# FORM 10-Q
Securities and Exchange Commission
Washington, D.C. 20549

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|ý | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2003
or

|o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

Commission File #000-30521Pavilion Bancorp, Inc.
(Exact name of registrant as specified in its charter)

|Michigan
(State or other jurisdiction of
incorporation or organization) | 38-3088340
(I.R.S. Employer
Identification No.)
|----------------------------------------------------------------------- | -----------------------------------------------

135 East Maumee Street, Adrian, Michigan 49221
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (517) 265-5144, Fax (517) 265-3926

Indicate by check mark 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 shorter periods
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|Yes           ý | No           o
|--------------- | --------------

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

|Yes           o | No            ý
|--------------- | ---------------

As of May 6, 2003 there were 820,380
outstanding shares of the registrants common stock, no par value.

Page 1

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# CROSS
REFERENCE TABLE

|ITEM NO. | DESCRIPTION | PAGE NO.
|-------- | ----------- | --------

# PART I - FINANCIAL INFORMATION

|Item 1.
Item 2.
Item 3.
Item 4. | Financial Statements (Condensed and Unaudited)
(a)    Report of Independent Accountants
(b)    Condensed Consolidated Balance Sheets
(c)    Condensed Consolidated Statements of Income and Comprehensive Income 
(d)    Condensed Consolidated Statements of Cash Flows 
(e)    Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of 
Financial Condition and Results of Operations 
Quantitative and Qualitative Disclosures About Market Risk
Controls and Procedures | 3       
4       
5       
6       
7       
10       
15       
15
|------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------

PART II -OTHER INFORMATION

|Item 1.   
Item 2.    
Item 3.    
Item 4.    
Item 5.    
Item 6.   | Legal Proceedings
Changes in Securities and Use of Proceeds
Defaults Upon Senior Securities             
Submission of Matters to a Vote of Security Holders
Other Information                                   
Exhibits and Reports on Form 8-K | 16      
16      
16      
16      
16      
16
|-------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------
|Signatures
Certifications for Quarterly Report on Form 10-Q
Exhibits | 18      
19      
21                                                                                                                                                                                                                              

Page 2

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REPORT OF INDEPENDENT
ACCOUNTANTS

Shareholders and Board of
DirectorsPavilion Bancorp, Inc.Adrian, Michigan

We have reviewed the condensed
consolidated balance sheet of Pavilion Bancorp, Inc. as of March 31, 2003, and the related
condensed consolidated statements of income and comprehensive income and the statement of
cash flows for the three months ended March 31, 2003 and 2002. These financial statements
are the responsibility of the Companys management.

We conducted our reviews in
accordance with standards established by the American Institute of Certified Public
Accountants. A review of interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.

Based on our reviews, we are not
aware of any material modifications that should be made to the consolidated financial
statements referred to above for them to be in conformity with accounting principles
generally accepted in the United States of America.

We have previously audited, in
accordance with auditing standards generally accepted in the United States of America, the
consolidated balance sheet of Pavilion Bancorp, Inc. as of December 31, 2002, and the
related consolidated statement of income, consolidated statement of changes in
shareholders equity and consolidated statement of cash flows for the year then ended
(not presented herein); and in our report dated February 4, 2003, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet as of
December 31, 2002, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.

| | Crowe, Chizek and Company LLP
| | -----------------------------

Grand Rapids, Michigan
May 12, 2003

Page 3

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# PART I

FINANCIAL INFORMATION

## ITEM 1-
FINANCIAL STATEMENTS

# (b) CONDENSED
CONSOLIDATED BALANCE SHEETS

`March 31,
In thousands of dollars, except share data                                                2003        December 31,
                                                                                       (unaudited)        2002
                                                                                       -----------        ----
ASSETS
Cash and due from banks                                                               $      9,784     $     11,223
Federal funds sold                                                                           1,900                -
                                                                                      ------------     ------------
     Total cash and cash equivalents                                                        11,684           11,223

Securities available for sale                                                               24,707           25,216
Federal Home Loan Bank stock, at cost                                                        2,504            2,504
Federal Reserve Bank stock, at cost                                                            501              493
Loans held for sale                                                                          5,054            1,473
Loans receivable, net of allowance for loan losses                                         237,232          233,049
Premises and equipment, net                                                                  6,167            6,314
Accrued interest receivable                                                                  2,032            1,868
Mortgage servicing asset                                                                     2,827            2,715
Other assets                                                                                 1,247            2,431
                                                                                      ------------     ------------

