SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------

                                   FORM 10-QSB


                 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2001

                                       OR
                 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

               For the transition period from _______ to ________

                        Commission file number: 333-63685

                         CLARKSTON FINANCIAL CORPORATION
        (Exact name of small business issuer as specified in its charter)

            MICHIGAN                                      38-3412321
  ----------------------------------------------------------------------------
  (State of other jurisdiction of                      (I.R.S. Employer
   incorporation or organization)                      Identification No.)

                 15 South Main Street, Clarkston, Michigan 48346
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (248) 625-8585

                 -----------------------------------------------

Check  whether  the issuer:  (1) has filed all  reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes   X    No
         -------    -------

The  number of shares  outstanding  of each of the  issuer's  classes  of common
stock,  as of the latest  practicable  date:  1,026,012  shares of the Company's
Common Stock (no par value) were outstanding as of September 30, 2001.

Transitional Small Business Disclosure Format (check one): Yes         No   X
                                                              --------   -------


<PAGE>
                                      INDEX


<TABLE>
                                                                                                          Page
                                                                                                         Number(s)

<S>               <C>                                                                                       <C>
Part I.           Financial Information (unaudited):

                  Item 1.
                  ------
                  Consolidated Financial Statements                                                         3-7
                  Notes to Consolidated Financial Statements                                                8-11

                  Item 2.
                  ------
                  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                                             12-14

Part II.          Other Information

                  Item 1.
                  ------
                  Legal Proceedings                                                                         15

                  Item 2.
                  ------
                  Changes in Securities and Use of Proceeds                                                 15

                  Item 3.
                  ------
                  Defaults Upon Senior Securities                                                           15

                  Item 4.
                  ------
                  Submission of Matters to a Vote of Securities Holders                                     15

                  Item 5.
                  ------
                  Other Information                                                                         15

                  Item 6.
                  ------
                  Exhibits and Reports on Form 8-K                                                          15


Signatures                                                                                                  16
</TABLE>

                                       2
<PAGE>
Part I   Financial Information (unaudited)

                         CLARKSTON FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
              September 30, 2001 (unaudited) and December 31, 2000
                  (dollars in thousands, except per share data)
<TABLE>
                                                                                September 30,            December 31,
                                                                                    2001                     2000
                                                                                 ----------               ----------
                                                                                (Unaudited)
ASSETS
<S>                                                                          <C>                         <C>
Cash and Cash Equivalents
       Total cash and due from banks                                         $         2,560             $       862
        Federal funds sold                                                             2,500                   2,550
                                                                                 -----------             -----------
            Total Cash and Cash Equivalents                                            5,060                   3,412

Securities Held to Maturity                                                            7,821                  21,342
Securities Available for Sale, at fair value                                          31,052                   8,989

Loans, less Loan Loss Reserve
       Total loans                                                                    32,993                  25,762
       Allowance for loan losses                                                         450                     379
                                                                                 -----------             -----------
       Net Loans                                                                      32,543                  25,383

Net Property and Equipment                                                               780                     282
Accrued interest receivable                                                              359                     457
Deposit premium and conversion costs,
       net of amortization                                                               133                     150
Other Assets                                                                             160                     205
                                                                                 -----------             -----------
            Total Assets                                                           $  77,908               $  60,220
                                                                                 ===========             ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits
       Noninterest-bearing                                                             7,827                   6,598
       Interest-bearing                                                               60,659                  44,810
                                                                                 -----------             -----------
            Total deposits                                                            68,486                  51,408
       Accrued Expenses and Other Liabilities                                            480                     534

Shareholders' Equity
       Common stock, no par value: 10,000,000
             Shares authorized; 1,026,012 shares
             issued and outstanding as of September 30,
             2001 and December 31, 2000                                                4,306                   4,306
       Capital surplus                                                                 4,306                   4,306
       Accumulated profit (deficit)                                                       15                    (335)
       Accumulated other comprehensive income (loss)                                     315                       1
                                                                                 -----------             -----------
             Total Shareholder Equity                                                  8,942                   8,278
                                                                                 -----------             -----------

              Total Liabilities and Shareholders' Equity                           $  77,908               $  60,220
                                                                                 ===========             ===========
</TABLE>


           See accompanying notes to consolidated financial statements

                                       3
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
  Three and Nine Month Periods Ended September 30, 2001, and September 30, 2000
                 (dollars in thousands, except per share data)
                                   (unaudited)

