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

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|X|      Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934For the quarterly period ended September 30, 2002
or
|_|      Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

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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           |X| | No           |_|
|----------------- | ----------------

As of November 1, 2002,
there were835,258 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. | Condensed Financial Statements (Unaudited)
       Report of Independent Accountants
       Condensed Consolidated Balance Sheets
       Condensed Consolidated Statements of Income
              and Comprehensive Income 
       Condensed Consolidated Statements of Cash Flows 
       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       
8       
12       
13
|------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------

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 | 13      
14      
14      
14      
14      
14
|-------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------
|Signatures
Certifications for Quarterly Report on Form 10-Q
Exhibits | 15      
16      
18                                                                                                                                                                                                                              

Page 2

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REPORT OF INDEPENDENT ACCOUNTANTS

Shareholders and Board of Directors
Pavilion Bancorp, Inc.
Adrian, Michigan

We have reviewed the
condensed consolidated balance sheet of Pavilion Bancorp, Inc. as of September
30, 2002, the related condensed consolidated statements of income and
comprehensive income for the quarter and year to date periods ended September
30, 2002 and 2001 and the condensed consolidated statements of cash flows for
the year to date periods ended September 30, 2002 and 2001. 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 to financial data 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
accompanying financial statements for them to be in conformity with generally
accepted accounting principles.

| | Crowe, Chizek and Company LLP
Grand Rapids, Michigan
November 1, 2002
| | ---------------------------------------------------------------------

Page 3

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# PART I

FINANCIAL INFORMATION

## ITEM 1-
FINANCIAL STATEMENTS

`CONDENSED CONSOLIDATED BALANCE SHEETS                                                 September 30,
In thousands of dollars                                                                   2002        December 31,
                                                                                       (unaudited)        2001
                                                                                       -----------        ----
ASSETS
Cash and due from banks                                                               $     14,688     $     15,987
Federal funds sold                                                                           6,465            8,290
                                                                                      ------------     ------------
     Total cash and cash equivalents                                                        21,153           24,277

Securities available for sale                                                               24,229           25,969
Federal Home Loan Bank stock, at cost                                                        2,504            2,504
Federal Reserve Bank stock, at cost                                                            480              480

Loans, net of allowance for loan losses of $2,429 at September 30,
   2002 (unaudited) and $2,200 at December 31, 2001                                        230,169          212,590
Loans held for sale                                                                          2,907              417
Premises and equipment, net                                                                  6,460            6,611
Accrued interest receivable                                                                  2,004            1,877
Mortgage servicing rights                                                                    2,573            2,066
Other assets                                                                                 2,406            1,336
                                                                                      ------------     ------------

     Total assets                                                                     $    294,885     $    278,127
                                                                                      ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
     Noninterest bearing                                                              $     54,436     $     45,488
     Interest bearing                                                                      196,728          189,919
                                                                                      ------------     ------------
         Total deposits                                                                    251,164          235,407

Borrowed funds                                                                               6,878            7,394
Capital securities                                                                           4,835            4,850
Accrued interest payable                                                                       552              850
Other liabilities                                                                            2,370            1,619
                                                                                      ------------     ------------
     Total liabilities                                                                     265,799          250,120

Common stock subject to repurchase obligation in ESOP                                        4,022            4,444

Shareholders' Equity
     Common stock and paid-in capital, no par value                                          9,951           10,187
     Retained earnings                                                                      14,742           13,124
     Accumulated other comprehensive income,
        net of tax                                                                             371              252
                                                                                      ------------     ------------
         Total shareholders' equity                                                         25,064           23,563
                                                                                      ------------     ------------

              Total liabilities and shareholders' equity                              $    294,885     $    278,127
                                                                                      ============     ============`

See accompanying notes to consolidated financial statements.

