# 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 March 31, 2004

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                        | 
|(State of other jurisdiction of | 
|incorporation or organization)  | 

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:
1,043,514 shares of the Companys Common Stock (no par value) were outstanding
as of May 13, 2004.

Transitional Small Business
Disclosure Format (check one): Yes ___    No _X_

---



# INDEX

|                                                      | PageNumber(s)
|----------------------------------------------------- | -------------
|                                                      |              
|Part I     Financial Information (unaudited):         |              
|                                                     
|Item 1                                                |              
|Consolidated Financial Statements                     |              
|Notes to Consolidated Financial Statements            |              
|                                                      |              
|Item 2                                                |              
|Management's Discussion and Analysis of               |              
|Financial Condition and Results of Operations         |              
|                                                      |              
|Item 3                                                |              
|Controls & Procedures                                 |              
|                                                      |              
|Part II     Other                                     |              
|                                                      |              
|                                                      |              
|Item 1                                                |              
|Legal Proceedings                                     |              
|                                                      |              
|                                                      |              
|Item 2                                                |              
|Changes in Securities and Use of Proceeds             |              
|                                                      |              
|                                                      |              
|Item 3                                                |              
|Defaults Upon Senior Securities                       |              
|                                                      |              
|                                                      |              
|Item 4                                                |              
|Submission of Matters to a Vote of Securities Holders |              
|                                                      |              
|                                                      |              
|Item 5                                                |              
|Other Information                                     |              
|                                                      |              
|                                                      |              
|Item 6                                                |              
|Exhibits and Reports on Form 8-K                      |              
|                                                      |              
|Signatures                                            |              

2

---



# Part I Financial
Information (unaudited)

# CLARKSTON FINANCIAL
CORPORATION                                             CONSOLIDATED BALANCE SHEET
                                 March 31, 2004 (unaudited) and December 31, 2003
                                              (dollars in thousands)

|ASSETS                                       | March 31,2004 | December 31,2003
|-------------------------------------------- | ------------- | ----------------
|                                             |               |                 
|
|Cash and cash equivalents                    |               |                 
|Total cash and due from banks                |               | $     3,416     
|Federal funds sold                           |               | 4,475           
|                                             |               |                 
|Total cash and cash equivalents              |               | 7,891           
|Securities available for sale, at fair value |               | 50,109          
|Loans, less loan loss reserve                |              
|Total loans                                  |               | 87,489          
|Allowance for loan losses                    |               | (1,041          
|                                             |               |                 
|Net loans                                    |               | 86,448          
|Banking premises and equipment               |               | 1,452           
|Interest receivable                          |               | 600             
|Deferred tax asset                           |               | 272             
|Other assets                                 |               | 509             
|                                             |               |                 
|Total assets                                 |               | $ 147,281       
|                                             |               |                 
|LIABILITIES AND SHAREHOLDERS' EQUITY         |              
|Deposits                                     |              
|Noninterest-bearing                          |               | 18,148          
|Interest-bearing                             |               | 111,432         
|                                             |               |                 
|Total deposits                               |               | 130,580         
|Junior subordinated debentures held by       |              
|unconsolidated subsidiary trust              |               | 4,000           
|Interest payable and other liabilities       |               | 705             
|                                             |               |                 
|Total liabilities                            |               | 135,285         
|Shareholders' equity                         |              
|Common stock, no par value: 10,000,000       |              
|Shares authorized; 1,039,264 shares          |              
|issued and outstanding as of March 31, 2004  |              
|and 1,039,184 December 31, 2003              |               | 4,377           
|Capital surplus                              |               | 4,377           
|Restricted stock - unearned compensation     |               | (27             
|Retained earnings                            |               | 2,659           
|Accumulated other comprehensive income       |               | 610             
|                                             |               |                 
|Total shareholders' equity                   |               | 11,996          
|                                             |               |                 
|Total liabilities and shareholders' equity   |               | $ 147,281       
|                                             |               |                 

