<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 Sept 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 October 27, 1997, the registrant had outstanding 297,528 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
September 30, 1997 and December 31, 1996.......... 1
Consolidated Statement of Income for
three and nine month periods ended
September 30, 1997 and 1996........................ 2
Consolidated Statement of Cash Flows
for nine month periods ended
September 30, 1997 and 1996........................ 3
Changes in Shareholders' Equity for
nine months ended September 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
PART I
CAPITAL DIRECTIONS, INC.
CONSOLIDATED BALANCE SHEET
--------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1997 1996
(UNAUDITED) (UNAUDITED)
-----------------------
<S> <C> <C>
Assets
Cash and non interest bearing deposits ........... $ 2,820 $ 2,538
Interest bearing deposits ........................ 0 139
Federal funds sold ............................... 0 2,800
------- -------
Total cash and cash equivalents 2,820 5,477
Securities available for sale ....................... 9,268 10,100
Securities held to maturity (fair value of $8,165 as
of Sept 30, 1997 and $9,230 as of December 31, 1996)
U.S. Government and agencies ..................... 3,104 3,551
State and municipal .............................. 4,850 5,482
Federal Home Loan Bank stock ........................ 364 364
------- -------
Total securities 17,586 19,497
Loans, net of unearned income:
Commercial and agricultural ...................... 3,438 4,453
Installment ...................................... 3,632 3,739
Real estate mortgage ............................. 50,472 43,600
------- -------
Total loans 57,542 51,792
Allowance for loan losses ........................ -1,044 -1,020
------- -------
Net loans 56,498 50,772
Premises and equipment, net ...................... 653 567
Accrued interest receivable and other assets ..... 2,891 2,607
------- -------
Total assets $80,448 $78,920
======= =======
Liabilities and shareholders' equity
Liabilities
Deposits
Non interest bearing ............................. $ 8,664 $10,356
Interest bearing ................................. 56,630 56,153
------- -------
Total deposits 65,294 66,509
Long-term Federal Home Loan Bank borrowings ....... 3,824 1,913
Accrued interest payable and other liabilities .... 1,314 1,101
------- -------
Total liabilities 70,432 69,523
Shareholders' equity
Common stock: $5 par value, 1,300,000 shares
authorized; 297,528 shares outstanding ......... 1,488 1,487
Additional paid in capital ....................... 2,561 2,559
Retained earnings ................................ 5,928 5,319
Net unrealized gains/(losses) on securities
available for sale, net of tax of $17 in 1996
and $20 in 1997 .................................. 39 32
------- -------
Total shareholders' equity 10,016 9,397
------- -------
Total liabilities and shareholders' equity $80,448 $78,920
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE> 4
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
----------------------- -----------------------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans, including fees ............................ $ 1,279 $ 1,106 $ 3,620 $ 3,324
Federal funds sold ...............................
Securities:
Taxable ........................................ 228 253 684 665
Tax exempt ..................................... 58 64 179 195
Other interest income ............................