Page 4

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## CONDENSED
CONSOLIDATED

         STATEMENTS OF INCOME AND
         COMPREHENSIVE INCOME (unaudited)

`Three Months Ended                Nine Months Ended
In thousands of dollars, except per share data                      September 30,                    September 30,
                                                            ----------------------------     ----------------------------
                                                                2002           2001              2002            2001
                                                                ----           ----              ----            ----
Interest and dividend income
     Loans receivable, including fees                       $      4,540    $      4,781     $     13,239    $     14,717
     Securities available for sale                                   302             393            1,028           1,067
     Federal funds sold and other                                     29              46               71             264
                                                            ------------    ------------     ------------    ------------
         Total interest and dividend income                        4,871           5,220           14,338          16,048

Interest expense
     Deposits                                                      1,336           1,842            4,168           6,145
     Federal Home Loan Bank advances                                  81              83              236             249
     Other                                                            78              25              238              84
                                                            ------------    ------------     ------------    ------------
         Total interest expense                                    1,495           1,950            4,642           6,478
                                                            ------------    ------------     ------------    ------------

Net interest income                                                3,376           3,270            9,696           9,570
     Provision for loan losses                                       417             119              673             263
                                                            ------------    ------------     ------------    ------------

Net interest income after provision
  for loan losses                                                  2,959           3,151            9,023           9,307

Noninterest income
     Service charges and fees                                        583             339            1,724           1,001
     Net gains on loan sales                                       1,349             681            2,448           1,665
     Other                                                          (280)             (4)            (214)            120
                                                            ------------    ------------     ------------    ------------
                                                                   1,652           1,016            3,958           2,786

Noninterest expense
     Salaries and employee benefits                                2,196           1,813            6,041           5,148
     Occupancy and equipment                                         586             542            1,774           1,517
     Other                                                           830             672            2,242           2,155
                                                            ------------    ------------     ------------    ------------
                                                                   3,612           3,027           10,057           8,820
                                                            ------------    ------------     ------------    ------------
Income before income tax                                             999           1,140            2,924           3,273
     Income tax expense                                              331             373              950           1,050
                                                            ------------    ------------     ------------    ------------

Net income                                                  $        668    $        767     $      1,974    $      2,223
                                                            ============    ============     ============    ============

Comprehensive income                                        $        712    $        916     $      2,093    $      2,604
                                                            ============    ============     ============    ============
Basic earnings per share                                    $        .80    $        .90     $       2.34    $       2.61
                                                            ============    ============     ============    ============
Diluted earnings per share                                  $        .79    $        .89     $       2.32    $       2.58
                                                            ============    ============     ============    ============
Dividends per share                                         $        .22    $        .20     $        .64    $        .60
                                                            ============    ============     ============    ============`

See accompanying notes to consolidated financial statements.

Page 5

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## CONDENSED CONSOLIDATED
STATEMENTS OF

         CASH FLOWS (unaudited)

`Nine Months Ended
In thousands of dollars                                                                       September 30,
                                                                                      -----------------------------
                                                                                           2002           2001
                                                                                           ----           ----
Cash flows from operating activities
     Net income                                                                       $      1,974     $      2,223
     Adjustments to reconcile net income to
       net cash from operating activities
         Depreciation                                                                          673              732
         Provision for loan losses                                                             673              263
         Net amortization and accretion on securities
           available for sale                                                                  242               56
         Amortization of mortgage servicing rights                                             691              480
         Loans originated for sale                                                        (125,596)         (89,699)
         Proceeds from sale of mortgage loans                                              124,356           89,021
         Net gains on sales of mortgage loans                                               (2,448)          (1,665)
     Net change in:
         Accrued interest receivable                                                          (127)            (487)
         Other assets                                                                       (1,070)             898
         Accrued interest payable                                                             (298)            (115)
         Other liabilities                                                                     690              (21)
                                                                                      ------------     ------------
              Net cash from operating activities                                              (240)           1,686
                                                                                      ------------     ------------

Cash flows from investing activities
     Proceeds from:
         Maturities, calls and principal payments on
           securities available for sale                                                    14,783            4,397
         Sales of securities available for sale                                              3,500                -
     Purchases of:
         Federal Reserve Bank stock                                                              -             (120)
         Securities available for sale                                                     (16,605)         (10,525)
         Premises and equipment, net                                                          (522)          (1,335)
     Net increase in loans                                                                 (18,252)          (2,914)
                                                                                      ------------     ------------
         Net cash from investing activities                                                (17,096)         (10,497)
                                                                                      ------------     ------------

