<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                    FORM 10-K
                  Annual Report Pursuant to Section 13 or 15(d)
              Of The Securities Exchange Act of 1934 (Fee Required)

For the fiscal year ended December 31, 1998     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

Securities registered pursuant to Section 12 (b) of the act:      NONE

Securities registered pursuant to Section 12 (g) of the act:      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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
                     ---            ---

Indicate by check mark if disclosure of delinquent filer pursuant to item 405 of
Registration S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The registrant estimates that as of March 23, 1999 the aggregate market value of
the voting stock held by non-affiliates of the registrant was approximately
$16,691,890. This is based on a market price of $35.75 per share for the
Registrant's stock as of that date.

As of March 23, 1999, the registrant had outstanding 596,122 shares of common
stock having a par value of $5 per share.


                                       1

<PAGE>   2


                       DOCUMENTS INCORPORATED BY REFERENCE

Annual Report to Shareholders for the Year Ended December 31, 1998 (Form 10-K,
Part I, Part II, Part III, and Part IV)

Proxy Statement for the Annual Meeting of Shareholders to be held April 22, 1999
(Form 10-K, Part III)


                                     PART I

Item 1.  Business

Capital Directions, Inc. (the "Registrant") is a one-bank holding company
registered under the Bank Holding Company Act of 1956, as amended. The
Registrant was incorporated on August 11, 1987 and formed for the purpose of
enabling Mason State Bank (the "Bank") to form a one-bank holding company and
engage in any other related activity allowed. Mason State Bank was consolidated
with Mason Bank on July 22, 1988, thereby causing Mason State Bank to become a
wholly-owned subsidiary of the Registrant.

Mason State Bank purchased Lakeside Insurance Services, Inc. in 1994 to take
advantage of the expanded insurance powers granted to banks in 1994. Lakeside is
licensed in Michigan to sell life insurance and variable annuity contracts.

The Registrant has no substantial assets except the investments in Mason State
Bank. The Registrant and its primary subsidiary, Mason State Bank, operate in
the banking industry, which accounts for substantially all of their assets,
revenues and operating income. Further discussion of the operations of the
Registrant and its subsidiaries is discussed under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1998 Annual
Report to the Shareholders, incorporated herein by reference. The Registrant's
primary competition is substantially the same as Mason State Bank's as discussed
below.

The Bank was organized in 1886 under the laws of Michigan and is subject to the
Michigan Banking Code of 1969. It is insured by the Bank Insurance Fund through
the Federal Deposit Insurance Corporation. The Bank is regulated by the Michigan
Financial Institutions Bureau and the Federal Deposit Insurance Corporation. The
Federal Reserve Board regulates the Registrant. The Bank's Principal office is
located at 322 South Jefferson Street, Mason, Michigan. It operates a branch at
661 North Cedar Street, Mason, Michigan and opened its second branch on October
1, 1998 at 810 W. Bellevue, Leslie, Michigan.

Banking services are provided to individuals, businesses, local state and
federal governmental units and institutional customers located in Mason and the
surrounding areas. Services include demand deposits, savings and time deposits,
collections, cash management, night depositories and personal, installment,
commercial and real estate loans. The Bank offers a credit card program
affiliated with the Visa and MasterCharge Inter-Bank charge card system.

The Bank maintains a correspondent relationship with several of the major banks
in the Detroit area and elsewhere, in order to provide for the clearance of
checks, the transfer of funds, and the periodic purchase and sale of Federal
funds, and participation in large loans which would be beyond the Bank's legal
lending limit if made by the Bank alone.

The Bank has full and part-time employees (40 full-time equivalents) and owns
its main office and Cedar Street office. The new facility in Leslie is operated
under a lease agreement. The Bank operates primarily within Ingham County.
Competing with the Bank in Ingham County are several other commercial banks and
financial institutions, some of which have significantly greater total resources
than the Bank.


                                       2
<PAGE>   3

Item 1.  Business-Statistical Disclosure

         I.  Distribution of Assets, Liabilities and Shareholders' Equity; 
             Interest Rates and Interest Differential

             (A), (B) The following table sets forth average balances for major
                      categories of interest earning assets and interest bearing
                      liabilities, the interest earned (on a fully taxable 
                      equivalent basis) or paid on such amounts, and average 
                      interest rates earned or paid thereon.





