Capitol Bancorp Reports First
Quarter Results
1ST QUARTER 2008 HIGHLIGHTS
- Assets Exceed $5 Billion
- Year-over-Year Growth in Assets (19%), Loans (23%) and Deposits (16%)
- Two De Novo Bank Openings
- Six Applications Pending for De Novo Banks in Four States
- The Announced Sale of Four Michigan Affiliate Banks
- Formation of a Joint Venture Announced
LANSING, Mich. and PHOENIX, April 17 /PRNewswire-FirstCall/ -- Capitol
Bancorp reported today earnings of $2.2 million for the first quarter of
2008 and assets exceeding $5 billion for the first time in its history.
Earnings per diluted share for the quarter were $0.13, a
decrease from the $0.36 per diluted share reported in the first quarter of
2007. First quarter earnings of $2.2 million reflect a decrease from the
first quarter of 2007 which approximated $6.3 million.
With year-over-year growth of 19 percent, consolidated
assets approximated $5.1 billion, compared to the $4.3 billion at March
31, 2007. Total portfolio loans increased 23 percent to approximately $4.5
billion, from $3.6 billion at March 31, 2007. An increase of more than 16
percent brought total deposits to $3.9 billion from the approximate $3.4
billion reported at March 31, 2007.
Capitol's Chairman and CEO Joseph D. Reid said,
"Capitol continues to confront the challenges presented by a softened
economy directly through our unwavering focus on geographic
diversification. The Corporation has entered into a commitment to sell
four of its western Michigan-based affiliate banks to another
Michigan-based company. This sale, expected to close mid-2008, will allow
Capitol to realign its banking presence in Michigan to be on par with the
growth the Corporation is experiencing in other regions of the country,
thus improving its geographical balance. This is a continuation of
Capitol's strategy for national geographic diversification, and will allow
the Corporation to redeploy assets from the sale into bank development
nationwide. Additionally, Capitol announced during the first quarter the
formation of a joint venture to own and operate central Indiana-based
Forethought Federal Savings Bank. The terms of the agreement will result
in a 51 percent ownership position by Capitol and the opportunity for
continued revenue diversification through noninterest income to the
Corporation, further enhancing its ability to provide positive, consistent
returns to shareholders. We are very excited about these new developments
for Capitol and the positive effect that each will have as we continue
forward with the strategic initiatives to diversify the Corporation. We
are proud of the strides taken to position Capitol to weather future
economic difficulties effectively."
Development through the addition of de novo affiliate
banks continues in 2008, with the opening of Adams Dairy Bank, located in
Blue Springs, Missouri, in January, and Mountain View Bank of Commerce, in
Westminster, Colorado, in February. The addition of these affiliates
resulted in the expansion of Capitol's national network to 62 banks
operating in 17 states. Six applications are currently pending to
establish community banks in the states of Arizona, North Carolina, Ohio
and Oklahoma. The capital foundation for the Corporation remains strong
and is the basis of support for its expansive national network of
community banks, as well as the anticipated continued growth into
additional markets. At March 31, 2008, Capitol's total capital stood in
excess of $708 million, nearly 14% of the Corporation's $5.1 billion of
total assets.
Quarterly Performance
Consolidated net operating revenues decreased slightly to
$48.5 million for the first quarter of 2008, compared to $50.3 million
reported for the same period in 2007. The net interest margin, reflecting
continued compression in this challenging environment, was 3.62 percent in
the first quarter of 2008. The net interest margin was affected by many
factors, including recent dramatic rate cuts of 300 basis points over the
last six months by the Federal Reserve, competitive market pricing on both
sides of the balance sheet, the impact of an elevated level of
nonperforming loans, and modestly lower levels of noninterest-bearing
demand deposit accounts year-over-year. Noninterest income expanded 18
percent year-over-year, reflecting the continued positive results of
Capitol's expanding wealth management initiatives, helping to mitigate
further softening in its mortgage banking revenue.
Net income for the quarter approximated $2.2 million, a
decrease from $6.3 million reported for the first quarter of 2007.