<TABLE>
                                                       Three Months       Three Months         Nine Months          Nine Months
                                                           Ended              Ended               Ended                Ended
                                                       September 30,      September 30,       September 30,        September 30,
                                                           2001               2000                2001                 2000
                                                       ------------       ------------        ------------         ------------
<S>                                                   <C>                 <C>                <C>                    <C>
Interest Income
       Loans, including fees                          $    680            $    438           $   1,847              $  1,066
       Securities                                          569                 417               1,502                 1,041
       Federal Funds sold                                   31                  35                 131                    86
                                                      --------            --------           ---------              --------
            Total interest income                        1,280                 890               3,480                 2,193

Interest Expense
       Deposits                                            700                 475                1909                 1,066
       Other                                                 0                   0                   0                     0
                                                      --------            --------           ---------              --------
            Total interest expense                         700                 475               1,909                 1,066

Net Interest Income                                        580                 415               1,571                 1,127

Provision  for loan losses                                  32                  36                  73                    98
                                                      --------            --------           ---------              --------

Net interest income
After provision for loan losses                            548                 379               1,498                 1,029

Noninterest income
     Gains (losses) on sale of securities                   89                   1                 127                    (9)
     Other income                                           38                  83                 193                   185
                                                      --------            --------           ---------              --------
            Total noninterest income                       127                  84                 320                   176
                                                      --------            --------           ---------              --------


Noninterest expense
     Salaries and benefits                                 202                 159                 606                   479
     Occupancy expense of premises                          41                  31                 115                    94
     Furniture and equipment expense                        40                  22                 110                    65
     Computer and data processing expenses                  71                  61                 168                   126
     Advertising and public relations                       34                  30                  86                    95
     Professional fees                                      24                  24                  81                    72
     Amortization of deposit premium
         and conversion cost                                 5                   6                  17                    17
     Other expense                                          50                  19                 118                    74
                                                      --------            --------           ---------              --------
            Total noninterest expense                      467                 352               1,301                 1,022
                                                      --------            ---------          ---------              --------

Profit before federal income tax                           208                 111                 517                   183

Federal income tax                                          70                   0                 167                     0
                                                      --------            --------           ---------              --------

Net profit                                            $    138            $    111           $     350              $    183
                                                      ========            ========           =========              ========

Basic and diluted profit per share                    $    .13            $    .12           $     .34              $    .20
                                                      ========            ========           =========              ========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
  Three and Nine Month Periods Ended September 30, 2001 and September 30, 2000
                             (dollars in thousands)
                                   (Unaudited)


<TABLE>
                                                        Three Months        Three Months        Nine Months        Nine Months
                                                            Ended               Ended              Ended              Ended
                                                        September 30,       September 30,      September 30,      September 30,
                                                            2001                2000               2001               2000
                                                        ------------        ------------       ------------       ------------


<S>                                                      <C>                <C>                 <C>               <C>
Net Profit as Reported                                   $     138          $     111           $     350         $     183

Other Comprehensive Income, Net of Tax:

       Change in unrealized gain on securities
           available for sale                                  297                 (5)                314                17
                                                         ---------          ---------           ---------         ---------

Comprehensive Profit                                     $     435          $     106           $     664         $     200
                                                         =========          =========           =========         =========
</TABLE>

















          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                      Nine Months ended September 30, 2001
                             (dollars in thousands)
                                   (Unaudited)


<TABLE>
                                                                                                Accumulated
                                                                                                   Other              Total
                                                     Common      Capital     Accumulated       Comprehensive      Shareholders'
                                                      Stock      Surplus       Deficit             Income            Equity
                                                    ---------    -------     -----------       -------------      ------------

<S>                                                  <C>         <C>          <C>                 <C>               <C>
Balance December 31, 2000                            $ 4,306     $ 4,306      $  (335)            $     1           $ 8,278

Net income for nine months
Ended September 30, 2001 (unaudited)                                              350                                   350

Increase  in  fair  market  value  of  securities
available for sale                                         0           0            0                 314               314
                                                     -------     -------      -------             -------           -------


Balance September 30, 2001                           $ 4,306     $ 4,306      $    15             $   315           $ 8,942
                                                     =======     =======      =======             =======           =======
</TABLE>

















          See accompanying notes to consolidated financial statements.


