves. CHARTERED FINANCIAL CONSULTANT & OWNER
Lau & Lau Associates, L.L.C.
OAKLAND COMMERCE BANK . . . JEFFREY M. LEIB
OFFERING DIVERSE LENDING SOLUTIONS FOR OUR COMMUNITY. ATTORNEY AT LAW & PRESIDENT
Leib, Leib & Kramer
/s/ JAMES R. KAYE
JAMES R. KAYE AKRAM NAMOU
PRESIDENT & CHIEF EXECUTIVE OFFICER [LOGO] CERTIFIED PUBLIC ACCOUNTANT
JULIUS L. PALLONE
PRESIDENT
J.L. Pallone Associates
FRANCINE PEGUES
REGIONAL SALES DIRECTOR
Blue Cross Blue Shield of Mich, SE Regio
OFFICERS
MICHAEL J. DEVINE
CHAIRMAN OF THE BOARD
ROBERT C. CARR
VICE CHAIRMAN
JAMES R. KAYE
PRESIDENT & CHIEF EXECUTIVE OFFICER
IHOR J. KUCZER
SENIOR VICE PRESIDENT & SECRETARY
NICOLET B. CASSIDY
VICE PRESIDENT
JAMES F. MILLER
VICE PRESIDENT
THOMAS K. PERKINS
VICE PRESIDENT
23
BOARD OF DIRECTORS [PHOTO OF PARAGON BANK & TRUST]
PAUL R. BALLARD PARAGON BANK & TRUST
EXECUTIVE VICE PRESIDENT
Capitol Bancorp Limited 301 Hoover Boulevard
Holland, MI 49423
ROBERT J. BATES 616.394.9600
PHYSICIAN www.paragonbank.com
Western Michigan Urological Assoc. P.C.
At Paragon Bank & Trust, it is not enough to meet the banking needs of our
CHARLES A. BROWER customers. We also are dedicated to meeting the needs of our community through
CERTIFIED PUBLIC ACCOUNTANT & PARTNER providing financial services, advice and time to people in need:
DeLong & Brower, P.C.
* Two of our employees prepare tax returns free-of-charge for those who are
SCOTT DIEPENHORST unable to complete the appropriate yearly filings.
PRINCIPAL
SD & Associates, Inc. * All of the officers of the Bank are serving the community through many
nonprofit causes such as Community Action House, Latin Americans United for
PAUL ELZINGA Progress, United Way and The Holland Rescue Mission. We also organized a
CHAIRMAN & DIRECTOR OF BUSINESS DEVELOPMENT team of Bank employees to take part in a Walk-a-Thon to benefit the
Elzinga & Volkers, Inc. Juvenile Diabetes Foundation.
JOHN D. GROOTHUIS * The Bank has also supported charitable organizations like the Good
PRESIDENT & CHIEF EXECUTIVE OFFICER Samaritan Center to provide temporary housing to the homeless, and provided
Grand Haven Bank counseling to those in the program that seek employment in the Holland
Area.
JEFFREY K. HELDER
ATTORNEY AT LAW * We provided loans, financial support and expertise to the Children's
Cunningham Dalman, P.C. Assessment Center, a nonprofit corporation that facilitates a
multidisciplinary approach when treating patients who have experienced
LAWRENCE D. KERKSTRA abusive situations.
PRESIDENT & CHIEF EXECUTIVE OFFICER
Kerkstra Precast, Inc. Loans and deposits are important to the Bank, but giving back to the community a
full measure of personal commitment solidifies Paragon Bank & Trust as your full
SCOTT G. KLING service community bank.
PRESIDENT & CHIEF EXECUTIVE OFFICER
Paragon Bank & Trust PROVIDING EXCELLENCE IN RELATIONSHIP BANKING.
LEONARD MAAS /s/ SCOTT R. KLING /s/ RANDALL R. SMITH
PRESIDENT SCOTT R. KLING RANDALL R. SMITH
Gillisse Construction Company PRESIDENT & CHIEF EXECUTIVE OFFICER CHIEF OPERATING OFFICER
[LOGO]
MITCHELL W. PADNOS
EXECUTIVE VICE PRESIDENT
Louis Padnos Iron & Metal Company
HENRI PATERSON
ASSOCIATE BROKER/PARTNER
Woodland Realty, Inc.