See accompanying notes
to consolidated financial statements  3

---



# CLARKSTON FINANCIAL
CORPORATION                                          CONSOLIDATED STATEMENT OF INCOME
                            Three Month Periods Ended March 31, 2004 and March 31, 2003
                                   (dollars in thousands, except per share data)
                                                    (unaudited)

|                                      | Three MonthsEndedMarch 31, 2004 | Three MonthsEndedMarch 31, 2003
|------------------------------------- | ------------------------------- | -------------------------------
|                                      |                                 |                                
|Interest Income                       |                                 |                                
|Loans, including fees                 |                                 | $1,364                         
|Securities                            |                                 | 497                            
|Federal Funds sold                    |                                 | 11                             
|                                      |                                 |                                
|Total interest income                 |                                 | 1,872                          
|Total Interest Expense                |                                 | 673                            
|                                      |                                 |                                
|Net Interest Income                   |                                 | 1,199                          
|Provision for loan losses             |                                 | 80                             
|                                      |                                 |                                
|Net interest income                   |                                
|After provision for loan losses       |                                 | 1,119                          
|Noninterest income                    |                                
|Gains on sale of securities           |                                 | 6                              
|Gain on sale of loans                 |                                 | 9                              
|Gain (loss) other                     |                                 | 2                              
|Other income                          |                                 | 116                            
|                                      |                                 |                                
|Total noninterest income              |                                 | 133                            
|Noninterest expense                   |                                
|Salaries and benefits                 |                                 | 424                            
|Occupancy expense                     |                                 | 66                             
|Office expense                        |                                 | 54                             
|Computer and data processing expenses |                                 | 84                             
|Advertising and public relations      |                                 | 46                             
|Professional fees                     |                                 | 68                             
|Amortization of deposit premium       |                                
|and conversion cost                   |                                 | 5                              
|Other expense                         |                                 | 103                            
|                                      |                                 |                                
|Total noninterest expense             |                                 | 850                            
|                                      |                                 |                                
|Income before federal income tax      |                                 | 402                            
|Federal income tax                    |                                 | 100                            
|                                      |                                 |                                
|Net income                            |                                 | $   302                        
|                                      |                                 |                                
|Basic earnings per share              |                                 | $   .29                        
|                                      |                                 |                                
|Diluted earnings per share            |                                 | $   .28                        
|                                      |                                 |                                

See accompanying notes
to consolidated financial statements.  4

---



# CLARKSTON FINANCIAL
CORPORATION                                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME                             Three Month Periods Ended March 31, 2004 and March 31,
2003                                               (dollars in thousands)
                                                    (Unaudited)

|                                               | Three MonthsEndedMarch 31, 2004 | Three MonthsEndedMarch 31, 2003
|---------------------------------------------- | ------------------------------- | -------------------------------
|                                               |                                 |                                
|Net Income as Reported                         |                                 | $ 302                          
|Other Comprehensive Income (loss), Net of Tax: |                                
|Change in unrealized gain / loss on securities |                                
|available for sale                             |                                 | 458                            
|                                               |                                 |                                
|Comprehensive Income                           |                                 | $ 760                          
|                                               |                                 |                                

5

---



# CLARKSTON FINANCIAL
CORPORATION                              CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY                                       Three Month Period ended March
31, 2004                                               (dollars in thousands)
                                                    (Unaudited)

|                                 | Common Stock | Capital Surplus | UnearnedComp. | RetainedEarnings | AccumulatedOtherCompre-hensiveIncome | TotalShare-holders'Equity
|-------------------------------- | ------------ | --------------- | ------------- | ---------------- | ------------------------------------ | -------------------------
|                                 |              |                 |               |                  |                                      |                          
|Balance December 31, 2003        |              |                 | $             | 4,376            |                                      | $                        
|                                 |              |                
|Issuance of  stock               |              |                 |               | 1                |                                      |                          
|                                 |              |                
|Recognition of compensation for  |              |                
|restricted stock award           |              |                 |               | --               |                                      |                          
|                                 |              |                
|Net income for three months      |              |                
|ended March 31, 2004             |              |                
|(unaudited)                      |              |                 |               | --               |                                      |                          
|                                 |              |                
|Increase in fair market value of |              |                
|securities available for sale    |              |                 |               | --               |                                      |                          
|                                 |              |                 |               |                  |                                      |                          
|Balance March 31, 2004           |              |                 | $             | 4,377            |                                      | $                        
|                                 |              |                 |               |                  |                                      |                          