                                       6
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
          Nine Months ended September 30, 2001, and September 30, 2000
                             (dollars in thousands)
                                   (unaudited)


<TABLE>
                                                                            Nine Months                         Nine Months
                                                                               Ended                               Ended
                                                                           September 30,                       September 30,
                                                                               2001                                 2000
                                                                            ----------                           ----------
<S>                                                                              <C>                            <C>
Net Cash Provided by Operating Activities:
       Net cash provided by operating activities                                 $      901                     $      441

Cash Flows from Investing Activities:
       Net increase in loans                                                         (7,231)                       (10,191)
       Purchase of held-to-maturity securities                                       (2,906)                       (10,420)
       Proceeds from maturities of held-to-maturity securities                       12,059                            995
       Proceeds from sales of held-to-maturity securities                             4,368                            0
       Purchase of available-for-sale securities                                    (46,719)                        (3,190)
       Proceeds from sales of available-for-sale securities                          24,656                          4,093
       Property and equipment expenditures                                             (558)                           (33)
                                                                                 ----------                     -----------
       Net cash used in investing activities                                        (16,331)                       (18,246)

Cash Flows from Financing Activities:
       Increase on deposits                                                          17,078                         18,116
                                                                                 ----------                     ----------

Net increase in cash and cash equivalents                                             1,648                            311
Cash and cash equivalents at beginning of year                                        3,412                          2,467
                                                                                 ----------                     ----------

Cash and cash equivalents at September 30, 2001 and 2000                         $    5,060                     $    2,778
                                                                                 ==========                     ==========
</TABLE>













          See accompanying notes to consolidated financial statements.


                                       7
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              September 30, 2001 (unaudited) and December 31, 2000



NOTE 1 - BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information  and with the  instructions  to Form  10-QSB and
Article  10 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 only of normal recurring accruals)  considered  necessary for a fair
presentation  have been included.  Operating  results for the three months ended
September 30, 2001,  are not  necessarily  indicative of the results that may be
expected for the year ending December 31, 2001. For further  information,  refer
to the consolidated  financial  statements and footnotes thereto included in the
Company's  Proxy  Statement  dated April 2, 2001  containing  audited  financial
statements as of December 31, 2000 and 1999.

NOTE 2 - COMPUTATION OF EARNINGS PER SHARE

     Basic  earnings  (loss) per share is based on net income (loss)  divided by
the weighted average number of shares outstanding during the period.


NOTE 3 - PRINCIPLES OF CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
Clarkston   Financial   Corporation  (the   "Company"),   and  its  wholly-owned
subsidiary,  Clarkston  State Bank (the "Bank").  All  significant  intercompany
accounts and transactions have been eliminated in consolidation.





                                       4
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              September 30, 2001 (unaudited) and December 31, 2000

NOTE 4 - SECURITIES

The  amortized  cost and fair values of securities  were as follows  (dollars in
thousands):

Available for Sale
<TABLE>
                                                                       Gross               Gross           Estimated
                                                    Amortized        Unrealized         Unrealized          Market
                                                       Cost            Gains              Losses             Value
                                                    ---------        ----------         ----------         ---------
  <S>                                               <C>               <C>                <C>               <C>
  September 30, 2001 (Unaudited)
         Taxable variable rate demand
             Municipal revenue bonds,
             Short term corporate
             Commercial paper, and bonds
             of government agencies                 $ 30,737          $    315           $      0          $ 31,052
                                                    ========          ========           ========          ========

Held to Maturity


  September 30, 2001 (Unaudited)
         Taxable variable rate demand
             Municipal revenue bonds,
             Short term corporate
             Commercial paper, and bonds
             of government agencies                 $  7,821          $    291           $      0          $  8,112
                                                    ========          ========           ========          ========
</TABLE>

During  the  nine  month  period  ended   September  30,  2001,  the  bank  sold
approximately $4,400,000 of securities,  classified as held-to-maturity,  due to
concerns  about  the  issuer's  creditworthiness  and  in  some  cases,  adverse
prepayment risks.

Contractual  maturities  of debt  securities  at  September  30,  2001,  were as
follows.  Expected  maturities may differ from  contractual  maturities  because
borrowers may have the right to call or prepay  obligations with or without call
or prepayment penalties.
<TABLE>
                                                                            Available-for-Sale Securities
                                                                         ----------------------------------
                                                                         Amortized              Estimated
                                                                           Cost                Market Value
                                                                         ---------             ------------
                                                                               (dollars in thousands)

      <S>                                                                     <C>                   <C>
      Due from 2001 to 2002                                                   $   290               $   292
      Due from 2002 to 2004                                                         0                     0
      Due from 2004 to 2006                                                     1,000                 1,001
      Due from 2006 to 2034                                                    29,447                29,759
                                                                               ------                ------
                                                                              $30,737               $31,052
                                                                               ------                ------

