CAPITOL BANCORP LTD, PRE 14A, 1999-03-05

CAPITOL BANCORP LTD
PRE 14A, 1999-03-05
NATIONAL COMMERCIAL BANKS

Previous: NEW CENTURY PORTFOLIOS, 497J, 1999-03-05

Next: FIRST CASH FINANCIAL SERVICES INC, S-8, 1999-03-05

<PAGE> 1

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [x]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[x] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(c)(2))

[ ] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CAPITOL BANCORP LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CAPITOL BANCORP LTD.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[x] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

- --------------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------

(5) Total fee paid:

- --------------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.

(1) Amount previously paid:

- --------------------------------------------------------------------------------

(2) Form, schedule or registration statement no.:

- --------------------------------------------------------------------------------

(3) Filing party:

- --------------------------------------------------------------------------------

(4) Date filed:

- --------------------------------------------------------------------------------

<PAGE> 2
[CAPITAL BANCORP LIMITED LOGO]

March 17, 1999

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders
of Capitol Bancorp Ltd. to be held at the Lansing Center, 333 East Michigan
Avenue, Lansing, Michigan, on Tuesday, May 4, 1999, at 4:00 p.m. Eastern Time.

The attached Notice of the Annual Meeting and Proxy Statement describe
the formal business to be transacted at the Meeting. The Meeting is for the
purpose of considering and acting upon the election of directors of the
Corporation and a proposed amendment to the Corporation's articles of
incorporation.

During the Meeting, we will also report on the operations of the
Corporation. Directors and officers of the Corporation, as well as a
representative of BDO Seidman, LLP will be present to respond to any appropriate
questions that you may have.

Please sign, date and return the enclosed proxy card. If you attend the
Meeting, you may withdraw your proxy and vote in person, even if you have
previously mailed a proxy card.

Sincerely,

JOSEPH D. REID
Chairman of the Board, President
and Chief Executive Officer

<PAGE> 3

CAPITOL BANCORP LTD.
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on Tuesday, May 4, 1999

The 1999 Annual Meeting of the Stockholders of Capitol Bancorp Ltd.
will be held at the Lansing Center, 333 East Michigan Avenue, Lansing, Michigan
on Tuesday, May 4, 1999 at 4:00 p.m. Eastern Time.

A Proxy Card and a Proxy Statement for the meeting are enclosed.

The meeting is for the purpose of considering and acting upon:

1. The election of 16 directors of the Corporation to
hold office for one year and until their successors
are elected and qualified and;

2. Amendment of the Corporation's articles of
incorporation to increase the number of authorized
common shares (no par value) from 10,000,000 to
25,000,000.

3. Such other matters as may properly come before the
meeting or any adjournments thereof.

The Board of Directors is not aware of any other business to come
before the meeting.

Action may be taken on any one of the foregoing proposals at the
meeting on the date specified, or on any dates to which, by original or later
adjournment, the meeting may be adjourned. Stockholders of record at the close
of business on March 10, 1999, are the Stockholders entitled to vote at the
meeting and any adjournments thereof.

You are requested to fill in and sign the enclosed form of proxy which
is solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend the meeting, withdraw your
proxy and vote in person.

BY ORDER OF THE BOARD OF DIRECTORS

DAVID O'LEARY
Secretary

Lansing, Michigan
March 17, 1999

IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. AN ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.

<PAGE> 4
CAPITOL BANCORP LTD.
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933

ANNUAL MEETING OF STOCKHOLDERS
May 4, 1999

PROXY STATEMENT

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Capitol Bancorp Ltd. to be used at the
1999 Annual Meeting of Stockholders of the Corporation which will be held at the
Lansing Center, 333 East Michigan Avenue, Lansing, Michigan, on Tuesday, May 4,
1999 at 4:00 p.m. Eastern Time. The accompanying Notice of Meeting and this
Proxy Statement are being mailed to stockholders on or about March 17, 1999.

REVOCATION OF PROXIES

Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Corporation or by the filing of a later proxy
prior to a vote being taken on a particular proposal at the meeting. A proxy
will not be voted if a particular stockholder attends the meeting and revokes
his or her proxy by notifying the Secretary at the meeting of his or her
intention to do so. Any stockholder who attends the meeting and revokes his
proxy may vote in person. Proxies solicited by the Board of Directors of the
Corporation will be voted in accordance with the directions given therein. Where
no instructions are indicated, proxies will be voted FOR the nominees for
directors set forth below.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

Stockholders of record as of the close of business on March 10, 1999
(the "Record Date"), are entitled to one vote for each share then held. As of
February 17, 1999, the Corporation had 6,344,886 shares of common stock issued
and outstanding.

The following table sets forth, as of February 17, 1999, certain
information as to each person (including any group as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) who was known to be the
beneficial owner of more than 5% of the Corporation's common stock as of that
date, and as to the shares of common stock beneficially owned by all executive
officers and directors of the Corporation as a group.

Name and Address of Shares of Percent of
Beneficial Owner Common Stock Common Stock
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Joseph D. Reid 1,103,384(a) 16.15%
Capitol Bancorp Ltd.
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933

All Directors and Executive 1,997,417(b) 28.78%
Officers as a group (29 persons)

- ----------------------------------------------------------------------------------------------------------------------

(a) Includes 485,119 options, each to purchase one share of common stock.
See "Executive Compensation".