RICHARD H. RUCH
DIRECTOR EMERITUS
RICHARD G. SWANEY
ATTORNEY AT LAW
Swaney & Thomas, P.C.
ROBERT J. TRAMERI
CHAIRMAN EMERITUS
Paragon Bank & Trust
OFFICERS
RICHARD G. SWANEY
CHAIRMAN OF THE BOARD
ROBERT J. BATES
VICE CHAIRMAN AND SECRETARY
SCOTT G. KLING
PRESIDENT & CHIEF EXECUTIVE OFFICER
RANDALL R. SMITH
CHIEF OPERATING OFFICER
ERIC J. HOOGSTRA
SENIOR VICE PRESIDENT
MARK D. HOFMEYER
SENIOR VICE PRESIDENT
JANE RIEMERSMA
VICE PRESIDENT
DEAN R. WEERSTRA
VICE PRESIDENT
24
[PHOTO OF PORTAGE COMMERCE BANK] BOARD OF DIRECTORS
PORTAGE COMMERCE BANK PAUL R. BALLARD
EXECUTIVE VICE PRESIDENT
800 East Milham Road Capitol Bancorp Limited
Portage, MI 49002
616.323.2200 DAVID L. BECKER
www.portagecommerce.com DIRECTOR
Becker Insurance Agency, P.C.
Portage Commerce Bank and its employees meet the needs of the community we call THOMAS R. BERGLUND
"home." Our commitment goes far beyond the daily activities conducted at the PHYSICIAN
Bank, to searching for ways in which we can contribute to the well-being of our Portage Physicians
community as a whole. Examples of our efforts include:
ROBERT B. BORSOS
* A specially designed lease-to-purchase program to encourage investor ATTORNEY & SHAREHOLDER
acquisition of 15 homes throughout Kalamazoo County. The goal is to enable Kreis, Enderle, Callander & Hudgins,P.C.
tenants to acquire properties through conventional financing and realize
the dream of home ownership. JOHN M. BRINK
CERTIFIED PUBLIC ACCOUNTANT
* Providing service charge-free accounts to nonprofit organizations so that Brink, Key & Chludzinski, P.C.
the funds they raise may be exclusively dedicated to their missions.
PATRICIA E. DOLAN
* Loaning significant funds to four local churches who have used the money to COMMUNITY VOLUNTEER
either expand their worship facilities or create additional space for area
youth group activities. ALAN A. HALPERN
PHYSICIAN
* Actively participating and contributing to events that help others and Michigan Orthopedic Surgery &
enrich the lives of those in our community. These include record support Rehabilitation, P.C.
from our employees for the United Way, and sponsorships such as our City's
Summer Shakespeare Festival, an international keyboard festival, and a ROBERT L. JOHNSON
Challenger Little League team for mentally and physically disabled RETIRED SECRETARY & TREASURER
children. Medallion Porperities, Inc.
WE APPRECIATE THE OPPORTUNITY TO SERVE OUR COMMUNITY. MICHAEL L. KASTEN
MANAGING PARTNER
/s/ DENNIS J. KUHN Kasten Investments, L.L.C.
DENNIS J. KUHN
PRESIDENT & CHIEF EXECUTIVE OFFICER [LOGO] DENNIS J. KUHN
PRESIDENT & CHIEF EXECUTIVE OFFICER
Portage Commerce Bank
PAUL M. LANE
PROFESSOR OF MARKETING
Seidman School of Business
Grand Valley State University
WILLIAM J. LONGJOHN
RETIRED VICE PRESIDENT
Midwest Business Exchange
JOHN W. MARTENS
CERTIFIED PUBLIC ACCOUNTANT
RUSSELL M. RATHBURN
PRESIDENT & OWNER
Rathco Safety Supply, Inc.
OFFICERS
MICHAEL L. KASTEN
CHAIRMAN OF THE BOARD
WILLIAM J. LONGJOHN
VICE CHAIRMAN & SECRETARY
DENNIS J. KUHN
PRESIDENT & CHIEF EXECUTIVE OFFICER
ALLAN T. REIFF
SENIOR VICE PRESIDENT
KENNETH R. BLOUGH
VICE PRESIDENT
ROY L. DANGEL, JR.