Dividends on Federal Home Loan Bank stock ........ 24 16 61 118
------- ------- ------- -------
Total interest and dividend income 1,589 1,439 4,544 4,302
Interest expense:
Deposits ......................................... 617 570 1,759 1,736
Short-term borrowings ............................ 1 0 10 0
Long-term Federal home Loan Bank borrowings ...... 62 32 144 97
------- ------- ------- -------
Total interest expense 680 602 1,913 1,833
------- ------- ------- -------
Net interest income ............................... 909 837 2,631 2,469
Provision for loan losses ......................... 0 0 0 0
------- ------- ------- -------
Net interest income after provision for loan losses 909 837 2,631 2,469
Non interest income:
Service charges on deposits ...................... 65 65 193 203
Monex investment commission fees ................. 0 15 0 139
Other income ..................................... 71 62 190 186
Gain on sale of loans ............................ 0 34 7 34
Gain or (Loss) on sale of securities) ............ (18) 0 (13) 0
------- ------- ------- -------
Total non interest income 118 176 377 562
Non interest expense:
Salaries and employee benefits ................... 337 309 1,021 967
Premises and equipment ........................... 82 98 248 292
Monex investment sales expenses .................. 0 24 0 147
Other operating expenses ......................... 161 140 468 428
------- ------- ------- -------
Total non interest expense 580 571 1,737 1,834
------- ------- ------- -------
Income before income tax expense .................. 447 442 1,271 1,197
Income tax expense ................................ 129 129 361 339
------- ------- ------- -------
Net income ........................................ $ 318 $ 313 $ 910 $ 858
======= ======= ======= =======
Average common shares outstanding 297,443 297,428 297,443 297,428
Earnings per common share $1.07 $1.05 $3.06 $2.88
Dividends per share of
common stock, declared .35 .30 1.01 .84
</TABLE>
See accompanying notes to consolidated financial statements
-2-
<PAGE> 5
CAPITAL DIRECTIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPT 30,
1997 1996
(UNAUDITED)
-------------------
<S> <C> <C>
Net cash from operating activities................. $ 970 $ 896
-------- --------
Cash flows from investing activities
Proceeds from maturities or sale of securities... 2,820 3,038
Principal payments on securities................. 693 774
Purchase of securities........................... (1,647) (8,236)
Net change in loans.............................. (5,726) (13)
Premises and equipment expenditures.............. (163) (28)
-------- --------
Net cash from investing activities................. (4,023) (4,465)
-------- --------
Cash flows from financing activities
Net change in deposits........................... (1,215) (3,154)
Net change in long-term borrowing................ 1,911 208
Dividends paid................................... (300) (250)
-------- --------
Net cash from financing activities................. 396 (3,196)
-------- --------
Net change in cash and cash equivalents............ (2,657) (6,765)
Cash and cash equivalents at beginning of year... 5,477 9,775
-------- --------
Cash and cash equivalents September 30........... $ 2,820 $ 3,010
======== ========
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest....................................... $ 1,894 $ 1,874
Income Taxes - Federal......................... $ 380 $ 424
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE> 6
CAPITAL DIRECTIONS, INC.
------------------------
CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY
FOR NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance - January 1, 1997................................... $ 9,397
Net income through September 30............................ 910
Net change in unrealized gain/(loss) on securities
available for sale, net of tax of $2...................... 6
Additional paid in capital from stock issue................ 3
Cash dividends through September 30 ($ 1.01 per share)..... (300)
-------
Balance - September 30...................................... $10,016
=======
</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 September 30, 1997 and December
31, 1996, the results of operations and cash flows for the nine month
periods ended September 30, 1997 and 1996, and the change in shareholders'
equity for the nine month period ended September 30, 1997.
2. Because the results of the 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 than 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 $162,000 at September 30, 1997 and 172,000 at December 31, 1996,
summarized as follows:
<TABLE>
<CAPTION>
Sept. 30, December 31,
Non-performing loans 1997 1996
--------------------------------------- --------- -------------
<S> <C> <C>
Non-accrual............................ $ 20,000 48,000
90 days or more past due............... 90,000 70,000
Renegotiated........................... 52,000 54,000
-------- --------
Total.................................. $162,000 $172,000
======== ========
</TABLE>
The renegotiated loans are all in compliance with the modified terms for
both periods. As of September 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
nine months ended September 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........................... (9) (44)
Recoveries.................................. 33 60
------ ------
Balance - end of period.................... $1,044 $1,011
====== ======
</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 6.56% when compared to the same period in
1996. The increase is a result of growth in loan outstandings. At September
30, 1997, loan outstandings increased 15.81% over September 30, 1996. Real
estate mortgage lending continues to show strong growth. Net interest margin
of 5.06% for the first nine months of 1997 compares favorably to 4.92% 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 September 30, 1997 the
allowance was equal to 1.81% of total loans outstanding, down slightly from
2.03% on September 30, 1996 and 1.97% on December 31, 1996.
RESULTS OF OPERATIONS
Net earnings for the third quarter ended September 30, 1997 was $318,000,
or $1.07 per share compared to earnings of $313,000, or $1.05 per share for the
same period in 1996. For the nine months ended September 30, 1997, net earnings
were $910,000 or $3.06 per share compared to $858,000, or $2.88 per share for
the same period in 1996. Cost control, increased margin, strong loan demand and
excellent credit quality contributed to the 6.06% year to date improvement in
earnings.