(b) Includes 1,403,046 shares held by 11 persons who are executive officers
of the Corporation, but not directors, of which 66,199 are held in the
Capitol Bancorp Ltd. Employee Stock Ownership Plan. Also includes
141,624 shares held by the Capitol Bancorp Ltd. Directors' Deferred
Compensation Plan and 595,586 options each to purchase one share of
common stock.

</TABLE>

<PAGE> 5

ELECTION OF DIRECTORS

The Bylaws of the Corporation establish that the number of directors
shall be not less than five nor more than twenty-five.

The persons named in the enclosed Proxy intend to vote for the election
of the nominees named in this Proxy Statement unless it contains instructions to
the contrary. All nominees are willing to be elected and to serve in such
capacity for one year and until their successors are elected and qualified. If
any of the nominees becomes unavailable for election, which is not anticipated,
the persons named in the Proxy will vote for such other nominee, if any, as may
be proposed by the Board of Directors. A majority of the common stock voting at
the meeting is required for the election of nominees to the Board of Directors.

Each of the nominees for election to the Board of Directors is
currently a member of the Corporation's Board of Directors and has been a member
of the Board of Directors of the Corporation since the year shown in the table
below (or, as to dates prior to 1988, Capitol National Bank).

The table below sets forth information regarding the Corporation's
Directors based on the data furnished by them. They have held the principal
occupations shown for at least the past five years unless otherwise indicated.
The shares in this table do not include the ESOP shares voted by Messrs. Reid,
O'Leary and Carr as trustees of the ESOP for which such trustees disclaim
beneficial ownership thereof except insofar as they are beneficiaries of the
ESOP trust. See "Executive Compensation".

Name; Positions with the
Corporation or Principal
Occupations or Positions
During Past Five Years; Other
Directorships in Companies Shares of Common
With Securities Registered Stock of the
Pursuant to Section 12 Year First Corporation Owned Percent of Total
of the Securities Became A Beneficially At Common Stock At
Exchange Act of 1934 Age Director February 17, 1999(a) February 17, 1999
- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
Joseph D. Reid 56 1982 1,103,384 (c) 16.15%
Chairman of the Board, President
and Chief Executive Officer of the
Corporation; Chairman of the Board
of certain of the Corporation's
subsidiaries(b); Chairman and Chief
Executive Officer, Access BIDCO,
Incorporated and Onset BIDCO,
Inc. (subsidiary of Access BIDCO, Inc.)

Robert C. Carr 59 1982 68,336 (d) 1.07%
Treasurer and Executive Vice
President of the Corporation;
Chairman, Capitol National Bank

David O'Leary 68 1982 48,985 .77%
Secretary of the Corporation;
Chairman, O'Leary Paint Company

</TABLE>

- --------
(a) Includes all shares as to which the nominee has voting power and/or
investment power, including shares held by entities owned and
controlled, and shares held by children residing in the same household
or jointly with spouse. This total does not reflect stock purchased
through voluntary participation in the Capitol Bancorp Ltd. Directors'
Deferred Compensation Plan.

(b) Chairman of the Boards of Directors of the following subsidiary banks:
Detroit Commerce Bank, Kent Commerce Bank and Muskegon Commerce Bank.
Also Chairman and CEO of Sun Community Bancorp Limited and its
subsidiary banks, Bank of Tucson, Camelback Community Bank, Mesa Bank,
Southern Arizona Community Bank, Sunrise Bank of Arizona and Valley
First Community Bank.

(d) Includes 39,600 options, each to purchase one share of common stock.
Also includes 12,270 allocated shares held in the Capitol Bancorp Ltd.
Employee Stock Ownership Plan.

<PAGE> 6

Paul R. Ballard 49 1990 87,060(b) 1.37%
Executive Vice President of the
Corporation; President and
CEO, Portage Commerce Bank

David L. Becker 63 1990 52,155 .82%
President, Becker Insurance
Agency, P.C.

Douglas E. Crist 58 1982 52,916 .83%
President, Developers of
SW Florida, Inc.

James C. Epolito 44 (c) 217 --
President and CEO, The
Accident Fund Company

Gary A. Falkenberg 60 1982 40,443 .64%
Doctor of Osteopathic Medicine

Joel I. Ferguson 60 1982 42,405 .67%
Chairman, Ferguson Development,
LLC; General Partner, F & S
Development Co. (a real estate
development firm)

Kathleen A. Gaskin 57 1982 30,869 .49%
Associate Broker/State Appraiser,
Tomie Raines, Inc. Realtors

H. Nicholas Genova 59 1992 14,131 .22%
Chairman and CEO, Washtenaw
News Company, Inc.; President,
H. N. Genova Development Company

L. Douglas Johns 55 1982 96,160 1.52%
President, Mid-Michigan Investment
Company

</TABLE>

(b) Includes 21,600 options, each to purchase one share of common stock.
Also includes 9,327 allocated shares held in the Capitol Bancorp Ltd.
Employee Stock Ownership Plan.

