<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 ended   March 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
                                                             --------------

                                      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 April 20, 1997 the registrant had outstanding 595,056 shares of common
stock having a par value of $5 per share.

<PAGE>   2


                            CAPITAL DIRECTIONS, INC.
                               INDEX TO FORM 10-Q

                                                                          Page
                                                                          Number
PART I - FINANCIAL INFORMATION

     Item 1. Consolidated Balance Sheets
             March 31, 1998 and December 31, 1997 ......................... 1

             Consolidated Statements of Income for the Three Month
             Periods ended March 31, 1998 and 1997......................... 2 

             Consolidated Statements of Cash Flows for the Three Month
             Periods ended March 31, 1998 and 1997......................... 3

             Consolidated Statements of Changes in Shareholders' Equity 
             for the Three Months Ended March 31, 1998..................... 4

             Notes to Interim Consolidated Financial Statements............ 5-6

    Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations........................... 6-10

PART II - OTHER INFORMATION

    Item 1.  Legal Proceedings............................................. 11
    Item 2.  Changes in Securities......................................... 11
    Item 3.  Defaults Upon Senior Securities............................... 11
    Item 4.  Submission of Matters to a Vote of Security Holders........... 11
    Item 5.  Other Information............................................. 11
    Item 6.  Exhibits and Reports on Form 8-K.............................. 11
    Item 7.  Signatures.................................................... 12
             Index to Exhibits............................................. 13


<PAGE>   3
                           CAPITAL DIRECTIONS, INC.
                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

(In thousands)                                          March 31, December 31,
                                                            1998      1997
                                                        --------- -----------
                                                        (Unaudited)
<S>                                                       <C>       <C>
ASSETS
  Cash and non interest bearing deposits                  $ 2,959   $ 2,188
  Federal funds sold                                        1,250         0
                                                          -------   -------
          Total cash and cash equivalents                   4,209     2,188
  Securities available for sale                             6,872     6,271
  Securities held to maturity (fair value of $7,016 as of
    March 31, 1998 and $7,705 as of December 31, 1997)
      U.S. Government and agencies                          2,658     2,944   
      State and municipal                                   4,149     4,539   
  Federal Home Loan Bank (FHLB) stock                         364       364   
                                                          -------   -------
          Total securities                                 14,043    14,118   
  Loans:                                                                      
    Commercial and agricultural                             3,487     4,241   
    Installment                                             3,382     3,601   
    Real estate mortgages                                  56,836    53,492   
                                                          -------   -------
          Total loans                                      63,705    61,334   
    Allowance for loan losses                             (1,034)   (1,035)   
                                                          -------   -------
          Net loans                                        62,671    60,299   
  Premises and equipment, net                                 617       618   
  Accrued income and other assets                           2,870     2,734   
                                                          -------   -------
          Total assets                                    $84,410   $79,957   
                                                          =======   =======
                                                                              
LIABILITIES AND SHAREHOLDERS' EQUITY                                          
  Liabilities                                                                 
    Deposits:                                                                 
      Non interest bearing                                $ 8,471   $ 8,322   
      Interest bearing                                     57,521    56,099   
                                                          -------   -------
          Total deposits                                   65,992    64,421   
    Federal funds purchased                                     0       450   
    Long-term FHLB borrowings                               6,684     3,670   
    Other liabilities                                       1,324     1,200   
                                                          -------   -------
          Total liabilities                                74,000    69,741   
  Shareholders' equity                                                        
    Common stock:  $5 par value, 1,300,000 shares                   
    authorized; 595,056 shares outstanding                  2,975     2,975   
    Additional paid in capital                              2,561     2,561   
    Retained earnings                                       4,843     4,652   
    Net unrealized gains/(losses) on securities available           
    for sale, net of tax of $16 as of March 31, 1998 and            
    $14 as of December 31, 1997                                31        28   
                                                          -------   -------
          Total shareholders' equity                       10,410    10,216   
          Total liabilities and shareholders equity       $84,410   $79,957
                                                          =======   =======
</TABLE>


See accompanying notes to consolidated financial statements.