Challenges resulting from a weakening national economy, especially felt in
the Great Lakes region, were contributing factors to the decrease in
earnings. As Capitol continues to leverage infrastructure investments made
during 2006 and 2007, operating expenses increased a modest 7 percent
year-over-year, tied primarily to the launching of two de novo banks
earlier this year. Diluted earnings per share decreased from $0.36
reported in the first quarter of 2007 to $0.13 for the quarter ended March
31, 2008. The first quarter provision for loan losses increased to
approximately $9.0 million over the $3.9 million for the same period in
2007, reflecting Capitol's efforts to prudently address challenging asset
quality dynamics, particularly in its Michigan markets. While Capitol's 13
Michigan-based affiliates currently represent approximately 34 percent of
consolidated total assets (but still nearly 50 percent of the
Corporation's assets at its wholly-owned affiliates), more than 60 percent
of its nonperforming assets are domiciled in Michigan.
Balance Sheet
Continued balance sheet strength in this challenging
environment has been a key objective at Capitol, as reflected in a solid
7.65 percent equity-to-asset ratio at March 31, 2008. With total capital
resources in excess of $708 million at quarter-end, the total
capital-to-asset ratio approximated 14 percent, providing solid support
for the Corporation's more than $5 billion balance sheet.
Net charge-offs increased to 0.49 percent in the first
quarter of 2008 from the 0.41 percent reported in the fourth quarter of
2007 and 0.26 percent reported for the corresponding period of 2007. The
ratio of nonperforming assets to total assets was 2.20 percent at March
31, 2008 compared to 1.82 percent reported at December 31, 2007. The
allowance coverage ratio of nonperforming loans decreased from 80 percent
at December 31, 2007 to 69 percent at March 31, 2008. As a result of the
increase in nonperforming loans, the allowance for loan losses was
increased slightly to 1.38 percent of total loans at March 31, 2008 from
1.35 percent at the beginning of the year. The Corporation remains
disciplined in its approach to portfolio review and analysis and, as a
result, the first quarter provision for loan losses was roughly 1.7 times
first quarter net charge-offs.
About Capitol Bancorp Limited
Capitol Bancorp Limited (
NYSE:CBC
) is a $5.1 billion national community bank development company, with a
network of 62 separately chartered banks with operations in 17 states. It
is the holder of the most individual bank charters in the country. Capitol
Bancorp Limited identifies opportunities for the development of new
community banks, raises capital for and mentors new community banks
through their formative stages and provides efficient services to its
growing network of community banks. Each community bank has full local
decision-making authority and is managed by an on-site president under the
direction of a local board of directors, composed of business leaders from
the bank's community. Founded in 1988, Capitol Bancorp Limited has
executive offices in Lansing, Michigan, and Phoenix, Arizona.
CAPITOL BANCORP LIMITED
SUMMARY OF SELECTED FINANCIAL DATA
(in thousands, except share and per share data)
Three Months Ended Year Ended
March 31 December 31
2008 2007 2007 2006
Condensed statements of
operations:
Interest income $79,503 $77,839 $330,439 $279,353
Interest expense 37,568 33,158 147,162 105,586
Net interest income 41,935 44,681 183,277 173,767
Provision for loan losses 8,958 3,932 25,340 12,156
Noninterest income 6,565 5,585 24,381 21,532
Noninterest expense 44,805 41,823 176,160 137,804
Income before income taxes 196 8,035 24,761 57,854
Net income $2,191 $6,271 $21,937 $42,391
Per share data:
Net income - basic $ 0.13 $ 0.38 $ 1.29 $ 2.69
Net income - diluted 0.13 0.36 1.27 2.57
Book value at end of period 22.37 22.37 22.47 21.73
Common stock closing price
at end of period $21.14 $36.85 $20.12 $46.20
