<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the quarter period ended March 31, 1996 Commission file number 33-20417
Capital Directions, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2781737
- ------------------------------- ---------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
322 South Jefferson St., Mason, Michigan 48854-0130
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517) 676-0500
--------------
None
---------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by checkmark 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 period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
As of May 12, 1996, the registrant had outstanding 297,428 shares of common
stock having a par value of $5 per share.
<PAGE> 2
CAPITAL DIRECTIONS, INC.
INDEX TO FORM 10-Q
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheet
March 31, 1996 and December 31, 1995............... 1
Consolidated Statement of Income for
Three month periods ended
March 31, 1996 and 1995............................ 2
Consolidated Statement of Cash Flows
for Three month periods ended
March 31, 1996 and 1995............................ 3
Changes in Shareholders' Equity for
Three months ended March 31, 1996.................. 4
Notes to interim Consolidated Financial Statements. 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 6 - 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................. 10
Item 2. Changes in Securities............................. 10
Item 3. Defaults Upon Senior Securities................... 10
Item 4. Submission of Matters to a Vote of
Security Holders................................. 10
Item 5. Other Information................................. 10
Item 6. Exhibits and Reports on Form 8-K.................. 10
Item 7. Signatures........................................ 11
Index to Exhibits................................. 12
<PAGE> 3
PART 1
CAPITAL DIRECTIONS, INC.
CONSOLIDATED BALANCE SHEET
--------------------------
(in thousands)
<TABLE>
<CAPTION>
MARCH 31 DEC. 31
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
ASSETS
Cash and non interest bearing deposits .... $ 2,748 $ 3,725
Federal funds sold ........................ 2,750 6,050
------- -------
Total cash and cash equivalents 5,498 9,775
Securities available for sale ............... 8,791 7,656
Securities held to maturity (fair value of
$8,432 as of March 31, 1996 and $8,261 as
of December 31, 1995)
U.S. Government and agencies ............ 2,847 2,405
State and municipal ..................... 5,351 5,630
Federal Home Loan Bank Stock ................ 364 364
------- -------
Total securities 17,353 16,055
Loans:
Commercial and agricultural ............... 4,413 5,869
Installment ............................... 5,498 5,888
Real estate mortgage ...................... 38,934 37,927
------- -------
Loans 48,845 49,684
Allowance for loan losses ................. -1,007 -995
------- -------
Net Loans 47,838 48,689
Premises and equipment, net ................. 618 649
Accrued income and other assets ............. 2,752 2,667
------- -------
TOTAL ASSETS $74,059 $77,835
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing .................... $ 7,430 $ 8,853
Interest bearing ........................ 54,518 57,355
------- -------
Total Deposits 61,948 66,208
Long-term Federal Home Loan Bank
borrowings .............................. 2,142 1,880
Accrued expense and other liabilities ..... 1,175 1,153
------- -------
Total Liabilities 65,265 69,241
------- -------
Shareholders' Equity:
Common stock: $5 par value, 1,300,000 shares
authorized; 297,428 shares outstanding .. 1,487 1,487
Additional paid in capital ................ 2,559 2,559
Retained earnings ......................... 4,710 4,522
Net unrealized gains/(losses) on securities
available for sale, net of tax of ($13)
in 1995 and ($20) in 1996 ............... 38 26
------- -------
Total Shareholders' Equity 8,794 8,594
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $74,059 $77,835
======= =======
</TABLE>
SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
-1-
<PAGE> 4
CAPITAL DIRECTIONS, INC.