                                       3
<PAGE>   4


<TABLE>
<CAPTION>

                                               1998                                                 1997
                              -----------------------------------                  ---------------------------------- 
                              Average                       Yield/        Average                          Yield/     
                              Balance       Interest         Rate         Balance         Interest          Rate      
                              -------       --------        ------        -------         --------         ------
                                                            (Dollars in thousands)                                    
<S>                           <C>           <C>               <C>        <C>              <C>                <C>      
ASSETS                        
Loans, including fees(1)      $ 69,172      $5,870             8.49%     $ 54,870         $4,910              8.95%
Taxable investment                                                                                                  
  securities                    10,095         662             6.56        12,893            878              6.81  
Non-taxable investment
  securities(2)                  4,051         324             8.00         4,545            357              7.85  
Federal funds sold               2,487         134             5.39         1,295             68              5.25  
                              --------      ------                        -------         ------                    
Total earning assets            85,805       6,990             8.15%       73,603          6,213              8.44%
                                                                                                                    
Cash and due from                2,337                                      2,710                                   
  banks                                                                                                             
Other assets, net                2,473                                      3,074                                   
                              --------                                    -------                                   
Total non-interest                                                                                                  
  earning assets                 4,810                                      5,784                                   
                              --------                                    -------                                   
Total assets                  $ 90,615                                    $79,387                                   
                              ========                                    =======                                   
LIABILITIES                                                                                                         
Interest bearing                                                                                                    
  demand deposits             $ 10,213         156             1.53%      $ 9,299            182              1.96% 
Savings deposits                17,592         522             2.97        16,586            487              2.94  
Time deposits under                                                                                                 
  $100,000                      20,923       1,218             5.82        21,133          1,213              5.74  
Time deposits of                                                                                                    
  $100,000 or more              10,173         576             5.66         8,551            493              5.77  
Other borrowings                10,816         653             6.04         3,501            219              6.26  
                              --------      ------                        -------         ------                    
Total interest bearing
  liabilities                   69,717       3,125             4.48%       59,070          2,594              4.39% 
                                            ------                                        ------                    
                                                                                                                    
Demand deposits                  8,870                                      8,674                                   
Other liabilities                1,381                                      1,743                                   
Shareholders' equity            10,647                                      9,900                     
                                ------                                     ------                     
Total non-interest                                                                                                  
  bearing liabilities and
  equity                        20,898                                     20,317                                   
                              --------                                    -------                                   
Total liabilities and
  equity                      $ 90,615                                    $79,387                                   
                              ========                                    =======                                   
                                                                                                                    
Net interest income                         $3,865                                        $3,619                    
                                            ======                                        ======                    
Net yield on interest
  earning assets(2)                                            4.50%                                          4.92% 
                                                               ====                                        =======  

</TABLE>


     (1)       Average balances for loans include non-accrual loans. The
               inclusion of non-accrual loans and fees does not have a material
               effect on either the average balance or the average interest
               rate.

     (2)       Interest on non-taxable investment securities is reflected on a
               fully tax equivalent basis using an effective tax rate of 34% for
               1998 and 1997.


                                       4

<PAGE>   5

I.   Distribution of Assets, Liabilities and Shareholders' Equity; Interest
     Rates and Differential (continued)

     (C)       The following table summarizes the changes in interest income (on
               a fully taxable equivalent basis) and interest expense resulting
               from changes in volume and changes in rates:


<TABLE>
<CAPTION>

         ---------------------------------------------------------------------------------------------------------------------------
         (IN THOUSANDS)                       1998 COMPARED TO 1997                     1997 COMPARED TO 1996     
         --------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                 <C>            <C>           <C>               <C>          <C>        
         INTEREST INCOME                VOLUME(1)           RATE(1)        TOTAL         VOLUME(1)         RATE(1)      TOTAL
         Loans                          $  1,225            $ (265)        $ 960         $  480            $  35        $ 515      
         Taxable investment
           securities                       (185)              (31)         (216)           (92)              31          (61)     
         Non-taxable investment
           securities (2)                    (39)                6           (33)           (44)               7          (37)     
         Federal funds sold                   64                 2            66            (45)              (2)         (47)
                                        --------             -----         -----         ------            -----        -----
           Total interest income           1,065              (288)          777            299               71          370
         INTEREST EXPENSE
         Interest bearing demand 
           deposits                           17               (43)          (26)           (21)             (17)         (38)
         Savings deposits                     30                 5            35            (15)              13           (2)     
         Time deposits under  
             $100,000                        (12)               17             5            (14)               2          (12)     
         Time deposits of $100,000  
             or more                          92                (9)           83            107                6          113      
         Other borrowings                    442                (8)          434             88                2           90
                                        --------             -----         -----         ------            -----        -----
             Total interest expense          569               (38)          531            145                6          151
                                        --------             -----         -----         ------            -----        -----
         Net interest income            $    496             $(250)        $ 246         $  154            $  65       $  219
</TABLE>

         (1)    The change in interest due to both volume and rate has
                been allocated to volume and rate in proportion to the
                relationship of the absolute dollar amounts of the change
                in each.

         (2)    Interest on tax-exempt investment securities is based on a fully
                taxable equivalent basis.

II.      Investment Portfolio

(A)             A table of carrying values of the investment portfolio as of
                December 31, 1998 and 1997 is set forth in Note 3 on page 14 of
                the 1998 Annual Report to Shareholders. Such information is
                incorporated herein by reference.
(B)             The following table shows the relative maturities and weighted
                yields of investment securities at December 31, 1998: (dollars
                in thousands)


                                Held-To-Maturity
<TABLE>
<CAPTION>

                                    1 Year or less  1 Year - 5 Years  5 Years - 10 Years   After 10 Years
                                    Amount  Yield    Amount  Yield      Amount   Yield      Amount Yield
                                    ------  -----    ------  -----      ------   -----      ------------
<S>                              <C>         <C>      <C>     <C>       <C>       <C>      <C>      <C>     
U.S. Government agencies(2)         $ 713    6.87%    $ 690   6.87%     $    0    0.0%     $  395    9.0%    
State and political
    subdivisions
      Non-taxable (1)                1,265   6.31      1,124  7.77       1,090    8.46        999   8.94
                                    ------            ------            ------             ------
       Total                        $1,978   6.51%    $1,814  7.43%     $1,090    8.46%    $1,394  8.96%
                                    ======            ======            ======             ======
</TABLE>


                                       5
<PAGE>   6


II.      Investment Portfolio (continued)


                               Available-For Sale
<TABLE>
<CAPTION>

                                                1 Year or less   1 Year - 5 Years
                                                Amount    Yield   Amount    Yield
                                                ------    -----   ------    -----
<S>                                             <C>       <C>    <C>        <C>  
         U.S. Government agencies (2)           $ 959     6.57%  $   577    6.44%
         State and political subdivisions
           Taxable                                                   509    6.08
         Corporate securities (2)               1,349     6.75     1,926    6.59
                                                -----            -------

             Total                              $2,308    6.68%  $ 3,012    6.48%
                                                ======           =======
</TABLE>

(1)                  Weighted average yield adjusted to a taxable equivalent
                     basis using a federal income tax rate of 34 percent.
(2)                  Mortgage Backed securities and Corporate securities, as
                     reflected in the above schedules consider anticipated
                     prepayments and calls.

         (C) The Registrant held no investment securities of a single issuer,
         except U.S. Government Agency securities, in an amount greater than ten
         percent of shareholders' equity as of December 31, 1998.

III.     Loan Portfolio
         (A)  A table of loans outstanding as of December 31, 1998 and 1997 is
              set forth in Note 4 on page 15 of the 1998 Annual Report to
              Shareholders. Such information is incorporated herein by
              reference.

              The loan portfolio is systematically reviewed and the results
              reported to the Board of Directors of the Registrant. The purpose
              of these reviews is to assist in assuring proper loan
              documentation, to provide for the early identification of
              potential problem loans and to help ensure the adequacy of the
              allowance for loan losses.