VICE PRESIDENT
KIMBERLEE M. FERRIS
VICE PRESIDENT
CHERYL M. GERMAIN
VICE PRESIDENT AND CASHIER
ALBERT C. GRANT
VICE PRESIDENT
JAMES V. LUNARDE
VICE PRESIDENT
BETH A. WRIGHT
VICE PRESIDENT
25
BOARD OF DIRECTORS [PHOTO OF RED ROCK COMMUNITY BANK]
ERIC L. COLVIN RED ROCK COMMUNITY BANK
SECRETARY & TREASURER
Marnell Corrao Association, Inc. 10000 West Charleston, Suite 100
Las Vegas, NV 89135
MICHAEL J. DEVINE 702.948.7500
ATTORNEY AT LAW www.redrockcommunity.com
MOLLY K. HAMRICK As a corporate partner of the Summerlin community and the Las Vegas Valley as a
VICE PRESIDENT & CHIEF FINANCIAL OFFICER whole, it has become part of our mission to touch people's lives in many ways.
Coldwell Banker Premier Realty Part of our success is measured by our response to our customers, which includes
creating new ways to interact with them.
PHILIP G. HARDY, JR.
VICE PRESIDENT Our commitment to community service is one of the best ways for us to
Hardy Painting & Drywall communicate our core values. Time honored values of personal service, honesty,
trustworthiness and treating others with respect and integrity are inherent in
JAMES A. HARRIS our banking philosophy. It's this commitment that has Red Rock Community Bank
VICE PRESIDENT active in the affairs of the following events and organizations:
Brown & Brown Insurance
* Annual Red Rock National Recreation Area Clean-up. Our involvement in this
KATHRYN D. JUSTYN effort helps preserve the natural setting of the RRNRA so that it can be
CHIEF EXECUTIVE OFFICER enjoyed by future generations.
Summerlin Hospital
* Summerlin Turkey Trot. For the past two years, we've sponsored this
KEITH W. LANGLANDS Thanksgiving time event to help raise funds for The Ronald McDonald House
PARTNER charities.
Langlands and Anaya Limited
* Financial contributions. This past year, in conjunction with our Board of
CHARLES L. LASKY Directors, the Bank made financial contributions to some of Southern
PRESIDENT Nevada's worthiest causes like American Red Cross, Women's Development
Lasky Fifarek & Hogan P.C. Center, Boy Scouts of America, Big Brothers Big Sisters, and Candlelighters
for Childhood Cancer.
STEVEN E. MALLORY
PRESIDENT Now more than ever, we need to foster personal connections and relationships
Red Rock Community Bank with our customers outside the traditional roles of banking. It's this focus,
and our service to the Summerlin community, that sets us apart as a bank that
THOMAS C. MANGIONE lives its mission and builds its brand - one relationship at a time.
PRESIDENT & CHIEF OPERATING OFFICER
Nevada Community Bancorp Limited PART OF THE SUMMERLIN LANDSCAPE.
JIM MOORE /s/ STEVEN E. MALLORY
CHIEF EXECUTIVE OFFICER STEVEN E. MALLORY
The Developers of Nevada [LOGO] PRESIDENT
JOSEPH D. REID III
CORPORATE COUNSEL
Capitol Bancorp Limited
JOHN STUART
PRESIDENT
Tartan Consultants, Ltd.
JOHN CHRISTOPHER STUHMER
CHIEF EXECUTIVE OFFICER
Christopher Homes
FREDERICK P. WAID
PRINCIPAL
SBG Group L.L.C.
