- Amended Quarterly Report (10-Q/A)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

Amendment No. 1

T	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2009
	OR
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ________________ to ________________

Commission file number: 001-31708

CAPITOL BANCORP LTD.

(Exact name of registrant as specified in its charter)

Michigan		38-2761672
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)
Capitol Bancorp Center
200 N. Washington Square
Lansing, Michigan		48933
(Address of principal executive offices)		(Zip Code)

(517) 487-6555

(Registrant's telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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 T

No £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £

No T

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class		Outstanding at April 17, 2009
Common Stock, No par value		17,289,974 shares

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( § 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes £

No T

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer £			Accelerated filer T
Non-accelerated filer £ (Do not check if a smaller reporting company)			Smaller reporting company £

Page 1 of 35

Explanatory Note

Capitol is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q to revise its unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2009 that were part of Form 10-Q that Capitol filed with the Securities and Exchange Commission (SEC) on April 30, 2009.

This Amendment No. 1 reflects revised interpretation of fair-value accounting guidance (FSP FAS 157-4) to properly base fair-value estimates of collateral-dependent loans and other real estate owned upon appraisal data rather than use of alternative valuation methods. FAS 157-4 was implemented in error for the period ended March 31, 2009, as disclosed in Capitol's 2009 Annual Report on Form 10-K.

When Capitol initially implemented FSP FAS 157-4 for the three months ended March 31, 2009, management made significant adjustments to appraisal data and used some alternative valuation methods, reducing estimated losses relating to fair value by $8 million. As 2009 progressed, additional regulatory guidance suggested that substantially all such fair value estimates should be based solely upon appraisal data rather than use of alternative valuation methods. As of December 31, 2009, substantially all fair value estimates for collateral-dependent loans and other real estate owned were based solely on appraisal data.

The information in this Amendment No. 1 not only revises the unaudited condensed consolidated financial statements that were contained in the originally-filed Form 10-Q for the three months ended March 31, 2009, but also amends other information in that Form 10-Q affected by the revision described above. Therefore, this Amendment No. 1 should be read together with the originally-filed Form 10-Q. Furthermore, this Amendment No. 1 does not reflect events occurring after the filing of the originally-filed Form 10-Q or update information or disclosures contained in the originally-filed Form 10-Q that were not affected by the revision described above. Accordingly, this Amendment No. 1 also should be read in conjunction with subsequent filings of financial information by Capitol relating to its financial position and results of operations for the year ended December 31, 2009, as information in such subsequent filings may update or supersede certain information contained in this Amendment No. 1 to Form 10-Q.

The following items of the originally-filed Form 10-Q for the period ended March 31, 2009 have been revised:

Part I – Financial Information:

Item 1 – Financial Statements (unaudited)

Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations

In addition, as required by Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, updated certifications by our principal executive officer and principal financial officer are filed herewith as Exhibit 31.1, Exhibit 31.2, Exhibit 32.1 and Exhibit 32.2 to this Amendment No. 1 on Form 10-Q which are currently dated April 27, 2010.

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Page 2 of 35

INDEX

PART I. FINANCIAL INFORMATION

Forward-Looking Statements

Certain of the statements contained in this document, including Capitol's consolidated financial statements, Management's Discussion and Analysis of Financial Condition and Results

of Operations and in documents incorporated into this document by reference that are not historical facts, including, without limitation, statements of future expectations, projections of results of operations and financial condition, statements of future economic performance and other 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," "believe," and similar expressions also are intended to 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 and access to 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) availability of funds under the U.S. Treasury ' s Capital Purchase Program, (xii) changes in management, and (xiii) other risks detailed in Capitol's other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should 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.

Item 1.	Financial Statements (unaudited):	Page
	Condensed consolidated balance sheets – March 31, 2009 and December 31, 2008.	4
	Condensed consolidated statements of operations – Three months ended March 31, 2009 and 2008.	5
	Condensed consolidated statements of changes in equity – Three months ended March 31, 2009 and 2008.	6
	Condensed consolidated statements of cash flows – Three months ended March 31, 2009 and 2008.	7
	Notes to condensed consolidated financial statements.	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	32
Item 4.	Controls and Procedures.	32

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings.	33
Item 1A.	Risk Factors.	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	33
Item 3.	Defaults Upon Senior Securities.	33
Item 4.	Submission of Matters to a Vote of Security Holders.	33
Item 5.	Other Information.	33
Item 6.	Exhibits.	33

SIGNATURES		34

EXHIBIT INDEX		35

Page 3 of 35

PART I, ITEM 1

CAPITOL BANCORP LIMITED
Condensed Consolidated Balance Sheets
As of March 31, 2009 and December 31, 2008
(in thousands, except share data)

		(Unaudited)
		March 31, 2009			December 31, 2008
		(As Revised--Note H)
ASSETS
Cash and due from banks		$	116,212		$	136,499
Money market and interest-bearing deposits			601,650			391,836
Federal funds sold			43,413			96,031
	Cash and cash equivalents		761,275			624,366
Loans held for sale			24,979			10,474
Investment securities -- Note C:
Available for sale, carried at market value			16,093			15,584
Held for long-term investment, carried at
amortized cost which approximates fair value			32,754			32,856
	Total investment securities		48,847			48,440
Portfolio loans:
Loans secured by real estate:
Commercial			2,147,361			2,115,515
Residential (including multi-family)			909,977			879,754
Construction, land development and other land			727,845			797,486
	Total loans secured by real estate		3,785,183			3,792,755
Commercial and other business-purpose loans			814,869			845,593
Consumer			56,810			61,340
Other			32,711			35,541
	Total portfolio loans		4,689,573			4,735,229
Less allowance for loan losses			(99,629	)		(93,040	)
	Net portfolio loans		4,589,944			4,642,189
Premises and equipment			56,975			59,249
Accrued interest income			18,346			18,871
Goodwill			72,270			72,342
Other real estate owned			84,885			67,171
Other assets			120,085			111,734

TOTAL ASSETS		$	5,777,606		$	5,654,836

LIABILITIES AND EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing		$	689,815		$	700,786
Interest-bearing			4,016,747			3,796,826
	Total deposits		4,706,562			4,497,612
Debt obligations:
Notes payable and short-term borrowings			392,420			446,925
Subordinated debentures -- Note G			167,330			167,293
	Total debt obligations		559,750			614,218
Accrued interest on deposits and other liabilities			26,684			29,938
	Total liabilities		5,292,996			5,141,768

EQUITY:
Capitol Bancorp Limited stockholders' equity:
Preferred stock, 20,000,000 shares authorized;
none issued and outstanding
Common stock, no par value, 50,000,000 shares authorized;
issued and outstanding: 2009 - 17,290,623 shares
2008 - 17,293,908 shares			274,178			274,018
Retained earnings			58,744			80,255
Undistributed common stock held by employee-benefit trust			(569	)		(569	)
Fair value adjustment (net of tax effect) for investment
securities available for sale (accumulated other
comprehensive income)			136			144
Total Capitol Bancorp Limited stockholders' equity			332,489			353,848
Noncontrolling interests			152,121			159,220
	Total equity		484,610			513,068

TOTAL LIABILITIES AND EQUITY		$	5,777,606		$	5,654,836

See notes to condensed consolidated financial statements.

Page 4 of 35

CAPITOL BANCORP LIMITED
Condensed Consolidated Statements of Operations (Unaudited)
For the Three Months Ended March 31, 2009 and 2008
(in thousands, except per share data)

	2009			2008
Interest income:	(As Revised--Note H)
Portfolio loans (including fees)	$	68,076		$	77,331
Loans held for sale		217			300
Taxable investment securities		152			133
Federal funds sold		35			1,213
Other		236			526
Total interest income		68,716			79,503
Interest expense:
Deposits		24,872			30,688
Debt obligations and other		6,387			6,880
Total interest expense		31,259			37,568
Net interest income		37,457			41,935
Provision for loan losses		33,916			8,958
Net interest income after provision for loan losses		3,541			32,977
Noninterest income:
Service charges on deposit accounts		1,502			1,333
Trust and wealth-management revenue		1,388			1,645
Fees from origination of non-portfolio residential mortgage loans		902			921
Gain on sales of government-guaranteed loans		240			580
Realized gains on sale of investment securities available for sale		1			43
Other		924			2,043
Total noninterest income		4,957			6,565
Noninterest expense:
Salaries and employee benefits		29,053			25,548
Occupancy		4,891			4,404
Equipment rent, depreciation and maintenance		3,433			2,866
Costs associated with foreclosed properties and other real
estate owned		4,359			911
FDIC insurance premiums and other regulatory fees		2,114			937
Other		8,097			10,139
Total noninterest expense		51,947			44,805
Loss before income taxes		(43,449	)		(5,263	)
Income taxes benefit		(15,542	)		(1,995	)
NET LOSS		(27,907	)		(3,268	)
Less net losses attributable to noncontrolling interests		7,233			5,459

NET INCOME (LOSS) ATTRIBUTABLE TO
CAPITOL BANCORP LIMITED	$	(20,674	)	$	2,191

NET INCOME (LOSS) PER SHARE ATTRIBUTABLE
TO CAPITOL BANCORP LIMITED -- Note F:
Basic	$	(1.20	)	$	0.13

Diluted	$	(1.20	)	$	0.13

See notes to condensed consolidated financial statements.