         (B)  The following table sets forth the remaining maturity of loans
              outstanding (excluding real estate mortgages, installment and
              lease financing) at December 31, 1998, according to scheduled
              payments of principal (in thousands) and considering the banks
              "rollover policy."(1)

<TABLE>
<CAPTION>
              (In thousands)
                                    1 Year       1 Year -      After
                                    or less      5 Years      5 Years      Total
                                    -------     --------      --------    --------
<S>                                 <C>         <C>           <C>         <C>     
              Commercial and
                Agricultural        $ 2,739     $ 2,186       $    622    $  5,547
                                    =======     =======       ========    ========
</TABLE>

              The following table sets forth commercial and agricultural loans
              due after one year, which have predetermined interest rates and/or
              adjustable interest rates at December 31, 1998.

<TABLE>
<CAPTION>
              (In thousands)
                                                 Fixed       Adjustable
                                                 Rate           Rate          Total  
                                                -------       --------       -------  
<S>                                             <C>           <C>            <C>    
              Due after one but within five
                  years                         $ 1,052       $  1,134       $ 2,186
              Due after five years                  274            348           622
                                                -------       --------       -------

                   Total                        $ 1,326       $  1,482       $ 2,808
                                                =======       ========       =======
</TABLE>

                                       6
<PAGE>   7
         III.   Loan Portfolio (continued)

                  (1) The "rollover policy" is to generally write terms of these
                  loans for a shorter time then the expected payments. The
                  purpose of this is to re-evaluate the term and credit of the
                  respective borrower. We estimate that this happens on
                  approximately 80% of these borrowings and is reflected as such
                  in this schedule.

                  (C).  Risk Elements

                    (1).  Nonaccrual, Past Due, Impaired and Restructured Loans.
                          A table and discussion of nonaccrual, past due,
                          impaired and restructured loans for the years ended
                          December 31, 1998 and 1997 is in "Management's
                          Discussion and Analysis of Financial Condition and
                          Results of Operations" on pages 2, 3, and 4 under
                          Provision and allowance for loans losses, Note 1 under
                          "Loans" and "Allowance for Loan Losses" on page 12 and
                          in Note 5 on page 15 in the 1998 Annual Report to the
                          Shareholders. Such information is incorporated herein
                          by reference.

                          Gross interest income that would have been recorded in
                          1998 on such loans if the loans had been current in
                          accordance with their original terms and outstanding
                          throughout the period or since origination was $5,172.
                          No income was included in interest income on these
                          loans in 1998.

                    (2).  Potential Problem Loans
                          There are no material loans that are current as to
                          which management has serious doubts as to the ability
                          of the borrower to comply with the loan repayment
                          terms, or which are expected to need adjustments in
                          their repayment terms, or which are believed to
                          require additional provisions for loan losses.

                    (3).  Foreign Outstandings
                          There were no foreign outstandings as of December 31,
                          1998 and 1997.

                    (4).  Loan Concentrations
                          There were no concentrations of loans exceeding 10% of
                          total loans that have not been already disclosed as a
                          category at December 31, 1998.

              (D).   Other Interest Bearing Assets

                     As of December 31, 1998, there were no other interest
                     bearing assets that would be required to be disclosed under
                     Item III, Parts (C) (1) or (C) (2) of the loan portfolio
                     listing if such assets were loans.

                                       7
<PAGE>   8

         IV.  Summary of Loan Loss Experience

              (A).  The following table sets forth loan allowance balances and
                    summarizes changes in the allowance for loan losses for each
                    of the two years ended December 31.

<TABLE>
<CAPTION>

                                             Analysis of the Allowance For Loan Losses

              (Dollars in thousands)             1998                      1997
                                                 ----                      ----
<S>                                             <C>                      <C>     
              Balance, beginning of period      $ 1,035                  $  1,020
                                                -------                  --------

              Loans charged-off
                Commercial and agricultural           0                         7
                Real estate-construction              0                         0
                Real estate-mortgages                 0                         0
                Lease financing                       0                         0
                Installment and others               30                        19
                                               --------                  --------
                  Total                              30                        26

              Recoveries of loans charged-off
                Commercial and agricultural           3                         6
                Real estate-construction              0                         0
                Real estate-mortgages                 0                         0
                Lease financing                       0                         0
                Installment and others               26                        35
                                               --------                  --------
                  Total                              29                        41