OFFICERS
THOMAS C. MAGIONE
CHAIRMAN OF THE BOARD
CHARLES L. LASKY
SECRETARY
STEVEN E. MALLORY
PRESIDENT
JAMES F. WOJEWODKA
EXECUTIVE VICE PRESIDENT & CHIEF CREDIT
OFFICER
MARY E. DAVIS
SENIOR VICE PRESIDENT
SHAHZAD ALI
SENIOR VICE PRESIDENT
MICHAEL R. BEAL
VICE PRESIDENT
SUSAN E. DALEIDEN
VICE PRESIDENT
SARAH S. GUINDY
VICE PRESIDENT
JOEY E. JOHNSON
VICE PRESIDENT
BRENT D. KAMERATH
VICE PRESIDENT
26
[PHOTO OF SOUTHERN ARIZONA COMMUNITY BANK] BOARD OF DIRECTORS
SOUTHERN ARIZONA COMMUNITY BANK WILLIAM R. ASSENMACHER
PRESIDENT
6400 North Oracle Road T.A. Caid Industries, Inc.
Tucson, AZ 85704
520.219.5000 JODY A. COMSTOCK, M.D.
www.southernarizonabank.com PHYSICIAN & OWNER
Skin Spectrum
Community banking is a tried and true concept. Why return to banking the "old"
way? Because our customers want a connection to their bank's president, officers MICHAEL J. DEVINE
and staff. We at Southern Arizona Community Bank partner with our customers. We ATTORNEY AT LAW
help them grow their businesses. Ultimately, they employ more people and use
local suppliers and contractors as they expand. We make our resources available ROBERT A. ELLIOTT
to nonprofits, minority businesses and individuals. Examples of Southern Arizona PRESIDENT & OWNER
Community Bank's commitment to community are varied. We: The Elliott Accounting Group
* Provided the financial resources necessary for a local company to assist in BRIAN K. ENGLISH
the renovation of the Pentagon following the September 11, 2001 terrorist GENERAL COUNSEL
attack. Capitol Bancorp Limited
* Participated in a 90+ unit residential development in Tucson's inner city. MICHAEL L. KASTEN
We collaborated with a local developer and a utility company to fund MANAGING PARTNER
energy-efficient housing and help revitalize downtown Tucson. Kasten Investments, L.L.C.
* Allocated financial resources necessary for a minority-owned engineering YORAM LEVY
firm to assist in its continued growth and expansion into Yuma and Phoenix. PROJECT MANAGER
Diamond Ventures, Inc.
* Developed and delivered a financial education program for new medical
residents enrolling in the University of Arizona internship program. JOHN P. LEWIS
PRESIDENT
Additionally, our bank officers contribute their time and expertise to several Southern Arizona Community Bank
worthwhile nonprofits. Those organizations benefiting from their personal time
include: the Tucson YMCA Youth Foundation; One-on-One Partners, a nonprofit JIM LIVENGOOD
organization whose mission includes mentoring youth; and, The Pima Community DIRECTOR OF ATHLETICS
College Entrepreneur Program, an intensive 12-week training for owners of small University of Arizona
to medium-sized businesses. Southern Arizona Community Bank continues to operate
the old-fashioned way--with genuine, in-person banking. JAMES A. MATHER
C.P.A. & ATTORNEY AT LAW
EVERYTHING OLD IS NEW AGAIN.
MORGAN NORTH
/s/ JOHN P. LEWIS PRESIDENT & OWNER
JOHN P. LEWIS Borderland Construction Company, Inc.
PRESIDENT [LOGO]
JAMES SAKRISON
PRINCIPAL
Slutes, Sakrison, & Hill, P.C.
PAUL A. ZUCARELLI
PRESIDENT
Gordon, Zucarelli & Handley Insurance
OFFICERS
PAUL A. ZUCARELLI
CHAIRMAN OF THE BOARD
MICHAEL L. KASTEN
VICE CHAIRMAN
ROBERT A. ELLIOT
SECRETARY
JOSEPH D. REID
CHIEF EXECUTIVE OFFICER
JOHN P. LEWIS
PRESIDENT
MICHAEL J. TRUEBA
EXECUTIVE VICE PRESIDENT & CHIEF CREDIT OFFICER
TERESA R. GOMEZ
VICE PRESIDENT
JEAN M. GRIFFIN-GETEK
VICE PRESIDENT
MINDY C. WEBB
VICE PRESIDENT
27
BOARD OF DIRECTORS [PHOTO OF SUNRISE BANK OF ALBUQUERQUE]
FREDERICK D. BERNSON SUNRISE BANK OF ALBUQUERQUE
PRESIDENT
Sunrise Bank of Albuquerque 225 Gold SW
Albuquerque, NM 87102
STEVE BLACK 505.243.3388
PRESIDENT, CALIFORNIA REGION www.sunrisebankofalbuquerque.com
Sunrise Capital Corporation
At Sunrise Bank of Albuquerque, becoming part of the community and working to
TURNER W. BRANCH improve banking services to small businesses and working professionals, was part
Branch Law Firm, P.A. of our mission when we were formed two years ago. This dedication to community
involvement and superior service continues today. We:
DAVID J. DANIEL
EXECUTIVE VICE PRESIDENT * Selected a downtown Albuquerque location in 1999 and invested in
Sunrise Bank of Albuquerque improvements at a time when a major revitalization of historic downtown
Albuquerque was just beginning. As the only Bank located in the downtown
HELEN ELLIOTT redevelopment district, we have become part of a significant renovation
CERTIFIED PUBLIC ACCOUNTANT process that now includes a new 14-screen theater and a major new
Helen Elliott & Associates P.C. transportation center within a two-block radius.