6

---



# CLARKSTON FINANCIAL
CORPORATION                                        CONSOLIDATED STATEMENT OF CASH FLOWS
                            Three Month Periods ended March 31, 2004 and March 31, 2003
                                              (dollars in thousands)
                                                    (unaudited)

|                                                     | Three MonthsEndedMarch 31, 2004 | Three MonthsEndedMarch 31, 2003
|---------------------------------------------------- | ------------------------------- | -------------------------------
|                                                     |                                 |                                
|Net Cash Provided by Operating Activities:           |                                 |                                
|Net cash provided by operating activities            |                                 | $      436                     
|Cash Flows from Investing Activities:                |                                
|Net increase in loans                                |                                 | (3,437                         
|Purchase of available-for-sale securities            |                                 | (13,976                        
|Proceeds from sales of available-for-sale securities |                                 | 13,055                         
|Property and equipment expenditures                  |                                 | (58                            
|                                                     |                                 |                                
|Net cash used in investing activities                |                                 | (4,416                         
|Cash Flows from Financing Activities:                |                                
|Increase in deposits                                 |                                 | 3,937                          
|Proceeds from sale of stock                          |                                 | 2                              
|                                                     |                                 |                                
|Net Cash provided by financing activities            |                                 | 3,939                          
|Net increase (decrease) in cash and cash equivalents |                                 | (41                            
|Cash and cash equivalents at beginning of year       |                                 | 7,932                          
|                                                     |                                 |                                
|Cash and cash equivalents at March 31, 2004 and 2003 |                                 | $   7,891                      
|                                                     |                                 |                                

See accompanying notes
to consolidated financial statements.  7

---



# NOTE 1  SUMMARY OF
CRITICAL ACCOUNTING POLICIES

Basis of Presentation and
Consolidation  The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, the Bank. All significant intercompany
transactions are eliminated in consolidation.

Use of Estimates The
accounting and reporting policies of the Company and its subsidiary conform to accounting
principles generally accepted in the United States of America. Management is required to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these estimates and
assumptions. Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses and deferred
tax assets.

Cash and Cash Equivalents For the purpose of the consolidated statement of cash flows, cash and cash
equivalents include cash and balances due from banks and federal funds sold, all of which
mature within 90 days.

Securities Debt
securities that management has the positive intent and ability to hold to maturity are
classified as held to maturity and recorded at amortized cost. Debt securities
not classified as held to maturity and equity securities with readily determinable fair
values are classified as available for sale and recorded at fair value, with
unrealized gains and losses excluded from earnings and reported in other comprehensive
income.

Purchase premiums and discounts are
recognized in interest income using the interest method over the terms of the securities.
Declines in the fair value of held-to-maturity and available-for-sale securities below
their cost that are deemed to be other than temporary are reflected in earnings as
realized losses. Gains and losses on the sale of securities are recorded on the trade date
and are determined using the specific identification method.

Loans The Company
grants mortgage, commercial, and consumer loans to customers. Loans are reported at their
outstanding unpaid principal balances adjusted for charge offs, the allowance for loan
losses, and any deferred fees or costs on originated loans. Interest income is accrued on
the unpaid principal balance. Loan origination fees, net of certain direct origination
costs, are deferred and recognized as an adjustment of the related loan yield using the
interest method.

The accrual of interest on loans is
discontinued at the time the loan is 90 days delinquent unless the credit is well-secured
and in process of collection. In all cases, loans are placed on nonaccrual or charged off
at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not
collected for loans that are placed on nonaccrual or charged off is reversed against
interest income. The interest on these loans is accounted for on the cash basis or
cost-recovery method, until qualifying for return to accrual. Loans are returned to
accrual status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.

Allowance for Loan Losses The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses are charged
against the allowance when management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance.