Consolidated Statement of Income
--------------------------------
(in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
(UNAUDITED)
-----------------------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans, including fees ....................... $1,112 $1,145
Securities:
Taxable ................................... 185 179
Tax exempt ................................ 68 59
Dividends on Federal Home Loan Bank stock ... 67 10
------ ------
Total interest and dividend income 1,432 1,393
INTEREST EXPENSE:
Deposits .................................... 590 578
Short-term borrowings ....................... 0 10
Long-term Federal home Loan Bank borrowings.. 31 6
------ ------
Total interest expense 621 594
------ ------
NET INTEREST INCOME ........................... 811 799
PROVISION FOR LOAN LOSSES ..................... 0 27
------ ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 811 772
NON INTEREST INCOME:
Service charges on deposits ................. 67 73
Investment commission fees .................. 86 46
Other income ................................ 78 64
------ ------
Total Non Interest Income 231 183
NON INTEREST EXPENSE:
Salaries and employee benefits .............. 346 323
Premises and equipment ...................... 94 100
F.D.I.C. insurance assessment .,............. 1 37
Investment sales expenses ................... 80 57
Other operating expenses .................... 152 133
------ ------
Total Non Interest Expense 673 650
------ ------
INCOME BEFORE FEDERAL INCOME TAXES ............ 369 305
INCOME TAX EXPENSE ............................ 101 71
------ ------
NET INCOME .................................... $ 268 $ 234
====== ======
Average common shares outstanding 297,428 297,428
Earnings per common share $.90 $.79
Dividends per share of common stock, declared .27 .25
</TABLE>
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<PAGE> 5
CAPITAL DIRECTIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
(UNAUDITED)
-------------------
<S> <C> <C>
Net Cash From Operating Activities................. $ 263 $ 852
-------- --------
Cash Flows From Investing Activities
Proceeds from maturities of securities........... 775 1,050
Principal payments on securities................. 253 188
Purchase of securities........................... (2,336) (500)
Net (increase) decrease in loans................. 851 (82)
Property and equipment expenditures.............. (5) (7)
-------- --------
Net Cash From Investing Activities................. (462) 813
-------- --------
Cash Flows From Financing Activities
Net decrease in deposits......................... (4,260) (872)
Increase in long-term borrowing.................. 262 (50)
Dividends paid................................... (80) (74)
-------- --------
Net Cash From Financing Activities................. (4,078) (996)
-------- --------
Net Change in Cash and Cash Equivalents............ (4,277) 689
Cash and cash equivalents at beginning of year... 9,775 4,020
-------- --------
Cash and cash equivalents March 31............... $ 5,498 $ 4,689
======== ========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year For
Interest....................................... $ 647 $ 593
Income Taxes - Federal......................... $ 172 $ 45
</TABLE>
SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE> 6
CAPITAL DIRECTIONS, INC.
CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY
FOR THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE - JANUARY 1, 1996................................... $8,594
Net Income through March 31................................ 268
Net change in unrealized gain/(loss) on securities
available for sale, net of tax of ($6).................... 12
Cash dividends through March 31 ($ .27 per share).......... (80)
------
BALANCE - MARCH 31, 1996.................................... $8,794
======
</TABLE>
SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
-4-
<PAGE> 7
CAPITAL DIRECTIONS, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. In the opinion of management of the Registrant, the accompanying
consolidated financial statements contain all adjustments (consisting only
of normal recurring items) necessary to present fairly the consolidated
financial position of the Registrant as of March 31, 1996 and December 31,
1995, the results of operations and cash flows for the three month period
ended March 31, 1996 and 1995, and the change in shareholders' equity for
the three month period ended March 31, 1996.
2. The results of the operations for the three months ended March 31,
1996 are not necessarily indicative of the results to be expected for the
full year.
3. The accompanying unaudited consolidated financial statements should be read
in conjunction with the notes to consolidated financial statements contained
the 1995 Annual Report.
4. Management determines the adequacy of the allowance for loan losses based on
an evaluation of the loan portfolio, recent loss experience, current
economic conditions and other pertinent factors. Non-performing loans,
which includes loans contractually past due ninety days or more, loans
accounted for on a non-accrual basis and loans whose terms have been
renegotiated to provide a reduction or deferral of interest or principal
because of deterioration in the financial position of the borrower, amounted
to $123,000 at March 31, 1996 and $266,000 at December 31, 1995, summarized
as follows:
<TABLE>
<CAPTION>
March 31, December 31,
Non-performing loans 1996 1995
--------- ------------
<S> <C> <C>
Non-accrual............................ $ 19,000 $ 17,000
90 days or more past due............... 46,000 191,000
Renegotiated........................... 58,000 58,000
-------- --------
Total.................................. $123,000 $266,000
======== ========
</TABLE>
The renegotiated loans are all in compliance with the modified terms for
both periods. As of March 31, 1996 in accordance with SFAS No. 114, as
ammended (Accounting by Creditors for Impairment of a loan), and as the
registrant has defined in the 1995 annual report there were no loans
considered impaired.