                                      1
<PAGE>   4
                            CAPITAL DIRECTIONS, INC.
                CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                   March 31,
(In thousands, except per share data)                           1998       1997
                                                                ----       ----
<S>                                                          <C>        <C>
INTEREST AND DIVIDEND INCOME
  Interest and fees on loans                                 $  1,361   $  1,158  
  Federal funds sold                                               24          9  
  Securities:  Taxable - available for sale                       121        153  
               Taxable - held to maturity                          55         73  
               Tax exempt - held to maturity                       52         64  
  Dividends on FHLB stock                                           7          7  
  Other interest income                                             0          2  
                                                             --------   --------
          Total interest and dividend income                    1,620      1,466  
INTEREST EXPENSE                                                               
  Deposits                                                        613        566  
  Federal funds purchased                                           1          9  
  Long-term FHLB borrowings                                        93         29  
                                                             --------   --------
          Total interest expense                                  707        604  
                                                             --------   --------
Net interest income                                               913        862  
                                                             --------   --------
Provision for loan losses                                         (8)          0  
                                                             --------   --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES               921        862   
NON INTEREST INCOME                                                            
  Service charges on deposits                                      68         63  
  Net gain (loss) on sale and call of securities                  (13)         7  
  Net gain on sales of loans                                        1          7  
  Other income                                                     65         58  
                                                             --------   --------
          Total non interest income                               121        135  
NON INTEREST EXPENSE                                                           
  Salaries and employee benefits                                  369        343  
  Premises and equipment                                           78         83  
  Other operating expense                                         170        161  
                                                             --------   --------
          Total non interest expense                              617        587  
                                                                               
INCOME BEFORE INCOME TAX EXPENSE                                  425        410  
INCOME TAX EXPENSE                                                122        115  
                                                             --------   --------
                                                                               
NET INCOME                                                   $    303   $    295   
                                                             ========   ========               

AVERAGE COMMON SHARES OUTSTANDING                             595,056    594,856
BASIC EARNINGS PER COMMON SHARE                                  0.51       0.50  
DILUTED EARNINGS PER COMMON SHARE                                0.51       0.49  
DIVIDENDS PER SHARE OF COMMON STOCK, DECLARED                    0.21       0.16  

</TABLE>
                                                                               
See accompanying notes to consolidated financial statements.


                                      2
<PAGE>   5
                           CAPITAL DIRECTIONS, INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                                March 31,
(In thousands)                                           1998               1997
                                                         ----               ----
<S>                                                      <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                           $   303             $   295 
  Adjustments to reconcile net income to net cash          
    from operating activities          
      Depreciation                                          28                  23
      Provision for loan losses                             (8)                  -
      Net amortization (accretion) on securities            10                  18
      Net gain (loss) on sales of loans                     (1)                 (7)
      Net gain (loss) on sales of securities                13                  (7)
      Changes in assets and liabilities:          
        Accrued interest receivable                        (42)                (67)
        Accrued interest payable                             7                  (1)
        Other assets                                       (94)                (86)
        Other liabilities                                  117                 155
                                                       -------             -------
      Net cash from operating activities                   333                 323

CASH FLOWS FROM INVESTING ACTIVITIES          
  Securities available for sale:          
    Purchases                                           (2,444)                  -
    Maturities, call and principal payments              1,834                 225
  Securities held to maturity:                                    
    Purchases                                                -                   -
    Maturities, call and principal payments                675                 623
  Proceeds from sale of non-residential loans               53                 180
  Net change in loans                                   (2,425)                113
  Premises and equipment expenditures                      (27)                 (1)
                                                       -------             -------
          Net cash from investing activities            (2,334)              1,140
CASH FLOWS FROM FINANCING ACTIVITIES                              
  Net change in deposits                                 1,571              (4,051)
  Federal funds purchased                                 (450)                  -
  Proceeds from long-term FHLB borrowings                3,100               1,000
  Repayment of long-term FHLB borrowings                   (86)                (86)
  Dividends paid                                          (113)                (98)
                                                       -------             -------
          Net cash from financing activities             4,022              (3,235)
                                                       -------             -------
NET CHANGE IN CASH AND CASH EQUIVALENTS                  2,021              (1,772)
Cash and cash equivalents at beginning of year           2,188               5,477
                                                       -------             -------
CASH AND CASH EQUIVALENTS AT MARCH 31                  $ 4,209             $ 3,705
                                                       =======             =======
                                                                  
Supplemental disclosure of cash flow information                  
  Cash paid during the year for:                                  
    Interest                                           $   606             $   605
    Income taxes - federal                             $   130             $   124

</TABLE>


See accompanying notes to consolidated financial statements.