8

---



The allowance for loan losses is
evaluated on a regular basis by management and is based on managements periodic
review of the collectibility of the loans in light of historical experience, the nature
and volume of the loan portfolio, adverse situations that may affect the borrowers
ability to repay, estimated value of any underlying collateral, and prevailing economic
conditions. This evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.

The allowance consists of specific,
general, and unallocated components. The specific components relate to loans that are
classified as either doubtful, substandard, or special mention. For such loans that are
also classified as impaired, an allowance is established when the discounted cash flows
(or collateral value or observable market price) of the impaired loan is lower than the
carrying value of that loan. The general component covers non-classified loans and is
based on historical loss experience adjusted for qualitative factors. An unallocated
component is maintained to cover uncertainties that could affect managements
estimate of probable losses.

The unallocated component of the
allowance reflects the margin of imprecision inherent in the underlying assumptions used
in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when,
based on current information and events, it is probable that the Corporation will be
unable to collect the scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value, and the profitability of
collecting scheduled principal and interest payments when due. Loans that experience
insignificant payment delays and payment shortfalls generally are not classified as
impaired. Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances surrounding
the loan and the borrower, including length of the delay, the reasons of the delay, the
borrowers prior payment record, and the amount of the shortfall in relation to the
principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial
and construction loans by either the present value of expected future cash flows
discounted at the loans effective interest rate, the loans obtainable market
price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of homogeneous loans are
collectively evaluated for impairment. Accordingly, the Corporation does not separately
identify individual consumer and residential loans for impairment disclosures.

Credit-related Financial
Instruments In the ordinary course of business, the Company has entered into
commitments to extend credit, commercial letters of credit, and standby letters of credit.
Such financial instruments are recorded when they are funded.

Banking Premises and Equipment Land is carried at cost. Buildings and equipment are stated at cost, less
accumulated depreciation computed on the straight-line method over the estimated useful
lives of the assets.

Income Taxes Deferred
income tax assets and liabilities are determined using the liability (or balance sheet)
method. Under this method, the net deferred tax asset or liability is determined based on
the tax effects of the various temporary differences between the book and tax bases of the
various balance sheet assets and liabilities and gives current recognition to changes in
tax rates and laws.

Stock Compensation Plans The Company applies the provisions of APB Opinion No. 25, Accounting
for Stock-based Compensation, accounting for all employee stock option grants using
the intrinsic value method. Compensation expense in the pro forma disclosures is not
indicative of future amounts, as options vest over several years and additional grants may
be made each year.

9

---



Earnings per Share Basic earnings per share represents income available to common
stockholders divided by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share reflects additional common shares that would have
been outstanding if dilutive potential common shares had been issued, as well as any
adjustment to income that would result from the assumed issuance. Potential common shares
that may be issued by the Company relate solely to outstanding stock options and are
determined using the treasury stock method.

Book Value per Share
Book value per share represents total stockholders equity divided by the total
number of shares outstanding at the end of each period.

Other Comprehensive Income Accounting principles generally require that recognized revenue, expenses,
gains, and losses be included in net income. Certain changes in assets and liabilities,
however, such as unrealized gains and losses on available-for-sale securities, are
reported as a direct adjustment to the equity section of the balance sheet. Such items,
along with net income, are considered components of comprehensive income.

# NOTE 2 
COMPUTATION OF EARNINGS PER SHARE

Basic earnings (loss) per share is
based on net income (loss) divided by 1,035,384, the weighted average number of shares
outstanding during the period.

# NOTE 3  SECURITIES

At March 31, 2004, investment
securities having a carrying value of $3.4 million were pledged to local municipalities
and county governments. Securities are pledged as required by law to be used as collateral
for public liabilities.