Cash flows from financing activities
     Net change in deposits                                                                 15,757            9,261
     Net change in borrowed funds and capital securities                                      (531)            (830)
     Change in shareholders' equity                                                         (1,014)            (656)
                                                                                      ------------     ------------
         Net cash from financing activities                                                 14,212            7,775
                                                                                      ------------     ------------

Net change in cash and cash equivalents                                                     (3,124)          (1,036)

Cash and cash equivalents at beginning of period                                            24,277           12,992
                                                                                      ------------     ------------

Cash and cash equivalents at end of period                                            $     21,153     $     11,956
                                                                                      ============     ============

     Cash paid for:
         Interest                                                                     $      4,940     $      6,593
         Income taxes                                                                          820              762`

See accompanying notes to consolidated financial statements.

Page 6

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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). The Bank of Lenawee includes
its wholly owned subsidiaries, Pavilion Financial Services and Pavilion Mortgage
Company. It should be noted that the name changes to Pavilion Bancorp, Inc. and
Pavilion Financial Services (previously Lenawee Bancorp, Inc. and Lenawee
Financial Services) were approved by the shareholders on April 18, 2002. All
significant intercompany balances and transactions have been eliminated in
consolidation.

The Company is a two-bank
holding company that conducts limited business activities. The Banks perform the
majority of the Companys business activities.

The Banks provide a full
range of banking services to individuals, agricultural businesses, commercial
business and light industries located in its service area. The Banks maintain
diversified loan portfolios, including loans to individuals for home mortgages,
automobiles and personal expenditures, and loans to business enterprises for
current operations and expansion. The Banks offer a variety of deposit products,
including checking, savings, money market, individual retirement accounts and
certificates of deposit.

## 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 nine month period ended September 30, 2002 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. 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, 2001.

## NOTE 3 -
EARNING PER SHARE

A reconciliation of the
numerators and denominators of the basic earnings and diluted earnings per share
computations for the three and nine months ended September 30, 2002 and 2001 is
presented below in thousands, except for per share information:

`Three Months Ended                Nine Months Ended
                                                             September 30,                    September 30,
                                                     -----------------------------    -----------------------------
                                                          2002            2001             2002            2001
                                                          ----            ----             ----            ----
Basic earnings per share
------------------------
Net income available to common shareholders          $        668     $        767    $      1,974     $      2,223
                                                     ============     ============    ============     ============
Weighted average common shares outstanding                    839              848             844              851
                                                     ============     ============    ============     ============
Basic earnings per share                             $        .80     $        .90    $       2.34     $       2.61
                                                     ============     ============    ============     ============
Diluted earnings per share
--------------------------
Net income available to common shareholders          $        668     $        767    $      1,974     $      2,223
                                                     ============     ============    ============     ============
Weighted average common shares outstanding                    839              848             844              851
Add:  Dilutive effects of exercise of stock options             5               11               7               10
                                                     ------------     ------------    ------------     ------------
Weighted average common and dilutive
  potential shares outstanding                                844              859             851              861
                                                     ============     ============    ============     ============
Diluted earnings per share                           $        .79     $        .89    $       2.32     $       2.58
                                                     ============     ============    ============     ============`

Page 7

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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 Pavilion Bancorp, Inc. and its subsidiaries, Bank of Lenawee and Bank of
Washtenaw, as of September 30, 2002 and for the three and nine month periods
ended September 30, 2002 and 2001.

## FINANCIAL
CONDITION

SecuritiesThe balance of our
securities portfolio decreased by $1.7 million during the first nine months of
2002. Purchases of securities available for sale totaling $16.6 million were
offset by principal repayments on mortgage backed securities and maturities
within the portfolio totaling $14.8 million and sales of securities available
for sale of $3.5 million. The securities portfolio has decreased as a result of
the additional funds being used to support loan growth.