Common shares outstanding
at end of period 17,317,000 17,075,000 17,317,000 16,656,000
Number of shares used
to compute:
Basic earnings per
share 17,141,000 16,695,000 16,967,000 15,772,000
Diluted earnings per
share 17,189,000 17,318,000 17,216,000 16,481,000
1st 4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter Quarter
2008 2007 2007 2007 2007
Condensed
statements of
financial
position:
Total assets $5,066,683 $4,901,763 $4,654,012 $4,439,279 $4,254,526
Portfolio loans 4,467,628 4,314,701 4,030,384 3,801,773 3,620,981
Deposits 3,945,754 3,844,745 3,673,950 3,523,346 3,392,035
Stockholders'
equity 387,433 389,145 390,466 387,917 381,992
Total capital $708,111 $701,473 $689,643 $668,067 $661,650
Key performance
ratios:
Return on average
assets 0.18% 0.28% 0.53% 0.58% 0.61%
Return on average
equity 2.25% 3.48% 6.15% 6.54% 6.74%
Net interest margin 3.62% 4.17% 4.42% 4.53% 4.67%
Efficiency ratio 92.38% 91.23% 82.70% 82.15% 83.20%
Asset quality ratios:
Allowance for loan
losses / portfolio
loans 1.38% 1.35% 1.31% 1.30% 1.30%
Total nonperforming
loans / portfolio
loans 1.99% 1.68% 1.31% 1.10% 1.02%
Total nonperforming
assets / total
assets 2.20% 1.82% 1.42% 1.17% 1.08%
Net charge-offs
(annualized) /
average
portfolio loans 0.49% 0.41% 0.45% 0.18% 0.26%
Allowance for loan
losses /
nonperforming loans 69.41% 80.03% 100.21% 118.28% 128.00%
Capital ratios:
Stockholders'
equity / total
assets 7.65% 7.94% 8.39% 8.74% 8.98%
Total capital /
total assets 13.98% 14.31% 14.82% 15.05% 15.55%
Forward-Looking Statements
This press release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include expressions such as
"expects", "intends", "believes" and
"should" which are not necessarily statements of belief as to
the expected outcomes of future events. Actual results could materially
differ from those presented due to a variety of internal and external
factors. Actual results could materially differ from those contained in,
or implied by, such statements. Capitol Bancorp Limited undertakes no
obligation to release revisions to these forward-looking statements or
reflect events or circumstances after the date of this release.
Supplemental analyses follow providing additional detail regarding
Capitol's results of operations, financial position, asset quality and
other supplemental data.
CAPITOL BANCORP LIMITED
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
Three Months Ended March 31
2008 2007
INTEREST INCOME:
Portfolio loans (including fees) $77,331 $73,524
Loans held for sale 300 946
Taxable investment securities 133 208
Federal funds sold 1,213 2,544
Other 526 617
Total interest income 79,503 77,839
INTEREST EXPENSE:
Deposits 30,688 28,329
Debt obligations and other 6,880 4,829
Total interest expense 37,568 33,158
Net interest income 41,935 44,681
PROVISION FOR LOAN LOSSES 8,958 3,932
Net interest income after
provision for loan losses 32,977 40,749
NONINTEREST INCOME:
Service charges on deposit accounts 1,333 1,105
Trust and wealth-management revenue 1,645 1,037
Fees from origination of non-portfolio
residential mortgage loans 921 1,307
Gain on sales of government-
guaranteed loans 580 800
Gain on sales of other non-
portfolio commercial loans 317 320
Realized gains on sale of investment
securities available for sale 43
Other 1,726 1,016
Total noninterest income 6,565 5,585
NONINTEREST EXPENSE:
Salaries and employee benefits 25,548 26,072
Occupancy 4,404 3,497
Equipment rent, depreciation and
maintenance 2,866 2,642
Other 11,987 9,612
Total noninterest expense 44,805 41,823
Income (loss) before income taxes
(benefit) and minority interest (5,263) 4,511
Income taxes (benefit) (1,995) 1,764
Income (loss) before minority interest (3,268) 2,747
Minority interest in net losses of
consolidated subsidiaries 5,459 3,524
NET INCOME $2,191 $6,271
NET INCOME PER SHARE:
Basic $0.13 $0.38
Diluted $0.13 $0.36
CAPITOL BANCORP LIMITED
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
March 31 December 31
2008 2007
ASSETS