5. A summary of the activity in the allowance for loan losses for the
three months ended March 31, follows:
<TABLE>
<CAPTION>
1996 1995
(In Thousands)
<S> <C> <C>
Balance - Beginning of period............... $ 995 $ 792
Provision charged to operating expense...... 0 27
Loans charged-off........................... (4) (3)
Recoveries.................................. 16 10
------ -----
Balance - end of period.................... $1,007 $ 826
====== =====
</TABLE>
6. The provision for income taxes represents federal income tax expense
calculated using annualized rates on taxable income generated during the
respective periods.
-5-
<PAGE> 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results
of operations provides additional information to assess the consolidated
financial statements of the Registrant and its wholly-owned subsidiaries. The
discussion should be read in conjunction with those statements.
The Company is not aware of any market or institutional trends, events, or
circumstances that will have or are reasonably likely to have a material effect
on liquidity, capital resources, or results of operations except as discussed
herein. Also, the Company is not aware of any current recommendations by
regulatory authorities which will have such effect if implemented.
FINANCIAL CONDITION
Management continues to maintain a strong net interest margin this year by
growing its earning assets at a profitable spread to its funding.
The average earning assets for the first three months of 1996 was $994,000
higher than for the same period in 1995. This was accomplished while
maintaining the average interest paying liabilities at the same level during
the period. This net increase was primarily a result of better utilization of
earning assets and an average equity increase of $753,000. This increase in
earning assets has taken place in the investment area and is also combined with
a shift from loans. A weaker loan demand during the first quarter, primarily in
the commercial area, is the reason for this decline.
The tax equivalent net interest margin was 4.89% for the first three
months of 1996 and 1995. This retention of margin, as mentioned above, is a
result of the average yield on interest earnings assets being 8.50% for the
first three months of 1996 compared to 8.42% for the same comparable period in
1995 and the yield on average funding being 3.78% for the first three months of
1996 compared to 3.61% for the same comparable period in 1995.
Part of our funding strategy has been to maintain our funding base through
long-term Federal Home Loan Bank borrowings. The average Federal Home Loan Bank
borrowings is $1,691,000 higher the first quarter of 1996 over the same period
in 1995. Management has profitability matched these funds to like term earning
assets. This has also helped us price deposits less aggressively with the
market than we had in previous years. This strategy has let us maintain our
market share but not grow in deposits. Our tracking of any outflow of deposits
continues to indicate that most of it goes to other types of uninsured, higher
risk investments outside of banking and the repayment of personal debt. This
is consistent with the reported national trends and is the major cause of the
decline in deposits.
Management feels that the current level in our allowance for loan losses
is very strong. At March 31, 1996 the allowance for loan losses was equal to
2.06% of total loans outstanding compared to 1.61% at March 31, 1995 and 2.00%
at December 31, 1995.
RESULTS OF OPERATIONS
Net income for the three month period ended March 31, 1996 was $268,000,
or $.90 per share compared to earnings of $234,000, or $.79 per share for
1995's comparable period.
The increase in margin, as discussed earlier, resulted in a $12,000
increase in net interest income for the first three months of 1996 compared to
the same period in 1995. The decrease in the provision for loan losses is a
result of our strong provision balance and its ratio to outstanding loans.
-6-
<PAGE> 9
Monex Investment Company, Inc. contributed $5,000 to the profits of the
Company during the first quarter of 1996 compared to a loss of $6,000 for the
same period in 1995.
The increase of $48,000 in noninterest income for the first three months
of 1996 compared to the same period in 1995 is due primarily to the increase in
Investment commission fee income due to increased sales of mutual funds and
annuities over last year.
The increase of $71,000 in noninterest expenses is due to the increased
sales of Monex Investment Co. which is reflected in the investment sales
expense and also the increase in Wages & benefits. There was also an increase
in data processing and service charge fees. These were primarily offset by the
F.D.I.C. insurance premium and premises and equipment reductions.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Management uses Federal Funds sold and purchased as its principal source
of liquidity. Other sources of liquidity include internally generated cash
flow being: repayments and maturities of loans, investments, borrowings and
growth in core deposits. The Bank also uses the Federal Home Loan Bank system
as another source of funding, a possible lower cost for these credit services
and another tool to help manage interest rate risk and source of liquidity.