<PAGE> 7

<S> <C> <C> <C> <C>
Michael L. Kasten 53 1990 78,088 1.23%
Managing Partner, Kasten Investments,
LLC; Vice President, Kasten Insulation
Services, Inc. (formerly M. L. Kasten
Company); Director and Vice Chairman,
Sun Community Bancorp Limited and a
Director of its subsidiaries, Bank of
Tucson, Camelback Community Bank, Mesa
Bank, Southern Arizona Community Bank,
Sunrise Bank of Arizona and Valley
First Community Bank; Director and
Chairman of Portage Commerce Bank

Leonard Maas 77 1995 93,807 1.48%
President, Gillisse Construction
Company (underground utility
construction); Partner, CP Limited
Partnership

Lyle W. Miller 55 1982 43,601 .69%
President, SERVCO, Inc. (provider of
credit card and computer enhancement
services); President, Northern Connections,
LLC (property leasing); President,
Northern Leasing and Sales, (property
leasing;) President, Lansing Ice &
Gymnastics Center; President, McMiller
Holding Company (land holding company);
Executive Vice President, NCCI (a
division of Cendent, direct marketing and
member servicing)
</TABLE>

<PAGE> 8

Individuals Who Have Served as a
Director in Most Recent Fiscal Year
and Are Not Standing for Re-Election
As a Director:

<S> <C> <C> <C> <C>
Richard G. Dorner 53 1990 15,823(b) .25%
President and CEO, Ann
Arbor Commerce Bank

James R. Kaye 41 1992 8,057(c) .13%
President and CEO, Oakland
Commerce Bank

</TABLE>

(a) Includes all shares as to which the nominee has voting power and/or
investment power, including shares held by entities owned and
controlled, and shares held by children residing in the same household
or jointly with spouse. This total does not reflect stock purchased
through voluntary participation in the Capitol Bancorp Ltd. Directors'
Deferred Compensation Plan.

(b) Includes 1,200 options, each to purchase one share of common stock and
7,087 allocated shares held in the Capitol Bancorp Ltd. Employee Stock
Ownership Plan.

(c) Includes 1,200 options, each to purchase one share of common stock and
4,157 allocated shares held in the Capitol Bancorp Ltd. Employee Stock
Ownership Plan.

Rules and regulations promulgated by the Securities and Exchange
Commission require periodic reporting of the beneficial ownership of and
transactions involving the Corporation's securities relating to directors,
officers and beneficial owners of 10% or more of the Corporation's securities.
Under those rules and regulations, certain acquisitions and divestitures of the
Corporation's securities are required to be disclosed via reports filed within
prescribed time limits. Based on the Corporation's review of filings made during
the year ended December 31, 1998 the following common stock transactions were
noted:

Leonard Maas purchased 1,000 shares on April 29, 1998 for a joint
account with his spouse. The acquisition of 1,000 shares was not
reported on the original report of holdings and should have been
reported thereon.

William Rheaume purchased 250 shares on September 15, 1998. The
acquisition of 250 shares was not reported on the original report of
holdings and should have been reported thereon.

The forgoing transactions were not reported timely pursuant to the
filing requirements. These transactions were subsequently reported in
conjunction with the required year-end reporting of beneficial ownership
interests of these individuals as of December 31, 1998.

PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION

The Corporation's Board of Directors recommends that the stockholders
approve a proposal to amend the articles of incorporation to increase the number
of authorized shares of common stock (no par value) from 10,000,000 to
25,000,000.

The articles of incorporation currently limit the number of common
shares which the Corporation could issue to 10,000,000, a provision which was
established in 1988. Since that time, the Corporation has issued additional
shares through stock offerings, acquisitions, stock splits, stock dividends,
upon exercise of stock options, dividend reinvestment plan and employee stock
ownership plan.

At December 31, 1998, there were 6,344,886 common shares outstanding.
If the amendment is adopted, approximately 18,650,000 shares of common stock
would be authorized and unissued. At December 31, 1998, there were

<PAGE> 9

617,714 stock options outstanding which provide for the issuance of a like
number of common shares, if and when exercised. Except to the extent that the
Corporation may issue additional common shares upon exercise of stock options,
the Corporation has no commitments for issuance of additional common shares, but
wishes to have such shares available for future issuances as the need may arise.
No further stockholder approval would be required prior to the issuance of the
additional shares authorized by this amendment.

The Corporation's Board of Directors believes that the increased number
of authorized common shares contemplated by the proposed amendment to the
articles of incorporation is desirable to make additional shares available for
issuance without further stockholder authorization, except as may be required by
law or by the rules of The NASDAQ Stock Market. Authorizing the Corporation to
issue more shares than currently authorized by the articles of incorporation
will not materially affect any substantive rights, powers or privileges of
holders of common shares. The Board of Directors believes that having such
additional shares authorized and available for issuance will allow the
Corporation to have greater flexibility in considering potential future actions
involving the issuance of stock.

Implementation of this proposed amendment to the articles of
incorporation requires approval by a majority of the Corporation's common shares
eligible to vote thereon. As a result, any shares not voted (whether by
abstention, broker non-vote or otherwise) will have the same effect as a vote
against the proposal.