Cash and due from banks $178,401 $196,083
Money market and interest-bearing deposits 27,263 26,924
Federal funds sold 149,702 129,365
Cash and cash equivalents 355,366 352,372
Loans held for sale 17,221 16,419
Investment securities:
Available for sale, carried at market value 8,996 14,119
Held for long-term investment, carried at
amortized cost which approximates
market value 28,902 25,478
Total investment securities 37,898 39,597
Portfolio loans:
Loans secured by real estate:
Commercial 1,968,358 1,917,113
Residential (including multi-family) 748,084 698,960
Construction, land development
and other land 867,311 852,595
Total loans secured by
real estate 3,583,753 3,468,668
Commercial and other business-purpose
loans 802,675 768,473
Consumer 52,556 48,041
Other 28,644 29,519
Total portfolio loans 4,467,628 4,314,701
Less allowance for loan losses (61,666) (58,124)
Net portfolio loans 4,405,962 4,256,577
Premises and equipment 60,011 60,031
Accrued interest income 19,046 19,417
Goodwill and other intangibles 72,609 72,722
Other assets 98,570 84,628
TOTAL ASSETS $5,066,683 $4,901,763
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing $655,647 $671,688
Interest-bearing 3,290,107 3,173,057
Total deposits 3,945,754 3,844,745
Debt obligations:
Notes payable and short-term borrowings 379,044 320,384
Subordinated debentures 156,153 156,130
Total debt obligations 535,197 476,514
Accrued interest on deposits and
other liabilities 33,774 35,161
Total liabilities 4,514,725 4,356,420
MINORITY INTERESTS IN CONSOLIDATED
SUBSIDIARIES 164,525 156,198
STOCKHOLDERS' EQUITY:
Common stock, no par value, 50,000,000 shares
authorized; issued and outstanding:
2008 - 17,317,065 shares
2007 - 17,316,568 shares 272,574 272,208
Retained earnings 115,381 117,520
Undistributed common stock held by
employee-benefit trust (580) (586)
Market value adjustment (net of tax effect)
for investment securities available for
sale (accumulated other comprehensive
income/loss) 58 3
Total stockholders' equity 387,433 389,145
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $5,066,683 $4,901,763
CAPITOL BANCORP LIMITED
Allowance for Loan Losses and Asset Quality Data
ALLOWANCE FOR LOAN LOSSES ACTIVITY (in thousands):
2008 2007
Allowance for loan losses at January 1 $ 58,124 $ 45,414
Loans charged-off:
Loans secured by real estate:
Commercial (672) (159)
Residential (including multi-family) (2,150) (355)
Construction, land development and other
land (1,359) (202)
Total loans secured by real estate (4,181) (716)
Commercial and other business-purpose loans (1,801) (1,807)
Consumer (134) (114)
Total charge-offs (6,116) (2,637)
Recoveries:
Loans secured by real estate:
Commercial 118 59
Residential (including multi-family) 84 64
Construction, land development and other land 26 1
Total loans secured by real estate 228 124
Commercial and other business-purpose loans 430 174
Consumer 41 45
Other 1 --
Total recoveries 700 343
Net charge-offs (5,416) (2,294)
Additions to allowance charged to expense 8,958 3,932
Allowance for loan losses at March 31 $ 61,666 $ 47,052
Average total portfolio loans for period
ended March 31 $4,402,469 $3,555,432
Ratio of net charge-offs (annualized) to
average portfolio loans outstanding 0.49% 0.26%
CAPITOL BANCORP LIMITED
Selected Supplemental Data
ASSET QUALITY (in thousands):
March 31 December 31
2008 2007
Nonaccrual loans:
Loans secured by real estate:
Commercial $ 21,497 $ 19,016
Residential (including multi-family) 17,094 13,381
Construction, land development and other
land 36,704 29,756
Total loans secured by real estate 75,295 62,153
Commercial and other business-purpose loans 7,833 5,782
Consumer 86 66
Other -- 84
Total nonaccrual loans 83,214 68,085
Past due (>90 days) loans:
Loans secured by real estate:
Commercial 503 113
Residential (including multi-family) 3,407 1,116
Construction, land development and other
land 214 2,531
Total loans secured by real estate 4,124 3,760
Commercial and other business-purpose loans 1,477 714
Consumer 23 66