Management feels it has adequate sources for liquidity.
Interest rate sensitivity management seeks to maximize net interest
margins through periods of changing interest rates. The Bank develops
strategies to assure that desired levels of interest sensitive assets and
interest bearing liabilities mature or reprice within selected time frames.
Strategies include the use of variable rate loan products as well as managing
deposit accounts and maturities in the investment portfolio. The following
chart, using recommended regulatory standards, reflects "the rate sensitive
position" or the difference between loans and investments, and liabilities that
mature or reprice within the next year and beyond. The financial industry has
generally referred to this difference as "GAP" and its handling as "GAP
Management". At March 31, 1996, the percentage of rate sensitive assets to
rate sensitive liabilities within a one-year time horizon was 107% compared to
112% at December 31, 1995.
The chart shows an asset sensitive position of $3 million, which indicates
higher net interest income may be earned if interest rates rise during the
period. Due to the limitations of GAP analysis, modeling is also used to
enhance measurement and control.
-7-
<PAGE> 10
MASON STATE BANK GAP OR INTEREST RATE RISK EXPOSURE MEASUREMENTS AS OF 03/31/96
<TABLE>
<CAPTION>
ASSETS SUBJECT TO INTEREST RATE
ADJUSTMENT WITHIN TIME HORIZON
TIME HORIZONS
GREATER
IMMEDIATE AND THAN 30 DAYS
TYPE OF ASSET: LESS THAN 30 DAYS LESS THAN 90 DAYS 2ND QUARTER 3RD QUARTER 4TH QUARTER
============== ================= ================= =============== =============== ================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL COM. LOANS 7,455 9.72% 275 8.91% 399 9.41% 836 7.70% 12 10.56%
TOTAL CONSUMER LOANS 200 9.55% 400 9.55% 2,037 8.65% 600 9.55% 600 9.55%
CONSUMER RUNOFF OFFSET
TOTAL REV. CREDIT 3,053 10.20% 0 .00% 0 .00% 0 .00% 0 .00%
TOTAL MTGE. LOANS 634 7.92% 3,497 7.81% 3,855 8.03% 3,840 8.23% 3,811 8.18%
MORTGAGE RUNOFF OFFSET
TOTAL OTHER MTGES. 692 10.06% 503 8.67% 138 7.20% 138 7.20% 138 7.20%
RESERVE FOR LN. LOSS 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------- ------ ------- ----- ------- ----- ------- ----- ------- ------
TOTAL LOANS 12,034 9.76% 4,675 8.12% 6,429 8.29% 5,414 8.27% 4,561 8.34%
INVESTMENTS-MUNI'S 25 7.95% 470 6.87% 0 .00% 144 5.93% 123 5.43%
FED FUNDS 2,750 5.25% 0 .00% 0 .00% 0 .00% 0 .00%
CORPORATES 0 .00% 459 4.89% 1,013 4.65% 500 8.08% 497 8.07%
MTG. BACKED PAYDOWNS 67 6.26% 133 6.26% 200 6.26% 200 6.26% 200 6.26%
INVEST-CMO'S FLOAT 205 6.39% 0 .00% 0 .00% 0 .00% 0 .00%
INVESTMENTS-ARM'S 411 7.81% 0 .00% 142 7.73% 381 7.25% 2,306 6.84%
INVESTMENTS-GOVT'S 368 8.00% 0 .00% 322 5.18% 602 9.06% 0 .00%
------- ------ ------- ----- ------- ----- ------- ----- ------- ------
TOTAL INVESTMENTS 3,826 5.89% 1,062 5.94% 1,677 5.20% 1,827 7.86% 3,126 6.94%
TOTAL EARNING ASSETS 15,860 8.83% 5,737 7.71% 8,106 7.65% 7,241 8.17% 7,687 7.77%
NON-EARNING ASSETS 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------- ------ ------- ----- ------- ----- ------- ----- ------- ------