              Net charge-offs (recoveries)            1                       (15)

              Additions charged (credited)
              to operations                         (23)                        0
                                               --------                  --------

              Balance at end of period         $  1,011                  $  1,035
                                               ========                  ========

              Average gross loans outstanding  $ 69,172                  $54,870
                                               ========                  =======

              Ratio of net charge-offs(recoveries)
                during the period to average gross
                loans outstanding during the
                period                              0.00%                   -0.03%
</TABLE>

         Further discussion of the provision and allowance for loan losses as
         well as non-performing and impaired loans is presented in "Management's
         Discussion and Analysis of Financial Condition and Results of
         Operations" on pages 2, 3, and 4, Note 1 on page 12 and Note 5 on page
         15 in the 1998 Annual Report to the Shareholders, incorporated herein
         by reference.

                                       8
<PAGE>   9
         IV.  Summary of Loan Loss Experience  (continued)


              (B) The following table presents an allocation for loan losses
                  to the various loan categories at December 31:

<TABLE>
<CAPTION>

                                                  1998                  1997
                                                       % of                   % of
              (Dollars n thousands)        Allowance Loans to   Allowance    Loans to
                                            Amount  Total Loans  Amount    Total Loans
                                           -------  ----------   -------    --------
<S>                                        <C>            <C>    <C>            <C>  
              Commercial and agricultural  $    81        6.77%  $    74        6.92%
              Real estate-mortgages            491       89.12         4       87.21
              Installment and other             45        4.11         7        5.87
              Unallocated                      394         N/A       950         N/A
                                           -------   ---------   -------    --------
                  Total                    $ 1,011      100.00%  $ 1,035      100.00%
                                           =======   =========   =======    ========
</TABLE>

              Mason State Bank is committed to the maintenance of an allowance
              for loan losses in amounts sufficient to absorb loan and lease
              losses inherent in the loan portfolio. To assure the adequacy of
              balances and the resulting provision allocations, measurements
              against historical performance and current analyses of asset
              quality are undertaken on a periodic basis with consideration for
              qualitative factors. These evaluations support the budgeted
              allowance provisions and the traditional philosophy of accounting
              for losses as they are recognized.

              On a predetermined basis, a Loan Loss Allowance Model (LLAM) is
              completed quarterly for the Bank. The results of the LLAM provide
              a consistent, conservative management tool for quantifying the
              amount of risk in the loan portfolio. This LLAM computes a
              suggested allowance balance to be compared to the actual allowance
              for loan losses. The difference between the suggested and actual
              allowance is monitored and maintained at an amount considered
              reasonable to provide for potential losses inherent in the
              portfolio.

              To determine the suggested allowance balance, two tests are
              applied to the various loan categories. The test with the most
              conservative (greatest) allowance allocation is selected for each
              category. The two tests are then combined with a separate
              qualitative factor spread against all loan categories.

              The first test includes establishment of a minimum allocation
              percentage for each loan (primarily commercial) based upon its
              loan grade. The second test involves computing the actual loss
              experience over the last five years for each of the loan
              categories (primarily consumer and residential real estate loans).
              The factor applied to the current outstanding loan balances of
              these loan categories is equal to at least the five-year average
              of net charge-offs to average loans for the appropriate loan
              portfolio.

              When economic conditions or other factors warrant, a qualitative
              factor is applied against all loan categories. Management declared
              that such a factor be instituted for 1998 given the unprecedented
              seven year expansion of the United States economy and the
              expection of a reversal of this trend in the near future. The
              factor applied to the current outstanding of all loan balances is
              equal to the seven year average of net charge-offs to average
              loans for the seven year period prior to the start of the current
              economic expansion (years 1985 through 1991).

              The allowance allocations above were deemed by management to be
              amounts reasonably necessary to provide for the inherent losses in
              the various loan categories as of December 31, 1998 and 1997.

