# Securities and
Exchange CommissionWashington, D.C. 20549

_________________

# FORM 10-Q

|X| Quarterly Report
Pursuant to Section 13 or 15(d)

of the Securities
Exchange Act of 1934

# For the quarterly
period ended June 30, 2004

or

[ ] Transition Report
Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934

_________________

# Commission File
#000-30521

Pavilion 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 [__]

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

Yes [__] No |X|

As of August 11, 2004 there were
845,420 outstanding shares of the registrants common stock, no par value.

Page 1

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|         |  |                                 
|-------- |  | --------------------------------
|ITEM NO. |  | CROSS REFERENCE TABLEDESCRIPTION

---

|                                                                                                   | 
|-------------------------------------------------------------------------------------------------- | 
|                                                                                                  
|PART I 
FINANCIAL INFORMATION                                                                     | 
|                                                                                                  
|Item 1.      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                                      | 
|                                                                                                  
|Item 2.      Management's Discussion and Analysis of Financial Condition and Results of Operations | 
|                                                                                                  
|Item 3.      Quantitative and Qualitative Disclosures About Market Risk                            | 
|                                                                                                  
|Item 4.      Controls and Procedures                                                               | 
|                                                                                                  
|PART II -OTHER INFORMATION                                                                         | 
|                                                                                                  
|Item 1.      Legal Proceedings                                                                     | 
|Item 2.      Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities     | 
|Item 3.      Defaults Upon Senior Securities                                                       | 
|Item 4.      Submission of Matters to a Vote of Security Holders                                   | 
|Item 5.      Other Information                                                                     | 
|Item 6.      Exhibits and Reports on Form 8-K                                                      | 
|                                                                                                  
|Signatures                                                                                         | 
|                                                                                                  
|Exhibit Index                                                                                      | 

Page 2

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Independent
Accountants Report

We have reviewed the consolidated
balance sheet of Pavilion Bancorp, Inc. (the Corporation) as of June 30, 2004, and the
related consolidated statements of income, and cash flows for the three and six-month
period then ended, included in the Corporations SEC Form 10-Q. These financial
statements are the responsibility of the Corporations management.

We conducted our review 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 review, we are not aware
of any material modifications that should be made to the consolidated financial statements
referenced above for them to be in conformity with generally accepted accounting
principles.

Plante & Moran, PLLCAuburn
Hills, MIAugust 11, 2004

Page 3

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# PART IFINANCIAL INFORMATION

# ITEM 1- FINANCIAL
STATEMENTS

CONDENSED
CONSOLIDATED BALANCE SHEETS               
              In thousands of dollars

|                                                          | June 30,2004(unaudited) | December 31,2003
|--------------------------------------------------------- | ----------------------- | ----------------
|ASSETS                                                    |                         |                 
|Cash and due from banks                                   |                         | $   11,113      
|                                                          |                         |                 
|Total cash and cash equivalents                           |                         | 11,113          
|Securities available for sale                             |                         | 22,054          
|Federal Home Loan Bank stock, at cost                     |                         | 2,601           
|Federal Reserve Bank stock, at cost                       |                         | 522             
|Loans held for sale                                       |                         | 2,593           
|Loans receivable, net of allowance for loan losses        |                         | 277,540         
|Premises and equipment, net                               |                         | 6,299           
|Accrued interest receivable                               |                         | 1,776           
|Mortgage servicing asset                                  |                         | 2,796           
|Other assets                                              |                         | 1,038           
|                                                          |                         |                 
|Total Assets                                              |                         | $ 328,332       
|                                                          |                         |                 
|LIABILITIES AND SHAREHOLDERS' EQUITY                      |                        
|Deposits                                                  |                        
|Noninterest bearing                                       |                         | $   56,645      
|Interest bearing                                          |                         | 211,733         
|                                                          |                         |                 
|Total deposits                                            |                         | 268,378         
|Borrowed funds                                            |                         | 12,048          
|Federal funds purchased                                   |                         | 9,080           
|Accrued interest payable                                  |                         | 322             
|Other liabilities                                         |                         | 2,310           
|Subordinated debentures                                   |                         | 5,000           
|Common stock subject to repurchase obligation in ESOP     |                         | 4,115           
|                                                          |                         |                 
|Total liabilities                                         |                         | 301,253         
|Shareholders' equity                                      |                        
|Common stock and paid-in capital, no par value            |                         | 12,536          
|Authorized 3,000,000; Issued 845,420 shares at 6/30/04;   |                        
|846,186 shares at 12/31/03                                |                        
|Retained earnings                                         |                         | 14,676          
|Accumulated other comprehensive income (loss), net of tax |                         | (133            
|                                                          |                         |                 
|Total shareholders' equity                                |                         | 27,079          
|                                                          |                         |                 
|Total liabilities and shareholders' equity                |                         | $ 328,332       
|                                                          |                         |                 