The increase in margin resulted in a $162,000 increase in net interest
income for the first nine months of 1997 compared to the same period in 1996.
A decrease in non interest income has been offset with a comparable
reduction in non interest expense.
-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
$1,510,000 in Federal Funds sold during the first nine 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 September 30, 1997, the securities available for sale were valued at
$9,268,000.
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 September 30, 1997, the percentage of rate sensitive assets to
rate sensitive liabilities within the one-year time horizon was 101%.
The chart shows the Bank's GAP position as of September 30, 1997. The Bank
has an asset sensitive position within one year of $378,000, 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
our rate sensitivity. Due to some of the limitations of GAP analysis, price
modeling is also used to enhance measurement and control.
-7-
<PAGE> 10
ASSETS SUBJECT TO INTEREST RATE
ADJUSTMENT WITHIN TIME HORIZON TIME HORIZONS
<TABLE>
<CAPTION>
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 5,531 9.73% 586 9.43% 220 8.91% 876 8.44% 201 8.33% 7,414 9.49%
TOTAL CONSUMER LOANS 302 9.62% 400 10.51% 600 10.51% 600 10.51% 600 10.51% 2,502 10.41%
CONSUMER RUNOFF OFFSET
TOTAL REV. CREDIT 4,412 9.68% 0 .00% 0 .00% 0 .00% 0 .00% 4,412 9.68%
TOTAL MTGE. LOANS 340 8.12% 2,301 8.28% 2,707 8.18% 3,045 8.29% 5,175 8.31% 13,568 8.27%
MORTGAGE RUNOFF OFFSET
TOTAL OTHER MTGES. 445 7.88% 905 8.85% 109 7.18% 109 7.18% 109 7.18% 1,677 8.27%
RESERVE FOR LN. LOSS 0 .00% 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------------- ------------ ------------ ------------ ----------- ------------
TOTAL LOANS 11,030 9.58% 4,192 8.78% 3,636 8.58% 4,630 8.58% 6,085 8.51% 29,573 8.97%
INVESTMENTS-MUNI'S 45 7.93% 0 .00% 642 7.45% 170 7.52% 408 6.63% 1,265 7.21%
FED FUNDS 0 .00% 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
CORPORATES 1,202 5.41% 0 .00% 0 .00% 0 .00% 0 .00% 1,202 5.41%
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 38 6.55% 0 .00% 0 .00% 0 .00% 0 .00% 38 6.55%
INVESTMENTS-ARM'S 564 7.55% 0 .00% 0 .00% 1,817 6.93% 0 .00% 2,381 7.08%
INVESTMENTS-GOVT'S 364 7.25% 0 .00% 522 5.78% 513 6.79% 1,000 6.20% 2,399 6.39%
------------- ------------ ------------ ------------ ----------- ------------
TOTAL INVESTMENTS 2,280 6.33% 133 6.26% 1,364 6.64% 2,700 6.89% 1,608 6.32% 8,085 6.56%
TOTAL EARNING ASSETS 13,310 9.03% 4,325 8.70% 5,000 8.05% 7,330 7.96% 7,693 8.05% 37,658 8.45%
NON-EARNING ASSETS 0 .00% 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------------- ------------ ------------ ------------ ----------- ------------
TOTAL ASSETS 13,310 9.03% 4,325 8.70% 5,000 8.05% 7,330 7.96% 7,693 8.05% 37,658 8.45%
<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 3,122 8.90% 4,461 9.12% 2,236 8.98% 17,233 9.22%
TOTAL CONSUMER LOANS 1,856 10.60% 1,283 10.60% 0 .00% 5,641 10.51%
CONSUMER RUNOFF OFFSET -2,400 10.51%
TOTAL REV. CREDIT 0 .00% 0 .00% 0 .00% 4,412 9.68%
TOTAL MTGE. LOANS 1,851 8.99% 1,446 8.44% 18,103 7.86% 34,968 8.10%
MORTGAGE RUNOFF OFFSET -4,000 8.10%
TOTAL OTHER MTGES. 0 .00% 0 .00% 11 4.00% 1,688 8.52%
RESERVE FOR LN. LOSS 0 .00% 0 .00% 0 .00% -1,044 .00%
------------- ------------ ------------- -------------