                                      3
<PAGE>   6


                            CAPITAL DIRECTIONS, INC

                           CONSOLIDATED STATEMENT OF
                 CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
              For the three months ended March 31, 1998 and 1997

<TABLE>
<CAPTION>                                                                            Accumulated        
                                                                                       Other
                                            Common       Paid In         Retained   Comprehensive
                                            Stock         Capital        Earning       Income         Total
                                            -----         -------        -------       ------         -----
<S>                                        <C>            <C>            <C>           <C>           <C>
Balance, January 1, 1997                   $ 1,487        $ 2,559        $ 5,319       $   32        $  9,397
Net income                                                                   295                          295
Unrealized gain (loss) on securities,                                                      (2)             (2)
   net of tax                                                                                        --------
Comprehensive income                                                                                      293
Cash dividends ($ .16 per share)                                             (98)                         (98)
                                           -------        -------        -------       ------        --------

Balance, March 31, 1997                    $ 1,487        $ 2,559        $ 5,516       $   30        $  9,592
                                           =======        =======        =======       ======        ========


Balance, January 1, 1998                   $ 2,975        $ 2,561        $ 4,652       $   28        $ 10,216
Net income                                                                   303                          303
Unrealized gain (loss) on securities,                                                       3               3
   net of tax                                                                                        --------
Comprehensive income                                                                                      306
Cash dividends ($ .19 per share)                                            (112)                        (112)
                                           -------        -------        -------       ------        --------

Balance, March 31, 1998                    $ 2,975        $ 2,561        $ 4,843       $   31        $ 10,410
                                           =======        =======        =======       ======        ========

</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 March 31, 1998 and December 31,
     1997, the results of operations and cash flows for the three month periods
     ended March 31, 1998 and 1997, and the change in shareholders' equity for
     the three month periods ended March 31, 1998 and 1997.

2.   The results of operations for the three months ended March 31, 1998 are not
     necessarily indicative of the results to be expected for the full year.

3.   The accompanying unaudited Consolidated Financial Statements and the
     notes thereto should be read in conjunction with the Notes to Consolidated
     Financial Statements and the notes included therein, for the fiscal year
     end 1997, included in the Registrant's 1997 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 are
     defined as all loans which are accounted for as non-accrual; loans 90 days
     or more past due and still accruing interest; or loans which have been
     renegotiated due to the borrowers' inability to comply with the original
     terms. As of March 31, 1998, non-performing loans totaled $102,000 or .19%
     of total loans. This represents a decrease of $89,000 from the $209,000
     balance at December 31, 1997.

<TABLE>
<CAPTION>
                                                     March 31,     December 31,
               Non-performing loans                     1998           1997
               -----------------------------         ---------     ------------
               <S>                                   <C>           <C>
               Non-accrual                           $  10,000       $  48,000
               90 days or more past due                 99,000         161,000
               Renegotiated                             11,000             ---
                                                     ---------       ---------
                                                     $ 120,000       $ 209,000
                                                     =========       =========
</TABLE>
 
    The renegotiated loans are in compliance with the modified terms.

    A loan is considered impaired when full collection of principal and interest
    is not expected. There were no impaired loans in the portfolio at March 31,
    1998 or December 31, 1997.

                                       5
<PAGE>   8
                                                                 

5.  A summary of the activity in the allowance for loan losses for the three
    months ended March 31, follows:

<TABLE>
<CAPTION>
    (In thousands)                                    1998           1997
                                                      ----           ----
    <S>                                              <C>            <C>
    Balance - beginning of period                    $1,035         $1,020
    Provision charged to operating period                (8)             0
    Loans charged-off                                    (1)            (1)
    Recoveries                                            8             13
                                                     ------         ------
      Balance, end of period                         $1,034         $1,032
                                                     ======         ======
</TABLE>

6.  The provision for income taxes represents federal income tax expense
    calculated using annualized rates on taxable income generated during the
    respective periods.




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.

    FINANCIAL CONDITION

    Total assets at March 31, 1998 increased from December 31, 1997 by 5.57% or
    $4,453. This increase resulted primarily from strong growth in mortgage
    lending. This growth was funded largely by an increase in Federal Home Loan
    Bank borrowings.

    The allowance for loan losses remains strong . At March 31, 1998 the
    allowance was equal to 1.65% of average total loans outstanding, down
    slightly from 1.69% at December 31, 1997.


    RESULTS OF OPERATIONS

    Net income for the three months ended March 31, 1998 totaled $303,000
    compared to $295,000 in 1997. Basic earnings per share for 1998 were $.51
    compared to $.50 for the same period in 1997. Diluted earnings per share
    were $.51 for 1998 compared to $.49 in 1997.


                                        6
<PAGE>   9





ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

    Net interest income increased 5.9% or $51,000 compared to 1997. The increase
    is primarily a result of growth in the mortgage loan portfolio. Loans grew
    by $2,371,000 during the first quarter of 1998 compared to a decline in loan
    balances of $274,000 for the same period in 1997.