E. GARY FICHTNER * Actively participate in the development of the arts scene in downtown
Esthetic Dental Arts, Inc. Albuquerque through Magnifico!, Albuquerque's designated arts organization.
DONALD E. FRY * At the request of our physically-challenged customers, provided a loan to
UNM-School of Medicine the only technician in Albuquerque who provides equipment to, and services,
their special equipment needs when Medicare payments are delayed.
WILLIAM D. HINZ, II
PRESIDENT * Have an employee that spends her winter weekends in the Adaptive Ski
Sunrise Bank of Arizona Program to provide free skiing instruction for disabled adults and
children.
JOHN R. LEWINGER
CHIEF EXECUTIVE OFFICER * Operate as a resource to individuals and couples through the Credit Women's
Grubb & Ellis/Lewinger Hamilton Professionals organization. At an individual's request, we instruct them in
how to obtain loans and further understand loan transactions. We often
RANDY E. WHITEHEAD attend their closings.
PRESIDENT
New Mexico Coffee Company SMALLER BANK. BIGGER SERVICE.(TM)
/s/ FREDERICK D. BERNSON
OFFICERS FREDERICK D. BERNSON
[LOGO] PRESIDENT
JOSEPH D. REID
CHAIRMAN
WILLIAM D. HINZ, II
CHIEF EXECUTIVE OFFICER
FREDERICK D. BERNSON
PRESIDENT
DAVID J. DANIEL
EXECUTIVE VICE PRESIDENT, SECRETARY & CHIEF
CREDIT OFFICER
CONNI L. JONES
VICE PRESIDENT & OPERATIONS MANAGER
JOAN ARCHIBEQUE
VICE PRESIDENT
28
[PHOTO OF SUNRISE BANK OF ARIZONA] BOARD OF DIRECTORS
SUNRISE BANK OF ARIZONA SANDY A. ABALOS
PRESIDENT
4350 East Camelback Road, Suite 100A Abalos & Associates, P.C.
Phoenix, AZ 85018
602.956.6250 MICHAEL R. ALLEN
www.sunrisebankofarizona.com PRESIDENT
Sureway Properties
At Sunrise Bank of Arizona, giving back to the community is important to us;
thus we make active involvement our priority. We are proud to be an integral JAMES P. DEW
part of our community. We have committed to it in the following ways: PRESIDENT
Dew Wealth Management
* The Bank is proud to have been the number one SBA 504 lender in Arizona.
Twenty 504 loans totaling more than $16 million were made, which created or MICHAEL J. DEVINE
retained 295 jobs. ATTORNEY AT LAW
* We adopted the Arcadia neighborhood and sponsored numerous events for the BRIAN K. ENGLISH
families who live there. Three Bank employees participated in the Arcadia GENERAL COUNSEL
Pride Golf Tournament and one employee became treasurer of the Arcadia Capitol Bancorp Limited
Little League.
HOWARD J. HICKEY III
* We donated Arizona Diamondback tickets to charities including Kivel Care, EXECUTIVE VICE PRESIDENT
Esperanca, and Golden Gate Community Center. These organizations raffled Sunrise Bank of Arizona
them off at their annual charity events to raise money to support their
causes. WILLIAM D. HINZ, II
PRESIDENT
* Several Bank employees were active supporters of the Metropolitan Phoenix Sunrise Bank of Arizona
Boys and Girls Club programs. In addition to serving on their Executive
Council, Bank employees participated in the Shopping for Kids program, a MICHAEL L. KASTEN
golf tournament, and a wine tasting fundraising event. MANAGING PARTNER
Kasten Investments, L.L.C.