The Board of Directors recommends a vote FOR the proposal to approve
this amendment.

MEETINGS OF THE BOARD OF DIRECTORS

The Board of Directors conducts its business through meetings of the
Board and its committees. During 1998, the Board of Directors held four
meetings. No director of the Corporation attended fewer than 75% of the meetings
of the Board of Directors and committee meetings on which such Board member
served during this period.

Directors who are not employees of the Corporation or its subsidiaries
are entitled to receive an annual directors' fee ($6,000 in 1998). Directors
entitled to receive such fee may either receive the amount currently or elect to
defer the amount pursuant to a deferred compensation plan. See "Directors'
Deferred Compensation Plan". Members of the Corporation's Audit Committee and
Compensation Committee receive a fee of $300 for each committee meeting
attended.

COMMITTEES OF THE BOARD OF DIRECTORS

The Corporation's Board of Directors has several committees, including
an executive committee, an audit committee and a compensation committee.

EXECUTIVE COMMITTEE

Through, 1998 the Executive Committee was composed of Messrs. Reid,
Carr, O'Leary, Ballard, Ferguson and Johns. During 1998, the Executive Committee
met four times. In early 1999 the composition of the Committee was changed to
consist of Messrs. Reid, O'Leary, Ferguson, Johns, Kasten and Miller. The
Executive Committee meets for the purpose of monitoring current operating
strategy and implementation of the Corporation's business plan.

AUDIT COMMITTEE

The members of the Audit Committee are Messrs. Genova and Kasten and
its Chairman, Dr. Falkenberg.

The Audit Committee reviews the results of the independent auditors'
audit of the Corporation's consolidated financial statements and evaluates
policies, procedures and results relating to the internal audit function and
recommends to the Corporation's Board of Directors the selection of independent
auditors. During 1998, the Audit Committee met five times.

COMPENSATION COMMITTEE

The Compensation Committee consists of three directors, Mr. Kasten, Ms.
Gaskin and its Chairman, Mr. Miller, who are not employed by the Corporation and
are not eligible to participate in any of the Corporation's benefit plans other
than the Capitol Bancorp Ltd. Directors Deferred Compensation Plan.

The Compensation Committee meets for the purpose of reviewing
compensation and benefit levels for the Corporation's management and making
related recommendations to the Corporation's Board of Directors. During 1998,
three meetings of the Compensation Committee were held.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

<PAGE> 10

OVERVIEW

The Corporation's executive compensation structure and policies have
been established to attract, retain and motivate quality managerial talent
necessary to lead the Corporation while attaining its business objectives and
maximizing shareholder value. Because of the Corporation's evolution, it has not
been necessary, in the opinion of the Compensation Committee, to utilize
external compensation consultants for the purpose of determining compensation
levels for executive officers and other employees of the Corporation. The
Compensation Committee does, however, review reports of various compensation
surveys (including surveys which are specifically applicable to compensation in
the banking industry). In the opinion of the Committee, the Corporation's
compensation levels are appropriate and competitive insofar as is consistent
with the objective stated above.

Compensation of executive officers of the Corporation includes the
following elements:

1. Salary.
2. Incentive compensation in the form of discretionary bonuses payable in
cash and common stock based on meeting certain performance criteria
applicable to subsidiary and corporate-wide performance.
3. Discretionary awards of stock options.
4. An Executive Supplemental Income Program offered to certain key senior
officers of the Corporation and its subsidiaries.
5. Participation in other benefit plans offered to employees, including
ESOP, 401(k), health insurance and similar programs.
6. Other fringe benefits, such as company-provided vehicles.

BASE SALARIES

Annual salaries for the Corporation's CEO and next four most highly
compensated executive officers for 1998, 1997 and 1996 are shown on page 12.

In each of the years presented, annual salary amounts for the named
executive officers (including the Corporation's CEO) have increased. During
those periods, asset growth has been significant. The growth in the number of
banking subsidiaries has increased significantly, particularly in 1998. Earnings
in 1998 decreased, compared to 1997, due in part to asset growth and the
Corporation's aggressive expansion plans. The Corporation's size, past
performance and ongoing development, in the opinion of the Compensation
Committee, do not establish a linear relationship between earnings and executive
compensation.

Amounts of annual salary and bonuses have been determined for the CEO on
a discretionary basis, consistent with the factors discussed above. In lieu of a
1997 bonus, the Compensation Committee increased the CEO's salary in 1998.

The CEO's compensation for 1998 was determined by the Compensation
Committee's review of qualitative factors which included the aggressive addition
of de novo banks, significant asset growth, shareholder value, asset quality and
core earnings performance of established bank subsidiaries. Although these
factors have quantitative bases, the Committee's review and consideration of CEO
compensation is primarily subjective and, hence, qualitative.

Amounts of annual salary and bonuses paid to the other named executive
officers were determined by the Compensation Committee after reviewing
recommendations made to the Committee by the Corporation's CEO. Compensation
amounts for the other named executive officers, including salary and bonuses,
were determined subjectively, similarly to the qualitative factors described
above regarding determination of CEO compensation amounts.