TOTAL LOANS 6,829 9.39% 7,190 9.25% 20,350 7.98% 56,498 8.87%
INVESTMENTS-MUNI'S 713 7.95% 715 7.54% 2,168 7.52% 4,861 7.51%
FED FUNDS 0 .00% 0 .00% 0 .00% 0 .00%
CORPORATES 2,217 6.84% 528 6.49% 0 .00% 3,947 6.36%
MTG. BACKED PAYDOWNS 0 6.26%
INVEST-CMO'S FLOAT 0 .00% 0 .00% 0 .00% 38 6.55%
INVESTMENTS-ARM'S 0 .00% 0 .00% 416 6.34% 2,797 6.97%
INVESTMENTS-GOVT'S 1,147 6.28% 545 6.91% 1,803 6.58% 5,894 6.48%
------------- ------------ ------------- -------------
TOTAL INVESTMENTS 4,077 6.88% 1,788 7.04% 4,387 7.02% 17,537 6.81%
TOTAL EARNING ASSETS 10,906 8.45% 8,978 8.81% 24,737 7.81% 74,035 8.38%
NON-EARNING ASSETS 0 .00% 0 .00% 0 .00% 6,243 .00%
------------- ------------ ------------- -------------
TOTAL ASSETS 10,906 8.45% 8,978 8.81% 24,737 7.81% 80,278 7.73%
</TABLE>
LIABILITIES SUBJECT TO INTEREST
RATE ADJUSTMENT WITHIN TIME HORIZON
<TABLE>
<CAPTION>
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 321 .00% 634 .00% 1,042 .00% 955 .00% 955 .00%
NOW ACCOUNTS 724 1.95% 1,457 1.95% 698 1.95% 741 1.95% 741 1.95%
NEGOTIATED NOW 0 3.75% 0 3.75% 0 .00% 0 .00% 0 .00%
MONEY MARKET SAVINGS 1,073 3.56% 2,146 3.56% 1,073 3.56% 1,073 3.56% 1,073 3.56%
------------- ------------ ------------ ------------ ------------
TOTAL DDA ACCOUNTS 2,119 2.47% 4,237 2.47% 2,813 1.84% 2,770 1.90% 2,770 1.90%
TOTAL SAVINGS ACCTS. 523 3.56% 576 3.56% 733 3.56% 733 3.56% 733 3.56%
TOTAL COD 5,386 5.41% 3,935 5.63% 4,271 5.31% 2,718 5.43% 2,719 5.52%
FED FUNDS & OTHER 0 .00% 0 .00% 157 6.23% 86 5.73% 0 00%
------------- ------------ ------------ ------------ ------------
TOTAL DEPOSITS 8,028 4.52% 8,748 3.97% 7,975 3.94% 6,307 3.67% 6,222 3.68%
OTHER LIABILITIES 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------------- ------------ ------------ ------------ ------------
TOTAL LIABILITIES 8,028 4.52% 8,748 3.97% 7,975 3.94% 6,307 3.67% 6,222 3.68%
TOTAL CAPITAL 0 .00% 0 .00% 0 .00% 0 .00% 0 .00%
------------- ------------ ------------ ------------ ------------
TOTAL LIAB. & CAP. 8,028 4.52% 8,748 3.97% 7,975 3.94% 6,307 3.67% 6,222 3.68%
- -------------------------------------------------------------------------------------------------------------------------
GAP FIGURES 5,282 -4,423 -2,975 1,023 1,471
CUMULATIVE GAP 5,282 859 -2,115 -1,093 378
NET POSITION AS
A % OF TOTAL ASSETS 6.58% 1.07% -2.64% -1.36% .47%
RSA AS A % OF RSL 165.79% 105.12% 91.45% 96.48% 101.01%
<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 3,909 .00% 2,172 .00% 2,172 .00% 434 .00% 8,686 .00%
NOW ACCOUNTS 4,361 1.95% 1,744 1.95% 1,744 1.95% 872 1.95% 8,722 1.95%
NEGOTIATED NOW 0 3.75% 0 .00% 0 .00% 0 .00% 0 3.75%
MONEY MARKET SAVINGS 6,439 3.56% 1,610 3.56% 1,073 3.56% 1,610 3.56% 10,732 3.56%
------------- ------------ ------------- ------------- -------------
TOTAL DDA ACCOUNTS 14,709 2.14% 5,526 1.65% 4,989 1.45% 2,916 2.55% 28,140 1.96%
TOTAL SAVINGS ACCTS. 3,299 3.56% 2,175 3.56% 2,040 3.56% 3,043 3.56% 10,557 3.56%
TOTAL COD 19,029 5.45% 6,522 6.33% 1,095 6.35% 0 .00% 26,646 5.71%
FED FUNDS & OTHER 243 6.05% 1,941 6.50% 823 6.48% 817 6.10% 3,824 6.38%
------------- ------------ ------------- ------------- -------------
TOTAL DEPOSITS 37,280 3.98% 16,164 4.38% 8,947 2.99% 6,776 3.43% 69,167 3.89%
OTHER LIABILITIES 0 .00% 0 .00% 0 .00% 0 .00% 1,078 .00%
------------- ------------ ------------- ------------- -------------