                                       9
<PAGE>   10

V.       Deposits

         The following table sets forth average deposit balances and the
         weighted average rate paid for each of the two years ended December 31:

<TABLE>
<CAPTION> 

                                                      1998                1997
         (Dollars in thousands)                     Average             Average
                                               Balance    Rate     Balance    Rate
                                               -------    ----     -------    ----
<S>                                            <C>                 <C>    
         Non interest-bearing demand deposits  $ 8,870             $ 8,674
         Interest-bearing demand deposits       10,213    1.53%      9,299    1.96%
         Savings deposits                       17,592    2.97      16,586    2.94
         Time deposits under $100,000           20,923    5.82      21,133    5.74
         Time deposits of $100,000 or more      10,173    5.66       8,551    5.77
                                               -------             -------
           Total                               $67,771    3.65%    $64,243    3.70%
                                               =======             =======
</TABLE>

         The following table summarizes time deposits in amounts of $100,000 or
         more by time remaining until maturity as of December 31, 1998:

<TABLE>
<CAPTION>
                (In thousands)
<S>                                                            <C>     
                Three months or less                           $  6,988
                Over three months through six months              2,003
                Over six months through one year                    562
                Over one year                                     1,724
                                                               --------
                  Total                                        $ 11,277
                                                               ========
</TABLE>

         As of December 31, 1998 the registrant had no foreign deposits.

VI.      Return on Equity and Assets

         The following table presents the ratios for the year ended December 31:

<TABLE>
<CAPTION>
                                                                 1998        1997
                                                                 ----        ----
<S>                                                             <C>         <C>  
         Net income to average total assets                      1.47%       1.56%
         Net income to average shareholders' equity             12.53       12.47
         Cash dividend payout ratio per share                   42.63       33.65
         Average shareholders' equity to average total assets   11.75       12.47
</TABLE>

VII.     Short Term Borrowings - Not applicable

Item 2.  Properties

         The Bank owns the land on which the Bank's main office is located. The
         land measures 85' by 170' and bears the municipal address of 322 South
         Jefferson Street, Mason, Michigan. The permanent building, also owned
         by Mason State Bank, has approximately 6,800 square feet including
         banking facilities, storage and personnel lounge areas. This brick
         structure was built in the mid 1800's and has gone through several
         remodelings, the last one being in 1986 and is in good general
         condition. A parking area with spaces to accommodate 20 vehicles
         occupies part of the property; part is occupied by two drive-in banking
         stations.

         The Bank also owns the land used as a Branch office. The land measures
         368' by 297' and bears the municipal address of 661 North Cedar Street,
         Mason, Michigan. The permanent building, built in the 1960's, also
         owned by Mason State Bank, measures approximately 2,400 square feet,
         including banking facilities, storage and personnel lounge areas. This
         building is also in good condition. A parking area with spaces to
         accommodate 24 vehicles occupies part of the property; part is occupied
         by 4 drive-in banking stations.

                                       10
<PAGE>   11

Item 2.  Properties (continued)

         In October 1998, the Bank established an in-store branch located within
         the Felpausch Food Center, 810 Bellevue Street, Leslie, Michigan. The
         Bank entered into a lease arrangement and occupies 709 square feet of
         the southeast corner of the store. Prior to occupancy, this space was
         renovated to provide full service banking accommodations. Customer
         parking is readily available and maintained by Felpausch Food Center.

         The Registrant operates its business at the same address as Mason State
         Bank's main office. As of March 19, 1999, the Registrant owned no
         properties.

Item 3.  Legal Proceedings

         There are no material pending legal proceedings to which the Registrant
         or its subsidiaries is a party or to 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.

Item 4.  Submission of Matters to a Vote of Security Holders

         Not applicable

         Additional Item - Executive Officers

         Executive officers of the Registrant are appointed annually by the
         Board of Directors at the meeting of Directors following the Annual
         Meeting of Shareholders. There are no family relationships among these
         officers and/or Directors of the Registrant or any arrangement or
         understanding between any officer and any other person pursuant to
         which the officer was elected.

         The following sets forth certain information with respect to the
         Registrant's Executive Officers and Directors as of December 31, 1998.