TOTAL ASSETS 15,860 8.83% 5,737 7.71% 8,106 7.65% 7,241 8.17% 7,687 7.77%
<CAPTION>
ASSETS SUBJECT TO INTEREST RATE
ADJUSTMENT WITHIN TIME HORIZON
TIME HORIZONS
TYPE OF ASSET: ANNUAL TOTAL 1 - 3 YEARS 3 - 5 YEARS OVER 5 YEARS GRAND TOTAL
============== ================ ================ =============== =============== ================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL COM. LOANS 8,977 9.49% 3,669 8.50% 2,324 8.66% 1,980 9.07% 16,950 9.12%
TOTAL CONSUMER LOANS 3,837 9.08% 2,526 10.01% 1,424 10.01% 0 .00% 7,787 9.55%
CONSUMER RUNOFF OFFSET -2,400 9.55%
TOTAL REV. CREDIT 3,053 10.20% 0 .00% 0 .00% 0 .00% 3,053 10.20%
TOTAL MTGE. LOANS 15,637 8.06% 1,628 8.99% 714 9.13% 7,754 8.10% 25,733 8.16%
MORTGAGE RUNOFF OFFSET -4,000 8.16%
TOTAL OTHER MTGES. 1,609 8.89% 0 .00% 0 .00% 112 4.00% 1,721 8.57%
RESERVE FOR LN. LOSS 0 .00% 0 .00% 0 .00% 0 .00% -1,006 .00%
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
TOTAL LOANS 33,113 8.80% 7,823 9.09% 4,462 9.17% 9,846 8.25% 47,838 8.97%
INVESTMENTS-MUNI'S 762 6.50% 1,738 7.42% 680 7.39% 2,171 7.38% 5,351 7.27%
FED FUNDS 2,750 5.25% 0 .00% 0 .00% 0 .00% 2,750 5.25%
CORPORATES 2,469 6.08% 2,786 6.17% 0 .00% 0 .00% 5,255 6.13%
MTG. BACKED PAYDOWNS 800 6.26% 0 6.26%
INVEST-CMO'S FLOAT 205 6.39% 0 .00% 0 .00% 0 .00% 205 6.39%
INVESTMENTS-ARM'S 3,240 7.05% 0 .00% 0 .00% 0 .00% 3,240 7.05%
INVESTMENTS-GOVT'S 1,292 7.79% 1,034 6.03% 579 6.34% 202 9.15% 3,107 7.02%
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
TOTAL INVESTMENTS 11,518 6.39% 5,558 6.53% 1,259 6.91% 2,373 7.53% 19,908 6.61%
TOTAL EARNING ASSETS 44,631 8.18% 13,381 8.03% 5,721 8.67% 12,219 8.11% 67,746 8.28%
NON-EARNING ASSETS 0 .00% 0 .00% 0 .00% 0 .00% 6,073 .00%
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
TOTAL ASSETS 44,631 8.18% 13,381 8.03% 5,721 8.67% 12,219 8.11% 73,819 7.60%
<CAPTION>
LIABILITIES SUBJECT TO INTEREST
RATE ADJUSTMENT WITHIN TIME HORIZON
GREATER
IMMEDIATE AND THAN 30 DAYS
TYPE OF LIABILITY: LESS THAN 30 DAYS LESS THAN 90 DAYS 2ND QUARTER 3RD QUARTER 4TH QUARTER
================== ================= ================= =============== =============== ================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-INT. BEARING DDA 373 .00% 745 .00% 1,118 .00% 1,118 .00% 1,118 .00%
NOW ACCOUNTS 322 2.00% 625 2.00% 1,420 2.00% 1,894 2.00% 1,894 2.00%
NEGOTIATED NOW 373 3.75% 723 3.75% 0 .00% 0 .00% 0 .00%
MONEY MARKET SAVINGS 1,562 3.36% 3,019 3.36% 3,956 3.36% 937 3.36% 937 3.36%
------- ------ ------- ----- ------- ----- ------- ----- ------- ------
TOTAL DDA ACCOUNTS 2,629 2.77% 5,112 2.76% 6,494 2.48% 3,948 1.76% 3,948 1.76%
TOTAL SAVINGS ACCTS. 453 2.13% 741 2.13% 1,416 3.29% 1,715 3.10% 1,715 3.10%
TOTAL COD 3,522 5.55% 2,050 5.38% 4,276 5.24% 2,226 5.14% 1,192 5.22%
FED FUNDS & OTHER 0 .00% 0 .00% 0 .00% 176 6.23% 34 5.88%
------- ------ ------- ----- ------- ----- ------- ----- ------- ------
TOTAL DEPOSITS 6,604 4.21% 7,904 3.38% 12,186 3.55% 8,065 3.07% 6,889 2.71%