LoansLoan growth continued
through the first nine months of 2002. During the first nine months of 2002,
annualized loan growth was 11%. The mix of the loan portfolio remains relatively
unchanged from prior periods. The Banks continue to originate residential
mortgage and business loans on a sustained basis.

In addition to the increase
in portfolio loans, we experienced an increase in the volume of our residential
mortgage loans sold into the secondary market when compared to the first nine
months of 2001. The significant decrease in mortgage interest rates during the
first nine months of 2002 has also caused a decline in mortgage interest rates,
resulting in significant increases in mortgage loan originations.

Credit QualityWe continuously monitor the
asset quality of our loan portfolios utilizing both internal and external loan
review specialists. Periodically, reports are submitted to the Banks
Senior Management and Boards of Directors regarding the credit quality of the
loan portfolios. These reviews are independent of the loan approval process.
Also, we continue to monitor delinquencies, nonperforming assets and potential
problem loans to assess the continued quality of our 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). The aggregate amount of
nonperforming loans, in thousands of dollars, is shown in the table below. Our
classifications of nonperforming loans are generally consistent with loans
identified as impaired.

Page 8

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The chart below shows the
makeup of our nonperforming assets by type, in thousands of dollars, as of
September 30, 2002 and 2001, and December 31, 2001.

`9/30/2002      12/31/2001       9/30/2001
                                                                        ---------      ----------       ---------

     Nonaccrual loans                                                  $       135    $        230     $        248
     90 days or more past due & still accruing                               1,560           1,046              574
     Other nonperforming loans                                                   -               -                -
                                                                       -----------    ------------     ------------
         Total nonperforming loans                                           1,695           1,276              822
     Other real estate                                                       1,823             879              771
                                                                       -----------    ------------     ------------
         Total nonperforming assets                                    $     3,518    $      2,155     $      1,593
                                                                       ===========    ============     ============

     Nonperforming loans as a percent of total loans                          .73%            .59%             .37%
     Nonperforming assets as a percent of total loans                        1.51%           1.00%             .73%
     Nonperforming loans as a percent of the allowance
       for loan losses                                                      69.78%          58.00%           36.08%`

Total nonperforming assets
increased $1.4 million or 63% during the nine months ended September 30, 2002.
This significant increase is attributable to real estate properties acquired in
foreclosure as well as multiple small loan customers that are experiencing
financial difficulties in an economically challenging period. These
nonperforming assets have collateral values sufficient to compensate for the
loan obligations in the event these customers are unable to return to
traditional economic vitality.

Due to the challenging
economic conditions during the last quarter of 2001 and the first nine months of
2002, we intensified our utilization of independent third party loan review
specialists in order to verify the overall quality of the loan portfolios. We
increased the provision for loan losses 156% for the nine month period ended
September 30, 2002 when compared to the same period of the prior year as a
result of the increase in net charge-offs and nonperforming loans. The provision
for loan losses provides for probable incurred losses inherent in the loan
portfolio. While nonperforming assets have increased as a percent of loans over
the reported periods, Management does not expect this trent to continue.

DepositsTotal deposit growth for
the first nine months of 2002 was approximately $15.8 million or approximately
9% on an annualized basis. Noninterest bearing deposits increased $9.0 million
and interest bearing deposits increased $6.8 million during the first nine
months of 2002. These results were primarily the effect of the expansion of
liquidity in the local and national markets. We anticipate similar deposit
growth during the remainder of 2002 as a result of continued expansion into new
and existing markets coupled with the abundant levels of liquidity in the
overall marketplace.

LiquidityWe maintained an average
federal funds sold position for the first three quarters of 2002, although we
generally move in and out of the federal funds market as liquidity needs vary.
Borrowings decreased from December 31, 2001, and we anticipate that deposit and
loan growth will cause continued variation in our short-term funding position.
We have a number of additional liquidity sources should the need arise, and we
are comfortable with the liquidity position of the Company.