Page 5 of 35

CAPITOL BANCORP LIMITED

Condensed Consolidated Statements of Changes in Equity (Unaudited)

For the Three Months Ended March 31, 2009 and 2008

(in thousands, except share and per share data)

	Capitol Bancorp Limited Stockholders' Equity
								Undistributed						Total Capitol
								Common Stock			Accumulated			Bancorp
								Held by			Other			Limited
	Common				Retained			Employee-			Comprehensive			Stockholders'			Noncontrolling			Total
	Stock				Earnings			Benefit Trust			Income			Equity			Interests			Equity

Three Months Ended March 31, 2008

Balances at January 1, 2008		$	272,208		$	117,520		$	(586	)	$	3		$	389,145		$	156,198		$	545,343

Noncontrolling investment in formation of subsidiaries																		13,786			13,786

Issuance of 3,174 shares of common stock upon exercise
of stock options			54												54						54

Surrender of 13,489 shares of common stock to facilitate
vesting of restricted stock			(271	)											(271	)					(271	)

Issuance of 12,812 unvested shares of restricted common
stock, net of related unearned employee compensation
and 2,000 forfeited shares			--												--						--

Recognition of compensation expense relating to restricted
common stock and stock options			589												589						589

Tax benefit from share-based payments			(4	)											(4	)					(4	)

Transfer of 205 shares to employee stock ownership plan			(2	)					6						4						4

Cash dividends paid ($0.25 per share)						(4,330	)								(4,330	)					(4,330	)

Components of comprehensive loss:
Net income (loss)						2,191									2,191			(5,459	)		(3,268	)
Fair value adjustment for investment securities
available for sale (net of income tax effect)												55			55						55
Comprehensive loss																					(3,213	)

BALANCES AT MARCH 31, 2008		$	272,574		$	115,381		$	(580	)	$	58		$	387,433		$	164,525		$	551,958

Three Months Ended March 31, 2009 (As Revised--Note H)

Balances at January 1, 2009		$	274,018		$	80,255		$	(569	)	$	144		$	353,848		$	159,220		$	513,068

Sale of subsidiary shares to noncontrolling interests						27									27			134			161

Surrender of 3,285 shares of common stock to facilitate
vesting of restricted stock			(19	)											(19	)					(19	)

Recognition of compensation expense relating to restricted
common stock and stock options			283												283						283

Tax benefit from share-based payments			(104	)											(104	)					(104	)

Cash dividends paid ($0.05 per share)						(864	)								(864	)					(864	)

Components of comprehensive loss:
Net loss						(20,674	)								(20,674	)		(7,233	)		(27,907	)
Fair value adjustment for investment securities
available for sale (net of income tax effect)												(8	)		(8	)					(8	)
Comprehensive loss															(20,682	)					(27,915	)

BALANCES AT MARCH 31, 2009		$	274,178		$	58,744		$	(569	)	$	136		$	332,489		$	152,121		$	484,610

See notes to condensed consolidated financial statements.

Page 6 of 35

CAPITOL BANCORP LTD.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2009 and 2008
(in thousands)

	2009			2008
	(As Revised--Note H)
OPERATING ACTIVITIES
Net loss	$	(27,907	)	$	(3,268	)
Adjustments to reconcile net loss to net cash used
by operating activities:
Provision for loan losses		33,916			8,958
Depreciation of premises and equipment		2,965			2,450
Amortization of intangibles		122			113
Net amortization (accretion) of investment security
premiums (discounts)		(20	)		10
Loss on sale of premises and equipment		16			4
Gain on sales of government-guaranteed loans		(240	)		(580	)
Realized gains on sales of investment securities available
for sale		(1	)		(43	)
Loss on sale of other real estate owned		500			5
Write-downs of other real estate owned		3,880			714
Amortization of issuance costs of subordinated debentures		37			23
Share-based compensation expense		283			589
Originations and purchases of loans held for sale		(79,757	)		(51,216	)
Proceeds from sales of loans held for sale		65,252			50,414
Increase in accrued interest income and other assets		(7,329	)		(7,764	)
Decrease in accrued interest expense on deposits and
other liabilities		(3,254	)		(1,387	)

NET CASH USED BY OPERATING ACTIVITIES		(11,537	)		(978	)

INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale					883
Proceeds from calls, prepayments and maturities of investment
securities		5,085			7,862
Purchases of investment securities		(5,884	)		(7,111	)
Net increase in portfolio loans		(7,263	)		(166,209	)
Proceeds from sales of premises and equipment		29			6
Purchases of premises and equipment		(736	)		(2,440	)
Proceeds from sale of other real estate owned		3,738			1,806

NET CASH USED BY INVESTING ACTIVITIES		(5,031	)		(165,203	)

FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings
accounts		30,486			21,918
Net increase in certificates of deposit		178,464			79,091
Net borrowings from (payments on) debt obligations		(1,905	)		5,878
Proceeds from Federal Home Loan Bank advances		892,571			623,524
Payments on Federal Home Loan Bank advances		(945,171	)		(570,742	)
Resources provided by noncontrolling interests					13,786
Net proceeds from issuance of common stock					54
Tax benefit from share-based payments		(104	)		(4	)
Cash dividends paid		(864	)		(4,330	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		153,477			169,175

INCREASE IN CASH AND CASH EQUIVALENTS		136,909			2,994

Cash and cash equivalents at beginning of period		624,366			352,372


CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	761,275		$	355,366

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	32,798		$	33,704
Transfers of loans to other real estate owned		25,832			8,446
Surrender of common stock to facilitate exercise of stock
options and vesting of restricted stock		19			271

See notes to condensed consolidated financial statements.

Page 7 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED

Note A – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Capitol Bancorp Ltd. (Capitol or the Corporation) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all information and footnotes necessary for a fair presentation of consolidated financial position, results of operations and cash flows in conformity with generally accepted accounting principles.

The condensed consolidated financial statements do, however, include all adjustments of a normal recurring nature (in accordance with Rule 10-01(b)(8) of Regulation S-X) which Capitol considers necessary for a fair presentation of the interim periods.

The results of operations for the period ended March 31, 2009 are not necessarily indicative of the results to be expected for the year ending December 31, 2009.

The consolidated balance sheet as of December 31, 2008 was derived from audited consolidated financial statements as of that date. Certain 2008 amounts have been reclassified to conform to the 2009 presentation.

Note B – Implementation of New Accounting Standards

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

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

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

Page 8 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED – Continued

Note B – Implementation of New Accounting Standards – Continued

On April 9, 2009, the FASB issued FSPs, which become effective for second quarter reporting, with earlier implementation permitted for the first calendar quarter of 2009. Capitol elected to implement the new guidance effective January 1, 2009.

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

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

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

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

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

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Page 9 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED – Continued

Note C – Investment Securities

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

	March 31, 2009				December 31, 2008
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Available for sale:
United States government agency securities	$	8,739	$	8,799	$	9,785	$	9,913
Mortgage backed securities		6,380		6,510		4,813		4,890
Municipals		768		784		768		781
		15,887		16,093		15,366		15,584
Held for long-term investment:
Federal Reserve Bank stock		150		150		146		146
Federal Home Loan Bank stock		26,279		26,279		26,053		26,053
Corporate		6,173		6,173		6,591		6,591
Other		152		152		66		66
		32,754		32,754		32,856		32,856

	$	48,641	$	48,847	$	48,222	$	48,440

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.

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

	March 31, 2009				December 31, 2008
	Gains		Losses		Gains		Losses
United States government agency securities	$	60	$	--	$	128	$	--
Mortgage backed securities		132		2		85		8
Municipals		16		--		13		--

	$	208	$	2	$	226	$	8

The age of gross unrealized losses and carrying value (at estimated fair value) of mortgage backed securities are summarized below (in $1,000s):

	March 31, 2009				December 31, 2008
	Unrealized Loss		Carrying Value		Unrealized Loss		Carrying Value

One year or less	$	1	$	249	$	4	$	281
In excess of one year		1		480		4		501

	$	2	$	729	$	8	$	782

Management does not believe any individual unrealized loss as of March 31, 2009 represents an other-than-temporary loss (primarily due to such amounts being attributable to changes in interest rates) and has both the intent and ability to hold these securities for a time period necessary to recover the amortized cost.