* Ten Bank employees competed as a team in "Brokers for Kids," an annual
Olympiad competition organized by the local real estate community. Events KEVIN B. KINERK
included volleyball, basketball, horseshoes, and bocci ball. All of the EXECUTIVE VICE PRESIDENT
money raised went to support numerous children's charities in the valley. Sunrise Bank of Arizona
* The bank was recognized "SBA Lender of the Year" and "Bank of the Year" by GERALD D. PAQUETTE
Ranking Arizona. Recipients of this prestigious award are chosen by local PARTNER/LABORER
citizens based upon their contributions to the community. Caliber Construction, Inc.
BRINGING THE RELATIONSHIP BACK TO BANKING JOSEPH D. REID
CHAIRMAN & CHIEF EXECUTIVE OFFICER
/s/ WILLIAM D. HINZ, II Capitol Bancorp Limited
WILLIAM D. HINZ, II Sun Community Bancorp
PRESIDENT [LOGO]
MARK STEIG
ORTHODONTIST
Mark Steig, DDS, MS
MEYER TURKEN
PRESIDENT
Turken Industrial Properties
OFFICERS
JOSEPH D. REID
CHAIRMAN & CHIEF EXECUTIVE OFFICER
MICHAEL L. KASTEN
VICE CHAIRMAN
WILLIAM D. HINZ, II
PRESIDENT
HOWARD J. HICKEY, III
EXECUTIVE VICE PRESIDENT & SECRETARY
KEVIN B. KINERK
EXECUTIVE VICE PRESIDENT
DOUGLAS N. REYNOLDS
VICE PRESIDENT & CHIEF CREDIT OFFICER
MARIAN B. CREEL
VICE PRESIDENT
JAMES A. SELLICK
VICE PRESIDENT
29
BOARD OF DIRECTORS [PHOTO OF SUNRISE BANK OF SAN DIEGO]
RICHARD A. BYER SUNRISE BANK OF SAN DIEGO
PRESIDENT
Bycor General Contractor 4570 Executive Drive, Suite 110
San Diego, CA 92121
CRAIG V. CASTANOS 858.625.9050
OWNER www.sunrisebanksandiego.com
Craig V. Castanos,
Certified Public Accountant At Sunrise Bank there is a well recognized slogan that is promoted throughout
the Bank - "STAY THE COURSE." The "course" is our day-to-day attitude and
RANDALL S. CUNDIFF actions that contribute to the primary goal of providing unparalleled service to
PRESIDENT our community.
Sunrise Bank of San Diego
In 2001 we:
LESLIE JANE HAHN
PARTNER * Were honored as the year's "EMERGING SMALL BUSINESS 504 LENDER(TM)," San
Hahn & Burnett, AP.C. Diego District Office for our exemplary service in Small Business Lending
and Community Development.
WILLIAM D. HINZ, II
PRESIDENT * Provided SBA financing for a minority, female dentist to expand her
Sunrise Bank of Arizona practice and provide services into a low-income area.
JOHN S. LEWIS * Provided financing for a local plastic surgeon, who donates substantial
PRESIDENT time and money performing cleft pallet and burn reconstruction surgery in
Sun Community Bancorp Limited Tijuana, Mexico.
TOBY T. MACFARLANE Officers and employees of the Bank participated in:
SENIOR VICE PRESIDENT
United Title Company * Boys and Girls Club of San Dieguito's annual "Bucks for Boys and Girls" and
helped raise over $140,000 to sponsor youth activities.
ROBERT J. MATKOVICH
Robert J. Matkovich, DDS, Inc. * "Light the Night" annual walkathon fund-raiser to fight leukemia and
lymphoma cancers.
JOHN F. MCCOLL
MANAGING DIRECTOR * The After School Tennis program as part of Volunteer San Diego, providing a
Sentre Partners safe haven for kids.