                                                                                    Held-To-Maturity
                                                                         ----------------------------------
                                                                         Amortized              Estimated
                                                                           Cost                Market Value
                                                                         ---------             ------------

      Due from 2001-2002                                                      $     0               $     0
      Due from 2002-2004                                                          853                   871
      Due from 2004-2006                                                        1,322                 1,373
      Due from 2006-2031                                                        5,646                 5,868
                                                                               ------                ------
                                                                              $ 7,821               $ 8,112
                                                                               ======                ======
</TABLE>
                                   (Continued)

                                       9
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              September 30, 2001 (unaudited) and December 31, 2000




NOTE 5 - LOANS

Loans are as follows (dollars in thousands):

<TABLE>
                                                                              September 30,             December 31,
                                                                                  2001                     2000
                                                                              ------------              -----------
                                                                              (Unaudited)

        <S>                                                                        <C>                      <C>
        Commercial                                                                $ 22,577                 $ 16,100
        Mortgage                                                                     3,654                    3,955
        Consumer                                                                     6,762                    5,707
                                                                                  --------                 --------
                                                                                    32,993                   25,762
        Allowance for loan losses                                                      450                      379
                                                                                  --------                 --------
                                                                                  $ 32,543                 $ 25,383
                                                                                  ========                 ========
</TABLE>



Activity in the allowance for loan losses is as follows (dollars in thousands):




<TABLE>
                                                                              Nine months                For the
                                                                                 Ended                  Year Ended
                                                                              September 30,             December 31,
                                                                                  2001                     2000
                                                                              ------------              -----------
                                                                              (Unaudited)

        <S>                                                                       <C>                      <C>
        Balance at beginning of period                                            $    379                 $    140
               Provision charged to operating expense                                   73                      243
        Net loans (charge-offs) recoveries                                             (2)                      (4)
                                                                                  --------                 --------

        Balance at end of periods                                                 $    450                 $    379
                                                                                  ========                 ========

        Allowance for loan losses as a percentage of
               loans at end of period                                                1.36%                    1.47%
                                                                                  ========                 ========
</TABLE>











                                   (Continued)

                                       10
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              September 30, 2001 (unaudited) and December 31, 2000



NOTE 6 - PREMISES AND EQUIPMENT - NET

Premises and equipment are as follows (dollars in thousands):

<TABLE>
                                                                                       Accumulated         Carrying
                                                                         Cost         Depreciation           Value
                                                                         ----         ------------         --------
<S>                                                                    <C>             <C>                <C>
September 30, 2001 (unaudited)
       Building and improvements                                       $     567       $      24          $     543
       Furniture and equipment                                               449             212                237
                                                                       ---------       ---------          ---------
                                                                       $   1,016       $     236          $     780
                                                                       =========       =========          =========

December 31, 2000
       Building and improvements                                       $      86       $       8          $      78
       Furniture and equipment                                               372             168                204
                                                                       ---------       ---------          ---------
                                                                       $     458       $     176          $     282
                                                                       =========       =========          =========
</TABLE>




NOTE 7 - DEPOSITS

Interest-bearing deposits are summarized as follows (dollars in thousands):


<TABLE>
                                                                            September 30,              December 31,
                                                                                2001                       2000
                                                                            ------------               -----------

<S>                                                                               <C>                     <C>
Demand deposit accounts                                                          $  2,094                 $  1,635
Money market accounts                                                               4,411                    3,524
Savings accounts                                                                    5,971                    5,796
Certificates of Deposit                                                            48,183                   33,855
                                                                                 --------                 --------
                                                                                 $ 60,659                 $ 44,810
                                                                                 ========                 ========
</TABLE>











                                   (Continued)


                                       11
<PAGE>



Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

General

     Clarkston Financial  Corporation (the "Company") is a Michigan  corporation
incorporated  on May 18,  1998.  The  Company is the bank  holding  company  for
Clarkston State Bank (the "Bank").  The Bank commenced  operations on January 4,
1999. The Bank is a Michigan chartered bank with depository  accounts insured by
the Federal  Deposit  Insurance  Corporation.  The Bank provides a full range of
commercial and consumer banking services,  primarily in Clarkston,  Michigan and
the surrounding market area primarily located in north Oakland County, Michigan.
The Bank  operates five customer  service  locations  including two full service
branches.