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

Page 10 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED – Continued

Note D – Fair Value

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

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

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

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

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

Investment securities available for sale: Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based on quoted prices, when available. If quoted prices are not available, fair values are measured using independent pricing models. Level 1 securities include those traded on an active exchange as well as U.S. Treasury and other U.S. government and agency mortgage-backed securities that are traded by dealers or brokers in active over-the-counter markets. Level 2 securities include municipal government securities.

Mortgage loans held for sale: Mortgage loans held for sale are carried at the lower of cost or fair value and are measured on a nonrecurring basis. There were no mortgage loans held for sale written down to fair value at March 31, 2009. Fair value is based on independent quoted market prices, where applicable, or the prices for other mortgage whole loans with similar characteristics.

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

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

The balances of assets and liabilities measured at fair value on a recurring basis as of March 31, 2009 were as follows (in $1,000s):

	Total		Significant Other Observable Inputs (Level 2)

Securities available for sale:
United State government agency securities	$	8,799	$	8,799
Mortgage backed securities		6,510		6,510
Municipals		784		784
	$	16,093	$	16,093

Page 11 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED – Continued

Note D – Fair Value – Continued

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of March 31, 2009 were as follows (in $1,000s):

	As Revised
	Total		Significant Other Observable Inputs (Level 3)

Impaired loans (1)	$	57,096	$	57,096

Other real estate owned (1)	$	84,885	$	84,885

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

Many of Capitol ' s collateral-dependent impaired loans and foreclosed assets are located in severely depressed real estate markets. In those markets, appraisal data is of limited usefulness in estimating fair value because comparable sale transactions are infrequent, not orderly and are often distressed or forced.

Capitol began applying the fair value measurement and disclosure provisions of SFAS No. 157 effective January 1, 2009 to nonfinancial assets and liabilities measured on a nonrecurring basis; which did not have a material effect on Capitol ' s consolidated financial position upon implementation. The Corporation measures the fair value of the following on a nonrecurring basis: (1) long-lived assets, (2) foreclosed assets, (3) the reporting unit under step one of its goodwill impairment test and (4) indefinite lived intangible assets.

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Page 12 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED – Continued

Note D – Fair Value – Continued

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

	March 31, 2009 (As Revised)						December 31, 2008
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	761,275		$	761,275		$	624,366		$	624,366
Loans held for sale		24,979			24,979			10,474			10,474
Investment securities:
Available for sale		16,093			16,093			15,584			15,584
Held for long-term investment		32,754			32,754			32,856			32,856
		48,847			48,847			48,440			48,440
Portfolio loans:
Loans secured by real estate:
Commercial		2,147,361			2,132,221			2,115,515			2,105,204
Residential (including multi-family)		909,977			887,754			879,754			865,406
Construction, land development and other land		727,845			678,440			797,486			753,028
Total loans secured by real estate		3,785,183			3,698,415			3,792,755			3,723,638
Commercial and other business-purpose loans		814,869			809,139			845,593			830,283
Consumer		56,810			57,516			61,340			62,313
Other		32,711			30,789			35,541			32,504
Total portfolio loans		4,689,573			4,595,859			4,735,229			4,648,738
Less allowance for loan losses		(99,629	)		(99,629	)		(93,040	)		(93,040	)
Net portfolio loans		4,589,944			4,496,230			4,642,189			4,555,698

Financial Liabilities:
Deposits:
Noninterest-bearing		689,815			689,815			700,786			700,786
Interest-bearing:
Demand accounts		1,272,627			1,272,628			1,231,170			1,231,172
Time certificates of less than $100,000		986,163			988,528			1,160,221			1,161,411
Time certificates of $100,000 or more		1,757,957			1,758,201			1,405,435			1,408,431
Total interest-bearing		4,016,747			4,019,357			3,796,826			3,801,014
Total deposits		4,706,562			4,709,172			4,497,612			4,501,800
Notes payable and short-term borrowings		392,420			393,357			446,925			447,490
Subordinated debentures		167,330			170,841			167,293			170,841

Estimated fair values of financial assets and liabilities in the preceding table are based upon a comparison of current interest rates on financial instruments and the timing of related scheduled cash flows to the estimated present value of such cash flows using current estimated market rates of interest (unless quoted market values or other fair value information is more readily available). For example, the estimated fair value of portfolio loans is based on discounted cash flow computations. Similarly, the estimated fair value of time deposits, debt obligations and subordinated debentures were determined through discounted cash flow computations. Such estimates of fair value are not intended to represent market value or portfolio liquidation value, and only represent an estimate of fair value based on current financial reporting requirements.

Given current market conditions, a portion of the loan portfolio is not readily marketable and market prices do not exist. Capitol has not attempted to market the loan portfolio to potential buyers, if any exist, to determine the fair value of those instruments in accordance with the definition in FAS No. 157. Since negotiated prices in illiquid markets depend upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales

Page 13 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED – Continued

Note D – Fair Value – Continued

prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Accordingly, the fair value measurements for loans included in the table above are unlikely to represent the instruments' liquidation values.

Note E – Stock Options

Stock option activity for the interim 2009 period is summarized as follows:

	Number of Stock Options Outstanding			Exercise Price Range	Weighted Average Exercise Price

Outstanding at January 1		2,374,159		$ 13.50 to $ 46.20	$	28.28
Granted		69,520		6.04		6.04
Exercised		--
Cancelled or expired		(5,308	)

Outstanding at March 31		2,438,371		$ 6.04 to $ 46.20	$	27.67

Stock options were granted in the first quarter of 2009 and 2008, with an aggregate fair value approximating $240,000 and $255,000, respectively. Stock options granted in the interim 2009 period have a vesting date of December 31, 2009, and stock options granted in the interim 2008 period (52,360) became vested at December 31, 2008. Each stock option expires seven years from date of grant. Share-based compensation expense relating to stock options for the three months ended March 31, 2009 and 2008 approximated $108,000 and $206,000, respectively.

As of March 31, 2009, stock options outstanding had a weighted average remaining contractual life of 2.47 years and had no intrinsic value at that date. The following table summarizes stock options outstanding segregated by exercise price range as of March 31, 2009:

				Weighted Average
Exercise Price Range		Number Outstanding		Exercise Price		Remaining Contractual Life

$	5.00 to 14.99		69,520	$	6.04	6.85 years
$	15.00 to 19.99		135,853		16.67	1.48 years
$	20.00 to 24.99		584,956		21.67	2.54 years
$	25.00 to 29.99		585,415		27.09	1.40 years
$	30.00 to 34.99		695,119		32.10	2.44 years
$	35.00 or more		367,508		37.92	3.67 years

Total outstanding			2,438,371

Page 14 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED – Continued

Note F – Net Income (Loss) Per Share

The computations of basic and diluted earnings (loss) per share were based on the following (in 1,000s) for the period ended March 31:

	Three Months Ended March 31
	2009			2008
	(As Revised)

Numerator—net income (loss) for the period	$	(20,674	)	$	2,191

Denominator:
Weighted average number of shares outstanding, excluding unvested restricted shares (denominator for basic earnings per share)		17,162			17,141

Effect of dilutive securities:
Unvested restricted shares		--			25
Stock options		--			23
Total effect of dilutive securities		--			48

Denominator for diluted earnings per share—
Weighted average number of shares and potential dilution		17,162			17,189

Number of antidilutive stock options excluded from diluted earnings per share computation		2,438			2,271

Note G – Trust-Preferred Securities

In April 2009, the Corporation determined that it would commence the deferral of interest payments on its various trust-preferred securities, as is permitted under the terms of the securities, to conserve cash and capital resources. The payment of interest may be deferred for periods up to five years. During such deferral periods, Capitol is prohibited from paying dividends on its common stock and holders of the trust-preferred securities will continue to recognize current taxable income relating to the deferred interest payments.

Note H – Revision of Previously-Issued Financial Statements

The unaudited condensed consolidated financial statements for the three months ended March 31, 2009 have been revised to properly base fair-value estimates of collateral-dependent loans and other real estate owned upon appraisal data rather than use of alternative valuation methods under fair value accounting guidance (FSP FAS 157-4). FSP FAS 157-4 was implemented in error for the period ended March 31, 2009.