The Bank does not have any securities
in its portfolio that are classified as held to maturity. All securities are classified as
available for sale and the amortized cost and fair values of those securities are as
follows (dollars in thousands):

# Available for Sale

|                             | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | EstimatedMarketValue
|---------------------------- | ------------- | -------------------- | --------------------- | --------------------
|                             |               |                      |                       |                     
|March 31, 2004 (Unaudited)   |               |                      |                       |                     
|Taxable variable rate demand |              
|Municipal revenue bonds,     |              
|Short term corporate         |              
|Commercial paper, and bonds  |              
|of government agencies       |               | $49,184              |                       | $995                
|                             |               |                      |                       |                     

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. Listed below are the contractual maturities
of debt securities at March 31, 2004:

10

---



|                      | Available-for-Sale Securities
|--------------------- | -----------------------------
|
|                      |                              
|                      |                              
|Due from 2004 to 2005 |                              
|Due from 2005 to 2007 |                              
|Due from 2007 to 2009 |                              
|Due from 2010 to 2041 |                              
|                      |                              
|                      |                              
|                      |                              

# NOTE 4  LOANS

Loans
are as follows (dollars in thousands):

|                          | March 31,2004 | December 31,2003
|------------------------- | ------------- | ----------------
|                          |               |                 
|Commercial                |               | $ 75,515        
|Mortgage                  |               | 8,188           
|Consumer                  |               | 3,786           
|                          |               |                 
|Gross Loans               |               | 87,489          
|Allowance for loan losses |               | (1,041          
|                          |               |                 
|Net Loans                 |               | $ 86,448        
|                          |               |                 

11

---



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

|                                             | Three monthsEndedMarch 31, 2004(unaudited) | For theYear EndedDecember 31, 2003
|-------------------------------------------- | ------------------------------------------ | ----------------------------------
|                                             |                                            |                                   
|Balance at beginning of period               |                                            | $ 1,092                           
|Provision charged to operating expense       |                                            | 80                                
|Loan losses                                  |                                            | (160                              
|Loan recoveries                              |                                            | 29                                
|                                             |                                            |                                   
|Balance at end of period                     |                                            | $ 1,041                           
|                                             |                                            |                                   
|Allowance for loan losses as a percentage of |                                           
|loans at end of period                       |                                            | 1.19                              
|                                             |                                            |                                   

The table below outlines the
allowance for loan loss allocations (dollars in thousands):

|                      | March 31, 2004 | December 31, 2003
|--------------------- | -------------- | -----------------
|                      |                |                  
|                      |                |                  
|Commercial            |                | $   297          
|Real estate mortgages |                | 730              
|Consumer              |                | 14               
|Unallocated           |                | 0                
|                      |                |                  
|Total                 |                | $1,041           
|                      |                |                  

The above allocations are not
intended to imply limitations on the usage of the allowance. The entire allowance is
available for any future loans without regards to loan type.

# NOTE 5  PREMISES
AND EQUIPMENT-NET

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

|                                  | (unaudited)March 31, 2004 | December 31, 2003
|--------------------------------- | ------------------------- | -----------------
|                                  |                           |                  
|Building and improvements         |                           | $1,059           
|Land and improvements             |                           | 67               
|Furniture and equipment           |                           | 851              
|                                  |                           |                  
|Total Bank premises and equipment |                           | 1,977            
|Less accumulated depreciation     |                           | 525              
|                                  |                           |                  
|Net carrying amount               |                           | $1,452           
|                                  |                           |                  

12

---



# NOTE 6  DEPOSITS

Deposits are summarized as follows
(dollars in thousands):

|                                             | March 31,2004 | December 31,2003
|-------------------------------------------- | ------------- | ----------------
|                                             |               |                 
|Non-interest bearing demand deposit accounts |               | $  19,148       
|Interest-bearing demand deposit accounts     |               | 10,248          
|Savings accounts                             |               | 5,504           
|Money market accounts                        |               | 51,788          
|Certificates of deposit                      |               | 43,892          
|                                             |               |                 
|                                             |               | $130,580        
|                                             |               |                 

# NOTE 7  STOCK
BASED COMPENSATION

The Corporation has two stock-based
compensation plans. Under the employees Stock Compensation Plan (Employee
Plan), the Corporation may grant options or issue restricted stock to key employees
for up to 21,445 shares of common stock. Under the 1998 Founding Directors Stock Option
Plan (Director Plan), the Corporation may grant options for up to 72,693
shares of common stock. Under both plans, there is a minimum vesting period of between one
to three years before the options may be exercised, and all options expire 10 years after
the date of their grant. Certain options (contingent options) under both plans vest on an
accelerated basis upon the achievement of various future financial and operational goals.
All such options vest 9.5 years after the date of grant regardless of achievement of
future goals. Under both plans, the exercise price of each option equals the market price
of the Corporations common stock on the date of grant.