Financial Condition

     Total assets of the Company  increased  by $17.7  million or 29.4% to $77.9
million at September  30,  2001,  from $60.2  million at December 31, 2000.  The
increase in assets is primarily  attributable  to the Bank continuing to attract
customer deposits.  The Company anticipates that the Bank's assets will continue
to increase during 2001, which is the Bank's third full year of operations.

     Cash and cash equivalents,  which include federal funds sold and short-term
investments,  increased  $1.7 million or 50% to $5.1  million at  September  30,
2001,  from $3.4  million at December 31,  2000.  The increase is primarily  the
result of prepayments and maturities of securities occurring in September 2001.

     Securities  increased  $8.6 million or 28.4% to $38.9  million at September
30, 2001 from $30.3 million at December 31, 2000.  The increase is the result of
slower than expected loan growth.

     The Company's  portfolio of  held-to-maturity  securities  declined to $7.8
million at  September  30, 2001 from $21.3  million at December  31,  2000.  The
decrease is primarily a result of call options being exercised by the issuers of
the  securities,  and, in some  cases,  management's  decision  to sell  certain
securities  as a result of  concerns  over the  issuer's  creditworthiness.  New
securities  purchased by the Bank with proceeds from those  maturities  and from
new deposits have been classified as available-for-sale.

     Total  loans  increased  by $7.2  million  or  27.9% to  $33.0  million  at
September 30, 2001, from $25.8 million at December 31, 2000. Management believes
that the total loans will continue to increase over time,  although  potentially
at a lower rate of increase.

     The  allowance  for loan  losses as of  September  30,  2001 was  $450,000,
representing  approximately  1.36%  of  total  loans  outstanding,  compared  to
$379,000 as of December 31, 2000.

     As of December 31, 2000, the Company had an accumulated deficit of $335,000
and  as  of  September  30,  2001,  the  accumulated  profit  was  $15,000.  The
accumulated  deficit  was the result of opening  the Bank's  main office and its
branches,  wages paid to  employees,  fees and expenses  incurred in forming the
Company and applying for regulator approvals. The operating profits the bank has
earned in 2000 and 2001 has eliminated the accumulated deficit.

                                       12
<PAGE>
Results of Operations

     The  Company's  net  profit  was  $138,000  for the third  quarter  of 2001
compared to net profit of $111,000 for the third quarter of 2000. Net profit was
$350,000 for the nine months ended September 30, 2001,  compared to $183,000 for
the nine months ended September 30, 2000. The Bank began  operations in 1999 and
has earned a profit every month since  January,  2000.  Net profit for the three
and nine month periods ended  September  30, 2001  included  federal  income tax
provision of $70,000 and $167,000,  respectively. The comparable periods in 2000
did not include any federal income tax provision due to the Company's  operating
loss carryforward for federal tax purposes.

     Interest income for the third quarter of 2001 was $1.3 million, an increase
of 46.1% from interest  income of $890,000 for the third  quarter of 2000.  This
increase resulted primarily from the increase in loans and securities.  Interest
income was $3.5  million  for the nine  months  ended  September  30,  2001,  an
increase of 59.1% from interest income of $2.2 million for the nine months ended
September 30, 2000.

     Interest  expense was $1.9 million for the nine months ended  September 30,
2001,  an increase of 72.7% from  interest  expense of $1.1 million for the nine
months ended  September  30, 2000.  This  consisted of interest paid on interest
bearing deposits.

     The Company had an  allowance  for loan  losses of  approximately  1.36% of
total loans at September , 2001.  The  provision for loan loss for the three and
nine  month  periods  ended  September  30 ,  2001,  was  $32,000  and  $73,000,
respectively.  Management  believes the current  rate of providing  for the loan
loss reserve is adequate.

     In each accounting period,  management evaluates the problems and potential
losses in the loan portfolio.  Consideration is also given to off-balance  sheet
items that may  involve  credit  risk,  such as  commitments  to extend  credit.
Management's  evaluation of the allowance is further based on  consideration  of
actual loss  experience,  the present and  prospective  financial  condition  of
borrowers, adequacy of collateral,  industry concentrations within the portfolio
and general economic conditions.  The results of these evaluations are reflected
in the allowance and periodic provision for credit losses.

     The  primary  risk  element   considered  by  management   regarding   each
installment  and  residential  real estate loan is the lack of timely  payments.
Management  has a reporting  system that monitors past due loans and has adopted
policies  to pursue  its  creditor's  rights  in order to  preserve  the  Bank's
position.  The  primary  risk  elements  concerning  commercial  loans  are  the
financial condition of the borrower,  the sufficiency of the collateral and lack
of timely  payment.  Management has a policy of requesting and reviewing  annual
financial statements from its commercial loan customers and periodically reviews
the existence and value of collateral for selected loans.