Page 15 of 35

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CAPITOL BANCORP LIMITED – Continued

Note H – Revision of Previously Issued Financial Statements – Continued

The following table summarizes the financial statement revision on each affected line item (in $1,000s, except per-share data):

	As of and for the Three Months Ended March 31, 2009
	As Previously Reported			Adjustment			As Revised

Net portfolio loans	$	4,595,688		$	(5,744	)	$	4,589,944
Other real estate owned		86,837			(1,952	)		84,885
Other assets		117,391			2,694			120,085
Total assets		5,782,608			(5,002	)		5,777,606
Retained earnings		63,746			(5,002	)		58,744
Total Capitol Bancorp Limited stockholders' equity		337,491			(5,002	)		332,489

Provision for loan losses		28,172			5,744			33,916
Noninterest expense		49,995			1,952			51,947
Loss before income taxes		(35,753	)		(7,696	)		(43,449	)
Income taxes benefit		(12,848	)		(2,694	)		(15,542	)
Net loss		(22,905	)		(5,002	)		(27,907	)
Net loss attributable to Capitol Bancorp Limited		(15,672	)		(5,002	)		(20,674	)
Net loss per share attributable to Capitol Bancorp Limited (basic and diluted)	$	(0.91	)	$	(0.29	)	$	(1.20	)

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Page 16 of 35

PART I, ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Financial Condition

Total assets approximated $5.8 billion at March 31, 2009, an increase of $123 million from the December 31, 2008 level of $5.7 billion. The balance sheet includes Capitol and its consolidated subsidiaries (in thousands):

	Total Assets
	March 31, 2009		December 31, 2008
	(As Revised)
Arizona Region:
Arrowhead Community Bank	$	87,501	$	80,606
Asian Bank of Arizona		40,536		38,127
Bank of Tucson		197,010		189,869
Camelback Community Bank		94,200		93,754
Central Arizona Bank		79,373		79,775
Colonia Bank		12,507		12,522
Mesa Bank		252,319		248,262
Southern Arizona Community Bank		93,283		88,146
Sunrise Bank of Albuquerque		79,273		81,977
Sunrise Bank of Arizona		131,375		119,395
Yuma Community Bank		72,267		73,028
Arizona Region Total		1,139,644		1,105,461

California Region:
Bank of Escondido		99,752		96,803
Bank of Feather River		30,614		29,218
Bank of San Francisco		80,822		74,670
Bank of Santa Barbara		63,124		72,076
Napa Community Bank		145,174		149,093
Point Loma Community Bank		69,708		61,514
Sunrise Bank of San Diego		89,063		86,322
Sunrise Community Bank		39,322		36,139
California Region Total		617,579		605,835

Colorado Region:
Fort Collins Commerce Bank		84,840		80,247
Larimer Bank of Commerce		87,860		88,725
Loveland Bank of Commerce		37,464		32,034
Mountain View Bank of Commerce		38,486		37,740
Colorado Region Total		248,650		238,746

Great Lakes Region:
Bank of Auburn Hills		44,751		43,856
Bank of Maumee		57,910		56,812
Bank of Michigan		85,200		78,716
Capitol National Bank		240,114		245,354
Elkhart Community Bank		96,052		99,917
Evansville Commerce Bank		60,451		63,228
Goshen Community Bank		82,640		87,419
Michigan Commerce Bank (1)		1,285,607		1,271,862

Page 17 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Financial Condition – Continued

Summary of total assets – continued:

	Total Assets
	March 31, 2009		December 31, 2008
	(As Revised)
Great Lakes Region: - Continued
Ohio Commerce Bank	$	60,783	$	60,678
Paragon Bank & Trust		122,720		107,491
Great Lakes Region Total		2,136,228		2,115,333

Midwest Region:
Adams Dairy Bank		37,458		33,867
Bank of Belleville		70,823		73,901
Community Bank of Lincoln		57,367		53,222
Summit Bank of Kansas City		58,181		53,429
Midwest Region Total		223,829		214,419


Nevada Region:
1 st Commerce Bank		45,379		52,622
Bank of Las Vegas		72,884		73,692
Black Mountain Community Bank		164,355		157,545
Desert Community Bank		94,034		100,312
Red Rock Community Bank		124,071		126,993
Nevada Region Total		500,723		511,164

Northeast Region:
USNY Bank		54,062		49,620

Northwest Region:
Bank of Bellevue		57,324		55,841
Bank of Everett		44,629		44,756
Bank of Tacoma		50,220		44,241
High Desert Bank		52,569		41,904
Issaquah Community Bank		36,135		36,942
Northwest Region Total		240,877		223,684

Southeast Region:
Bank of Valdosta		57,971		58,995
Community Bank of Rowan		146,629		138,341
First Carolina State Bank		121,503		119,774
Peoples State Bank		29,990		29,233
Pisgah Community Bank		44,708		36,897
Sunrise Bank of Atlanta		60,821		62,198
Southeast Region Total		461,622		445,438

Texas Region:
Bank of Fort Bend		25,335		26,424
Bank of Las Colinas		41,578		31,354
Texas Region Total		66,913		57,778

Parent company and other, net		87,479		87,358

Consolidated Totals	$	5,777,606	$	5,654,836

(1)	Michigan Commerce Bank resulted from the merger of Ann Arbor Commerce Bank, Brighton Commerce Bank, Detroit Commerce Bank, Grand Haven Bank, Kent Commerce Bank, Macomb Community Bank, Muskegon Commerce Bank, Oakland Commerce Bank and Portage Commerce Bank effective March 31, 2009.

Portfolio loans, the single largest asset category, decreased during the 2009 period by approximately $46 million, compared to loan growth of about $153 million during the corresponding period of 2008. Portfolio growth has slowed in response to the need to preserve liquidity and capital in the current economic climate.

Page 18 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Financial Condition – Continued

Geographic diversification of Capitol's balance sheet has become increasingly important. Prior to 1996, all of Capitol's banking operations were located in Michigan. As of March 31, 2009, 38% of the consolidated loan portfolio relates to banks located within the Great Lakes Region (39% at December 31, 2008) and 62% of the consolidated loan portfolio relates to banks located in other regions of the country (61% at December 31, 2008). The reason why this is important is that Capitol's diversification efforts will add stability to results of operations by further reducing a disproportionate geographic concentration within a specific region.

The consolidated allowance for loan losses at March 31, 2009 approximated $100 million or 2.12% of total portfolio loans, a significant increase from the 1.96% ratio at the beginning of the year.

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. Management's determination of the adequacy of the allowance is based on evaluation of the portfolio (including potential impairment of individual loans and concentrations of credit), past loss experience, current economic conditions, volume, amount and composition of the loan portfolio and other factors. The allowance is increased by provisions charged to operations and reduced by net charge-offs. The table below summarizes portfolio loan balances and activity in the allowance for loan losses (in thousands):

	2009			2008
	(As Revised)
Allowance for loan losses at January 1	$	93,040		$	58,124

Loans charged-off:
Loans secured by real estate:
Commercial		(3,573	)		(672	)
Residential (including multi-family)		(7,903	)		(2,150	)
Construction, land development and other land		(8,185	)		(1,359	)
Total loans secured by real estate		(19,661	)		(4,181	)
Commercial and other business-purpose loans		(8,202	)		(1,801	)
Consumer		(292	)		(134	)
Other		--			--
Total charge-offs		(28,155	)		(6,116	)
Recoveries:
Loans secured by real estate:
Commercial		102			118
Residential (including multi-family)		47			84
Construction, land development and other land		119			26
Total loans secured by real estate		268			228
Commercial and other business-purpose loans		544			430
Consumer		15			41
Other		1			1
Total recoveries		828			700
Net charge-offs		(27,327	)		(5,416	)
Additions to allowance charged to expense		33,916			8,958

Allowance for loan losses at March 31	$	99,629		$	61,666

Average total portfolio loans for the period	$	4,722,595		$	4,402,469

Ratio of net charge-offs (annualized) to average portfolio loans outstanding		2.31	%		0.49	%

Page 19 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Financial Condition – Continued

Interim loan charge-offs for the three-month 2009 period, which increased significantly compared to 2008, are not necessarily indicative of future charge-off levels because of the variability in asset quality and resolution of nonperforming loans. The significant increase in the provision for loan losses in 2009 was associated primarily with Michigan and certain Arizona banks, due to growth in nonperforming loans and a sustained difficult and uncertain economic climate. The interim 2009 provision for loan losses is discussed in further detail in the ‘Results of Operations’ section of this narrative.

