|X| Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002
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 |_| |
As of November 1, 2002, there were 835,258 outstanding shares of the registrant’s common stock, no par value.
Page 1
| ITEM NO. |
DESCRIPTION |
PAGE NO. |
|
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
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
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
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
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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (unaudited)
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.
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.
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
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.
Securities
The 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.
Loans
Loan 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 Quality
We 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
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.
Deposits
Total 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.
Liquidity
We 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 Resources
At 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
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.”
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
Income
The 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
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
Income
For 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 Expenses
Noninterest 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 Tax
Our changes in income tax
expense continue to be relatively consistent with our change in income before
income tax.
Page 11
Forward-Looking Statements
This 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-looking statements. 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:
These are representative of the Future Factors that could cause a difference between an actual outcome and a forward-looking statement.
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.
Page 12
We continue to work very diligently to protect our interest rate margin from material changes in market driven interest rate conditions.
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.
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.
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.
Page 13
No changes in the securities of the Company occurred during the quarter ended September 30, 2002.
There have been no defaults upon senior securities relevant to the requirements of this section during the three months ended September 30, 2002.
No matters were submitted for vote of security holders during the quarter.
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.
| (a) | Listing of Exhibits (numbered as in Item 601 of Regulation S-K): |
|
| 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 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. |
|
| (b) | Reports on Form 8-K |
|
| Form 8-K filing dated July 31, 2002 showing second quarter 2002 results. |
||
Page 14
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) |
Page 15
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) | designed such disclosure controls and procedures 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 quarterly report is being prepared; |
|
| (b) | evaluated the effectiveness of the registrant’s disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the “Evaluation Date”); and |
|
| (c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date; |
|
| 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) | all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls; and |
|
| (b) | any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls; and |
|
| 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. Kapnick Douglas L. Kapnick Chief Executive Officer |
Page 16
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) | designed such disclosure controls and procedures 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 quarterly report is being prepared; |
|
| (b) | evaluated the effectiveness of the registrant’s disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the “Evaluation Date”); and |
|
| (c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date; |
|
| 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) | all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls; and |
|
| (b) | any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls; and |
|
| 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. Happel Loren V. Happel Chief Financial Officer |
Page 17
| 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. |
Page 18
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. Kapnick Douglas L. Kapnick Chief Executive Officer |
Page 19
(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. Happel Loren V. Happel Chief Financial Officer |
Page 20