JAMES L. MCCULLOUGH Our strength and purpose are enhanced by the synergy of our staff and community.
ENTREPRENEUR Our purpose remains, building partnerships with San Diego's business community
and leaders. We remain committed to our community and we will...
RONALD D. MCMAHON
PRESIDENT STAY THE COURSE.
McMahon Development Group, L.L.C.
JOHN M. ROONEY /s/ RANDALL S. CUNDIFF
PRESIDENT RANDALL S. CUNDIFF
Torrey Financial Group [LOGO] PRESIDENT
STEVE SATO
ENTREPRENEUR
RANDE H. TURNER
PRESIDENT
T2 Ventures
OFFICERS
JOHN S. LEWIS
CHAIRMAN & CHIEF EXECUTIVE OFFICER
WILLIAM D. HINZ, II
VICE CHAIRMAN
RANDALL S. CUNDIFF
PRESIDENT & SECRETARY
SUZANNE K. GREGORY
EXECUTIVE VICE PRESIDENT & CHIEF
CREDIT OFFICER
BETTY B. BARK
VICE PRESIDENT
TIMOTHY M. HIMSTREET
VICE PRESIDENT
JOSEPH L. KENNEDY
VICE PRESIDENT
30
[PHOTO OF VALLEY FIRST COMMUNITY BANK] BOARD OF DIRECTORS
VALLEY FIRST COMMUNITY BANK W. CRAIG BERGER
CLU & CHFC
7501 East McCormick Parkway, North Court, Suite 105 N Spence, Driscoll & Company
Scottsdale, AZ 85258
480.596.0883 KATHRYN H. CAMPANA
www.valleyfirstbank.com FORMER MAYOR
City of Scottsdale
Community Service is an integral part of Valley First Community Bank's mission
statement. We believe in supporting the communities we serve, as evidenced by MARILYN D. CUMMINGS
the following programs: REALTOR
Russ Lyon Realty Company
* A unique Holiday Doll and Toy program - bank customers, friends, and staff
take unclothed dolls and wooden toy kits purchased by the Bank, clothe the MICHAEL J. DEVINE
dolls, and assemble and paint the trains and planes, so Santa can ATTORNEY AT LAW
distribute them to local charities sponsored by the Bank;
JUDITH R. EGAN
* Mother's Day at the Chrysalis Shelter (a domestic violence program) - Bank CHIEF OPERATING OFFICER
sponsored career day counselors help the women with their appearance and Valley First Community Bank
job search activities;
WILLIAM R. FITZPATRICK
* YMCA Youth Camp fundraiser - the Bank is a member of the prestigious CERTIFIED PUBLIC ACCOUNTANT
President's Club due to the amount of money raised; Fitzpatrick, Hopkins,
Kelly & Leonhard, PLC
* Bank promotion of education training in Scottsdale schools on saving,
budgeting, and using credit carefully; STEVEN M. GOLDSTEIN
ATTORNEY AT LAW
* Entrepreneur's Business Council - we established this group of 12 local Sacks Tierney, P.A. Lawyers
business owners to provide feedback and suggestions on how we may better
serve our customers and our community; ROSS HALLIDAY, M.D.
Institute for Bone & Joint Disorders
* Quarterly Business Forums - in partnership with our Entrepreneur's Business
Council, we host a quarterly business forum for small business owners in GARY W. HICKEL
our community, where we provide educational seminars on banking and PRESIDENT
finance-related topics. Valley First Community Bank
Community service is something we believe in and practice every day at Valley MICHAEL L. KASTEN
First Community Bank. MANAGING PARTNER
Kasten Investments, L.L.C.
OUR BUSINESS IS HELPING YOUR BUSINESS TO GROW!
DONALD J. MAHONEY
/s/ GARY W. HICKEL /s/ JUDITH R. EGAN MANAGING DIRECTOR
GARY W. HICKEL JUDITH R. EGAN Trammell Crow Company
PRESIDENT CHIEF OPERATIING OFFICER [LOGO]
GORDON D. MURPHY
CHAIRMAN EMERITUS
Esperanca, Inc.
HARRY ROSENZWEIG, JR.