Compensation Committee
Lyle W. Miller, Chairman
Michael L. Kasten
Kathleen A. Gaskin

<PAGE> 11

EMPLOYEE STOCK OWNERSHIP PLAN

The Employee Stock Ownership Plan provides substantially all full-time
employees of the Corporation and certain subsidiaries with an equity interest in
the company. All employees of the Corporation and certain subsidiaries, subject
to meeting certain eligibility criteria, are entitled to participate in the
ESOP, excepting only Mr. Reid. Contributions to the ESOP are determined at the
discretion of the Corporation's Board of Directors.

ESOP contributions charged to expense in 1998, 1997 and 1996
approximated $256,000, $180,000, and $131,000, respectively.

The ESOP trust held 213,200 shares of the Corporation's Common Stock at
February 17, 1999. The ESOP shares are voted by eligible participants of the
ESOP, including officers and directors of the Corporation, insofar as such
shares are allocated to participants' accounts (154,000 at February 17, 1999).
ESOP shares which have not been allocated to participants' accounts (59,200 at
February 17, 1999) are voted by Messrs. Reid, Carr and O'Leary. ESOP shares
voted by officers of the Corporation who are also participants in the ESOP at
December 31, 1998 are included in the "Voting Securities and Principal Holdings
Thereof" section of the Proxy Statement.

EMPLOYEE RETIREMENT 401(K) PLAN

The Corporation has a contributory employee retirement savings 401(k)
plan which covers substantially all full-time employees of the Corporation and
certain subsidiaries over age 21. The Plan provides for contributions in amounts
determined annually by the Board of Directors. Eligible employees make voluntary
contributions to the Plan; contributions to the Plan by the Corporation are an
employee match (50%, subject to certain limitations). The Corporation's
contributions to the Plan charged to expense for the years 1998, 1997 and 1996
were $182,000, $111,000 and $88,000, respectively.

At February 17, 1999 19,967 shares of common stock were held in the
participants' accounts of the Plan. Such shares are voted by the Plan Trustee,
Paragon Bank & Trust, a wholly-owned subsidiary of the Corporation.

<PAGE> 12

STOCK PERFORMANCE GRAPH

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
CAPITOL BANCORP LTD., NASDAQ MARKET INDEX, AND SNL $500M-$1B BANK ASSET-SIZE
INDEX

Set forth below is a graph which summarizes the cumulative return
experienced by the Corporation's shareholders over the last five years compared
to the SNL $500 M - $1 B Bank Asset-Size Index(a) and the cumulative total
return on the NASDAQ Market Value Index(b) ("Broad Market Index"). Such
presentation assumes that the value of the investment in the Corporation's
common stock and each index was $100 on December 31, 1993 and that subsequent
cash dividends were reinvested. This index was used by the Corporation in 1997
and 1998. Use of this index in 1998 was appropriate inasmuch as total assets
reached $1 billion at the end of the year.

<PAGE> 13

EXECUTIVE COMPENSATION

The following table sets forth compensation paid to the CEO and the next
four most highly compensated executive officers of the Corporation for each of
the three years in the period ended December 31, 1998. The Corporation has
entered into written employment agreements with Joseph D. Reid and certain
officers of the Corporation and its subsidiaries. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS".

SUMMARY COMPENSATION TABLE

Long-Term Compensation
------------------------------------

Annual Compensation Awards Payouts
- ----------------------------------------------------------------------------------------------------------------------------------
Other
Name and Annual Restricted Number of
Principal Compen- Stock Options/ LTIP
Position/Year Salary Bonus(a) sation(b) Award(s) SARs Payouts
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph D. Reid(c)
Chairman, President and
CEO of the Corporation
and Chairman and CEO of
Sun Community Bancorp Limited:
1998 518,500 -0- 4,472 -0- -0- -0-
1997 300,100 -0- 13,766(d) -0- 146,836(e) -0-
1996 255,798 255,534 3,779 -0- 237,901(e) -0-
Robert C. Carr
Treasurer and Executive
Vice President of the
Corporation; Chairman,
Capitol National Bank:
1998 170,000 33,500 2,200 -0- -0- -0-
1997 154,327 33,500 2,280 -0- 3,600 -0-
1996 150,000 27,000 2,252 -0- 12,000 -0-
Paul R. Ballard
Executive Vice President of
the Corporation; President and
CEO, Portage Commerce Bank:
1998 150,000 30,000 2,899 -0- -0- -0-
1997 133,846 30,000 4,320 -0- 3,600 -0-
1996 130,000 23,000 3,685 -0- 12,000 -0-

Lee W. Hendrickson
Senior Vice President and
Chief Financial Officer of the
Corporation and of Sun
Community Bancorp Limited:
1998 130,961 15,000 3,883 -0- -0- -0-
1997 47,692 15,000 495 -0- 2,400 -0-
1996 (f) -0- -0- -0- -0- -0- -0-
David K. Powers
Executive Vice President:
1998 116,848 20,000 2,773 -0- -0- -0-
1997 106,729 20,000 2,290 -0- 2,400 -0-
1996 103,736 20,000 2,669 -0- -0- -0-