The amounts of the allowance for loan losses allocated in the following table (dollars in thousands) 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:

	March 31, 2009					December 31, 2008
	Amount		Percentage of Total Portfolio Loans			Amount		Percentage of Total Portfolio Loans




Loans secured by real estate:
Commercial	$	33,484		0.71	%	$	30,007		0.63	%
Residential (including multi-family)		21,423		0.46	%		21,645		0.46	%
Construction, land development and other land		17,889		0.38	%		17,496		0.37	%
Total loans secured by real estate		72,796		1.55	%		69,148		1.46	%
Commercial and other business-purpose loans		25,618		0.55	%		22,547		0.47	%
Consumer		973		0.02	%		1,032		0.02	%
Other		242					313		0.01	%

Total allowance for loan losses	$	99,629		2.12	%	$	93,040		1.96	%

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Page 20 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Financial Condition – Continued

Nonperforming loans (i.e., loans which are 90 days or more past due and still accruing interest and loans on nonaccrual status) and other nonperforming assets are summarized below (in thousands):

	March 31, 2009		December 31, 2008
	(As Revised)
Nonaccrual loans:
Loans secured by real estate:
Commercial	$	67,248	$	39,892
Residential (including multi-family)		60,246		35,675
Construction, land development and other land		76,390		72,996
Total loans secured by real estate		203,884		148,563
Commercial and other business-purpose loans		16,964		16,283
Consumer		356		190
Other		--		--
Total nonaccrual loans		221,204		165,036

Past due ( > 90 days) loans and accruing interest:
Loans secured by real estate:
Commercial		2,345		1,623
Residential (including multi-family)		2,371		365
Construction, land development and other land		109		2,293
Total loans secured by real estate		4,825		4,281
Commercial and other business-purpose loans		636		747
Consumer		50		146
Other		--		--
Total past due loans		5,511		5,174

Total nonperforming loans	$	226,715	$	170,210

Real estate owned and other repossessed assets		85,122		67,449

Total nonperforming assets	$	311,837	$	237,659

Nonperforming loans at March 31, 2009 approximated 4.83% of total portfolio loans, an increase from the December 31, 2008 ratio of 3.59%. Nonperforming loans increased $56.5 million or 33% during the interim 2009 period. Of the nonperforming loans at March 31, 2009, about 92% were real estate secured. Those loans, when originated, had appropriate loan-to-value ratios based upon real estate market conditions at that time and, accordingly, have loss exposure which would be expected to be minimal; however, underlying real estate values depend upon current economic conditions and liquidation strategies. Most other nonperforming loans were generally secured by other business assets. Nonperforming loans at March 31, 2009 were in various stages of resolution for which management believes such loans are adequately collateralized or otherwise appropriately considered in its determination of the adequacy of the allowance for loan losses.

Due to local and regional economic conditions, there is uncertainty in future real estate values, appraisal results and the resulting potential impact on valuation of collateral-dependent loans and real estate owned. The fair value measurement of collateral-dependent loans and other real estate owned is dependent primarily upon appraisal of the underlying property value. Fair value measurement has been defined in a relatively recent accounting standard, Financial Accounting Standards Board Statement No. 157 (see Note B of the notes to the condensed consolidated financial statements). Management cautiously monitors real estate values and related appraisal data when evaluating such valuations.

Page 21 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Financial Condition – Continued

Many of Capitol ' s collateral-dependent impaired loans are located in severely depressed real estate markets. In those markets, appraisal data is of limited usefulness in estimating fair value because comparable sale transactions are infrequent, not orderly and are often distressed or forced.

Total nonperforming loans approximated $227 million at March 31, 2009. Of that total, $112 million (including some loans carried at the parent level) or 49% were originated by banks within the Great Lakes Region, primarily located in Michigan. Within the Great Lakes Region, nonperforming loans approximated 6.18% of total portfolio loans at March 31, 2009. Responsive to the elevated level of nonperforming loans within the Great Lakes Region, higher levels of allowances for loan losses have been established, approximating 2.83% of portfolio loans for the region on a combined basis as of March 31, 2009 and ranging as high as 3.65% at certain banks. Those ratios can be contrasted with other banks and geographic regions within the Corporation with lower levels of nonperforming loans. Nonperforming loans have recently increased in other regions, such as the Arizona Region ($13 million) and the Nevada Region ($11 million) as the effects of the recession have had a more significant effect on those regions than previously.

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 ratings. At inception, all loans are individually assigned a rating which grades the credits on a risk basis, based on the financial strength of the borrower and guarantors and other factors such as nature of the borrower's business climate, local economic conditions and other subjective factors. The loan rating process is fluid and subjective.

Potential problem loans include loans which are generally performing as agreed; however, because of loan reviews and/or lending staff's risk assessment, increased monitoring is deemed appropriate. In addition, some loans are assigned a more adverse classification, with specific performance issues or other risk factors requiring close management and development of specific remedial action plans.

At March 31, 2009, potential problem loans (including the previously-mentioned nonperforming loans) approximated $657 million or about 14% of total consolidated portfolio loans, compared to approximately $551 million or about 12% at December 31, 2008. 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 has considered these loans in its evaluation of the adequacy of the allowance for loan losses. Management believes, however, that current general economic conditions in some markets may result in higher levels of future loan losses in comparison to previous years, as experienced in the first three months of 2009.

Real estate owned and other repossessed assets increased $18 million to $85 million during the three months ended March 31, 2009. Most of this increase was related to banks located in Michigan and the Arizona Region ($15 million).

Foreclosure laws in Michigan generally favor borrowers rather than lenders and, accordingly, foreclosure and redemption periods (i.e., the number of months it takes for a financial institution to obtain clear title to freely market the real estate) take much longer than many other states. Further, once the property is available to the bank for sale or liquidation, market conditions, as they are currently (particularly in Michigan and some western communities), may not be conducive to rapid marketing or near-term sale of the properties.

Page 22 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Financial Condition – Continued

The following comparative analysis summarizes each bank's total portfolio loans, allowance for loan losses, nonperforming loans and ratio of the allowance as a percentage of portfolio loans (dollars in thousands):

					Allowance for								Allowance as a Percentage
	Total Portfolio Loans				Loan Losses				Nonperforming Loans				of Total Portfolio Loans
	March 31, 2009		Dec 31, 2008		March 31, 2009		Dec 31, 2008		March 31, 2009		Dec 31, 2008		March 31, 2009			Dec 31, 2008
	(As Revised)								(As Revised)				(As Revised)
Arizona Region:
Arrowhead Community Bank	$	62,324	$	69,487	$	4,066	$	2,375	$	5,885	$	7,430		6.52	%		3.42	%
Asian Bank of Arizona		35,466		33,023		964		694		2,568		1,898		2.72	%		2.10	%
Bank of Tucson		162,747		168,390		1,384		1,550		3,486		2,462		0.85	%		0.92	%
Camelback Community Bank		84,130		84,957		995		789		3,549		2,030		1.18	%		0.93	%
Central Arizona Bank		68,712		69,372		1,587		1,339		3,770		1,895		2.31	%		1.93	%
Colonia Bank		9,598		7,483		223		120						2.32	%		1.60	%
Mesa Bank		132,319		147,853		2,832		3,250		20,121		21,423		2.14	%		2.20	%
Southern Arizona Community Bank		78,684		79,434		1,235		875		630				1.57	%		1.10	%
Sunrise Bank of Albuquerque		71,351		74,115		1,179		933		5,328		43		1.65	%		1.26	%
Sunrise Bank of Arizona		108,524		110,131		1,492		1,159		8,384		3,707		1.37	%		1.05	%
Yuma Community Bank		62,964		63,804		714		730		2,102		1,506		1.13	%		1.14	%
Arizona Region Total		876,819		908,049		16,671		13,814		55,823		42,394		1.90	%		1.52	%

California Region:
Bank of Escondido		68,122		62,608		869		810		3,111		817		1.28	%		1.29	%
Bank of Feather River		23,908		22,962		309		320						1.29	%		1.39	%
Bank of San Francisco		69,425		60,772		930		823		251		299		1.34	%		1.35	%
Bank of Santa Barbara		54,621		60,535		1,184		1,138		2,277		1,841		2.17	%		1.88	%
Napa Community Bank		134,577		130,150		1,866		1,890		1,828		1,848		1.39	%		1.45	%
Point Loma Community Bank		51,513		52,497		963		797		2,100		795		1.87	%		1.52	%
Sunrise Bank of San Diego		75,860		76,282		1,179		1,048		2,554		1,444		1.55	%		1.37	%
Sunrise Community Bank		31,248		28,355		503		440		2,015				1.66	%		1.55	%
California Region Total		509,274		494,161		7,803		7,266		14,136		7,044		1.53	%		1.47	%

Colorado Region:
Fort Collins Commerce Bank		78,415		74,280		1,244		1,101		787		48		1.59	%		1.48	%
Larimer Bank of Commerce		79,766		78,638		1,230		1,160						1.54	%		1.48	%
Loveland Bank of Commerce		29,073		27,251		477		652		1,790		1,090		1.64	%		2.39	%
Mountain View Bank of Commerce		33,035		32,180		499		474						1.51	%		1.47	%
Colorado Region Total		220,289		212,349		3,450		3,387		2,577		1,138		1.57	%		1.60	%