TOTAL LIABILITIES 37,280 3.98% 16,164 4.38% 8,947 2.99% 6,776 3.43% 70,245 3.83%
TOTAL CAPITAL 0 .00 0 .00% 0 .00% 10,033 .00% 10,033 .00%
------------- ------------ ------------- ------------- -------------
TOTAL LIAB. & CAP. 37,280 3.98% 16,164 4.38% 8,947 2.99% 16,809 1.38% 80,278 3.35%
- ------------------------------------------------------------------------------------------------------------------------------
GAP FIGURES 378 -5,258 31 7,928 0
CUMULATIVE GAP -4,880 -4,849 3,079
NET POSITION AS
A % OF TOTAL ASSETS .47% -6.08% -6.04% 3.84%
RSA AS A % OF RSL 101.01% 90.87% 92.23% 103.89%
</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 $612,000 or 6.53% to $9,977,000 at
September 30, 1997, which represents 12.40% of total assets. These figures do
not include the 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 20.40% as of September 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
September 30, 1997 $10,541,000 20.40 $4,134,000 8.00 $6,407,000 12.40
</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 nine month periods ended
September 30, 1997 and 1996 totaled $361,000 and $339,000 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 created a project task force to examine year 2000
issues and used the steps outlined in the Federal Financial Institutions
Examination Council's interagency statement entitled, "Year 2000 Project
Management Awareness" as a guideline to insure that all areas affected by this
matter are examined and in compliance.
The Corporation has not had significant dilution from stock options,
therefore, the new calculation methods will not affect future basic earnings
per share and diluted earnings per share.
The Corporation declared a two-for-one stock split on October 16, 1997 to
shareholders of record as of November 3, 1997.
-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 September 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
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 September
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 October 27, 1997 By: /s/ Timothy Gaylord
---------------- ------------------------
Timothy Gaylord
President
Date October 27, 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:
3 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
-12-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1997
10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2820
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9268
<INVESTMENTS-CARRYING> 8318
<INVESTMENTS-MARKET> 8165
<LOANS> 57542
<ALLOWANCE> 1044
<TOTAL-ASSETS> 80448
<DEPOSITS> 65294
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1314
<LONG-TERM> 3824
0
0
<COMMON> 1488
<OTHER-SE> 8528
<TOTAL-LIABILITIES-AND-EQUITY> 80448
<INTEREST-LOAN> 3620
<INTEREST-INVEST> 924
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<INTEREST-TOTAL> 4544
<INTEREST-DEPOSIT> 1759
<INTEREST-EXPENSE> 1913
<INTEREST-INCOME-NET> 2631
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (13)
<EXPENSE-OTHER> 1737
<INCOME-PRETAX> 1271
<INCOME-PRE-EXTRAORDINARY> 1271
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<NET-INCOME> 910
<EPS-PRIMARY> 3.06
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.13
<LOANS-NON> 20
<LOANS-PAST> 90
<LOANS-TROUBLED> 52
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1020
<CHARGE-OFFS> 9
<RECOVERIES> 33
<ALLOWANCE-CLOSE> 1044
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