Page 4

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CONDENSED CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME (unaudited)In thousands of dollars, except per
share data

|                                                    | Three Months EndedJune 30, | Six Months EndedJune 30,
|--------------------------------------------------- | -------------------------- | ------------------------
|
|Interest and dividend income                        |                            |                         
|Loans receivable, including fees                    |                            | $4,450                  
|Securities                                          |                            | 241                     
|Federal funds sold and other                        |                            | 2                       
|                                                    |                            |                         
|Total interest and dividend income                  |                            | 4,693                   
|Interest expense                                    |                           
|Deposits                                            |                            | 772                     
|Federal Home Loan Bank advances                     |                            | 107                     
|Other                                               |                            | 67                      
|                                                    |                            |                         
|Total interest expense                              |                            | 946                     
|                                                    |                            |                         
|Net interest income                                 |                            | 3,747                   
|Provision for loan losses                           |                            | 88                      
|                                                    |                            |                         
|Net interest income after provision for loan losses |                            | 3,659                   
|Noninterest income                                  |                           
|Service charges and fees                            |                            | 427                     
|Gains on loan sales                                 |                            | 476                     
|Loan servicing fees, net of amortization            |                            | 105                     
|Other                                               |                            | 79                      
|                                                    |                            |                         
|                                                    |                            | 1,087                   
|Noninterest expense                                 |                           
|Salaries and employee benefits                      |                            | 2,011                   
|Occupancy and equipment                             |                            | 564                     
|Other                                               |                            | 940                     
|                                                    |                            |                         
|                                                    |                            | 3,515                   
|                                                    |                            |                         
|Income before income tax                            |                            | 1,231                   
|Income tax expense                                  |                            | 372                     
|                                                    |                            |                         
|Net income                                          |                            | $   859                 
|                                                    |                            |                         
|Basic earnings per share                            |                            | $  1.02                 
|                                                    |                            |                         
|Diluted earnings per share                          |                            | $  1.01                 
|                                                    |                            |                         
|Dividends per share                                 |                            | $   .24                 
|                                                    |                            |                         

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CONDENSED
CONSOLIDATED STATEMENT OF         CASH
FLOWS (unaudited)         In thousands of dollars

|                                                    | Six Months EndedJune 30,
|--------------------------------------------------- | ------------------------
|
|Cash Flows from operating activities                |                         
|Net income                                          |                         
|Adjustments to reconcile net income to              |                         
|net cash from/(for) operating activities            |                         
|Depreciation                                        |                         
|Provision for loan losses                           |                         
|Net amortization and accretion on securities        |                         
|available for sale                                  |                         
|Net change in:                                      |                         
|Accrued interest receivable                         |                         
|Loans held for sale                                 |                         
|Gain on sale of loans                               |                         
|Other assets                                        |                         
|Accrued interest payable                            |                         
|Other liabilities                                   |                         
|                                                    |                         
|Net cash (used in) provided by operating activities |                         
|                                                    |                         
|Cash flows from investing activities                |                         
|Securities available for sale:                      |                         
|Maturities, calls and principal payments            |                         
|Purchases                                           |                         
|Purchase of Federal Reserve Bank stock              |                         
|Net premises and equipment expenditures             |                         
|Net increase in loans                               |                         
|                                                    |                         
|Net cash used in investing activities               |                         
|                                                    |                         
|Cash flows from financing activities                |                         
|Net change in deposits                              |                         
|Net change in borrowed funds                        |                         
|Payment of dividends                                |                         
|                                                    |                         
|Net cash provided by financing activities           |                         
|                                                    |                         
|Net change in cash and cash equivalents             |                         
|Cash and cash equivalents at beginning of period    |                         
|                                                    |                         
|Cash and cash equivalents at end of period          |                         
|                                                    |                         
|Supplemental Disclosure of Cash Flow Information    |                         
|Cash paid for:                                      |                         
|Interest                                            |                         
|Income taxes                                        |                         

Page 6

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# NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (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, and 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 six month period ended June 30, 2004 are not
necessarily indicative of the results that may be expected for the year ending December
31, 2004. 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, 2003.