     Total assets                                                                     $    293,955     $    287,286
                                                                                      ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
     Noninterest bearing                                                              $     49,585     $     48,827
     Interest bearing                                                                      200,076          192,893
                                                                                      ------------     ------------
         Total deposits                                                                    249,661          241,720

Borrowed funds                                                                               7,093            8,635
Accrued interest payable                                                                       492              507
Other liabilities                                                                            2,463            2,255
Trust preferred securities                                                                   5,000            5,000
Common stock subject to repurchase obligation in ESOP                                        4,100            4,100
                                                                                      ------------     ------------
     Total liabilities                                                                     268,809          262,217


Shareholders' equity
     Common stock and paid-in capital, no par value                                          9,290            9,712
     Retained earnings                                                                      15,927           15,254
     Accumulated other comprehensive income (loss),
       net of tax                                                                              (71)             103
                                                                                      ------------     ------------
         Total shareholders' equity                                                         25,146           25,069
                                                                                      ------------     ------------

              Total liabilities and shareholders' equity                              $    293,955     $    287,286
                                                                                      ============     ============`

See accompanying notes to consolidated financial statements.

Page 4

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## (c) CONDENSED
CONSOLIDATED STATEMENTS OF        INCOME AND COMPREHENSIVE INCOME (unaudited)

`Three Months Ended
In thousands of dollars, except per share data                                                  March 31,
                                                                                      -----------------------------
                                                                                           2003           2002
                                                                                           ----           ----
Interest and dividend income
     Loans receivable, including fees                                                 $      4,331     $      4,372
     Securities                                                                                283              388
     Federal funds sold and other                                                               18               21
                                                                                      ------------     ------------
         Total interest and dividend income                                                  4,632            4,781

Interest expense
     Deposits                                                                                1,059            1,448
     Federal Home Loan Bank advances                                                            46               78
     Other                                                                                      77               75
                                                                                      ------------     ------------
         Total interest expense                                                              1,182            1,601
                                                                                      ------------     ------------

Net interest income                                                                          3,450            3,180
     Provision for loan losses                                                                 140              106
                                                                                      ------------     ------------

Net interest income after provision for loan losses                                          3,310            3,074

Noninterest income
     Service charges and fees                                                                  471              619
     Gains on loan sales                                                                     1,608              536
     Loan servicing fees, net of amortization                                                 (498)              (4)
     Other                                                                                     (83)             196
                                                                                      ------------     ------------
                                                                                             1,498            1,347
Noninterest expense
     Salaries and employee benefits                                                          2,115            1,985
     Occupancy and equipment                                                                   562              590
     Other                                                                                     886              745
                                                                                      ------------     ------------
                                                                                             3,563            3,320
                                                                                      ------------     ------------

Income before income tax                                                                     1,245            1,101
     Income tax expense                                                                        389              354
                                                                                      ------------     ------------

Net income                                                                            $        856     $        747
                                                                                      ============     ============

Comprehensive income                                                                  $        682     $        632
                                                                                      ============     ============
Basic earnings per share                                                              $       1.03     $        .88
                                                                                      ============     ============
Diluted earnings per share                                                            $       1.03     $        .87
                                                                                      ============     ============
Dividends per share                                                                   $        .22     $        .20
                                                                                      ============     ============`

See accompanying notes to consolidated financial statements.

Page 5

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## (d) CONDENSED CONSOLIDATED
STATEMENTS OF

           CASH FLOWS (unaudited)

`Three Months Ended
In thousands of dollars                                                                         March 31,
                                                                                      -----------------------------
                                                                                           2003           2002
                                                                                           ----           ----
Cash flows from operating activities
     Net income                                                                       $        856      $       747
     Adjustments to reconcile net income to
       net cash from operating activities
         Depreciation                                                                          215              224
         Provision for loan losses                                                             140              106
         Net amortization and accretion on securities
           available for sale                                                                   88               72
         Amortization of mortgage servicing rights                                             686              144
         Loans originated for sale                                                         (75,547)         (34,801)
         Proceeds from sale of mortgage loans                                               72,776           34,987
         Net gains on sales of mortgage loans                                               (1,608)            (676)
     Net change in:
         Accrued interest receivable                                                          (164)            (152)
         Other assets                                                                        1,336             (484)
         Accrued interest payable                                                              (15)             (38)
         Other liabilities                                                                     298               11
                                                                                      ------------      -----------
              Net cash from operating activities                                              (939)             140
                                                                                      ------------      -----------

