<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 June 30, 1997 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 July 28, 1997, 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
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheet
June 30, 1997 and December 31, 1996................ 1
Consolidated Statement of Income for
three and six month periods ended
June 30, 1997 and 1996............................. 2
Consolidated Statement of Cash Flows
for six month periods ended
June 30, 1997 and 1996............................. 3
Changes in Shareholders' Equity for
six months ended June 30, 1997..................... 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
</TABLE>
<PAGE> 3
CAPITAL DIRECTIONS, INC.
CONSOLIDATED BALANCE SHEET
--------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DEC. 31,
1997 1996
(UNAUDITED) (UNAUDITED)
------------------------
<S> <C> <C>
Assets
Cash and non interest bearing deposits............ $ 3,109 $ 2,538
Interest bearing deposits......................... 0 139
Federal funds sold................................ 4,250 2,800
------- -------
Total cash and cash equivalents 7,359 5,477
Securities available for sale......................... 8,916 10,100
Securities held to maturity (fair value of $8,317 as
of June 30, 1997 and $9,230 as of December 31, 1996)
U.S. Government and agencies...................... 3,285 3,551
State and municipal............................... 4,863 5,482
Federal Home Loan Bank Stock.......................... 364 364
------- -------
Total securities 17,428 19,497
Loans, net of unearned income:
Commercial and agricultural....................... 3,644 4,453
Installment....................................... 3,553 3,739
Real estate mortgage.............................. 46,811 43,600
------- -------
Total loans 54,008 51,792
Allowance for loan losses......................... -1,037 -1,020
------- -------
Net loans 52,971 50,772
Premises and equipment, net........................... 598 567
Accrued interest receivable and other assets.......... 2,656 2,607
------- -------
Total Assets $81,012 $78,920
======= =======
Liabilities and shareholders' equity
Liabilities
Deposits
Non interest bearing.............................. $ 8,881 $10,356
Interest bearing.................................. 57,358 56,153
------- -------
Total deposits 66,239 66,509
Long-term Federal Home Loan Bank borrowings........... 3,824 1,913
Accrued interest payable and other liabilities........ 1,172 1,101
------- -------
Total liabilities 71,235 69,523
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................................. 5,715 5,319
Net unrealized gains/(losses) on securities
available for sale, net of tax of $17 in 1996
and $8 in 1997.................................... 16 32
------- -------
Total shareholders' equity 9,777 9,397
------- -------
Total liabilities and shareholders' equity $81,012 $78,920
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE> 4
CAPTIAL DIRECTNS, INC.
CONSOLIDATED STATEMENT OF INCOME
-----------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
---------------- ----------------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans, including fees............................... $1,183 $1,106 $2,341 $2,218
Federal funds sold..................................
Securities:
Taxable.......................................... 222 227 456 412
Tax exempt....................................... 58 63 121 131
Other interest income...............................
Dividends on Federal Home Loan Bank stock........... 26 35 37 102
------- ------- ------- -------
Total interest and dividend income 1,489 1,431 2,955 2,863
Interest expense:
Deposits............................................ 585 576 1,151 1,166
Short-term borrowings............................... 9 0 9 0
Long-term Federal home Loan Bank borrowings......... 35 34 73 65
------- ------- ------- -------
Total interest expense 629 610 1,233 1,231
------- ------- ------- -------
Net interest income................................... 860 821 1,722 1,632
Provision for loan losses............................. 0 0 0 0
------- ------- ------- -------
Net interest income after provision for loan losses.. 860 821 1,722 1,632
Net interest income:
Service charges on deposits......................... 65 71 128 138
Monex investment commission fees.................... 0 38 0 124
Other income........................................ 61 46 119 124
Gain on sale of loans............................... 0 0 7 0
Gain or (Loss) on sale of securities................ (2) 0 5 0
------- ------- ------- -------
Total non interest income 124 155 259 386
Non interest expense:
Salaries and employee benefits...................... 341 312 684 658
Premises and equipment.............................. 83 100 166 194
Monex investment sales expenses..................... 0 43 0 123
Other operating expenses............................ 146 135 307 288
------- ------- ------- -------
Total non interest expense 570 590 1,157 1,263
------- ------- ------- -------
Income before income tax expense.................... 414 386 824 755
Income tax expense.................................. 117 109 232 210
------- ------- ------- -------