<TABLE>
<CAPTION>
                                           Position With           First Elected as an
         Name (Age)                          Registrant          Officer of the Registrant 
         ----------                          ----------          ------------------------- 
<S>                         <C>                                            <C> 
         George A. Sullivan (66)           Chairman                        1988
         Gerald W. Ambrose (49)            Vice Chairman                   1994
         Timothy P. Gaylord (44)           President and C.E.O.            1995
         Douglas W. Dancer (58)            Secretary                       1990
</TABLE>

         Mr. Sullivan is a Director of the registrant and Chairman of the Board
         of Directors of Mason State Bank.
         Mr. Ambrose is a Director of the registrant and Vice Chairman of the
         Board of Directors of Mason State Bank.
         Mr. Gaylord is a Director of the registrant and President and Chief
         Executive Officer of Mason State Bank.
         Mr. Dancer is a Director of the registrant and Secretary of the Board
         of Directors of Mason State Bank.

                                       11
<PAGE>   12

                                     PART II

         I. The information required by this item appears in the Capital
            Directions, Inc. Annual Report to Shareholders for the year ended
            December 31, 1998, and is incorporated herein by reference, as
            follows:

<TABLE>
<CAPTION>
                                                                           Pages in 1998
                                                                           Annual Report
                                                                           -------------
<S>                  <C>                                                        <C>
         Item 5.     Market for Registrant's Common Equity and
                     Related Stockholder Matters                                1

         Item 6.     Selected Financial Data                                    1

         Item 7.     Management's Discussion and Analysis of
                     Financial Condition and Results of Operation               2 - 7

         Item 7a.    Quantitative and Qualitative Disclosures About
                     Market Risk                                                Not required as
                                                                                registrant meets
                                                                                requirements to be
                                                                                a small business filer

         Item 8.     Financial Statements and Supplementary Data                8 - 23

         Item 9.     Changes in and Disagreements With Accountants on
                     Accounting and Financial Disclosure                        None
</TABLE>

                                    Part III

         The information required by this item is included in the Capital
         Directions, Inc. 1999 Proxy Statement, dated March 29, 1999, and is
         incorporated herein by reference, as follows:

<TABLE>
<CAPTION>
                                                                               Page in 1999
                                                                              Proxy Statement
                                                                              ---------------
<S>                  <C>                                                           <C>
         Item 10.    Directors and Executive Officers of the Registrant            3 - 4
                     (In addition, reference is made to additional item -
                     Executive Officers under Part I, Item 4 of this Form 
                     10-K report on page 11)

         Item 11.    Executive Compensation                                        4 - 6

         Item 12.    Security Ownership of Certain Beneficial Owners
                     and Management                                                2 - 3

         Item 13.    Certain Relationships and Related Transactions                6 - 7
</TABLE>

                     The information appearing in the Corporation's Proxy
                     Statement and in Note 4 on page 15 of the Notes to
                     Consolidated Financial Statements of the 1998 Annual Report
                     to Shareholders is incorporated by reference in response to
                     this item.

                                       12
<PAGE>   13

                                     Part IV

         Item 14.    Exhibits, Financial Statement Schedules, and Reports on 
                     Form 8-K

           (a).      The following documents are filed as part of this report:

                     1. The following consolidated financial statements of 
                        Capital Directions, Inc. included in the 1998 Annual
                        Report to Shareholders for the year ended December 31,
                        1998, are incorporated herein by reference in Item 8:

<TABLE>
<CAPTION>
                                                                       Page in 1998
                                                                       Annual Report
                                                                       -------------
<S>                                                                        <C>
                     Consolidated balance sheets -
                         December 31, 1998 and 1997                         8

                     Consolidated statements of income for the years
                         ended December 31, 1998, 1997, and 1996            9

                     Consolidated statements of cash flows for the years
                         ended December 31, 1998, 1997, and 1996            10

                     Consolidated statements of changes in shareholders'
                         equity for the years ended December 31, 1998,
                         1997, and 1996                                     11

                     Notes to consolidated financial statements             12 - 23

                     Report of Independent Auditors                         7
</TABLE>

                     2. Financial  Statement Schedules

                     Not applicable

                     3. Exhibits

                     (3a) Articles of Incorporation and (3b) Bylaws (previously
                     filed as Exhibits included in Capital Directions, Inc.
                     Registration Statement Amendment No. 1 to Form S-4, No. 1
                     to Form S-4, No. 33-20417, Dated March 17, 1988).