Cash flows from investing activities
     Securities available for sale:
         Maturities, calls and principal payments                                            3,157            3,117
         Purchases                                                                          (3,000)          (7,725)
     Purchase of Federal Reserve Bank stock                                                     (8)               -
     Net premises and equipment expenditures                                                   (68)            (240)
     Net increase in loans                                                                  (4,475)            (517)
                                                                                      ------------      -----------
              Net cash from investing activities                                            (4,394)          (5,365)
                                                                                      ------------      -----------

Cash flows from financing activities
     Net change in deposits                                                                  7,941           (2,303)
     Net change in borrowed funds                                                           (1,542)             492
     Change in shareholders' equity                                                           (605)            (111)
                                                                                      ------------      -----------
              Net cash from financing activities                                             5,794           (1,922)
                                                                                      ------------      -----------

Net change in cash and cash equivalents                                                        461           (7,147)

Cash and cash equivalents at beginning of period                                            11,223           24,277

Cash and cash equivalents at end of period                                            $     11,684      $    17,130
                                                                                      ============      ===========

     Cash paid for:
         Interest                                                                     $      1,197      $     1,654
         Income taxes                                                                            -              180`

See accompanying notes to consolidated financial statements.

Page 6

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(e) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (unaudited)

## NOTE 1 
PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

The unaudited  condensed  consolidated  financial  statements  include the accounts of Pavilion  Bancorp,  Inc. (the "Company") and its
wholly-owned  subsidiaries,  Bank of Lenawee and Bank of Washtenaw  (together "the Banks").  Bank of Lenawee  includes its wholly-owned
subsidiaries,  Pavilion Financial Services and Pavilion Mortgage Company. All significant  intercompany  balances and transactions have
been eliminated in consolidation.
The  Company is a two-bank  holding  company  which  conducts  limited  business  activities.  The Banks  perform  the  majority of the
Company's business activities.
The Banks provide a range of banking services to individuals,  commercial  businesses,  light industries and municipal entities located
in their service  areas.  Each bank  maintains a  diversified  loan  portfolio,  including  loans to  individuals  for home  mortgages,
automobiles  and personal  expenditures,  and loans to business  enterprises  for current  operations  and  expansion.  The Banks offer
traditional bank deposit products,  including checking, savings, money market savings, individual retirement accounts,  certificates of
deposit as well as a mobile banking courier service.NOTE 2  BASIS OF PRESENTATION
The unaudited  condensed  consolidated  financial  statements of the Company have been prepared in accordance  with generally  accepted
accounting  principles  for  interim  financial  information  and the  instructions  to Form  10-Q and Rule  10-01 of  Regulation  S-X.
Accordingly,  they do not include all of the  information  and  footnotes  required by generally  accepted  accounting  principles  for
complete financial  statements.  In the opinion of management,  all adjustments  (consisting of normal recurring  accruals)  considered
necessary  for a fair  presentation  have been  included.  Operating  results for the three month  period  ended March 31, 2003 are not
necessarily  indicative of the results that may be expected for the year ending  December 31, 2003. For further  information,  refer to
the  consolidated  financial  statements and footnotes  thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002.

Page 7

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NOTE 3  EARNINGS PER SHARE
A reconciliation  of the numerators and  denominators of the basic earnings and diluted  earnings per share  computations for the three
months ended March 31, 2003 and 2002 is presented below:

`2003                 2002
                                                                                    ----                 ----
      Basic earnings per share
      ------------------------
      Net income available to common shareholders                                 $  856,000         $  747,000
                                                                                  ==========         ==========
      Weighted average common shares outstanding                                     828,517            849,620
                                                                                  ==========         ==========
      Basic earnings per share                                                    $    1.03          $     0.88
                                                                                  ==========         ==========

      Diluted earnings per share
      --------------------------
      Net income available to common shareholders                                 $  856,000         $  747,000
                                                                                  ==========         ==========
      Weighted average common shares outstanding                                     828,517            849,620
      Add:  Dilutive effects of exercise of stock options                              5,216              7,505
                                                                                  ----------         ----------
      Weighted average common and dilutive
        potential shares outstanding                                                 833,733            857,125
                                                                                  ==========         ==========
      Diluted earnings per share                                                  $    1.03          $     0.87
                                                                                  ==========         ==========`

# NOTE 4  ACCOUNTING
FOR STOCK BASED COMPENSATION

Compensation expense under stock
options is reported using the intrinsic value method. The exercise price of stock options
is generally equivalent to the market price of the underlying common stock as of the date
of grant. No stock-based compensation cost is reflected in net income, for stock options
granted with an exercise price equal to or greater than the market price of the underlying
common stock at date of grant. For stock options granted below market price, compensation
expense is based upon the difference between the market price and the exercise price at
the date of grant and is recorded over the vesting period of the options. Compensation
expense actually recognized for the three months ending March 31, 2003 and 2002 was not
significant. The following table illustrates the effect on net income and earnings per
share if expense was measured using the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation.