OTHER LIABILITIES 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------- ------ ------- ----- ------- ----- ------- ----- ------- ------
TOTAL LIABILITIES 6,604 4.21% 7,904 3.38% 12,186 3.55% 8,065 3.07% 6,889 2.71%
TOTAL CAPITAL 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------- ------ ------- ----- ------- ----- ------- ----- ------- ------
TOTAL LIAB. & CAP. 6,604 4.21% 7,904 3.38% 12,186 3.55% 8,065 3.07% 6,889 2.71%
------- ------ ------- ----- ------- ----- ------- ----- ------- ------
GAP FIGURES 9,256 -2,167 -4,080 -824 798
CUMMULATIVE GAP 9,256 7,090 3,010 2,185 2,983
NET POSITION AS
A % OF TOTAL ASSETS 12.54% 9.60% 4.08% 2.96% 4.04%
RSA AS A % OF RSL 240.17% 148.87% 111.27% 106.29% 107.16%
<CAPTION>
LIABILITIES SUBJECT TO INTEREST
RATE ADJUSTMENT WITHIN TIME HORIZON
TYPE OF LIABILITY: ANNUAL TOTAL 1 - 3 YEARS 3 - 5 YEARS OVER 5 YEARS GRAND TOTAL
================== ================ ================ =============== =============== ================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-INT. BEARING DDA 4,471 .00% 2,980 .00% 0 .00% 0 .00% 7,451 .00%
NOW ACCOUNTS 6,155 1.95% 2,367 2.00% 947 2.00% 0 .00% 9,469 1.97%
NEGOTIATED NOW 1,096 3.75% 0 .00% 0 .00% 0 .00% 1,096 3.75%
MONEY MARKET SAVINGS 10,410 3.36% 0 .00% 0 .00% 0 .00% 10,410 3.36%
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
TOTAL DDA ACCOUNTS 22,131 2.32% 5,348 .89% 947 2.00% 0 .00% 28,426 2.03%
TOTAL SAVINGS ACCTS. 6,041 2.95% 2,654 4.32% 1,689 4.97% 0 .00% 10,384 3.63%
TOTAL COD 13,266 5.33% 7,653 5.90% 2,240 7.36% 0 .00% 23,159 5.71%
FED FUNDS & OTHER 210 6.17% 483 6.09% 473 6.09% 926 6.09% 2,092 6.10%
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
TOTAL DEPOSITS 41,648 3.39% 16,138 3.98% 5,349 5.54% 926 6.09% 64,061 3.75%
OTHER LIABILITIES 0 .00% 0 .00% 0 .00% 0 .00% 1,081 .00%
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
TOTAL LIABILITIES 41,648 3.39% 16,138 3.98% 5,349 5.54% 926 6.09% 65,142 3.69%
TOTAL CAPITAL 0 .00% 0 .00% 0 .00% 8,677 .00% 8,677 .00%
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
TOTAL LIAB. & CAP. 41,648 3.39% 16,138 3.98% 5,349 5.54% 9,603 .59% 73,819 3.26%
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
GAP FIGURES 2,983 -2,757 372 2,616 0
CUMMULATIVE GAP 226 598 3,214
NET POSITION AS
A % OF TOTAL ASSETS 4.04% .31% .81% 4.35%
RSA AS A % OF RSL 107.16% 100.39% 100.95% 104.42%
</TABLE>
-8-
<PAGE> 11
CAPITAL RESOURCES
The adequacy of the Corporation's capital is reviewed regularly to ensure
that sufficient capital is available to meet current and future funding needs
and comply with regulatory requirements. Shareholders' equity increased
$188,000 or 2.19% to $8,756,000 at March 31, 1996, which represents 11.82% of
total assets. This figure does not include the $38,000, net of tax in net
unrealized gain on available for sale securities. At December 31, 1995, the
ratio of shareholder's equity to total assets was 11.01%. The "risk-based"
capital to asset ratio, as established by the regulatory authorities was 18.67%
as of March 31, 1996 compared to 18.01% at December 31, 1995 as shown below.