# 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 and six months ended June 30, 2004 and 2003 is presented below:

|                                                    | Three Months EndedJune 30 | Six Months EndedJune 30
|--------------------------------------------------- | ------------------------- | -----------------------
|
|
|Basic earnings per share                            |                           |                        
|Net income available to common shareholders         |                           | $859                   
|                                                    |                           |                        
|Weighted average common shares outstanding          |                           | 845                    
|                                                    |                           |                        
|Basic earnings per share                            |                           | $1.02                  
|                                                    |                           |                        
|Diluted earnings per share                          |                          
|Net income available to common shareholders         |                           | $859                   
|                                                    |                           |                        
|Weighted average common shares outstanding          |                           | 845                    
|Add:  Dilutive effects of exercise of stock options |                           | 3                      
|                                                    |                           |                        
|Weighted average common and dilutive                |                          
|potential shares outstanding                        |                           | 848                    
|                                                    |                           |                        
|Diluted earnings per share                          |                           | $1.01                  
|                                                    |                           |                        

Page 7

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# 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 and six months ended June 30, 2004 and 2003 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.

|                                       | June 30,   | June 30,  
|-------------------------------------- | ---------- | ----------
|
|
|                                      
|Net income as reported                 | $      859 | $      852
|Less:  Stock-based compensation       
|expense determined under fair value   
|based method                           | $       10 | $       16
|                                       |            |           
|Pro forma net income                   | $      849 | $      836
|                                       |            |           
|Net Income per Common Share:          
|Basic earnings per share as reported   | $    1.02  | $    1.04 
|Pro forma basic earning per share      | $    1.00  | $    1.02 
|Diluted earnings per share as reported | $    1.01  | $    1.03 
|                                       |            |           
|Pro forma diluted earnings per share   | $    1.00  | $    1.01 
|                                       |            |           

The weighted average fair value of
stock options granted during the six months ended June 30, 2004 and 2003 were $11.43 and
$10.15, respectively. The fair value of options granted during the six months ended June
30, 2004 and 2003 were estimated using an option pricing model with the following weighted
average information as of the grant dates:

|                           | 2004    | 2003   
|-------------------------- | ------- | -------
|Risk free rate of interest | 3.75%   | 3.58%  
|Expected option life       | 8 years | 8 years
|Expected dividend yield    | 1.91%   | 1.96%  
|Expected volatility        | 19.49%  | 22.74% 

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.

# NOTE 5  SUBSEQUENT
EVENT

On July 16, 2004 Pavilion Bancorp
executed a definitive agreement for the sale of the Bank of Washtenaw to Dearborn Bancorp,
Inc. pending regulatory approval and certain other conditions (Washtenaw
Sale). Subject to regulatory approval and certain other conditions, the sale is
expected to be completed in the fourth quarter for the sum of $15,000,000. As of June 30,
2004 the Bank of Washtenaw has $72.6 million in total assets and $7.1 million in equity.
For the six month period ended June 30, 2004 Bank of Washtenaw earned $73,700. A Form 8-K
was filed with the Securities and Exchange Commission on July 19, 2004 detailing this
transaction.

Page 8

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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
June 30, 2004 and for the three and six month periods ended June 30, 2004 and 2003.

The Washtenaw Sale described in Note
5 to the Consolidated Financial Statements is subject to regulatory approval and other
conditions. If the Washtenaw sale is completed as contemplated, it is anticipated that the
transaction will have a positive impact on the Companys financial condition and
results of operations. The transaction will result in a reduction of consolidated assets
(primarily loans, currently $66.5 million), and liabilities (primarily deposits, currently
$72.6 million). However, the Companys capital position is expected to be
strengthened by the amount of the net after tax and transaction expense proceeds to be
received in the transaction. The earnings on the additional capital are expected to more
than offset the earnings contributed by Bank of Washtenaw to the Companys
consolidated results of operations. Management and the Board are developing a plan for the
deployment of the additional capital in a manner which will support enhanced growth and
expansion in the Lenawee County market area while maximizing the return on that
investment. In the interim, the net proceeds from the transaction will be invested in
short-term securities.

# FINANCIAL CONDITION

Cash and cash equivalentsCash and cash equivalents of $11.1
million increased 10.0%, or $1.01 million during the first six months of 2004 reflective
of routine daily fluctuation.