`Three Months Ended
                                                                                        March 31,
                                                                              2003                     2002
                                                                              ----                     ----

Net income as reported                                                     $      856               $      747

Less:  Stock-based compensation
  expense determined under fair value
  based method                                                             $       16               $       23
                                                                           ----------               ----------

Pro forma net income                                                       $      840               $      724
                                                                           ==========               ==========

Basic earnings per share as reported                                       $     1.03               $      .88
Pro forma basic earning per share                                                1.00                      .85

Diluted earnings per share as reported                                           1.03                      .87
Pro forma diluted earnings per share                                             1.00                      .84`

Page 8

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The weighted average fair value of
stock options granted during the three months ended March 31, 2003 and 2002 were $10.15
and $16.69. The fair value of options granted during the three months ended March 31, 2003
and 2002 were estimated using an option pricing model with the following weighted average
information as of the grant dates:

`2003                  2002
                                                                          ----                  ----

     Risk free rate of interest                                           3.58%                 4.78%
     Expected option life                                                 8 years               8 years
     Expected dividend yield                                              1.96%                 1.38%
     Expected volatility                                                 22.74%                22.92%`

In future years, as additional
options are granted, the proforma effect on net income and earnings per share may
increase. Stock options are used to reward directors and certain executive officers and
provide them with an additional equity interest. Options are issued for ten year periods
and have varying vesting schedules.

Page 9

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# ITEM 2 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion provides information
about the consolidated financial condition and results of operations of the Company as of
March 31, 2003 and for the three month periods ended March 31, 2003 and 2002.

# FINANCIAL CONDITION

Cash and cash equivalentsCash and cash equivalents of $11.7
million declined a slight 4%, or $461,000, during the first three months of 2003
reflective of routine daily fluctuation.

SecuritiesSecurities available for sale
declined $509,000 during the first quarter of 2003. Maturities, calls and principal
repayments of securities available for sale were offset by the purchase of $3 million of
like investments during the period. The mix of the securities portfolio remains relatively
unchanged from period to period over the long term.

LoansDuring the first three months of
2003, loans, net of allowance for loan losses, remained relatively stable growing $4.2
million, or 2%. The mix of the loan portfolio continues to remain relatively unchanged
from prior periods. Over the long term, the trend continues toward an increased portion of
business loans.

Credit QualityThe Company continues to monitor the
asset quality of the loan portfolio utilizing a loan review officer who, combined with
external loan review specialists, periodically submits reports to the Chief Lending
Officer and to the Board of Directors regarding the credit quality of each loan portfolio.
This review is independent of the loan approval process. Also, management continues to
monitor delinquencies, nonperforming assets and potential problem loans to assess the
continued quality of the Companys loan portfolios.

Nonperforming loans are comprised of
(1) loans accounted for on a nonaccrual basis, (2) loans contractually past due 90 days or
more as to interest or principal payments (but not included in the nonaccrual loans in (1)
above) and (3) other nonperforming loans (but not included in (1) or (2) above) which
consist of loan arrangements under the Business Manager program. The aggregate amount of
nonperforming loans, in thousands of dollars, is shown in the table below. The
Companys classifications of nonperforming loans are generally consistent with loans
identified as impaired. Management has been successful in a concerted effort to relieve
the Company of the majority its other real estate holdings and reducing its other asset
balances outstanding.

Page 10

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The chart below shows the makeup of
the Companys nonperforming assets by type, in thousands of dollars, as of March 31,
2003 and 2002, and December 31, 2002.