<TABLE>
<CAPTION>
Actual Required Excess
------------- ------------ -------------
Amount % Amount % Amount %
------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Risked-Based Capital
March 31, 1996 $8,855,000 18.67 $3,794,000 8.00 $5,061,000 10.67
</TABLE>
Management does not feel that future rate changes will have a material
impact on our capital adequacy. Management feels that capital and
shareholders' equity is and will remain adequate for 1996.
FEDERAL INCOME TAXES
The provision for Federal income taxes for the three month periods ended
March 31, 1996 and 1995 totaled $101,000 and $71,000 respectively. The
increase in taxes is partially reflective of the decrease in non taxable income
due to an decline in average non taxable investments of $221,000 and the
increased taxable earnings for the three month periods ended March 31, 1996 and
1995.
OTHER MATTERS
The Company adopted the Statement of Financial Accounting Standards No.
122 "Accounting for Mortgage Servicing Rights" January 1, 1996. This statement
provides guidance on accounting for originated mortgage servicing rights and
purchased mortgage servicing rights related to normal servicing. This standard
has not had nor is expected to have a material impact on the operations of the
Company.
-9-
<PAGE> 12
PART II
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Registrant or
its subsidiaries, is a party or which any of its property is subject, except
for proceedings which arise in the ordinary course of business. In the opinion
of management, pending legal proceedings will not have a material effect on the
consolidated financial statements of the Registrant or its subsidiaries as of
and for the period ended March 31, 1996.
Item 2. Changes in Securities
There have been no changes in the Registrant's securities which would
cause any shareholder's rights to be materially modified, limited or qualified.
Item 3. Defaults Upon Senior Securities
There have been no defaults involving senior securities on the part of the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of the Registrant's
security holders.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits required by Item 601 of Regulation S-K
See Index to Exhibits on page 12.
2. Reports on Form 8-K.
No reports on Form 8-K were filed for the three months ended March 31,
1996.
-10-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITAL DIRECTIONS, INC.
Date May 13, 1996 By: /s/ Timothy Gaylord
-----------------------------
Timothy Gaylord
President
Date May 13, 1996 By: /s/ Robert G. Kennedy
-----------------------------
Robert G. Kennedy
Treasurer
-11-
<PAGE> 14
INDEX TO EXHIBITS
The following exhibits are filed or incorporated by reference
as part of this report:
2 PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION - Consolidation Agreement included in Amendment No. 1 to
Form S-4 Registration Statement No. 33-20417
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES - Not applicable
11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS -
Not applicable
15 LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION -
Not applicable
18 LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPALS -
Not applicable
19 PREVIOUS UNFILED DOCUMENTS - Not applicable
20 REPORT FURNISHED TO SECURITY HOLDERS - Not applicable
23 PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE OF
SECURITY HOLDERS - Not applicable
24 CONSENTS OF EXPERTS AND COUNSEL - Not applicable
25 POWER OF ATTORNEY - Not applicable
27 FINANCIAL DATA SCHEDULE
28 ADDITIONAL EXHIBITS - Not applicable
-12-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) 1996
FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2748
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2750
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8791
<INVESTMENTS-CARRYING> 8198
<INVESTMENTS-MARKET> 8432
<LOANS> 48845
<ALLOWANCE> 1007
<TOTAL-ASSETS> 74059
<DEPOSITS> 61948
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1175
<LONG-TERM> 2142
<COMMON> 1487
0
0
<OTHER-SE> 7307
<TOTAL-LIABILITIES-AND-EQUITY> 74059
<INTEREST-LOAN> 1112
<INTEREST-INVEST> 320
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1432
<INTEREST-DEPOSIT> 590
<INTEREST-EXPENSE> 621
<INTEREST-INCOME-NET> 811
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 673
<INCOME-PRETAX> 369
<INCOME-PRE-EXTRAORDINARY> 369
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 268
<EPS-PRIMARY> .90
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.89
<LOANS-NON> 19
<LOANS-PAST> 46
<LOANS-TROUBLED> 58
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 995
<CHARGE-OFFS> 4
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 1007
<ALLOWANCE-DOMESTIC> 150
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 857
</TABLE>