                     (10)     Material Contracts
                               (a) Incentive Compensation Plans (previously 
                                   filed as Exhibits included in Capital
                                   Directions, Inc.'s 1988 10-K reported dated
                                   March 29, 1989 and the 1993 10-K report dated
                                   March 29, 1994).
                               (b) Directors Deferred Compensation Plans
                                   (previously filed as Exhibits included in
                                   Capital Directions, Inc.'s 1988 10-K report
                                   dated March 29, 1989).
                               (c) Supplementary Executive Retirement Plan
                                   (previously filed as Exhibits included in
                                   Capital Directions, Inc.'s 1988 10-K report
                                   dated March 29, 1989).

                     (13)      Annual Report to Shareholders for the year ended 
                               December 31, 1998 (filed herewith).

                     (22)      Subsidiaries of registrant (previously filed as 
                               Exhibits included in Capital Directions, Inc.'s 
                               1988 10-K report dated March 29, 1989).

                                       13
<PAGE>   14

Part IV - Exhibits, Financial Statement Schedules, and Reports on Form 8-K 
          (Continued)

                     (23) Consents of experts. Consent of Crowe, Chizek and 
                          Company LLP.

                     (27) Financial Data Schedule for EDGAR filer.

          (b).   Reports on Form 8-K

                 No reports of Form 8-K were filed during the last quarter of
                    the year covered by this report.



                                       14
<PAGE>   15
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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, on March 23, 1999.


CAPITAL DIRECTIONS, INC.


/s/ Timothy P. Gaylord      Timothy P. Gaylord
--------------------------  (President and Chief Executive Officer)

/s/ Lois A. Toth            Lois A. Toth
--------------------------  (Treasurer)

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been duly signed by the following persons in the capacities
indicated on March 23, 1999.

/s/ George A. Sullivan      George A. Sullivan
--------------------------  Chairman of Board of Directors

/s/ Gerald W. Ambrose       Gerald W. Ambrose
--------------------------  Vice Chairman of Board of Directors

/s/ Douglas W. Dancer       Douglas W. Dancer
--------------------------  Secretary of Board of Directors

/s/ Timothy P. Gaylord      Timothy P. Gaylord
--------------------------  President and Chief Executive Officer

/s/ Marvin B. Oesterle      Marvin B. Oesterle
--------------------------  Director

/s/ Paula Johnson           Paula Johnson
--------------------------  Director
                                       15
<PAGE>   16
                                Index to Exhibits

The following exhibits are filed or incorporated by reference as part of this 
report:

3(A)  Articles of Incorporation of the Registrant as currently in effect and any
      amendments thereto (Incorporated herein by reference to exhibit 3(A) of
      the Registrants' Form S-4 Registration Statement dated March 17, 1988 No.
      33-20417).

3(B)  Bylaws of the Registrant as currently in effect and any amendments thereto
      (Incorporated herein by reference to exhibit 3(B) of the Registrants' Form
      S-4 Registration Statement dated March 17, 1988 No. 33-20417).

10(A) Incentive Compensation Plans (Incorporated herein by reference to exhibit 
      10(A) to Registrants' Report on Form 10-K for the year ended December 31,
      1988 and December 31, 1988 and December 31, 1993 [1988 and 1993 10-K
      Report]).

10(B) Directors Deferred Compensation Plan (Incorporated herein by reference to 
      exhibit 10(B) to Registrants' Report on Form 10-K for the year ended
      December 31, 1988 [1988 10-K Report]).

10(C) Supplementary Executive Retirement Plan (Incorporated herein by reference 
      to exhibit 10(C) to Registrants' Report on Form 10-K for the year ended
      December 31, 1988 [1988 10-K Report]).

13    Annual Report to Shareholders for the year ended December 31, 1998 (filed
      herewith).

22    List of Subsidiaries (Incorporated herein by reference to exhibit 22 to 
      Registrants' Report on Form 10-K for the year ended December 31, 1988
      [1988 10-K Report]).

23    Consents of experts. Consent of Crowe, Chizek and Company LLP.

27    Financial Data Schedule for EDGAR filer.

                                       16