Capital ResourcesAt September 30, 2002 and
December 31, 2001, equity capital totaled $25.1 and $23.6 million, respectively.
This increase is primarily the result of our net income for the nine months
ended September 30, 2002 partially offset by dividends declared during the nine
months ended September 30, 2002. 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 9

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At September 30, 2002 and
December 31, 2001, the Company and the Banks exceeded all regulatory minimum
capital requirements and are considered to be well capitalized.

## Results of
Operations

## Net Income

Net income decreased 11%,
diluted earnings per share decreased from $2.58 to $2.32 and dividends per share
increased from $.60 to $.64 when comparing the results of the nine months ended
September 30, 2002 to the same period in 2001. Net income decreased 13%,
diluted earnings per share decreased from $.89 to $.79 and dividends per share
increased from $.20 to $.22 when comparing the results of the three months ended
September 30, 2002 to the same period in 2001.

The decrease in net income
for the three and nine months ended September 30, 2002 when compared to the same
periods of 2001, is primarily the result of increased noninterest expense and an
increase in the provision for loan losses. The decrease in net income during the
nine months ended September 30, 2002, was offset by a one time increase during
the first quarter in non-interest income of $283,000 resulting from processing
errors occurring over a period of time relating to the recognition of fee income
on foreign ATM transactions. We have taken the appropriate measures to ensure
that these processing errors do not occur in the future.

Net Interest
IncomeThe yield on interest
earning assets decreased for the three and nine months ended September 30, 2002
as compared to the same periods in the prior year primarily as a result of the
general decline in interestrates during the first nine months of 2002 and the
continued repricing of our interest earning assets. The cost of funds on
interest bearing liabilities decreased for the three and nine months ended
September 30, 2002 as compared to the same periods during the prior year
primarily as a result of the declining interest rate environment and the
continued repricing of customer deposit accounts. Despite the economic
challenges that have been presented during the past two years, our net interest
margin remains quite strong, and we continue to take steps to neutralize some
portion of this risk.

Page 10

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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 nine month periods ended September 30, 2002 and 2001.

`Yield Analysis of Consolidated Average Assets and Liabilities
-------------------------------------------------------------
Dollars in thousands                              9/30/2002                                 9/30/2001
                                                  ---------                                 ---------
                                    Average       Interest                    Average       Interest
                                  Outstanding      Earned/     Yield/       Outstanding      Earned/     Yield/
                                    Balance         Paid        Rate          Balance         Paid        Rate
                                    -------         ----        ----          -------         ----        ----

Interest earning assets:
Loans (1)                        $   220,083     $    13,239      8.02%    $   217,546    $    14,717      9.02%
Investment securities (2) (3)         29,677           1,028      4.62%         26,147          1,067      5.44%
Federal funds sold and other           6,191              71      1.53%          7,536            264      4.67%
                                 -----------     -----------               -----------    -----------
  Total int. earning assets          255,951          14,338      7.47%        251,229         16,048      8.52%

Interest bearing liabilities:
Interest bearing demand
  deposits                       $    55,160     $       529      1.28%    $    53,127    $     1,003      2.52%
Savings deposits                      27,366             215      1.05%         24,194            269      1.48%
Time deposits                        105,838           3,424      4.31%        116,424          4,873      5.58%
Other borrowings                      12,949             474      4.88%          7,330            333      6.06%
                                 -----------     -----------               -----------    -----------
  Total int. bearing liabilities     201,313           4,642      3.07%        201,075          6,478      4.29%

Net interest income (3)                          $     9,696                              $     9,570
                                                 ===========                              ===========
Net spread (3)                                                    4.40%                                    4.23%
                                                                ======                                    =====
Net interest margin (3)                                           5.05%                                    5.08%
                                                                ======                                    =====
Ratio of interest earning assets to
  interest bearing liabilities          1.27                                      1.25
                                 ===========                               ===========

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

Noninterest
IncomeFor the three and nine
months ended September 30, 2002, noninterest income from banking products and
services increased 63% and 42% as compared to the same periods in 2001.
Increases in net gains on loan sales and service charges and fees primarily
contributed to the overall growth in noninterest income for the nine month
period ended September 30, 2002. The Company also experienced a significant
increase in service charges and fees during the first quarter of 2002 due to a
one-time increase of $283,000 resulting from processing errors occurring over a
period of time related to the recognition of fee income on foreign ATM
transactions.