    Net interest margin for the first three months of 1998 was 4.70% compared to
    4.94% for the same period in 1997. Lower rates, particularly in the mortgage
    lending area contributed to the decline in margin.

    A decrease of $14,000 in non interest income for the first three months of
    1998, compared to the same period in 1997, is due primarily to a loss of
    $13,000 incurred on the sale of a security.

    Non interest expense for the first three months of 1998 increased $30,000
    compared to the same period in 1997. This is due primarily to increased
    salary and benefit expenses as well as increased marketing and data
    processing costs.

    The provision for loan losses was reduced $8,000 for the first three months
    of 1998. This reduction corresponded directly to the recoveries booked thus
    far in 1998 and is in response to the previous five consecutive years of net
    recoveries. The 1997 provision for the same period was $0.

    The federal income tax provision for the first three months of 1998 was
    $122,000, up from $115,000 for the same period in 1997. This increase
    reflects a higher taxable income for 1998.

    LIQUIDITY AND INTEREST RATE SENSITIVITY 

    The primary objective of asset/liability management is to assure the
    maintenance of adequate liquidity and maximize 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 demand of borrowers.

    Sources of liquidity include federal funds sold, investment security
    maturities and principal payments. A net average balance of $1,805,000 in
    federal funds sold was maintained during the first quarter of 1998. As a
    member of the Federal Home Loan Bank system, the Bank has access to an
    alternate funding source, lower cost for credit services, and an additional
    tool to manage interest rate risk. In January of 1998, the Bank used this
    source of funding to offset new mortgage loan demand. Other sources of
    liquidity include internally generated cash flow, repayments and maturities
    of loans, borrowing and normal deposit growth. The primary source of funds
    for the parent company is the upstream of dividends from the Bank.
    Management believes these sources of liquidity are sufficient for the Bank
    and parent company to continue current business plans.

    At March 31, 1998 the securities available for sale were valued at
    $6,872,000. 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.


                                       7
<PAGE>   10

                                                                     
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS (CONTINUED)


    Strategies include the use of variable rate loan products in addition to
    managing deposit accounts and maturities in the investment portfolio. The
    following table, 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 handing as "GAP Management". At March 31, 1998, the percentage of rate
    sensitive assets to rate sensitive liabilities within the one-year time
    horizon was 100.19%.

    The table shows the Bank's GAP position as of March 31, 1998. The Bank has
    an asset sensitive position of $69,000, which indicates higher net interest
    income may be earned if rates increase during the period. Due to the
    limitations of GAP analysis, modeling is also used to enhance measurement
    and control.


                                       8

<PAGE>   11

<TABLE>
<CAPTION>


GAP Measurement
(Dollars in thousands)
                                                                                                              Over
                            0-30      31-90    Second    Third     Fourth    Annual     1 - 3      3 - 5      Five
          ASSETS            Days      Days     Quarter   Quarter   Quarter   Total      Years      Years      Years      Total
--------------------------- ----      -----    -------   -------   -------  --------   --------   --------   --------   --------
<S>                        <C>       <C>       <C>       <C>       <C>      <C>        <C>        <C>        <C>        <C>     
Loans                      $10,263   $ 4,241   $ 5,117   $ 5,267   $ 4,522  $ 29,410   $ 10,140   $ 13,599   $ 16,693   $ 69,842
Loan repayment offset            -         -         -         -         -         -          -          -          -     (6,148)
Allowance for loan
  losses                         -         -         -         -         -         -          -          -          -     (1,034)
Federal funds sold           1,250         -         -         -         -     1,250          -          -          -      1,250
Investments(1)               1,082     2,349     1,103       565       225     5,324      4,597        809      4,113     14,843
Mortgage-backed repayments                                                                                                  (800)
Other non-earning assets                                                                                                   6,373
                           -----------------------------------------------------------------------------------------------------

  Total                    $12,595   $ 6,590   $ 6,220   $ 5,832   $ 4,747  $ 35,984   $ 14,737   $ 14,408   $ 20,806   $ 84,326

        LIABILITIES
---------------------------

Non interest bearing
  deposits                     314       619     1,017       932       932     3,814      2,119      2,119        424      8,476
Interest bearing
  deposits                   8,915     6,634     6,289     4,361     5,761    31,960     13,639      6,415      5,506     57,520
Federal funds purchased          -         -         -         -         -         -          -          -          -          -
Long-term FHLB 
  borrowings                     -         -         -         -       141       141      2,915      3,625          -      6,681
Other liabilities                -         -         -         -         -         -          -          -          -      1,326
Capital                                                                            -                           10,323     10,323
                           -----------------------------------------------------------------------------------------------------