Net income.......................................... $ 297 $ 277 $ 592 $ 545
======= ======= ======= =======
Average common shares outstanding 297,428 297,428 297,428 297,428
Earnings per common share $1.00 $.93 $1.99 $1.83
Dividends per share of
common stock, declared .33 .27 .66 .54
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 5
CAPITAL DIRECTIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
(UNAUDITED)
--------------------
<S> <C> <C>
Net cash from operating activities................. $ 683 $ 585
Cash flows from investing activities
Proceeds from maturities or sale of securities... 2,320 1,776
Principal payments on securities................. 423 555
Purchase of securities........................... (709) (6,436)
Net change in loans.............................. (2,199) (309)
Premises and equipment expenditures.............. (81) (18)
-------- --------
Net cash from investing activities................. (246) (4,432)
Cash flows from financing activities
Net change in deposits........................... (270) (1,033)
Net change in long-term borrowing................ 1,911 208
Dividends paid................................... (196) (160)
-------- --------
Net cash from financing activities................. 1,445 (985)
-------- --------
Net change in cash and cash equivalents............ 1,882 (4,832)
Cash and cash equivalents at beginning of year... 5,477 9,775
-------- --------
Cash and cash equivalents June 30................ $ 7,359 $ 4,943
======== ========
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest....................................... $ 646 $ 1,262
Income Taxes - Federal......................... $ 245 $ 289
</TABLE>
SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE> 6
CAPITAL DIRECTIONS, INC.
CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY
FOR SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance - January 1, 1997................................... $9,397
Net income through June 30................................. 592
Net change in unrealized gain/(loss) on securities
available for sale, net of tax of $5...................... (16)
Cash dividends through June 30 ($ .66 per share)........... (196)
------
Balance - June 30........................................... $9,777
======
</TABLE>
See accompanying notes to 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
June 30, 1997 and December 31, 1996, the results of operations and
cash flows for the six month period ended June 30, 1997 and 1996,
and the change in shareholders' equity for the six month period
ended June 30, 1997.
2. Because the results of operations are so closely related to and responsive
to changes in economic conditions, the results for any interim period
are not necessarily indicative of the results that can be expected for
future periods.
3. The accompanying unaudited consolidated financial statements should
be read in conjunction with the notes to consolidated financial
statements contained in the 1996 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 $337,000 at
June 30, 1997 and 172,000 at December 31, 1996, summarized as
follows:
<TABLE>
<CAPTION>
June 30, December 31,
Non-performing loans 1997 1996
--------------------------------------- -------- ------------
<S> <C> <C>
Non-accrual............................ $224,000 48,000
90 days or more past due............... 61,000 70,000
Renegotiated........................... 52,000 54,000
-------- --------
Total.................................. $337,000 $172,000
======== ========
</TABLE>
The renegotiated loans are all in compliance with the modified terms
for both periods. As of June 30, 1997 in accordance with SFAS
No. 114, as amended (Accounting by Creditors for Impairment of a
loan), and as the registrant has defined in the 1996 Annual Report,
there were no loans considered impaired.
5. Following is a summary of activity in the allowance for loan losses
for the six months ended June 30:
<TABLE>
<CAPTION>
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Balance - beginning of period............... $1,020 $ 995
Provision charged to operating expense...... 0 0
Loans charged-off........................... (8) (16)
Recoveries.................................. 25 34
------ ------
Balance - end of period.................... $1,037 $1,013
====== ======
</TABLE>
6. Federal income tax expensed is calculated using annualized rates on
the 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
Net interest income increased 5.51% when compared to the same period
in 1996. The increase is a result of growth in loan outstandings and
reduced funding costs due to the growth of average non interest bearing
deposit balances. Loans grew by 7.99% when compared with the first half of
1996. Real estate mortgage lending continues to show strong growth during
this period.
Net interest margin of 5.08% for the first six months of 1997 compares
favorably to 4.89% for the same period in 1996.
The Bank accessed long term FHLB funding during this period to match
assets of like term.
Allowance for Loan Loss remains strong. At June 30, 1997 the
allowance was equal to 1.92% of total loans outstanding, down slightly from
2.03% on June 30, 1996 and 1.97% on December 31, 1996.