     Noninterest expense was $467,000 for the third quarter of 2001, an $115,000
(or 32.7%) increase over the third quarter of 2000, with the increase  primarily
attributable  to  increases in salaries and benefits due to the increase of full
time equivalents and normal raises given to employees. There were also increases
in computer and data processing expenses due to growth in the number of accounts
processed.

                                       13
<PAGE>
Liquidity and Capital Resources

     Liquidity  is  measured by our  ability to raise  funds  through  deposits,
borrowed funds,  capital or cash flow from the repayment of loans and investment
securities.  These funds are used to meet deposit withdrawals,  maintain reserve
requirements,  fund loans and support our  operations.  Liquidity  is  primarily
achieved  through the growth of deposits  and liquid  assets such as  securities
available  for sale,  matured  securities,  and federal  funds  sold.  Asset and
liability  management  is the process of managing our balance sheet to achieve a
mix of earning  assets  and  liabilities  that  maximizes  profitability,  while
providing adequate liquidity.

     Our liquidity strategy is to fund loan growth with deposits and to maintain
an adequate  level of short- and  medium-term  investments to meet typical daily
loan and deposit  activity.  Although  deposits from  depositors  located in our
market area have  consistently  increased,  there is no  assurance  that deposit
growth alone will be sufficient  to fund our loan growth and provide  monies for
additional investing activities.

     Shareholders'  equity  is a  non-interest  bearing  source  of  funds  that
provides  support for asset  growth.  The Company  obtained  its initial  equity
capital in an initial public offering of its common stock in November, 1998. The
Company's plan of operation for the next twelve months does not  contemplate the
need to raise additional  capital during that period.  Management  believes that
its current capital and liquidity will provide the Company with adequate capital
to support its expected  level of deposit and loan growth and to otherwise  meet
its cash and capital requirements for at least the next year.

Forward Looking Statements

     This report contains certain forward-looking  statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities  Exchange  Act  of  1934,  as  amended.   The  Company  intends  such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking  statements  contained in the Private  Securities  Reform Act of
1995,  and is  including  this  statement  for  purposes  of these  safe  harbor
provisions.  Forward-looking statements,  which are based on certain assumptions
and describe  future plans,  strategies  and  expectations  of the Company,  are
generally  identifiable  by use  of the  words  "believe,"  "expect,"  "intend,"
"anticipate,"  "estimate,"  "project"  or  similar  expressions.  The  Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse affect on the
operations and future prospects of the Company and the subsidiaries include, but
are not limited to, changes in: interest  rates,  general  economic  conditions,
legislative/regulatory  changes,  monetary  and  fiscal  policies  of  the  U.S.
Government,  including  policies of the U.S.  Treasury  and the Federal  Reserve
Board, the quality or composition of the loan or investment  portfolios,  demand
for loan products, deposit flows, competition,  demand for financial services in
the Company's  market area and accounting  principles,  policies and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such  statements.  Further
information  concerning  the  Company  and its  business,  including  additional
factors  that  could  materially  affect the  Company's  financial  results,  is
included in the Company's filings with the Securities and Exchange Commission.

                                       14
<PAGE>
PART II - OTHER INFORMATION


Item 1.   Legal Proceedings.

          From time to time, we  may be  involved  in  various legal proceedings
that are incidental to our business.  In our opinion,  we are not a party to any
current legal proceedings that are material to our financial  condition,  either
individually or in the aggregate.


Item 2.   Changes in Securities and Use of Proceeds.

None.


Item 3.   Defaults Upon Senior Securities.

None.


Item 4.   Submission of Matters to a Vote of Securities Holders

None.


Item 5.   Other Information.

None.


Item 6.   Exhibits and Reports on Form 8-K.

     (a)  Exhibits -

     (b)  Reports on Form 8-K - None.


                                       15
<PAGE>
                                   SIGNATURES


     In accordance with the requirements of the Securities Exchange Act of 1934,
as amended,  the Registrant has duly caused this Quarterly Report on Form 10-QSB
for the quarter  ended  September  30,  2001,  to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                CLARKSTON FINANCIAL CORPORATION


                                /s/ David T. Harrison
                                ---------------------------------
                                David T. Harrison
                                President and Chief Executive Officer


                                /s/ Terry R. Wolf
                                ---------------------------------
                                Terry R. Wolf
                                Principal Financial and Account Officer


DATE:    November 10, 2001