- --------------------------------------------------------------------------------
Name and All Other
Principal Compensation
Position/Year
- --------------------------------------------------------------------------------
<S> <C> <C>
Joseph D. Reid (c)
Chairman, President and
CEO of the Corporation
and Chairman and CEO of
Sun Community Bancorp Limited:
1998 -0-
1997 -0-
1996 -0-
Robert C. Carr
Treasurer and Executive
Vice President of the
Corporation; Chairman,
Capitol National Bank:
1998 -0-
1997 -0-
1996 -0-
Paul R. Ballard
Executive Vice President of
the Corporation; President and
CEO, Portage Commerce Bank:
1998 -0-
1997 -0-
1996 -0-

Lee W. Hendrickson
Senior Vice President and
Chief Financial Officer of the
Corporation and of Sun
Community Bancorp Limited:
1998 -0-
1997 -0-
1996 (f) -0-
David K. Powers
Executive Vice President:
1998 -0-
1997 -0-
1996 -0-

</TABLE>

(a) Represents amounts pursuant to incentive compensation program.
(b) Represents allocated personal portion of value of automobile and life
insurance provided by the Corporation.
(c) See also "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
(d) Also includes certain expense allowances aggregating
$10,800 provided by Sun Community Bancorp Limited and its subsidiaries.
(e) Represents options granted pursuant to employment agreement. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
(f) Did not receive compensation from the Corporation in 1996.

12
<PAGE> 14

Aggregated Options/SARs Exercised in Last Fiscal Year and Fiscal Year-End Option/SAR Values
- -----------------------------------------------------------------------------------------------------------------------------------

(a) (b) (c) (d) (e)

Number of Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End Fiscal Year-End

Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable(b) Unexercisable(b)
- -----------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
Joseph D. Reid 63,276 $ 797,563(a) 485,119(b) $4,466,986(c)
Robert C. Carr 39,600(b) 486,975(c)
Paul R. Ballard 21,600(b) 256,391(c)

</TABLE>

(a) Based on approximate average market price per share during month of
transfer less exercise price of stock options multiplied by number of
stock options exercised.
(b) All outstanding options are currently exercisable.
(c) The Corporation's common stock is traded on The Nasdaq Stock Market(SM)
under the symbol "CBCL". Value is based on December 31, 1998 closing
price of $ 20.938 per share (which was based on market quotations
supplied to the Corporation and reflects inter-dealer prices without
retail mark-up, mark-down or commissions).

DIRECTORS' DEFERRED COMPENSATION PLAN

Nonemployee directors of the Corporation may either receive directors'
fees currently or elect to defer such fees pursuant to a deferred compensation
plan (the "Plan"). Under the terms of the Plan, directors' fees voluntarily
deferred are remitted to a trustee (the "Trustee", Paragon Bank & Trust,
Holland, Michigan) and such funds are invested in shares of Common Stock of the
Corporation in open market transactions. As of February 17, 1999, the Plan held
141,624 shares of the Corporation's Common Stock. The Trustee has sole voting
power over the shares held by the Plan; accordingly, the shares held by the Plan
are not included in the shares attributed to each director in the table included
elsewhere in this Proxy Statement. However, shares held by the Plan are included
in the total of all shares held by directors and officers as a group. Each
director's participation in the Plan is voluntary and does not affect the amount
of his/her director fees.

<PAGE> 15

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Corporation has entered into an Employment Agreement with Joseph
D. Reid under which, in addition to any other functions to be performed by him
as may be prescribed by the Board of Directors of the Corporation, he agreed to
serve as Chairman of the Board, President and Chief Executive Officer of the
Corporation. The term of the Employment Agreement is three years and is
automatically extended for an additional year each January 1 unless either party
gives written notice to the contrary. Mr. Reid's Employment Agreement binds the
Corporation to issue Mr. Reid certain options at the outset of the Employment
Agreement and additional options in the event of any new issue of shares equal
to 15% of the sum of the additional shares issued and the shares subject to the
options. The exercise price of such options is to be established by the Board of
Directors based on the fair market price of Common Stock at the time of issuance
of the option but not less than $6.06 per share. Each option expires seven years
after its date of issuance. At December 31, 1998, Mr. Reid held options to
purchase up to 485,119 shares of Common Stock of the Corporation at exercise
prices ranging from $7.72 per share to $25.10 per share.

Sun Community Bancorp Limited, a 51%-owned subsidiary of the
Corporation, entered into an Employment Agreement with Mr. Reid in November 1997
(effective January 1, 1998) under which he has agreed to serve as its Chairman,
President and CEO, which provides for an annual salary, discretionary bonuses
and stock options. The term of the agreement is three years and is automatically
renewed for an additional year each January 1 unless either party gives written
notice to the contrary.

In May 1997, the Corporation entered into an agreement ("Put
Agreement") whereby upon Mr. Reid's death, his estate may request the
Corporation to purchase from his estate up to $2.5 million of the Corporation's
Common Stock then held by the estate. The Corporation's obligation pursuant to
the Put Agreement is covered by company-owned life insurance.