Great Lakes Region:
Bank of Auburn Hills		37,446		39,914		1,155		988		2,866		2,895		3.08	%		2.48	%
Bank of Maumee		45,013		50,094		729		752		6		37		1.62	%		1.50	%
Bank of Michigan		67,383		67,700		1,000		996		333		306		1.48	%		1.47	%
Capitol National Bank		207,410		213,392		7,573		8,341		16,023		12,828		3.65	%		3.91	%
Elkhart Community Bank		84,685		87,971		2,121		1,702		3,645		3,941		2.50	%		1.93	%
Evansville Commerce Bank		52,023		55,779		937		943		238		158		1.80	%		1.69	%
Goshen Community Bank		72,247		74,144		1,460		1,501		1,563		876		2.02	%		2.02	%
Michigan Commerce Bank (1)		1,087,761		1,123,721		32,662		30,258		71,641		63,090		3.00	%		2.69	%
Ohio Commerce Bank		52,086		48,207		792		723						1.52	%		1.50	%
Paragon Bank & Trust		83,648		87,651		2,206		2,990		6,610		6,447		2.63	%		3.41	%
Great Lakes Region Total		1,789,702		1,848,573		50,635		49,194		102,925		90,578		2.83	%		2.66	%

Midwest Region:
Adams Dairy Bank		31,684		28,834		478		450						1.51	%		1.56	%
Bank of Belleville		62,887		65,150		923		923						1.47	%		1.42	%
Community Bank of Lincoln		42,898		43,657		720		674						1.68	%		1.54	%
Summit Bank of Kansas City		48,536		44,068		780		709		1,069		779		1.61	%		1.61	%
Midwest Region Total		186,005		181,709		2,901		2,756		1,069		779		1.56	%		1.52	%

Page 23 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Financial Condition – Continued

Summary of loan information – continued:

					Allowance for								Allowance as a Percentage
	Total Portfolio Loans				Loan Losses				Nonperforming Loans				of Total Portfolio Loans
	March 31, 2009		Dec 31, 2008		March 31, 2009		Dec 31, 2008		March 31, 2009		Dec 31, 2008		March 31, 2009			Dec 31, 2008
	(As Revised)								(As Revised)				(As Revised)
Nevada Region:
1 st Commerce Bank	$	37,603	$	30,663	$	988	$	740	$	1,545	$	1,000		2.63	%		2.41	%
Bank of Las Vegas		64,098		64,648		836		901		5,954		4,399		1.30	%		1.39	%
Black Mountain Community Bank		144,588		143,654		1,653		1,765		5,671		1,722		1.14	%		1.23	%
Desert Community Bank		86,911		87,388		944		943		4,899		3,671		1.09	%		1.08	%
Red Rock Community Bank		100,661		110,143		1,500		1,200		9,688		5,488		1.49	%		1.09	%
Nevada Region Total		433,861		436,496		5,921		5,549		27,757		16,280		1.36	%		1.27	%

Northeast Region:
USNY Bank		47,943		43,471		800		680		159				1.67	%		1.56	%

Northwest Region:
Bank of Bellevue		48,639		48,838		1,190		850		142		170		2.45	%		1.74	%
Bank of Everett		34,954		32,735		1,000		686		59		92		2.86	%		2.10	%
Bank of Tacoma		40,628		40,175		1,115		770		1,147		1,183		2.74	%		1.92	%
High Desert Bank		36,130		35,407		526		624		1,489				1.46	%		1.76	%
Issaquah Community Bank		26,077		24,238		405		385						1.55	%		1.59	%
Northwest Region Total		186,428		181,393		4,236		3,315		2,837		1,445		2.27	%		1.83	%

Southeast Region:
Bank of Valdosta		49,129		51,629		867		835		724				1.76	%		1.62	%
Community Bank of Rowan		114,129		109,290		1,706		1,634		2,245		1,688		1.49	%		1.50	%
First Carolina State Bank		96,453		97,670		1,259		1,312		2,909		2,421		1.31	%		1.34	%
Peoples State Bank		21,276		21,314		384		366		1,773		937		1.80	%		1.72	%
Pisgah Community Bank		36,120		27,746		570		475		116		100		1.58	%		1.71	%
Sunrise Bank of Atlanta		50,584		52,763		968		1,063		2,911		269		1.91	%		2.01	%
Southeast Region Total		367,691		360,412		5,754		5,685		10,678		5,415		1.56	%		1.58	%

Texas Region:
Bank of Fort Bend		20,144		19,859		300		305						1.49	%		1.54	%
Bank of Las Colinas		33,682		29,657		504		435						1.50	%		1.47	%
Texas Region Total		53,826		49,516		804		740						1.49	%		1.49	%

Parent company and other, net		17,735		19,100		654		654		8,754		5,137		3.69	%		3.42	%

Consolidated totals	$	4,689,573	$	4,735,229	$	99,629	$	93,040	$	226,715	$	170,210		2.12	%		1.96	%

(1)	Michigan Commerce Bank resulted from the merger of Ann Arbor Commerce Bank, Brighton Commerce Bank, Detroit Commerce Bank, Grand Haven Bank, Kent Commerce Bank, Macomb Community Bank, Muskegon Commerce Bank, Oakland Commerce Bank and Portage Commerce Bank effective March 31, 2009.

[The remainder of this page intentionally left blank]

Page 24 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Results of Operations

Summary

The net loss attributable to Capitol Bancorp Limited for the three months ended March 31, 2009 approximated $20.7 million, compared to net income of $2.2 million in the corresponding period of 2008. The net loss per share attributable to Capitol Bancorp Limited was $1.20 for the three months ended March 31, 2009, compared to earnings per share of $0.13 in the corresponding 2008 period.

The primary reason for the interim 2009 loss was a large provision for loan losses recorded during the three months ended March 31, 2009 as the Corporation carefully assessed the implications and impact of declining property values and weak bank performance. The provision for loan losses increased $25.0 million to $33.9 million for the three months ended March 31, 2009, compared to $9 million for the corresponding period of 2008.

Analytical Review

The provision for loan losses for the three-month period in 2009 was $33.9 million, compared to $9 million for the same period in 2008. The provision for loan losses increased significantly in the 2009 period due to higher levels of loan charge-offs and in response to growth in nonperforming loans. Provisions for loan losses are based upon management's analysis of the adequacy of the allowance for loan losses, as previously discussed. The significant increase in the provision for loan losses compared to the preceding year had a material adverse effect on operating results for the interim 2009 period.

Net interest income for the first three months of 2009 totaled $37.5 million, a 10.70% decrease compared to $41.9 million in 2008. The net interest margin approximated 2.81% for the three months ended March 31, 2009, a 17 basis-point decrease compared to 2.98% for the three months ended December 31, 2008 and a 0.81% decrease compared to 3.62% for the three months ended March 31, 2008. Several causal factors impacted the 2009 margin, including elevated levels of nonperforming loans, higher levels of liquidity, competitive pressures at the bank level in pricing of loans and deposits, migration of noninterest-bearing deposits to interest-bearing accounts and higher interest costs related to debt obligations. It is difficult to speculate on future changes in net interest margin.

Noninterest income for the three months ended March 31, 2009 was $5.0 million, a decrease of $1.6 million or 24%, over the same period in 2008. The reduction in the 2009 period was due to decreases of $1 million in other fee income and $257,000 in trust and wealth-management revenue. Fees from origination of non-portfolio residential mortgage loans totaled $902,000 for the first quarter of 2009, down slightly from $921,000 for the comparable period in 2008, due to lower loan fees. The gain on sales of government-guaranteed loans decreased about 41% in the interim 2009 period, compared to 2008, due to the lack of a favorable market for sale of such loans.

Noninterest expense totaled $51.9 million for the three-month 2009 period, compared to $44.8 million for the comparable period in 2008. The increase in noninterest expense is associated with regulatory fees, growth in the size of previously-existing banks, costs of problem loan administration and other real estate write-downs. Costs associated with foreclosed properties and other real estate increased to $4.4 million in the 2009 period ($911,000 in the 2008 period) while the cost of the FDIC insurance and other regulatory fees also increased significantly to $2.1 million ($937,000 in the 2008 period). Increases in occupancy, equipment rent, depreciation and maintenance in 2009 relate primarily to the growth in the size of the mature banks within the consolidated group, the development of Capitol's wealth management unit and the addition of four de novo banks in 2008.

The largest element of noninterest expense is salaries and employee benefits, which approximated $29.1 million for the three months ended March 31, 2009, an increase from $25.5 million in the corresponding period of 2008. The increase is partly due to the opening of four new banks in 2008 and the severance payments arising from the consolidation of the nine Michigan banks into Michigan Commerce Bank effective March 31, 2009.