RESULTS OF OPERATIONS
Net earnings for the second quarter ended June 30, 1997 was $297,000,
or $1.00 per share compared to earnings of $277,000, or $.93 per share for
the same period in 1996. For the six months ended June 30, 1997, net
earnings were $592,000 or $1.99 per share compared to $545,000, or $1.83
per share for the same period in 1996. Cost control, increased margin,
strong loan demand and quality credits contributed to the 8.62% improvement
in earnings.
The increase in margin resulted in a $90,000 increase in net interest
income for the first six months of 1997 compared to the same period in
1996.
The decrease of $127,000 in non interest income for the first six
months of 1997, compared to the same period in 1996, is due primarily to
the decrease in Investment commission fee income from the sales of mutual
funds and annuities. This investment commission decrease was offset by a
like reduction in investment sales expense and resulted in a non interest
expense decline.
-6-
<PAGE> 9
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The primary objective of asset/liability management is to assure
adequate liquidity and net interest income by maintaining appropriate
maturities and balances between interest sensitive earning assets and
interest bearing liabilities. Liquidity management insures sufficient funds
are maintained to meet the cash withdrawal requirements of depositors and
the credit demands of borrowers.
Sources of liquidity include: federal funds sold, investment security
maturities, and pay downs. The Bank maintained a net average balance of
$1,408,000 in Federal Funds sold during the first six months of 1997. The
Bank is a member of the Federal Home Loan Bank system for several reasons:
access to an alternate funding source, lower cost for credit services, and
an alternate tool to manage interest rate risk. In March and May of 1997,
the Bank used this source of funding to directly offset loans of like terms
and conditions.
Other sources of liquidity include: internally generated cash flow,
repayments and maturities of loans, borrowing and growth in core deposits.
At June 30, 1997, the securities available for sale were valued at
$8,916,000. It is not anticipated that management will use these funds due
to the optional sources available.
Interest rate sensitivity management seeks to maximize net interest
margins through periods of changing interest rates. The Bank develops
strategies to assure 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 June 30, 1997, the percentage of rate
sensitive assets to rate sensitive liabilities within the one-year time
horizon was 112%.
The chart shows the Bank's GAP position as of June 30, 1997. The Bank
has an asset sensitive position within one year of $4,408,000, which
indicates higher net interest income may be earned if rates increase during
the period. A new program was implemented which measured the rate
sensitivity of our non maturity deposits. This refines the GAP model to
give a better indication of rate sensitivity. Due to limitations of GAP
analysis, price modeling is also used to enhance measurement and control.
-7-
<PAGE> 10
<TABLE>
<CAPTION>
ADJUSTMENT WITHIN TIME HORIZON TIME HORIZONS
IMMEDIATE AND > 30 DAYS
TYPE OF ASSET: < THAN 30 DAYS < 90 DAYS 2ND QUARTER 3RD QUARTER 4TH QUARTER ANNUAL TOTAL
============== ============= =========== =========== =========== =========== ============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL COM. LOANS 5,884 9.82% 675 9.06% 546 9.57% 285 8.53% 883 8.47% 8,273 9.56%