CO-OWNER
Harry's Fine Jewelry
PATRICIA B. TERNES, CFP
VICE PRESIDENT
Dain Rauscher Incorporated
OFFICERS
GORDON D. MURPHY
CHAIRMAN OF THE BOARD
MICHAEL J. DEVINE
VICE CHAIRMAN
HARRY ROSENZWEIG, JR.
SECRETARY
JOSEPH D. REID
CHIEF EXECUTIVE OFFICER
GARY W. HICKEL
PRESIDENT
JUDITH R. EGAN
CHIEF OPERATING OFFICER
DAVID D. FORTUNE
EXECUTIVE VICE PRESIDENT & CHIEF CREDIT
OFFICER
JEFFREY S. BIRKELO
VICE PRESIDENT
JEFFREY L. LE BAR
VICE PRESIDENT
LANCE K. WISE
VICE PRESIDENT
31
BOARD OF DIRECTORS [PHOTO OF YUMA COMMUNITY BANK]
BRUCE I. ASH YUMA COMMUNITY BANK
VICE PRESIDENT
Paul Ash Management, L.L.C. 454 West Catalina Drive
Yuma, AZ 85365
STEVEN M. BINKLEY, JR. 928.782.7000
SW DIVISION MANAGER www.yumabank.com
Arizona Public Service Company
During the formation of Yuma Community Bank, selecting the Bank name was of
KATHERINE M. BRANDON primary importance. Communities are structurally and functionally oriented
PRESIDENT around the social institutions which characterize human society: family, health,
Yuma Community Bank church, education, economic activities, recreation, government, and welfare. A
simple community need not have all institutions common to the society, but most
RAYMOND R. CORONA of them must be present and functioning adequately enough to satisfy the
OPTOMETRIST AND PRESIDENT community's needs, or it will disintegrate. Hence, our name tells the story.
Corona Optique Yuma Community Bank embraces the philosophy of meeting and serving the
community's needs.
JULI JESSEN
CHIEF OPERATING OFFICER * Members of our board of directors not only fully support this philosophy,
Gowan Company they also live it by serving in leadership positions on the boards of Yuma
Regional Medical Center, Arizona Western College Foundation, the Greater
RAM R. KRISHNA Yuma Economic Development Corporation, Yuma Elementary School District,
PHYSICIAN AND PRESIDENT Boys and Girls Club of Yuma and many, many more.
Ram R. Krishna, M.D., P.C.
* We were pleased to be the lender which allowed Yuma Community Food Bank to
JOHN T. OSTERMAN renovate an 81,000 square-foot facility gifted to them, for their new
PRESIDENT office and warehousing facility.
Osterman Financial Group
* Assisted a long time farming company in financing living facilities for
DAVID SELLERS their seasonal farm laborers.
PRESIDENT
Sellers Petroleum Products, Inc. Our expectations are to build on our first year with continuing community
service. Yuma Community Bank is honored to share the same name as our community.
CARYL L. STANLEY
PARTNER
Costen-Stanley Company
JOHN R. STERNITZKE PUTTING YUMA FIRST.
PRESIDENT
Sternco Engineers, Inc. /s/ KATHERINE M. BRANDON
KATHERINE M. BRANDON
PAMELA K. WALSMA [LOGO] PRESIDENT
ATTORNEY AT LAW
Westover, Shadle, Carter & Walsma, PLC
RONALD S. WATSON
BROKER/OWNER
Era Matt Fischer Realtor
LENN ZAZULA
EXECUTIVE VICE PRESIDENT
Sun Community Bancorp Limited
OFFICERS
RONALD S. WATSON
CHAIRMAN OF THE BOARD
RAM R. KRISHNA, M.D.
VICE CHAIRMAN
JOSEPH D. REID
CHIEF EXECUTIVE OFFICER
PAMELA K. WALSMA
SECRETARY
KATHERINE M. BRANDON
PRESIDENT
GEORGE E. WHITMER
EXECUTIVE VICE PRESIDENT &
CHIEF CREDIT OFFICER
SANDRA K. DUNCAN
VICE PRESIDENT
KARI M. REILY
VICE PRESIDENT
THERESA N. WINE
VICE PRESIDENT
32
CAPITOL BANCORP LIMITED
200 Washington Square North
Lansing, MI 48933
517.487.6555
www.capitolbancorp.com