Page 25 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Results of Operations – Continued

The more significant elements of other noninterest expense consisted of the following (in thousands) for the periods ended March 31:

	Three months ended March 31
	2009		2008

Professional fees	$	760	$	488
Bank services (ATMs, telephone banking and Internet banking)		716		555
Directors' fees		683		802
Loan and collection expense		590		546
Advertising		507		776
Paper, printing and supplies		498		770
Communications		491		508
Travel, lodging and meals		392		633
Postage		317		310
Taxes other than income taxes		225		374
Dues and memberships		207		221
Courier service		176		240
Insurance expense		173		147
Publications		54		45
Contracted labor		40		120
Preopening and start-up costs				952
Other		2,268		2,652
Total	$	8,097	$	10,139

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Page 26 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Results of Operations – Continued

Operating results (dollars in thousands) were as follows:

	Three Months Ended March 31
	Total Revenues				Net Income (Loss) (1)						Return on Average Equity (2)						Return on Average Assets (2)
	2009		2008		2009			2008			2009			2008			2009			2008
					(As Revised)
Arizona Region:
Arrowhead Community Bank	$	1,031	$	1,732	$	(2,537	)	$	29						1.36	%					0.13	%
Asian Bank of Arizona		501		455		(408	)		(189	)
Bank of Tucson		3,305		3,550		646			1,218			15.05	%		27.53	%		1.35	%		2.64	%
Camelback Community Bank		1,349		1,516		(79	)		273						11.94	%					1.26	%
Central Arizona Bank		942		1,341		(800	)		(55	)
Colonia Bank		137				(335	)
Mesa Bank		1,940		4,102		(2,633	)		472						9.89	%					0.87	%
Southern Arizona Community Bank		1,313		1,578		(105	)		302						13.34	%					1.39	%
Sunrise Bank of Albuquerque		1,062		1,342		(214	)		57						3.16	%					0.31	%
Sunrise Bank of Arizona		1,732		2,170		(830	)		4						0.12	%					0.01	%
Yuma Community Bank		1,197		1,411		216			208			11.28	%		10.66	%		1.21	%		1.08	%
Arizona Region Total		14,509		19,197		(7,079	)		2,319

California Region:
Bank of Escondido		1,135		1,373		(306	)		76						2.12	%					0.32	%
Bank of Feather River		458		286		(10	)		(117	)
Bank of San Francisco		1,014		942		8			1			0.39	%		0.04	%		0.04	%		0.01	%
Bank of Santa Barbara		929		1,027		(323	)		(113	)
Napa Community Bank		2,196		2,035		487			146			12.76	%		4.15	%		1.38	%		0.48	%
Point Loma Community Bank		788		960		(533	)		70						3.91	%					0.51	%
Sunrise Bank of San Diego		1,212		1,431		(324	)		146						5.54	%					0.67	%
Sunrise Community Bank		416		376		(313	)		(189	)
California Region Total		8,148		8,430		(1,314	)		20

Colorado Region:
Fort Collins Commerce Bank		1,273		1,124		100			179			4.23	%		7.99	%		0.50	%		1.15	%
Larimer Bank of Commerce		1,285		960		132			80			6.73	%		4.29	%		0.62	%		0.57	%
Loveland Bank of Commerce		419		306		34			(61	)		1.97	%					0.43	%
Mountain View Bank of Commerce		516		94		(62	)		(472	)
Colorado Region Total		3,493		2,484		204			(274	)

Great Lakes Region:
Bank of Auburn Hills		575		740		(373	)		(281	)
Bank of Maumee		671		662		(102	)		(116	)
Bank of Michigan		1,157		1,293		(68	)		123						7.52	%					0.72	%
Capitol National Bank		3,143		3,967		(481	)		599						12.66	%					1.06	%
Elkhart Community Bank		1,160		1,472		(415	)		130						5.87	%					0.57	%
Evansville Commerce Bank		911		1,005		(54	)		(28	)
Goshen Community Bank		1,121		1,368		32			103			1.66	%		5.28	%		0.16	%		0.52	%
Michigan Commerce Bank (3)		17,051		22,273		(7,329	)		(1,151	)
Ohio Commerce Bank		667		628		(76	)		(42	)
Paragon Bank & Trust		1,430		2,066		(879	)		(166	)
Great Lakes Region Total		27,886		35,474		(9,745	)		(829	)

Midwest Region
Adams Dairy Bank		532		282		(25	)		(459	)
Bank of Belleville		911		850		(24	)		(22	)
Community Bank of Lincoln		857		296		(86	)		(181	)
Summit Bank of Kansas City		793		760		(86	)		21						1.20	%					0.19	%
Midwest Region Total		3,093		2,188		(221	)		(641	)

Nevada Region:
1 st Commerce Bank		590		568		(159	)		(97	)
Bank of Las Vegas		1,225		1,239		99			19			6.56	%		0.86	%		0.74	%		0.11	%
Black Mountain Community Bank		2,411		2,799		320			398			8.94	%		10.83	%		0.81	%		1.05	%
Desert Community Bank		1,474		1,889		(435	)		136						5.39	%					0.55	%
Red Rock Community Bank		1,692		2,006		(826	)		195						5.73	%					0.67	%
Nevada Region Total		7,392		8,501		(1,001	)		651

Page 27 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Results of Operations – Continued

Operating results – continued:

	Three Months Ended March 31
												Return on						Return on
	Total Revenues					Net Income (Loss) (1)						Average Equity (2)						Average Assets (2)
	2009			2008		2009			2008			2009			2008			2009			2008
Northeast Region:						(As Revised)
USNY Bank	$	617		$	292	$	(172	)	$	(215	)

Northwest Region:
Bank of Bellevue		717			750		(267	)		(94	)
Bank of Everett		581			491		(281	)		(201	)
Bank of Tacoma		573			476		(533	)		(187	)
High Desert Bank		575			227		(210	)		(195	)
Issaquah Community Bank		497			230		(111	)		(174	)
Northwest Region Total		2,943			2,174		(1,402	)		(851	)

Southeast Region:
Bank of Valdosta		736			872		(158	)		(12	)
Community Bank of Rowan		1,546			1,941		123			250			4.69	%		10.42	%		0.38	%		0.87	%
First Carolina State Bank		1,369			1,783		(299	)		112						3.60	%					0.39	%
Peoples State Bank		334			515		(62	)		50						3.93	%					0.84	%
Pisgah Community Bank		444					(163	)
Sunrise Bank of Atlanta		969			1,126		(147	)		(119	)
Southeast Region Total		5,398			6,237		(706	)		281

Texas Region:
Bank of Fort Bend		298			136		(151	)		(261	)
Bank of Las Colinas		442			221		(118	)		(179	)
Texas Region Total		740			357		(269	)		(440	)

Parent company and other, net		(546	)		734		1,031			2,170

Consolidated totals	$	73,673		$	86,068	$	(20,674	)	$	2,191						2.25	%					0.18	%

(1)	Excludes net losses attributable to noncontrolling interests.
(2)	Annualized for periods presented.
(3)	Michigan Commerce Bank resulted from the merger of Ann Arbor Commerce Bank, Brighton Commerce Bank, Detroit Commerce Bank, Grand Haven Bank, Kent Commerce Bank, Macomb Community Bank, Muskegon Commerce Bank, Oakland Commerce Bank and Portage Commerce Bank effective March 31, 2009.

Liquidity and Capital Resources

The principal funding source for asset growth and loan origination activities is deposits. Total deposits increased $209 million for the three months ended March 31, 2009, compared to a $101 million increase in the corresponding period of 2008. Growth occurred in most interest-bearing deposit categories, with the majority coming from time deposit accounts. Brokered deposits approximated $1.2 billion as of March 31, 2009, or about 26% of total deposits, an increase of $144 million during the interim 2009 period, as the banks have sought to add these funds selectively based on maturity and interest-rate opportunities, to aid in matching the repricing of funding sources and assets. Brokered deposits at March 31, 2009 include about $331 million of relationship-based structured time accounts.

Noninterest-bearing deposits approximated 14.7% of total deposits at March 31, 2009, a decrease from 15.6% at December 31, 2008, and a decrease of $11 million in the 2009 interim period compared to a decrease of $16 million during the 2008 period. Levels of noninterest-bearing deposits can, however, fluctuate based on customers' transaction activity.

During the 2009 period, interest-bearing accounts increased about $220 million which served as the primary funding source for asset growth. Because of the growth in interest-bearing deposits, coupled with higher relative rates on those balances (particularly with time deposit accounts) and decreased noninterest-bearing deposits, net interest margins have decreased.

Page 28 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Liquidity and Capital Resources – Continued

Interim 2009 deposit growth was deployed primarily into cash and cash equivalents to enhance liquidity. Cash and cash equivalents amounted to $761.3 million or 13% of total assets at March 31, 2009, compared to $624.4 million or 11% of total assets at December 31, 2008. As liquidity levels vary continuously based on customer activities, amounts of cash and cash equivalents can vary widely at any given point in time. Management believes the banks' liquidity position at March 31, 2009 is adequate to fund loan demand and meet depositor needs. In the current low interest rate environment, deployment of deposit growth into cash and cash equivalents adversely impacts net interest margin.