TOTAL CONSUMER LOANS 311 9.60% 400 10.55% 600 10.55% 600 10.55% 600 10.55% 2,511 10.44%
CONSUMER RUNOFF OFFSET
TOTAL REV. CREDIT 4,176 9.82% 0 .00% 0 .00% 0 .00% 0 .00% 4,176 9.82%
TOTAL MTGE. LOANS 1,495 8.37% 2,398 8.30% 3,190 8.29% 2,447 8.20% 4,087 8.26% 13,617 8.28%
MORTGAGE RUNOFF OFFSET
TOTAL OTHER MTGES. 239 8.92% 482 8.72% 115 7.23% 115 7.23% 115 7.23% 1,066 7.87%
RESERVE FOR LN. LOSS 0 .00% 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------------- ------------ ------------ ------------ ------------ ------------
TOTAL LOANS 12,105 9.58% 3,955 8.71% 4,451 8.73% 3,447 8.60% 5,685 8.51% 29,643 9.02%
INVESTMENTS-MUNI'S 0 .00% 0 .00% 45 7.93% 645 7.45% 169 7.65% 859 7.51%
FED FUNDS 4,250 5.25% 0 .00% 0 .00% 0 .00% 0 .00% 4,250 5.25%
CORPORATES 0 .00% 519 5.57% 1,210 6.07% 0 .00% 0 .00% 1,729 5.92%
MTG. BACKED PAYDOWNS 67 6.26% 133 6.26% 200 6.26% 200 6.26% 200 6.26% 800 6.26%
INVEST-CMO'S FLOAT 41 6.24% 0 .00% 0 .00% 0 .00% 0 .00% 41 6.24%
INVESTMENTS-ARM'S 569 7.05% 0 .00% 0 .00% 1,879 6.93 0 .00% 2,448 6.96%
INVESTMENTS-GOVT'S 364 7.25% 0 .00% 0 .00% 523 5.78% 1,021 6.53% 1,908 6.46%
------------- ------------ ------------ ------------ ------------ ------------
TOTAL INVESTMENTS 5,291 5.60% 652 5.71% 1,455 6.15% 3,247 6.81% 1,390 6.63% 12,035 6.12%
TOTAL EARNING ASSETS 17,396 8.37% 4,607 8.29% 5,906 8.09% 6,694 7.73% 7,075 8.14% 41,678 8.18%
NON-EARNING ASSETS 0 .00% 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------------- ------------ ------------ ------------ ----------- ------------
TOTAL ASSETS 17,396 8.37% 4,607 8.29% 5,906 8.09% 6,694 7.73% 7,075 8.14% 41,678 8.18%
</TABLE>
<TABLE>
<CAPTION>
TYPE OF ASSET: 13 - 36 MTHS 37 - 60 MTHS OVER 5 YEARS GRAND TOTAL
============== ============= ============= ============== =============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL COM. LOANS 3,223 8.90% 3,336 9.09% 2,272 8.96% 17,104 9.26%
TOTAL CONSUMER LOANS 1,928 10.65% 1,183 10.65% 0 .00% 5,622 10.55%
CONSUMER RUNOFF OFFSET -2,400 10.55%
TOTAL REV. CREDIT 0 .00% 0 .00% 0 .00% 4,176 9.82%
TOTAL MTGE. LOANS 1,989 8.99% 723 8.55% 16,099 7.89% 32,428 8.14%
MORTGAGE RUNOFF OFFSET -4,000 8.14%
TOTAL OTHER MTGES. 0 .00% 0 .00% 12 4.00% 1,078 7.82%
RESERVE FOR LN. LOSS 0 .00% 0 .00% 0 .00% -1,037 .00%
-------------- -------------- -------------- --------------
TOTAL LOANS 7,140 9.40% 5,242 9.37% 18,383 8.02% 52,971 8.94%
INVESTMENTS-MUNI'S 1,120 7.50% 715 7.54% 2,170 7.52% 4,864 7.52%
FED FUNDS 0 .00% 0 .00% 0 .00% 4,250 5.25%
CORPORATES 2,223 6.44% 529 6.49% 0 .00% 4,481 6.25%
MTG. BACKED PAYDOWNS 0 6.26%
INVEST-CMO'S FLOAT 0 .00% 0 .00% 0 .00% 41 6.24%
INVESTMENTS-ARM'S 0 .00% 0 .00% 0 .00% 2,448 6.96%
INVESTMENTS-GOVT'S 1,738 6.25% 567 6.91% 1,356 6.66% 5,569 6.49%
-------------- -------------- -------------- --------------
TOTAL INVESTMENTS 5,081 6.61% 1,811 7.04% 3,526 7.19% 21,653 6.48%
TOTAL EARNING ASSETS 12,221 8.24% 7,053 8.77% 21,909 7.89% 74,624 8.23%
NON-EARNING ASSETS 0 .00% 0 .00% 0 .00% 6,331 .00%
-------------- -------------- -------------- --------------
TOTAL ASSETS 12,221 8.24% 7,053 8.77% 21,909 7.89% 80,955 7.58%
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES SUBJECT TO INTEREST
RATE ADJUSTMENT WITHIN TIME HORIZON
IMMEDIATE AND > 30 DAYS
TYPE OF LIABILITY: < THAN 30 DAYS < 90 DAYS 2ND QUARTER 3RD QUARTER 4TH QUARTER
================== ============== ============ =========== ============= =============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-INT. BEARING DDA 334 .00% 659 .00% 1,083 .00% 993 .00% 993 .00%
NOW ACCOUNTS 885 1.95% 1,781 1.95% 853 1.95% 907 1.95% 907 1.95%