The Corporation did not grant any
restricted stock units during the three month periods ended March 31, 2004 and 2003.
Restricted stock units outstanding totaled 3,835 and 3,805 at March 31, 2004 and 2003,
respectively. The units are not performance related and generally vest 33 percent annually
on each anniversary date of the respective grant dates. Units are forfeited if the grantee
terminates employment prior to vesting.

The following table summarizes stock
option transactions for both plans and the related average exercise prices for the three
month periods ended March 31, 2004 and 2003:

|                                          | 2004 | 2003  
|----------------------------------------- | ---- | ------
|
|Options Outstanding - beginning of period |      | 49,536
|Options granted                           |      | --    
|Options exercised                         |      | --    
|Options expired                           |      | --    
|                                          |      |       
|Options Outstanding - End of period       |      | 49,536
|                                          |      |       

13

---



The following table shows summary
information about fixed stock options outstanding at March 31, 2004:

|              | Stock Options Outstanding | Stock Options Exercisable
|------------- | ------------------------- | -------------------------
|
|Contingent    |                           | $9.09                    
|Noncontingent |                           | 9.09                     

If the Corporation had elected to recognize
compensation costs for the plans based on the fair value of awards at the grant date, net
income per share on a pro forma basis for the three month periods ended March 31, 2004 and
2003 would have been as follows (000s omitted, except per share data):

|               | Three Month Period Ended March 31,
|-------------- | ----------------------------------
|
|
|Net income     |                                   
|Net income per |                                   
|common share:  |                                   
|Basic          |                                   
|Fully diluted  |                                   

14

---



# NOTE 8  MINIMUM
REGULATORY CAPITAL REQUIREMENTS

The Corporation (on a consolidated
basis) and the Bank are subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Corporations and the
Banks financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Corporation and the Bank must meet specific
capital guidelines that involve quantitative measures of the assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classification are also subject to qualitative judgments by regulators
about components, risk weightings, and other factors. Prompt corrective action provisions
are not applicable to bank holding companies.

Quantitative measures established by
regulation to ensure capital adequacy require the Corporation and the Bank to maintain
minimum amounts and ratios (set forth in the following table) of total and Tier I capital
(as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital
(as defined) to average assets (as defined). Management believes, as of March 31, 2004 and
December 31, 2003, that the Corporation and the Bank met all capital adequacy requirements
to which they are subject.

As of March 31, 2004, the most recent
notification from the FDIC categorized the Bank as well-capitalized under the regulatory
framework for prompt corrective action. To be categorized as well-capitalized, an
institution must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the following table. There are no conditions or events since that
notification that management believes have changed the Banks capital category. The
Banks actual capital amounts and ratios as of March 31, 2004 and December 31, 2003
are also presented in the table below.

|                          | Actual | For CapitalAdequacy Purposes | To beWell-Capitalized
|------------------------- | ------ | ---------------------------- | ---------------------
|
|As of March 31, 2004:     |        |                              |                      
|Total risk-based capital  |       
|(to risk-weighted assets) |        | $13,220                      |                      
|Tier 1 capital            |        | 12,179                       |                      
|(to risk-weighted assets) |       
|Tier 1 capital            |        | 12,179                       |                      
|(to average assets)       |       
|                         
|As of December 31, 2003:  |       
|Total risk-based capital  |        | $12,069                      |                      
|(to risk-weighted assets) |       
|Tier 1 capital            |        | 10,977                       |                      
|(to risk-weighted assets) |       
|Tier 1 capital            |        | 10,977                       |                      
|(to average assets)       |       

15

---



# 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. We provide 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. We operate five customer service locations including two
full service branches.