Noninterest ExpensesNoninterest expense
increased during the three and nine months ended September 30, 2002 when
compared to the same periods of 2001, reflecting our continued growth and
expansion. Total noninterest expense for the three and nine month periods ended
September 30, 2002 was 19% and 14% above the same periods of 2001. Increases in
salaries and employee benefits for the three and nine month periods ended
September 30, 2002 of approximately 21% and 17% were the primary factors
contributing to the overall increase. These increases, along with increases in
occupancy and equipment and other expenses, are mainly attributable to our
continued efforts to expand our services into new and existing markets.

Federal Income TaxOur changes in income tax
expense continue to be relatively consistent with our change in income before
income tax.

Page 11

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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 forecasted in such forward-lookingstatements. Furthermore,
we undertake 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.

## ITEM 3 -
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk
exposure is interest rate risk and liquidity risk. All of our transactions are
denominated in U.S. dollars with no specific foreign exchange exposure. We have
a limited exposure to commodity prices related to agricultural loans. Any
impacts that changes in foreign exchange rates and commodity prices would have
on interest rates are assumed to be insignificant.

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 our earnings and capital base. Accordingly, effective
risk management that maintains IRR at prudent levels is essential to our 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, we seek 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 us to assess the existing and
potential future effects of changes in interest rates on our consolidated
financial condition, including capital adequacy, earnings, liquidity, and, where
appropriate, asset quality.

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We continue to work very
diligently to protect our interest rate margin from material changes in market
driven interest rate conditions.

## ITEM 4 
CONTROLS AND PROCEDURES

## Evaluation of Disclosure
Controls and Procedures

The Corporations
Chief Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of the Corporations disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date within 90
days of the filing date of this Form 10-Q Quarterly Report (the Evaluation
Date), have concluded that as of the Evaluation Date, the
Corporations disclosure controls and procedures were adequate and
effective to ensure that material information relating to the company would be
made known to them by others within the company, particularly during the period
in which this Form 10-Q Quarterly Report was being prepared.

## Changes in
Internal Controls

There were no significant
changes in the Corporations internal controls or in other factors that
could significantly affect internal controls subsequent to the date of the most
recent evaluation, nor any significant deficiencies or material weaknesses in
such internal controls requiring corrective actions. As a result, no corrective
actions were taken.

# PART II

OTHER INFORMATION

## ITEM 1 - LEGAL
PROCEEDINGS

We are not involved in any material
legal proceedings. Our 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.

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## ITEM 2 -
CHANGES IN SECURITIES

No changes in the
securities of the Company occurred during the quarter ended September 30, 2002.

## 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 September 30, 2002.

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

No matters were submitted for vote of security holders during the quarter.

## ITEM 5 - OTHER
INFORMATION

The Audit Committee of the Board
of Directors approved the categories of all non-audit services performed by the
Registrants independent accountants during the period covered by this
report.

## 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) | Reports on Form 8-K                                             
|    |                                                                 

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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:      November14, 2002 | /s/ Douglas L. Kapnick
Douglas L. Kapnick
Chief Executive Officer                                       
|Date:      November14, 2002 | /s/ Loren V. Happel
Loren V. Happel
Chief Financial Officer
(Principal Financial and Accounting 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.

Date: November
14, 2002

| | /s/ Douglas L. KapnickDouglas 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.

Date: November
14, 2002

| | /s/ Loren V. HappelLoren 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 September 30, 2002 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
September 30, 2002 fairly presents, in all material respects, the financial
condition and results of operations of Pavilion Bancorp, Inc.

Date: November
14, 2002

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

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# Exhibit 99.2

(1) the Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2002 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
September 30, 2002 fairly presents, in all material respects, the financial
condition and results of operations of Pavilion Bancorp, Inc.

Date: November
14, 2002

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

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