`3/31/02       12/31/02        3/31/02
                                                                            -------       --------        -------

     Nonaccrual Loans                                                      $    595       $    648       $    263
     90 days or more past due & still accruing                                1,495            949          1,800
                                                                           --------       --------       --------
          Total nonperforming loans                                           2,090          1,597           2063
     Other real estate                                                          643          1,783          1,888
                                                                           --------       --------       --------
          Total nonperforming assets                                       $  2,733       $  3,380       $  3,951
                                                                           ========       ========       ========

     Nonperforming loans as a percent of total loans                           .87%           .68%           .96%
     Nonperforming assets as a percent of total loans                         1.14%          1.43%          1.84%
     Nonperforming loans as a percent of the allowance for loan losses
                                                                            101.04%         60.05%         93.95%`

The Company increased its provision
for loan losses over the same period in 2002 based on managements assessment of the
allowance for loan losses. The provision provides for probable incurred losses in the
current portfolio over time. Near term activity is expected to remain similarly moderate
in proportion as experienced this quarter. Activity in the allowance for loan losses, in
thousands of dollars, for the three months ended March 31, 2003 and 2002 follows:

`2003              2002
                                                                                        ----              ----

     Balance at beginning of period                                                    $ 2,660          $ 2,200
     Loan charge-offs net of recoveries                                                    (95)             (96)
     Provision charged to operations                                                       140              106
     Balance at end of period                                                          $ 2,705          $ 2,210`

DepositsTotal deposits increased 3.3% during
the quarter to $250 million at March 31, 2003 from $242 million at December 31, 2002. This
increase is considered to be normal and stable deposit activity. Management anticipates
similar deposit growth during the remainder of 2003 as a result of continued expansion in
the Companys new and existing markets as well as an outcome of the economic effect
of current Federal Reserve monetary policy.

LiquidityThe Companys average federal
funds sold position increased slightly during the first quarter of 2003 compared to year
end 2002. The increase is mainly attributable to deposit growth. Borrowings declined
slightly during the first quarter of 2003, and management anticipates loan and deposit
growth will cause continued variation in the short-term funds position of the Company. The
Company has a number of additional liquidity sources should the need arise, and management
presently has no concerns as to the liquidity position of the Company.

Capital ResourcesAt March 31, 2003 and December 31,
2002, equity capital increased $77,000. This increase is primarily the result of our net
income for the three months ended March 31, 2003 offset by dividends declared during the
three months ended March 31, 2003, the repurchase of 10,750 shares of common stock and a
decline in the market value of the Companys available for sale securities. The
Company repurchases shares of its own stock from time to time according to the merit and
value of prevailing market conditions. We monitor the capital levels of the Company and
the Banks to provide for current and future business opportunities and to meet regulatory
guidelines for well capitalized institutions. Well capitalized
institutions are eligible for reduced FDIC premiums, and also enjoy other reduced
regulatory restrictions.

Page 11

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At March 31, 2003 and December 31,
2002, the Company and the Banks exceeded all regulatory minimum capital requirements and
are considered to be well capitalized.

# Results of Operations

Net IncomeNet income increased 14.6%, basic
earnings per share increased from $.88 to $1.03 and dividends per share increased 10% to
$.22 when comparing the results of the first three months of 2003 to the same period in
2002.

Net Interest IncomeThe yield on interest earning assets
decreased for the quarter ended March 31, 2003 as compared to the same period in the prior
year primarily as a result of the general decline in industry rates during fiscal year
2002. The cost of funds on interest bearing liabilities also decreased for the quarter
ended March 31, 2003 as compared to the same period during the prior year due to the
continued declining rate environment. While interest rates have decreased, the Company has
been able to maintain the net interest margin by decreasing the cost of funds at a rate
proportional to the decline of yields on assets. Despite the economic challenges that have
been presented during the first three months of 2003, the Companys net interest
margin remains quite strong, and management continues to take steps to neutralize some
portion of this risk.

Page 12

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The following table shows the year to
date daily average balances for interest earning assets and interest bearing liabilities,
interest earned or paid, and the annualized effective rate or yield, for the three month
periods ended March 31, 2003 and 2002.

`Dollars in thousands                                  3/31/2003                                 3/31/2002
                                                      ---------                                 ---------
                                        Average       Interest                    Average       Interest
                                      Outstanding      Earned/     Yield/       Outstanding      Earned/     Yield/
                                        Balance         Paid        Rate          Balance         Paid        Rate
                                        -------         ----        ----          -------         ----        ----
Interest earning assets:
Loans (1)                            $   237,441     $     4,331      7.30%    $   212,388    $     4,372      8.23%
Investment securities (2) (3)             26,615             283      4.25%         32,772            388      4.74%
Federal funds sold and other               5,545              18      1.30%          5,916             21      1.42%
                                     -----------     -----------               -----------    -----------
     Total int. earning assets           269,601           4,632      6.87%        251,076          4,781      7.62%