Financial Condition

Our
total assets increased by $4.7 million or 3.3% to $147.3 million at March 31, 2004, from
$142.6 million at December 31, 2003. The continued growth is attributable to ongoing
marketing efforts for deposits and an increase in lending relationships. During 2004,
which is our sixth year of operations, it is anticipated that our assets will continue to
grow.

Securities
increased $1.3 million or 2.6% to $50.4 million at March 31, 2004 from $49.1 million at
December 31, 2003. The bank continues to have excellent liquidity and will monitor its
level of securities to ensure proper liquidity is maintained.

Total
loans increased by $3.4 million or 4% to $87.5 million at March 31, 2004 from $84.1
million at December 31, 2003. This pattern of growth is consistent with our business plan
and is expected to continue throughout 2004. Most notably were significant increases in
commercial and commercial real estate loans which increased by 4.1% from $72.5 million at
December 31, 2003 to $75.5 million at March 31, 2004. In addition, residential real
estate loans increased by 7.9% from $7.6 million to $8.2 million for the same period. We
introduced in a new residential lending department in the first quarter of 2003. This
department has built a solid pipeline of residential mortgages and construction loans
which will help enhance the Banks other non interest earning income and provide a
valuable service to customers.

The
allowance for loan losses as of March 31, 2004 was $1,041,000 representing approximately
1.19% of total loans outstanding, compared to $1.1 million as of December 31, 2003.

The
loan loss allowance represents managements assessment of both current and future
losses inherent within the loan portfolio. Consideration is also given to off-balance
sheet items that may involve credit risk, such as commitments to extend credit. This
analysis is conducted on a quarterly basis utilizing a methodology that has been employed
since our inception. The methodology employed utilizes several factors to determine the
appropriateness of the allowance. Specifically, historical loss experience, present and
prospective financial condition of borrowers, collateral adequacy, credit risk rating
system and current economic conditions are incorporated in this analysis.

The
primary risk element considered by management regarding each installment and residential
real estate loan is the lack of timely payments. We have a reporting system that monitors
past due loans and has adopted policies to pursue its creditors rights in order to
preserve our 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.

16

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Although
the loan portfolio is unseasoned and actual loss experience is not readily determinable
management believes the allowance for loan losses is adequate as of March 31, 2004. The
adequacy of the allowance is based on the application of its credit risk rating system
which identifies problem credits and ranks loans by specific categories. Moreover, peer
comparisons and industry data for similar type loans are analyzed to measure industry and
market trends in order to further assess the adequacy of the loan loss allowance. As the
loan portfolio becomes more seasoned management will also incorporate actual loss
experience in determining the adequacy of the loan loss allowance. However, presently the
aforementioned credit risk rating system and industry and market metrics will be used to
determine the adequacy of the loan loss allowance.

We
have no other off-balance sheet liabilities other than commitments to extend credit in the
form of letters and lines of credit.

As
of March 31, 2004, our retained earnings were $2.7 million compared to $2.4 million at
December 31, 2003. The retained earnings continues to improve as net interest and
non-interest income has increased while maintaining low operating expenses.

Results of Operations

Our
net profit was $302,000 for the first quarter of 2004 compared to net profit of $214,000
for the first quarter of 2003. Net profit for the three month period ended March 31, 2004
included gains on the sale of securities of $6,000, gains on the sale of mortgage loans of
$9,000 and a federal income tax provision of $100,000. In addition, other non interest
earning income was $116,000.

Interest
income for the first quarter of 2004 was $1.87 million, an increase of 17.0% from interest
income of $1.56 million for the first quarter of 2003. This increase resulted primarily
from continued loan growth throughout the quarter as well as continuing efforts to
reemploy cash flow from lower interest earning securities into higher interest earning
loans. Interest expense was $673,000 for the first quarter of 2004 including $21,000 in
interest expense associated with the Corporations subordinated debentures.

We
had an allowance for loan losses of approximately 1.19% of total loans at March 31,
2004. The provision expense for loan loss for the first quarter of 2004 was $80,000.
Management believes the current rate of providing for the loan loss reserve is adequate.