SecuritiesSecurities available for sale
increased $1.6 million or 7.9% to $22.1 million during the first six months of 2004. The
increase represents the investment of our customers increased deposit accounts
funding. The mix of the securities portfolio was enhanced by additional government agency
investments.

LoansDuring the first six months of 2004,
loans, net of allowance for loan losses, increased $5.8 million or 2.1%. 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 small business loans in the
Banks markets. Additionally, the increase in loans was partially due to the increase
in loans held for sale at June 30, 2004. This increase of $2.2 million was due to timing
of their sale to third parties including Fannie Mae, Freddie Mac and FHLB. The sale
occurred subsequent to month-end.

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.

Page 9

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The chart below shows the makeup of
the Companys nonperforming assets by type, in thousands of dollars, as of June 30,
2004 and 2003, and December 31, 2003.

|                                                                  | June 30,2004 | December 31,2003 | June 30,2003
|----------------------------------------------------------------- | ------------ | ---------------- | ------------
|Nonaccrual Loans                                                  |              |                  | $           
|90 days or more past due & still accruing                         |              |                  |             
|                                                                  |              |                  |             
|Total nonperforming loans                                         |              |                  |             
|Other real estate                                                 |              |                  |             
|                                                                  |              |                  |             
|Total nonperforming assets                                        |              |                  | $           
|                                                                  |              |                  |             
|                                                                 
|Nonperforming loans as a percent of total loans                   |              |                  |             
|Nonperforming assets as a percent of total loans                  |              |                  |             
|Nonperforming loans as a percent of the allowance for loan losses |              |                  |             

The Company decreased its funding of
provision for loan losses during the three month period by $.21 million and $.28 million
during the six month period ended June 30, 2004 as compared to the same periods in 2003
based on managements assessment of the adequacy of the allowance for loan losses
primarily as a result of smaller growth and an overall improvement in credit quality
throughout the portfolio. The allowance 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 six months ended June, 2004 and 2003 follows:

|                                   | Three Months EndedJune 30, | Six Months EndedJune 30,
|---------------------------------- | -------------------------- | ------------------------
|
|                                  
|Balance at beginning of period     |                            |                         
|Loan charge-offs net of recoveries |                            |                         
|Provision charged to operations    |                            |                         
|                                   |                            |                         
|Balance at end of period           |                            |                         
|                                   |                            |                         

DepositsTotal deposits increased $4.4 million
or 1.7% during the six month period to $268.4 million at June 30, 2004 from $264.0 million
at December 31, 2003. The non-interest bearing deposits increased $4.7 million or 9.1%
during the six month period ended June 30, 2004 as compared to a $9.3 million or 19%
increase during the same period in 2003.

LiquidityThe Companys borrowing position
increased $6.5 million during the first six months of 2004 from $14.6 million at year end
2003 to $21.1 million at June 30, 2004. The increase is representative of normal daily
fluctuations. The Company has a number of additional liquidity sources should the need
arise, including Federal Home Loan Bank advances and the purchase of Federal Funds;
management presently has no concerns as to the liquidity position of the Company.

Capital ResourcesDuring the first six months of 2004,
equity capital increased $556,000 or 2.10% to $27.1 million, primarily as a result of
retention of quarterly earnings offset by the payment of dividends and the $365,000
decrease (net of income tax) in unrealized gains on available for sale securities. The
number of outstanding shares at December 31, 2003 of 805,392 increased to 845,420 during
the first six months as the result of a 5% stock dividend issued January 30, 2004 less
fractional shares paid in cash. Management monitors 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 10

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At June 30, 2004 and December 31,
2003, the Company and the Banks exceeded all regulatory minimum capital requirements and
are considered to be well capitalized.

# Results of Operations

Net IncomeNet income declined $90,000 or 5.3%
when comparing the results of the first six months of 2004 to the same period in 2003.
2004 revenues are reflective of the reduced activity within the mortgage re-financing
market as compared to the same period in 2003. This revenue reduction is offset by an
interest expense reduction of 14.2% for the same six months of 2003. Net Income increased
by .8% during the three months ended June 30, 2004 as compared to the same period in 2003
due to an increase of the net interest margin after provision for loan losses of $431,000
or 13.4% and a decrease of $40,000 or 9.7% in the federal income tax expense respectively.