Interest bearing liabilities:
Interest bearing demand
  deposits                           $    60,266     $       131       .87%    $    58,348    $       178      1.22%
Savings deposits                          30,637              53       .69%         25,886             67      1.04%
Time deposits                            106,577             875      3.28%        103,646          1,203      4.64%
Other borrowings                          12,165             123      4.04%         12,369            153      4.95%
                                     -----------     -----------               -----------    -----------
     Total int. bearing liabilities      209,645           1,182      2.26%        200,249          1,601      3.20%

Net interest income (3)                              $     3,450                              $     3,180
                                                     ===========                              ===========
Net spread (3)                                                        4.61%                                    4.42%
                                                                      =====                                    =====
Net interest margin (3)                                               5.12%                                    5.05%
                                                                      =====                                    =====
Ratio of interest earning assets to
  interest bearing liabilities              1.29                                      1.25
                                     ===========                               ===========`

|(1) | Non-accrual loans and overdrafts are included in the average balances of loans.
|--- | -------------------------------------------------------------------------------
|(2) | Includes Federal Home Loan Bank stock.                                         
|(3) | securities has not been adjusted to a taxable equivalent basis.                

Page 13

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Noninterest IncomeFor the first quarter of 2003,  noninterest  income from banking products and services  increased 11.2% as compared
to the same period in 2002.  Continued  low interest  rates over the course of the first  quarter of 2003  resulted
in increased  originations  of  residential  mortgage  loans and,  correspondingly,  the  Company's  volume of loan
sales.  An increase in net gains on loan sales of $1.1 million was one of the factors  contributing  to the overall
noninterest  income growth.  The  significant  decline in income from loan servicing fees, net of amortization is a
result of the  continued  low interest  rate  environment  and related  impact on mortgage  servicing  rights.  the
Company  continues to record additional  amortization on mortgage  servicing rights as a result of the low interest
rate  environment.  Losses on sales of other real estate  owned  created the net loss of $83,000 in the category of
other  noninterest  income during the first quarter of 2003.  The Company  continued to experience  solid  revenues
from  service  charges and fees during the first  quarter of 2003.  The service fees and charges are below the same
period in 2002 primarily due to a one-time increase of $283,000 in 2002.

Noninterest ExpenseNoninterest expense has also
increased over the same period of 2002. Total noninterest expense for the first three
months of 2003 was 7.3% above the same period for 2002. An increase in salaries and
employee benefits of approximately 6.5% was the primary factor contributing to the overall
increase. This increase is primarily attributable to the larger than usual commissions
paid to the mortgage origination staff as an incentive for larger volumes of mortgage loan
sales.

Federal Income TaxThe 9.9% increase in federal income
taxes during the first quarter of 2003 is directly related to the increase in income
before income taxes.

Critical Accounting
PoliciesCertain of the Companys
accounting policies are important to the portrayal of the Companys financial
condition, since they require management to make difficult, complex or subjective
judgments, some of which may relate to matters that are inherently uncertain. Estimates
associated with these policies are susceptible to material changes as a result of changes
in facts and circumstances. Facts and circumstances which could effect these judgments
include, but without limitation, changes in interest rates, in the performance of the
economy or in the financial condition of borrowers. Management believes that its critical
accounting policies include determining the allowance for loan losses, determining the
fair value of securities and other financial instruments and the valuation of mortgage
servicing rights.

Page 14

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Forward-Looking
StatementsThis discussion and analysis of
financial condition and results of operations and other sections of this Form 10-Q contain
forward looking statements that are based on managements beliefs, assumptions,
current expectations, estimates and projections about the financial services industry, the
economy and about the Company itself. Words such as anticipates,
believes, estimates, expects, forecasts,
foresee, intends, is likely, plans,
projects, variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions (Future
Factors) that are difficult to predict with regard to timing, extent, likelihood and
degree of occurrence. Therefore, actual results and outcomes may materially differ from
what may be expressed or forecast in such forward-lookingstatements. Furthermore,
the Company undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or otherwise. Future
Factors include:

- changes in interest rates and interest rate relationships; demand for products and services;
- the degree of competition by traditional and non-traditional competitors;
- changes in banking regulations;
- changes in tax laws;
- changes in prices, levies and assessments;
- the impact of technology, governmental and regulatory policy changes;
- the outcome of pending and future litigation and contingencies;
- trends in customer behavior as well as their ability to repay loans; and
       changes in the national and local economies.

These are representative of the
Future Factors that could cause a difference between an actual outcome and a
forward-looking statement.