The Corporation and/or its subsidiaries have entered into Employment
Agreements with certain executive officers and/or employee directors of the
Corporation (including Messrs. Ballard, Carr, Powers, Smythe and others). Except
for the salaries, the terms of each agreement currently in force are
substantially identical. The term of each Employment Agreement is three years
and is extended automatically for one year each January 1 unless either party
gives written notice to the contrary. In addition to their salaries, each
employee is entitled to various fringe benefits and a discretionary bonus. All
employees are entitled to disability benefits under prescribed circumstances.
Similar Employment Agreements have been entered into by the Corporation's
subsidiaries with certain of their executive officers who are not executive
officers or directors of the Corporation.

The Corporation and/or its subsidiaries have entered into Executive
Supplemental Income Agreements with certain of those executive officers and/or
employee directors of the Corporation and similarly by the Corporation's
subsidiaries with certain of their executive officers who are not executive
officers or directors of the Corporation. The Agreements provide for the payment
to each employee or designated beneficiary an annual benefit which is
approximately equal to the annual base salary of each employee for a period of
fifteen years in the event of either the employee's retirement or the death of
the employee before attaining retirement age. In the event of a change in
control of the Corporation (as defined in the Agreements) which is not approved
by the Board of Directors, each employee can retire with full benefits at any
time after attaining the age of 55 without approval of the Board of Directors as
then constituted. The benefit liabilities under the Agreements are covered by a
funded insurance program by the Corporation and/or its subsidiaries.

Cristin Reid English is the Corporation's Vice President and General
Counsel and also serves as Vice President and General Counsel of Sun Community
Bancorp Limited. Ms. English is Mr. Reid's daughter. In 1998, Ms. English
received salaries and expense allowances in the amount of $49,812 from the
Corporation and $44,134 from Sun Community Bancorp Limited as officer
compensation.

The Corporation and some of its bank subsidiaries utilize the law firm
of Lasky Fifarek & Hogan, a professional corporation, from time to time. Charles
L. Lasky is a principal shareholder in that law firm and is Mr. Reid's brother
in law. Amounts paid by the Corporation and its subsidiaries to the law firm
amounted to $105,654 in 1998.

Ann Arbor Commerce Bank leases its primary banking facility from South
State Commerce Center LLC. Mr. Genova and Ms. Gaskin are members of the limited
liability leasing entity. Rent paid by Ann Arbor Commerce Bank to the leasing
entity amounted to $165,449 in 1998.

Portage Commerce Bank leases its primary banking facility from Portage
Commerce Investors LLC. Messrs. Kasten and Ballard are members of the limited
liability leasing entity. Rent paid by Portage Commerce Bank to the leasing
entity amounted to $176,238 in 1998.

<PAGE> 16

Brighton Commerce Bank leases its primary banking facility from Tri-O
Development. Three of Mr. O'Leary's adult children are members of the limited
liability leasing entity. Rent paid by Brighton Commerce Bank to the leasing
entity amounted to $225,000 in 1998.

The Corporation and Capitol National Bank paid rent of approximately
$295,000 during 1998 for their principal offices at One Business & Trade Center,
200 Washington Square North, Lansing, Michigan to Business & Trade Center
Limited, a Michigan limited partnership, under lease agreements with expiration
dates ranging from 2000 to 2003 and portions of which are renewable for periods
of 2 1/2 years. Joseph D. Reid and L. Douglas Johns are partners of the
Partnership.

The Corporation's banking subsidiaries have, in the normal course of
business, made loans to certain directors and officers of the Corporation and
its subsidiaries, and to organizations in which certain directors and officers
have an interest. As of December 31, 1998, the outstanding principal balance of
such loans approximated $59,939,000 representing 121.6% of stockholders' equity.
In the opinion of management, such loans were made in the ordinary course of
business and were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
unrelated parties and did not involve more than the normal risk of
collectibility or present other unfavorable features. The Corporation has a
written policy that all loans to, and all transactions with, the Corporation's
officers, directors, affiliates and/or shareholders holding 10% or more of the
Corporation's stock will be made or entered into for bona fide business
purposes, on terms no less favorable than could be made to, or obtained from,
unaffiliated parties, and shall be approved by a majority of the directors of
the Corporation, including a majority of the independent disinterested directors
of the Corporation.

The Corporation and its subsidiaries on a consolidated basis own
approximately 20% of the outstanding common stock of Access BIDCO, Incorporated,
with an aggregate carrying value of $895,000 at December 31, 1998. Access BIDCO
is a business and industrial development corporation, regulated by the Michigan
Financial Institutions Bureau which is the same state agency which regulates
state-chartered commercial banks and other state-chartered financial
institutions. As a Michigan BIDCO, Access BIDCO is a non-depository financial
institution engaged in making loans and providing other financing and management
assistance to Michigan businesses as permitted under the Michigan BIDCO Act.

Joseph D. Reid, Chairman and Chief Executive Officer of Access BIDCO,
Incorporated serves as a director of Access BIDCO and its majority-owned
subsidiary, Onset BIDCO. In his capacity as an executive officer of Access
BIDCO, Mr. Reid received cash compensation in 1998 in the form of a salary in
the amount of $102,764. Mr. Reid also owns 4.5% of the outstanding common stock
of Access BIDCO. In addition to the relationship between Mr. Reid and Access
BIDCO, Senior Vice President and Chief Financial Officer of Capitol Bancorp, Lee
W. Hendrickson, serves as Vice President, Chief Financial Officer, and a
director of Access BIDCO and its majority- owned subsidiary. Mr. Hendrickson
received a salary from Access BIDCO for his services as an executive officer of
Access BIDCO. Cristin Reid English, Vice President and General Counsel of
Capitol Bancorp Ltd. is an employee, officer and a director of Access BIDCO and
is a director of its majority-owned subsidiary. In addition to the foregoing,
Access BIDCO leased office space from the Corporation in 1998 on a
month-to-month basis at approximately $2,000 per month.