Net Interest IncomeThe yield on interest earning assets
decreased 69 basis points for the six months ended June 30, 2004 as compared to the same
period in the prior year primarily as a result of the general decline of market rates. The
cost of funds on interest bearing liabilities also decreased for the quarter ended June
30, 2004 as compared to the same period during the prior year due to the reduction in
interest rates. With interest rates decreasing, the Companys net interest margin
decreased by 30 basis points, as compared to the first six months of 2003, to 4.81 %. Net
interest income for the three month period ended June 30, 2004 increased by 13.3% or
$431,000 as compared to the same period in 2003. This was the result of lower interest
expense and a lower provision for loan losses for the second quarter of 2004 as compared
to 2003. The Companys net interest margin remains quite strong, and management
continues to take steps to neutralize portions of this risk.

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 six month
periods ended June 30, 2004 and 2003.

|                                    | AverageOutstandingBalance | 2004InterestEarned/Paid | Yield/Rate | AverageOustandingBalance | 2003InterestEarned/Paid | Yield/Rate
|----------------------------------- | ------------------------- | ----------------------- | ---------- | ------------------------ | ----------------------- | ----------
|
|Interest earning assets:            |                           |                         |            |                          |                         |           
|Loans (3)                           |                           |                         | $          | 273,494                  |                         | $         
|Investment securities (2)(3)        |                           |                         |            | 28,374                   |                         |           
|Federal funds sold and other        |                           |                         |            | 3,047                    |                         |           
|                                    |                           |                         |            |                          |                         |           
|Total int. earning assets           |                           |                         |            | 304,915                  |                         |           
|Interest bearing liabilities:       |                           |                        
|Interest bearing demand deposits    |                           |                         | $          | 54,823                   |                         | $         
|Savings deposits                    |                           |                         |            | 34,725                   |                         |           
|Time deposits                       |                           |                         |            | 112,092                  |                         |           
|Other borrowings                    |                           |                         |            | 28,034                   |                         |           
|                                    |                           |                         |            |                          |                         |           
|Total int. bearing liabilities      |                           |                         |            | 229,674                  |                         |           
|Net interest income (3)             |                           |                         |            |                          |                         | $         
|                                    |                           |                         |            |                          |                         |           
|Net spread (3)                      |                           |                         |            |                          |                         |           
|                                    |                           |                         |            |                          |                         |           
|Net interest margin (3)             |                           |                         |            |                          |                         |           
|                                    |                           |                         |            |                          |                         |           
|Ratio of interest earning assets to |                           |                        
|interest bearing liabilities        |                           |                         |            | 1.33                     |                         |           
|                                    |                           |                         |            |                          |                         |           

Page 11

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|(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 first six months of 2004,
noninterest income from banking products and services declined 38.1% as compared to the
same period in 2003 due primarily to a decrease in gains on the sale of mortgages. The
Companys volume of mortgage loan sales into the secondary market continued to
decline from net gains of $3.8 million on sales in the first six months of 2003 to $.865
million in the first six months of 2004. This decline was 55.4%, or $.6 million, for the
three month period ended June 30, 2004 as compared to 2003. The decline resulted from an
increase in mortgage rates from the prior years historic lows and the resulting
refinancing activity.

Noninterest ExpenseNoninterest expense of $7.0 million
during the first six months of 2004 declined $.4 million or 6.2% from the level of
noninterest expense during the same period of 2003. Most of this decrease was attributable
to lower commissions paid to the mortgage origination staff, as was the decrease in
noninvestment expense comparing the second quarter of 2004 with the same period in 2003.

Federal Income TaxThe reduction in federal incomes
taxes of $40,000 and $101,000 during the three and six month periods ended Jun 30, 2004
respectively, is directly related to the decrease in income earned 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 affect 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.

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; o 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.
|- | --------------------------------------------

Page 12

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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

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, 2003, 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. The Companys
               Chief Executive Officer and Interim Chief Financial Officer, after evaluating
               the effectiveness of the companys disclosure controls and procedures (as
               defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
               period covered by this Form 10-Q Quarterly Report, have concluded that the
               Company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.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Changes in Internal Controls. During the period covered by this report,
               there have been no changes in the Companys internal controls over
               financial reporting that have materially affected or are reasonably likely to
               materially affect the Companys internal controls over financial reporting.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 13

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# PART IIOTHER 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, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