In addition to cash and cash equivalents, an additional source of long-term liquidity is the banks' marketable investment securities. Liquidity needs have not historically necessitated the sale of investments in order to meet funding requirements and the banks have not engaged in active trading of their investments. At March 31, 2009, Capitol's banks had approximately $16 million of investment securities classified as available for sale which can be utilized to meet various liquidity needs as they arise.

Several of Capitol's banks have secured lines of credit with regional Federal Home Loan Banks. Borrowings thereunder approximated $377 million and additional borrowing capacity approximated $271 million at March 31, 2009. These facilities are used from time to time as a lower-cost funding source versus various rates and maturities of time deposits available within banks' individual communities. Total notes payable and short-term borrowings were $392 million at March 31, 2009.

Capitol Bancorp Limited stockholders' equity, as a percentage of total assets, approximated 5.75% at March 31, 2009 and 6.26% at December 31, 2008. As of March 31, 2009, Capitol ' s total capital funds (i.e., the sum of Capitol Bancorp Limited stockholders' equity, noncontrolling interests in consolidated subsidiaries and subordinated debentures) approximated $652 million or 11.28% of total assets.

Capitol and its banks are subject to complex regulatory capital requirements, which require maintaining certain minimum capital ratios. These ratio measurements, in addition to certain other requirements, are used by regulatory agencies to determine the level of regulatory intervention and enforcement applied to financial institutions. Management believes Capitol and each of its banks are in compliance with regulatory requirements and are expected to maintain such compliance.

In October 2008, Capitol applied to its primary federal regulator and the FDIC for up to $142 million of preferred stock to be purchased by the U.S. Treasury pursuant to the Capital Purchase Program (CPP) under the Troubled Asset Relief Program (TARP). If the U.S. Treasury purchases such preferred stock from Capitol, Capitol would also issue warrants up to $21.3 million in shares of its common stock, which would be immediately exercisable. The preferred stock issued under CPP bears a 5% annual dividend for the first five years, increasing to 9% thereafter, and would be treated as permanent Tier 1 capital for regulatory purposes. Entering into a CPP stock purchase agreement with the U.S. Treasury under TARP restricts the issuer of preferred stock from increasing its dividends on common stock and repurchasing its common stock, places restrictions on executive compensation and has other evolving conditions and reporting obligations. There is no certainty Capitol will be approved for the CPP or, if approved, whether Capitol will choose to participate.

In February 2009, the U.S. Treasury announced its new Capital Assistance Program (CAP) under which U.S. banking organizations may apply for a U.S. Treasury investment in mandatorily convertible preferred stock in an amount of up to 1% or 2% of risk-weighted assets. The purpose of the CAP is to provide eligible banking organizations with capital in the form of a preferred security which is convertible into common equity. Participating

Page 29 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Liquidity and Capital Resources – Continued

banking organizations would also issue warrants to the U.S. Treasury. Eligibility will be consistent with the criteria and deliberative process established under the TARP/CPP. The CAP is open immediately and the application deadline for participation is in May 2009. Capitol has not yet determined whether it will submit a CAP application.

In early April 2009, Capitol proposed a share-exchange transaction regarding the noncontrolling interests of Bank of Auburn Hills. Under the share-exchange proposal, the bank ' s shareholders would receive approximately 249,000 shares of Capitol ' s previously unissued common stock and approximately 83,000 warrants for the purchase of Capitol ' s common stock. The proposal is subject to the approval of the bank ' s shareholders at a meeting scheduled for May 2009.

Trends Affecting Operations

One of the most significant trends which can impact the financial condition and results of operations of financial institutions is changes in market rates of interest.

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 a difference 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.

The Board of Governors of the Federal Reserve, which influences interest rates, changed interbank borrowing rates in 2008 by an aggregate 400 basis-point decrease. The Board of Governors of the Federal Reserve has also expressed concerns about a variety of economic conditions. Home mortgage rates have recently fluctuated and residential real estate markets have deteriorated in various regions, which adversely impacts fee income from the origination of residential mortgages. There has been widespread media coverage of subprime and other residential mortgage “meltdown” issues; Capitol believes its exposure to the residential real estate crisis to be generally minimal due to its practice of selling residential mortgage loan production to the secondary market. Many of Capitol's banks' commercial loans are variable-rate and, accordingly, rate decreases may result in lower interest income to Capitol in the near term; however, depositors will continue to expect reasonable rates of interest on their accounts, potentially compressing net interest margins further. The future outlook on interest rates and their impact on Capitol's interest income, interest expense and net interest income is uncertain.

General economic conditions also have a significant impact on both the results of operations and the financial condition of financial institutions. As mentioned previously, general economic conditions within the state of Michigan and the national economic recession are uncertain and are likely to continue to have an adverse effect on Capitol's banks and their customers. It is likely that, absent significant catalysts, Michigan's economic recovery in particular may take an extended period of time.

Media reports raising questions about the health of the domestic economy and the sustained national recession have continued in 2009. During the interim 2009 period, nonperforming assets have increased significantly; it is likely levels of nonperforming assets and related loan losses will increase further as economic conditions, locally and nationally, evolve.

Effective March 31, 2009, nine Michigan bank charters were merged into Michigan Commerce Bank. The resulting bank, with nine locations, was combined to gain efficiencies in loan portfolio and problem asset management and general operating efficiencies in daily processing. A similar four-bank merger has been proposed in the greater Phoenix area of Arizona, but is subject to regulatory approval. Additional mergers and combinations of bank charters in other markets are under consideration as management evaluates potential synergies and cost savings. In April 2009, Capitol announced the engagement of a financial advisor to assist management in pursuing divestiture opportunities.

Page 30 of 35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS – Continued

Impact of New Accounting Standards

There are several new accounting standards either becoming effective or being issued in 2009. They are listed and discussed in Note B of the accompanying condensed consolidated financial statements.

Critical Accounting Policies

Capitol's critical accounting policies are described on pages F-31 – F-32 of the financial section of its 2008 Annual Report. In the circumstances of Capitol, management believes its "critical accounting policies" are those which encompass the use of estimates in determining the allowance for loan losses (because of inherent subjectivity), accounting for goodwill (Capitol's annual review of goodwill for potential impairment is performed in the fourth quarter of the year) and other intangibles (due to inherent subjectivity in evaluating potential impairment) and its consolidation policy.

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Page 31 of 35

PART I, ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

MARKET RISK

Information about Capitol's quantitative and qualitative disclosures about market risk were included in Capitol's annual report on Form 10-K for the year ended December 31, 2008. Capitol does not believe that there has been a material change in the nature or categories of market risk exposure, except as noted in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section herein (Part I, Item 2), under the caption, "Trends Affecting Operations."

PART I, ITEM 4

CONTROLS AND PROCEDURES

Capitol maintains disclosure controls and procedures designed to provide reasonable assurance that the information Capitol must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. Capitol's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated Capitol's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, Capitol's disclosure controls and procedures, in all material respects, are effective in bringing to their attention on a timely basis material information relating to Capitol required to be included in Capitol's periodic filings under the Exchange Act.

No change in Capitol's internal control over financial reporting occurred during Capitol's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect Capitol's internal control over financial reporting.

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Page 32 of 35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings. Capitol and its subsidiaries are parties to certain ordinary, routine litigation incidental to their business. In the opinion of management, liabilities arising from such litigation would not have a material effect on Capitol's consolidated financial position or results of operations.
Item 1A.	Risk Factors. There were no material changes from the risk factors set forth in Part I, Item 1A, "Risk Factors," of Capitol's Form 10-K for the year ended December 31, 2008, during the three months ended March 31, 2009. Refer to that section of Capitol's Form 10-K for disclosures regarding the risks and uncertainties related to Capitol's business.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.
	(a) None. (b) Not applicable. (c) None.
Item 3.	Defaults Upon Senior Securities. None.
Item 4.	Submission of Matters to a Vote of Security Holders. None.
Item 5.	Other Information. None.
Item 6.	Exhibits:

(a)	(b)
Exhibit No.	Description of Exhibit
31.1	Certification of Chief Executive Officer, Joseph D. Reid, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer, Lee W. Hendrickson, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer, Joseph D. Reid, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer, Lee W. Hendrickson, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Page 33 of 35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report, Amendment No. 1, to be signed on its behalf by the undersigned thereunto duly authorized.

CAPITOL BANCORP LTD.

(Registrant)

/s/ Joseph D. Reid

Joseph D. Reid

Chairman and CEO

(duly authorized to sign on behalf of the

registrant)

/s/ Lee W. Hendrickson

Lee W. Hendrickson

Chief Financial Officer

Date: April 27, 2010

Page 34 of 35

INDEX TO EXHIBITS

Exhibit No.	Description of Exhibit

31.1	Certification of Chief Executive Officer, Joseph D. Reid, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer, Lee W. Hendrickson, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer, Joseph D. Reid, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer, Lee W. Hendrickson, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.