Page 15

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# ITEM 3 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys primary market
risk exposure is interest rate risk and liquidity risk. All of the Companys
transactions are denominated in U.S. dollars with no specific foreign exchange exposure.
The Company has a limited exposure to commodity prices and land values related to
agricultural loans. Any impacts that changes in foreign exchange rates and commodity
prices would have on interest rates are assumed to not be significant.

Interest rate risk (IRR) is the
exposure of a banking organizations financial condition to adverse movements in
interest rates. Accepting this risk can be an important source of profitability and
stockholder value; however, excessive levels of IRR could pose a significant threat to the
Companys earnings and capital base. Accordingly, effective risk management that
maintains IRR at prudent levels is essential to the Companys safety and soundness.

Evaluating a financial
institutions exposure to changes in interest rates includes assessing both the
adequacy of the management process used to control IRR and the organizations
quantitative level of exposure. When assessing the IRR management process, the Company
seeks to ensure that appropriate policies, procedures, management information systems and
internal controls are in place to maintain IRR at prudent levels with consistency and
continuity. Evaluating the quantitative level of IRR exposure requires the Company to
assess the existing and potential future effects of changes in interest rates on its
consolidated financial condition, including capital adequacy, earnings, liquidity, and,
where appropriate, asset quality.

The Company has not experienced a
material change in its financial instruments that are sensitive to changes in interest
rates since December 31, 2002, which information can be located in the Companys
annual report on Form 10-K.

# ITEM 4  CONTROLS
AND PROCEDURES

|a) | Evaluation of Disclosure  Controls and  Procedures.  Based on their  evaluation as of March 31, 2003, the Company's  principal
         executive  officer and the principal  financial officer have concluded that the Company's  disclosure  controls and procedures
         (as defined in Rules  13a-14(c) and 15d-14(c)  under the Securities  Exchange Act of 1934 (the "Exchange  Act")) are effective
         to ensure that  information  required to be disclosed  by the Company in reports  that it files or submits  under the Exchange
         Act is recorded,  processed,  summarized and reported within the time periods specified in Securities and Exchange  Commission
         rules and forms.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b) | Changes in Internal  Controls.  Such  officers have also  concluded  that there were no  significant  changes in the Company's
         internal  controls or in other factors that could  significantly  affect those  controls  subsequent to the date of their most
         recent  evaluation.  There were no significant  deficiencies  or material  weaknesses,  and therefore there were no corrective
         actions taken.                                                                                                                                                                                                                                                                                  

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# PART II OTHER INFORMATION

# ITEM 1  LEGAL
PROCEEDINGS

The Company is not involved in any
material legal proceedings. The Companys wholly-owned subsidiaries, Bank of Lenawee
and Bank of Washtenaw, are involved in ordinary routine litigation incident to their
business; however, no such proceedings are expected to result in any material adverse
effect on the operations or earnings of the Banks. Neither the Banks nor the Company are
involved in any proceedings to which any director, principal officer, affiliate thereof,
or person who owns of record or beneficially five percent (5%) or more of the outstanding
stock of the Company or the Banks, or any associate of the foregoing, is a party or has a
material interest adverse to the Company or the Banks.

# ITEM 2  CHANGES IN
SECURITIES

No changes in the securities of the
Company occurred during the quarter ended March 31, 2003.

# ITEM 3  DEFAULTS
UPON SENIOR SECURITIES

There have been no defaults upon
senior securities relevant to the requirements of this section during the three months
ended March 31, 2003.

# ITEM 4  SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote
of security holders during the quarter ended March 31, 2003.

# ITEM 5  OTHER
INFORMATION

None.

# ITEM 6  EXHIBITS
AND REPORTS ON FORM 8-K

|(a) | Listing of Exhibits (numbered as in Item 601 of Regulation S-K):                      
|--- | --------------------------------------------------------------------------------------
|    | 99.1                                                                                  
|    | 99.2                                                                                  
|(b) | The Company has filed two reports on Form 8-K during the quarter ended March 31, 2003:
|    | (1)                                                                                   
|    | (2)                                                                                   

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## 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.

|                        | Pavilion Bancorp, Inc.                                           
|----------------------- | -----------------------------------------------------------------
|Date:      May 15, 2003 | /s/ Douglas L. Kapnick
Douglas L. Kapnick
Chief Executive Officer
|Date:      May 15, 2003 | /s/ Loren V. Happel
Loren V. Happel
Chief Financial Officer      