Not
Applicable

# ITEM 3  DEFAULTS
UPON SENIOR SECURITIES  None

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

The annual meeting of our
shareholders was held on April 22, 2004. At that meeting, the following matters were
submitted to a vote of the shareholders. There were 845,425 voting shares outstanding
on March 8, 2004, the record date for the meeting. 610,069 shares or 72% voted as
follows:

|Directors nominated for       
terms expiring in 2007:       
Fred R. Duncan                
Dennis E. Pearsall            
Emory M. Schmidt              
Selection of Auditors for 2004
Plante & Moran, PLLC | For
584,055   
579,071   
538,442   For
603,375 | Against
 26,014       
 30,998       
 26,627       Against
  2,007 | Abstain
   0
   0
   0Abstain
 4,687
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------

# 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):
|--- | ----------------------------------------------------------------

| | 31.1 | Certificate
 of the Chief  Executive  Officer of  Pavilion  Bancorp,  Inc.  pursuant  to
                           Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certificate
of the Interim Chief Financial  Officer of Pavilion  Bancorp,  Inc. pursuant
                           to Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certificate
of the Chief Executive  Officer and the Interim 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.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 14

---



|(b) | Reports
on Form 8-K.
|--- | --------------------

| | Report
on Form 8-K dated April 30, 2004, submitting a shareholder report with respect to the
first quarter results of operations.
| | ---------------------------------------------------------------------------------------------------------------------------------

Report
on Form 8-K dated June 21, 2004, submitting a press release announcing a cash dividend.

Page 15

---



# 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.

|Date:      August 11, 2004
Date:      August 11, 2004 |  | Pavilion Bancorp, Inc./s/ Douglas L. Kapnick
Douglas L. KapnickChief Executive Officer/s/ Mark D. Wolfe
Mark D. WolfeInterim Chief Financial Officer
|----------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 16

---



EXHIBIT INDEX

Exhibit         Description

|31.1 | Certificate  of the Chief  Executive  Officer of  Pavilion  Bancorp,  Inc.  pursuant to 15 U.S.C.
                  Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.2 | Certificate
 of the Interim Chief  Financial  Officer of Pavilion  Bancorp,  Inc.  pursuant to 15
                  U.S.C. Section 7241, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32.1 | Certificate
of the Chief Executive  Officer and the Interim 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.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 17

---



EXHIBIT 31.1

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 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 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 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-15(e) and 15d-15(e)) for the registrant and have:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed under our supervision, to ensure that
               material information relating to the registrant, including its consolidated
               subsidiaries, is made known to us by others within those entities, particularly
               during the period in which this report is being prepared;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | disclosed in this report any change in the registrants internal control
               over financial reporting that occurred during the registrants most recent
               fiscal quarter that has materially affected, or is reasonably likely to
               materially affect, the registrants internal control over financial
               reporting; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation of internal control over financial reporting, to the
          registrants auditors and the audit committee of the registrants
          board of directors:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the registrants ability to record, process, summarize and
               report financial information; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal control over
               financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: August 11, 2004

| |  | /s/ Douglas L. Kapnick
Douglas L. KapnickChief Executive Officer
| |  | ------------------------------------------------------------------------------

Page 18

---



EXHIBIT 31.2

I, Mark D. Wolfe, certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of Pavilion Bancorp, Inc.;
|-- | -----------------------------------------------------------------------------

|2. | Based on my knowledge, this 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 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 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-15(e) and 15d-15(e)) for the registrant and have:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed under our supervision, to ensure that
               material information relating to the registrant, including its consolidated
               subsidiaries, is made known to us by others within those entities, particularly
               during the period in which this report is being prepared;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | disclosed in this report any change in the registrants internal control
               over financial reporting that occurred during the registrants most recent
               fiscal quarter that has materially affected, or is reasonably likely to
               materially affect, the registrants internal control over financial
               reporting; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation of internal control over financial reporting, to the
          registrants auditors and the audit committee of the registrants
          board of directors:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the registrants ability to record, process, summarize and
               report financial information; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal control over
               financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: August 11, 2004

| |  | /s/ Mark D. Wolfe
Mark D. WolfeInterim Chief Financial Officer
| |  | ----------------------------------------------------------------------------

Page 19

---



EXHIBIT 32.1

Douglas
L. Kapnick, Chief Executive Officer of Pavilion Bancorp, Inc. and Mark D. Wolfe, Interim
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 June 30, 2004
          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 June 30, 2004 fairly presents, in all material respects, the
          financial condition and results of operations of Pavilion Bancorp, Inc.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: August 11, 2004

| |  | /s/ Douglas L. Kapnick
Douglas L. KapnickChief Executive Officer/s/ Mark D. Wolfe
Mark D. WolfeInterim Chief Financial Officer
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

Page 20