Other -- 5
Total past due loans 5,624 4,545
Total nonperforming loans $ 88,838 $ 72,630
Real estate owned and other
repossessed assets 22,601 16,680
Total nonperforming assets $111,439 $ 89,310
CAPITOL BANCORP LIMITED
Selected Supplemental Data
EPS COMPUTATION COMPONENTS (in thousands):
Three Months Ended
March 31
2008 2007
Numerator-net income for the period $2,191 $6,271
Denominator:
Weighted average number of shares outstanding,
excluding unvested restricted shares
(denominator for basic earnings per share) 17,141 16,695
Effect of dilutive securities:
Unvested restricted shares 25 51
Stock options 23 572
Total effect of dilutive securities 48 623
Denominator for diluted earnings per share-
Weighted average number of shares and potential
dilution 17,189 17,318
Number of antidilutive stock options excluded
from diluted earnings per share computation 2,271 --
AVERAGE BALANCES (in thousands):
Three Months Ended
March 31
2008 2007
Portfolio loans $4,402,469 $3,555,432
Earning assets 4,634,581 3,828,582
Total assets 4,987,115 4,144,124
Deposits 3,898,649 3,317,872
Stockholders' equity 388,875 372,250
Capitol Bancorp's National Network of Community Banks
Arizona Region:
Arrowhead Community Bank Glendale, Arizona
Asian Bank of Arizona Phoenix, Arizona
Bank of Tucson Tucson, Arizona
Camelback Community Bank Phoenix, Arizona
Mesa Bank Mesa, Arizona
Southern Arizona Community Bank Tucson, Arizona
Sunrise Bank of Albuquerque Albuquerque, New Mexico
Sunrise Bank of Arizona Phoenix, Arizona
Valley First Community Bank Scottsdale, Arizona
Yuma Community Bank Yuma, Arizona
California Region:
Bank of Escondido Escondido, California
Bank of Feather River Yuba City, California
Bank of San Francisco San Francisco, California
Bank of Santa Barbara Santa Barbara, California
Napa Community Bank Napa, California
Point Loma Community Bank San Diego, California
Sunrise Bank of San Diego San Diego, California
Sunrise Community Bank Palm Desert, California
Colorado Region:
Fort Collins Commerce Bank Fort Collins, Colorado
Larimer Bank of Commerce Fort Collins, Colorado
Loveland Bank of Commerce Loveland, Colorado
Mountain View Bank of Commerce Westminster, Colorado
Great Lakes Region:
Ann Arbor Commerce Bank Ann Arbor, Michigan
Bank of Auburn Hills Auburn Hills, Michigan
Bank of Maumee Maumee, Ohio
Bank of Michigan Farmington Hills, Michigan
Brighton Commerce Bank Brighton, Michigan
Capitol National Bank Lansing, Michigan
Detroit Commerce Bank Detroit, Michigan
Elkhart Community Bank Elkhart, Indiana
Evansville Commerce Bank Evansville, Indiana
Goshen Community Bank Goshen, Indiana
Grand Haven Bank Grand Haven, Michigan
Kent Commerce Bank Grand Rapids, Michigan
Macomb Community Bank Clinton Township, Michigan
Muskegon Commerce Bank Muskegon, Michigan
Oakland Commerce Bank Farmington Hills, Michigan
Ohio Commerce Bank Beachwood, Ohio
Paragon Bank & Trust Holland, Michigan
Portage Commerce Bank Portage, Michigan
Midwest Region:
Adams Dairy Bank Blue Springs, Missouri
Bank of Belleville Belleville, Illinois
Community Bank of Lincoln Lincoln, Nebraska
Summit Bank of Kansas City Lee's Summit, Missouri
Nevada Region:
1st Commerce Bank North Las Vegas, Nevada
Bank of Las Vegas Las Vegas, Nevada
Black Mountain Community Bank Henderson, Nevada
Desert Community Bank Las Vegas, Nevada
Red Rock Community Bank Las Vegas, Nevada
Northeast Region:
USNY Bank Geneva, New York
Northwest Region:
Bank of Bellevue Bellevue, Washington
Bank of Everett Everett, Washington
Bank of Tacoma Tacoma, Washington
High Desert Bank Bend, Oregon
Issaquah Community Bank Issaquah, Washington
Southeast Region:
Bank of Valdosta Valdosta, Georgia
Community Bank of Rowan Salisbury, North Carolina
First Carolina State Bank Rocky Mount, North Carolina
Peoples State Bank Jeffersonville, Georgia
Sunrise Bank of Atlanta Atlanta, Georgia
Texas Region:
Bank of Fort Bend Sugar Land, Texas
Bank of Las Colinas Irving, Texas
Source: Capitol Bancorp
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