NEGOTIATED NOW 0 3.75% 0 3.75% 0 .00% 0 .00% 0 .00%
MONEY MARKET SAVINGS 1,068 3.50% 2,136 3.50% 1,068 3.50% 1,068 3.50% 1,068 3.50%
------------- ------------ ------------ ------------ ------------
TOTAL DDA ACCOUNTS 2,287 2.39% 4,576 2.39% 3,005 1.80% 2,968 1.86% 2,968 1.86%
TOTAL SAVINGS ACCTS. 399 3.65% 478 3.65% 720 3.65% 720 3.65% 720 3.65%
TOTAL COD 4,616 5.44% 4,070 5.46% 3,919 5.63% 3,517 5.44% 2,066 5.53%
FED FUNDS & OTHER 0 .00% 0 .00% 157 6.23% 86 5.73% 0 00%
------------- ------------ ------------ ------------ ------------
TOTAL DEPOSITS 7,302 4.38% 9,124 3.83% 7,800 3.98% 7,290 3.81% 5,753 3.40%
OTHER LIABILITIES 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------------- ------------ ------------ ------------ ------------
TOTAL LIABILITIES 7,302 4.38% 9,124 3.83% 7,800 3.98% 7,290 3.81% 5,753 3.40%
TOTAL CAPITAL 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------------- ------------ ------------ ------------ ------------
TOTAL LIAB. & CAP. 7,302 4.38% 9,124 3.83% 7,800 3.98% 7,290 3.81% 5,753 3.40%
- -------------------------------------------------------------------------------------------------------------------------
GAP FIGURES 10,094 -4,517 -1,894 -596 1,322
CUMULATIVE GAP 10,094 5,577 3,682 3,086 4,408
NET POSITION AS
A % OF TOTAL ASSETS 12.47% 6.89% 4.55% 3.81% 5.44%
RSA AS A % OF RSL 238.23% 133.95% 115.20% 109.79% 111.83%
</TABLE>
<TABLE>
<CAPTION>
TYPE OF LIABILITY ANNUAL TOTAL 13 - 36 MTHS 37 - 60 MTHS OVER 5 YEARS GRAND TOTAL
================= ============ ============ ============ ============ ============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-INT. BEARING DDA 4,062 .00% 2,257 .00% 2,257 .00% 451 .00% 9,026 .00%
NOW ACCOUNTS 2,133 1.95% 2,133 1.95% 2,133 1.95% 1,067 1.95% 10,665 1.95%
NEGOTIATED NOW 0 3.75% 0 .00% 0 .00% 0 .00% 0 3.75%
MONEY MARKET SAVINGS 6,409 3.50% 1,602 3.50% 1,068 3.50% 1,602 3.50% 10,682 3.50%
------------- ------------ ------------- ------------ -------------
TOTAL DDA ACCOUNTS 15,804 2.08% 5,992 1.63% 5,458 1.45% 3,120 2.46% 30,373 1.92%
TOTAL SAVINGS ACCTS. 3,036 3.65% 2,097 3.65% 1,935 3.65% 2,907 3.65% 9,975 3.65%
TOTAL COD 18,188 5.50% 6,840 6.18% 1,008 6.14% 0 .00% 26,036 5.70%
FED FUNDS & OTHER 243 6.05% 1,941 6.50% 823 6.48% 817 6.10% 3,824 6.38%
------------- ------------ ------------- ------------ -------------
TOTAL DEPOSITS 37,270 3.90% 16,870 4.29% 9,224 2.87% 6,844 3.40% 70,208 3.81%
OTHER LIABILITIES 0 .00% 0 .00% 0 .00% 0 .00% 1,074 .00%
------------- ------------ ------------- ------------ -------------
TOTAL LIABILITIES 37,270 3.90% 16,870 4.29% 9,224 2.87% 6,844 3.40% 71,282 3.75%
TOTAL CAPITAL 0 .00 0 .00% 0 .00% 9,673 .00% 9,673 .00%
------------- ------------ ------------- ------------ -------------
TOTAL LIAB. & CAP. 37,270 3.90% 16,870 4.29% 9,224 2.87% 16,516 1.41% 80,955 3.30%
- ------------------------------------------------------------------------------------------------------------------------------
GAP FIGURES 4,408 -4,649 -2,171 5,393 0
CUMULATIVE GAP -241 -2,413 2,980
NET POSITION AS
A % OF TOTAL ASSETS 5.44% -.30% -2.98% 3.68%
RSA AS A % OF RSL 111.83% 99.55% 96.19% 103.73%
</TABLE>
<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 $396,000 or 4.23% to $9,761,000 at
June 30, 1997, which represents 12.05% of total assets. This figure does
not include the $16,000, net of tax in net unrealized gain on available for
sale securities. At December 31, 1996, the similar ratio of shareholders'
equity to total assets was 11.87%. These measurements indicate the
Corporation has a strong capital position.