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# CERTIFICATIONS

I, Douglas L. Kapnick, certify that:

|1) | I have reviewed this quarterly report on Form 10-Q of Pavilion Bancorp, Inc.;                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | Based on my  knowledge,  this  quarterly  report does not contain any untrue  statement of a material  fact or omit to state a
     material fact necessary to make the statements  made, in light of the  circumstances  under which such  statements  were made, not
     misleading with respect to the period covered by this quarterly report;                                                                            
|3) | Based on my knowledge,  the financial  statements,  and other financial  information included in this quarterly report, fairly
     present in all material respects the financial  condition,  results of operations and cash flows of the registrant as of, and for,
     the periods presented in this quarterly report;                                                                                                    
|4) | The registrant's  other certifying  officers and I are responsible for  establishing and maintaining  disclosure  controls and
     procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                                            
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                             
|5) | The registrant's  other certifying  officers and I have disclosed,  based on our most recent  evaluation,  to the registrant's
     auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):                                                                                                                                                                       
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                             
|6) | The  registrant's  other  certifying  officers  and I have  indicated  in this  quarterly  report  whether  or not there  were
     significant changes in internal controls or in other factors that could  significantly  affect internal controls subsequent to the
     date of our most recent  evaluation,  including  any  corrective  actions  with regard to  significant  deficiencies  and material
     weaknesses.

|May 15, 2003
/s/ Douglas L. Kapnick

Douglas L. Kapnick
Chief Executive Officer | 
|------------------------------------------------------------------------------- | 

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I Loren V. Happel , certify that:

|1) | I have reviewed this quarterly report on Form 10-Q of Pavilion Bancorp, Inc.;                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | Based on my  knowledge,  this  quarterly  report does not contain any untrue  statement of a material  fact or omit to state a
     material fact necessary to make the statements  made, in light of the  circumstances  under which such  statements  were made, not
     misleading with respect to the period covered by this quarterly report;                                                                            
|3) | Based on my knowledge,  the financial  statements,  and other financial  information included in this quarterly report, fairly
     present in all material respects the financial  condition,  results of operations and cash flows of the registrant as of, and for,
     the periods presented in this quarterly report;                                                                                                    
|4) | The registrant's  other certifying  officers and I are responsible for  establishing and maintaining  disclosure  controls and
     procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                                            
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                             
|5) | The registrant's  other certifying  officers and I have disclosed,  based on our most recent  evaluation,  to the registrant's
     auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):                                                                                                                                                                       
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                             
|6) | The  registrant's  other  certifying  officers  and I have  indicated  in this  quarterly  report  whether  or not there  were
     significant changes in internal controls or in other factors that could  significantly  affect internal controls subsequent to the
     date of our most recent  evaluation,  including  any  corrective  actions  with regard to  significant  deficiencies  and material
     weaknesses.

|May 15, 2003
/s/ Loren V. Happel

Loren V. Happel
Chief Financial Officer | 
|------------------------------------------------------------------------- | 

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# EXHIBIT INDEX

|Exhibit | Description                                                                                                                                                                                            
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|99.1    | Certificate  of the Chief  Executive  Officer of  Pavilion  Bancorp,  Inc.  pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|99.2    | Certificate  of the Chief  Financial  Officer of  Pavilion  Bancorp,  Inc.  pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Exhibit 99.1

I, Douglas L. Kapnick,  Chief Executive  Officer of Pavilion  Bancorp,  Inc.  certify,  pursuant to 18 U.S.C.  Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

|(1) | the  Quarterly  Report on Form 10-Q for the  quarterly  period  ended March 31, 2003 which this  statement  accompanies  fully
         complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | the  information  contained  in the  Quarterly  Report on Form 10-Q for the  quarterly  period  ended  March 31,  2003  fairly
         presents, in all material respects, the financial condition and results of operations of Pavilion Bancorp, Inc.

Dated:  May 15, 2003

| | /s/ Douglas L. KapnickDouglas L. Kapnick
Chief Executive Officer
| | ----------------------------------------------------------------

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Exhibit 99.2

I, Loren V. Happel,  Chief  Financial  Officer of Pavilion  Bancorp,  Inc.  certify,  pursuant to 18 U.S.C.  Section  1350,  as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

|(1) | the  Quarterly  Report on Form 10-Q for the  quarterly  period  ended March 31, 2003 which this  statement  accompanies  fully
         complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | the  information  contained  in the  Quarterly  Report on Form 10-Q for the  quarterly  period  ended  March 31,  2003  fairly
         presents, in all material respects, the financial condition and results of operations of Pavilion Bancorp, Inc.

Dated:  May 15, 2003

| | /s/ Loren V. HappelLoren V. Happel
Chief Financial Officer
| | ----------------------------------------------------------

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