The embattled Capitol Bancorp Ltd. eked out a small profit in the first quarter, thanks largely to a $16.9 million gain on the conversion of trust-preferred securities to common equity.

But the meager $289,000 profit — its first quarterly profit in more than two years — only served to keep the company's equity hole from growing larger. At March 31, it reported an equity deficit of $38 million, roughly the same as it was three months earlier.

Capitol, a multi-bank holding company with dual headquarters in Lansing, Mich. and Phoenix, also said that the first-quarter profit also included a $4.3 million gain on the sale of bank units. Capitol's assets have shrunk 37% in the last year, to $3.2 million, as it has unloaded bank units as a way to raise capital and support its most troubled banks. Several of Capitol's banks are under prompt corrective action directives, meaning they could face failure if they are unable to raise additional capital quickly.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.