The "risk-based" capital to asset ratio, as established by the
regulatory authorities, was 20.31% as of June 30, 1997 compared to 19.50%
at December 31, 1996 as shown below:
<TABLE>
<CAPTION>
Actual Required Excess
------------------ ---------------- ----------------
Amount % Amount % Amount %
------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Risk-Based capital
June 30, 1997 $10,400,000 20.31 $4,097,000 8.00 $6,303,000 12.31
</TABLE>
Bank management does not perceive that future rate changes or
inflation will have a material impact on capital adequacy.
It is the opinion of Management that capital and shareholders' equity
is and will remain adequate for 1997.
FEDERAL INCOME TAXES
The provision for Federal income taxes for the six month periods ended
June 30, 1997 and 1996 totaled $232,000 and $210,000 respectively. The
increase in taxes is reflective of the increase in taxable income
for those periods.
OTHER MATTERS
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities," was issued by the Financial
Accounting Standards Board in 1996. It revises the accounting for transfers
of financial assets, such as loans and securities, and for distinguishing
between sales and secured borrowings. It is effective for some transactions
in 1997 and others in 1998. The anticipated effect on the consolidated
financial statements has yet to be determined.
The Corporation has not had significant dilution from stock options,
the new calculation methods will not affect future basic earnings per share
and diluted earnings per share.
-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 June 30, 1997.
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
The annual meeting of security holders of the Company was held
April 24, 1997. Information concerning the matters brought to a vote of
security holders is contained in the Company's Proxy Statement and
Notice of Annual Meeting of Shareholders held April 24, 1997, as
previously filed. There have been no further matters submitted to a
vote of the Registrant's security holders during the six months ended
June 30, 1997.
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
June 30, 1997.
-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 August 04, 1997 By: /s/ Timothy Gaylord
--------------- -------------------------------
Timothy Gaylord
President & CEO
Date August 04, 1997 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 and Form S-8 of the Articles
of Incorporation, the related Amendment and By-Laws
for the Incentive Stock Option Plan filed July 30, 1997
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 - (filed herewith)
28 Additional Exhibits - Not applicable
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1997 SECOND
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,109
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,916
<INVESTMENTS-CARRYING> 8,512
<INVESTMENTS-MARKET> 8,681
<LOANS> 54,008
<ALLOWANCE> 1,037
<TOTAL-ASSETS> 81,012
<DEPOSITS> 66,239
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,172
<LONG-TERM> 3,824
0
0
<COMMON> 1,487
<OTHER-SE> 8,290
<TOTAL-LIABILITIES-AND-EQUITY> 81,012
<INTEREST-LOAN> 2,341
<INTEREST-INVEST> 614
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,955
<INTEREST-DEPOSIT> 1,151
<INTEREST-EXPENSE> 1,233
<INTEREST-INCOME-NET> 1,722
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<EXPENSE-OTHER> 1,157
<INCOME-PRETAX> 824
<INCOME-PRE-EXTRAORDINARY> 824
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 592
<EPS-PRIMARY> 1.99
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<YIELD-ACTUAL> 5.08
<LOANS-NON> 224
<LOANS-PAST> 61
<LOANS-TROUBLED> 52
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<ALLOWANCE-OPEN> 1,020
<CHARGE-OFFS> 8
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