The Corporation entered into a subscription agreement in 1998 in the amount of
$5 million for a limited partnership interest in North Coast Technology
Ventures, LP, a $75 million limited partnership investment fund. The Corporation
intends that its bank subsidiaries will fund the subscription amount in 1999.
The general partner of the partnership is ATI Management, LLC. Mr. Reid is a
noncompensated member of the limited liability company.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

BDO Seidman, LLP acted as independent auditors for the Corporation for
the year ended December 31, 1998. Representatives of BDO Seidman, LLP will be
present at the Meeting to respond to appropriate questions and will have the
opportunity to make a statement if they desire to do so.

OTHER MATTERS

The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, including
matters relating to the conduct of the Meeting, it is intended that proxies in
the accompanying form will be voted in respect thereof in accordance with the
judgment of those voting the proxies.

<PAGE> 17

MISCELLANEOUS

The cost of solicitation of proxies will be borne by the Corporation.
In addition to solicitations by mail, directors, officers and regular employees
of the Corporation may solicit proxies personally or by telephone without
additional compensation.

The Corporation's 1998 Annual Report to Stockholders ("Annual Report")
is being provided herewith. Any stockholder who does not receive a copy of the
Annual Report may obtain a copy by writing the Corporation. The Annual Report is
not to be treated as a part of the proxy solicitation material nor as having
been incorporated herein by reference.

FORM 10-K

A copy of the Corporation's 1998 Form 10-K, without exhibits, is
available to stockholders without charge upon written request to: Capitol
Bancorp Ltd., One Business & Trade Center, 200 Washington Square North, Lansing,
Michigan 48933, Attention: Linda D. Pavona, Vice President.

Form 10-K, and certain other periodic filings, are filed with the
Securities and Exchange Commission (the "Commission"). The Commission maintains
an Internet web site that contains reports, proxy and information statements and
other information regarding companies which file electronically (which includes
the Corporation). The Commission's web site address is http:\\www.sec.gov. The
Corporation's filings with the Commission can also be accessed through the
Corporation's web site, http:\\www.cbcl.com.

STOCKHOLDER PROPOSALS

In order to be eligible for inclusion in the Corporation's proxy
material for next year's annual meeting of stockholders, any stockholder
proposal to take action at such meeting must be received at the Corporation's
main office at One Business & Trade Center, 200 Washington Square North,
Lansing, Michigan 48933, no later than November 13, 1999. Any such proposal
shall be subject to the requirements of the proxy rules adopted under the
Securities Exchange Act of 1934, as amended.

BY ORDER OF THE BOARD OF DIRECTORS

JOSEPH D. REID
CHAIRMAN OF THE BOARD

LANSING, MICHIGAN
MARCH 17, 1999

16
<PAGE> 18
CAPITOL BANCORP LTD. PROXY
One Business & Trade Center
200 Washington Square North
Lansing, MI 48933
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph D. Reid and David O'Leary as Proxies,
each with the power to appoint his substitute and hereby authorizes them to
represent and to vote as designated below, all the shares of Common Stock of
Capitol Bancorp Ltd. held of record by the undersigned on March 10, 1999 at the
Annual Meeting of Shareholders to be held on May 4, 1999, or any adjournment
thereof.

<TABLE>
<S><C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:

1. Election of Directors:
|_| FOR all nominees listed |_| WITHHOLD AUTHORITY to vote for all nominees listed
below
(except as marked to the contrary)

Louis G. Allen Douglas E. Crist Kathleen A. Gaskin Leonard Maas
Paul R. Ballard James C. Epolito H. Nicholas Genova Lyle W. Miller
David L. Becker Gary A. Falkenberg Lewis D. Johns David O'Leary
Robert C. Carr Joel I. Ferguson Michael L. Kasten Joseph D. Reid

</TABLE>

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)

- --------------------------------------------------------------------------------

2. Proposal to amend the Corporation's article's of incorporation to increase
the number of authorized common shares (no par value) from 10,000,000 to
25,000,000.
|_| FOR |_| AGAINST

3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)

<PAGE> 19

This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this Proxy will be voted
"FOR" the Proposals.

Please sign this proxy exactly as your
name appears on the books of the company.
Joint owners should each sign personally.
Trustees and other fiduciaries should
indicate the capacity in which they sign,
and where more than one name appears, a
majority must sign. If a corporation,
this signature should be that of an
authorized officer who should state his
or her title.

Date , 1999
-----------------------------

Signature
--------------------------------

Signature if held jointly
---------------

PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

PLEASE INDICATE WHETHER YOU PLAN TO
ATTEND THE ANNUAL MEETING OF STOCKHOLDERS
|_| WILL ATTEND |_| WILL NOT ATTEND