  Total                    $ 9,229   $ 7,253   $ 7,306   $ 5,293   $ 6,834  $ 35,915   $ 18,673   $ 12,159   $ 16,253   $ 84,326

GAP                        $ 3,366   $  (663)  $(1,086)  $   539   $(2,087) $     69   $ (3,936)  $  2,249    $ 4,553   $      -

Cumulative GAP               3,366     2,703     1,617     2,156        69        69     (3,867)  (  1,618)     2,935          -

GAP Ratio                  136.47%    90.86%    85.14%   110.18%    69.46%   100.19%     78.92%    118.50%    128.01%          - 
                                                                                                                     
</TABLE>

(1)  Maturities reflect probable prepayments and calls.


CAPITAL RESOURCES

The Corporation's capital adequacy is reviewed continuously. This ensures both
compliance with regulatory requirements and availability of sufficient capital
to meet current and future funding needs.

Shareholders' equity increased $194,000 or 1.90% to $10,410,000 at March 31,
1998. This represents 12.33% of total assets. At March 31, 1997, the similar
ratio of shareholders' equity to total assets was 12.56%. The Corporation has a
strong capital position that will continue to meet our needs throughout 1998.


                                        9

<PAGE>   12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED).

    Regulators established "risk-based" capital guidelines that became
    effective December 31, 1990. Under the guidelines, minimum capital levels
    are established for risk based and total assets based on perceived risk in
    asset categories and certain off-balance-sheet items, such as loan 
    commitments and standby letters of credit. On March 31, 1998, the Bank had
    a "risk-based" total capital to asset ratio of 19.85%.  The ratio exceeds 
    the requirements established by regulatory agencies as shown below.


<TABLE>
<CAPTION>
              CAPITAL                             March 31, 1998
              (dollars in thousands)      Risk-based          Leverage
                                          ----------          --------
              <S>                         <C>                <C>
              Actual amount               $  10,988          $  10,292
              Actual percent                  19.85%             12.33%
              Required amount             $   4,428          $   3,339
              Required percent                 8.00%              4.00%
              Excess amount               $   6,560          $   6,953
</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 adequate and will continue to be so
    throughout 1998.

    FEDERAL INCOME TAXES

    The provision for federal income taxes for the three-month periods ending
    March 31, 1998 and 1997 totaled $122,000 and $115,000 respectively. The
    increase in taxes is reflective of the increase in taxable income for the
    above mentioned time periods.

    OTHER MATTERS

    SFAS No. 128, "Earnings per Share," was issued by the Financial Accounting
    Standards Board in 1997. It requires computation of basic earnings per share
    based on net income divided by the weighted average of shares outstanding
    during the period as well as the computation of diluted earnings per share
    which shows the dilutive effect of additional common shares issuable under
    stock options. All prior period amounts have been restated to be comparable.



                                       10

<PAGE>   13



                                    PART II.

ITEM 1.  LEGAL PROCEEDINGS

The Corporation is not involved in any material pending legal proceedings to
which the Registrant or its subsidiaries, is a party or which any of its
property is subject, except for proceedings which arise in the ordinary
course of business. In the opinion of management, pending legal proceedings
will not have a material effect on the consolidated financial statements of
the Registrant or its subsidiaries as of and for the period ended March 31,
1998.

ITEM 2.  CHANGES IN SECURITIES

During the three months ended March 31, 1998, there weren't any changes in
the Registrant's securities, relevant to the requirements of this section,
that would cause any shareholder's rights to be materially modified, limited
or qualified.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

No defaults have occurred involving senior securities on the part of the
Registrant.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters have been 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 13.

   2.  Reports on Form 8-K
       No reports on Form 8-K were filed for the three months ended March
       31, 1998.

                                       11

<PAGE>   14


                                   SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                            CAPITAL DIRECTIONS, INC.


Date:  May 5, 1998        By: /s/    Timothy Gaylord
       -----------           ---------------------------------
                                     Timothy Gaylord
                                     President

Date:  May 5, 1998        By: /s/    Lois A. Toth
       -----------           ---------------------------------
                                     Lois A. Toth
                                     Treasurer



                                       12
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                                INDEX TO EXHIBITS

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

    2   Plan of Acquisition, Reorganization, Arrangement, Liquidation or 
        Succession - Consolidation Agreement included in Amendment No. 1 to 
        Form S-4 Registration Statement No. 33-20417

    4   Instruments Defining the Rights of Security Holders, Including 
        Debentures - 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



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