Non-interest
income was $133,000 for the first quarter of 2004, a $184,000 (or 58%) decrease over the
first quarter of 2003 when non-interest income was $317,000. In the first quarter of 2003
we followed our strategy of reinvesting principal cash flow from the investment portfolio
into higher interest earning loans. As a result of this, gains were realized on the sale
of securities when sold. In the first quarter of 2004 we have not had to sell securities
in order to fund loan activity given acceptable levels of liquidity. Therefore,
non-interest income in the first quarter of 2004 is significantly lower than the first
quarter of 2003. We may, however, sell securities in the future to fund additional loan
growth if necessary.

17

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Non-interest
expense was $850,000 for the first quarter of 2004, a $176,000 (or 26%) increase over the
first quarter of 2003 when non-interest expense was $674,000. The increase is primarily
attributable to higher salary and benefit costs due to the increase in full time
equivalents needed to manage the growth of the Bank. In addition, we have invested in our
core operating systems and now provide internet banking to our customers. To further
foster growth, more financial resources are being devoted to marketing efforts to further
promote the Banks products and services during 2004.

Liquidity and Capital
Resources

We
obtained our initial equity capital in an initial public offering of common stock in
November 1998. In 2003, we evaluated the need to raise additional capital in order to
support the current growth strategy. In December 2003, we completed an offering of $4.0
million of cumulative preferred securities (Trust Preferred Securities) to
further support our growth into the immediate future.

Management
believes that our current capital is adequate to support our expected level of deposit and
loan growth and to otherwise meet our capital requirements for the next year. One of the
growth strategies we may pursue is growth through acquisition or the start up of
additional de novo banks. If we make an acquisition or start a new bank, then we might
require additional equity capital.

Capital Resources at
March 31, 2004 (in thousands)

|                                   | Tier 1LeverageRatio | Tier 1Capital Ratio | Total Risk-BasedCapital Ratio
|---------------------------------- | ------------------- | ------------------- | -----------------------------
|Minimum regulatory requirement for |                     |                     |                              
|Capital adequacy                   |                     | 4                   | .00%                         
|Well capitalized regulatory level  |                     | 5                   | .00%                         
|Bank                               |                     | 8                   | .64%                         

The
following table shows the dollar amounts by which the Companys capital exceeds
current regulatory requirements on a dollar-enumerated basis:

|                                         | Tier 1Leverage | Tier 1Capital | TotalRisk-BasedCapital
|---------------------------------------- | -------------- | ------------- | ----------------------
|
|Capital balances at March 31, 2004       |                |               |                       
|Required regulatory capital              |                | $  5,639      |                       
|Capital in excess of regulatory minimums |                | 6,540         |                       
|                                         |                |               |                       
|Actual capital balances                  |                | $12,179       |                       
|                                         |                |               |                       

The
liquidity of a financial institution reflects its ability to provide funds to meet loan
requests, to accommodate possible outflows of deposits and to take advantage of interest
rate market opportunities. Our sources of liquidity include our borrowing capacity with
the Federal Home Loan Bank, loan payments by our borrowers, maturity and sales of our
securities available for sale, growth of our deposits and deposit equivalents and various
capital resources. Liquidity management involves the ability to meet the cash flow
requirements of our customers. Our customers may be either borrowers with credit needs or
depositors wanting to withdraw funds. We believe our liquidity position is sufficient to
meet these needs.

18

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To
support our growth and provide for additional liquidity resources we became a member of
the Federal Home Loan Bank of Indianapolis during the third quarter of 2003. The FHLB
membership allows the Bank to borrow funds to further support its operations.

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. Our 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 our operations and future prospects 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 our
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 about us and our
business, including additional factors that could materially affect our financial results,
is included in our filings with the Securities and Exchange Commission.

# Item 3 CONTROLS AND
PROCEDURES

|(a) |  | Evaluation of Disclosure Controls and Procedures. The Companys
               Chief Executive Officer and 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-QSB 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-QSB 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 control over financial
               reporting that have materially affected or are reasonably likely to materially
               affect the Companys internal control over financial reporting.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19

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# 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
|--- |  | --------

| | 31.1 | Certificate
of the Chief Executive Officer of Clarkston Financial Corporation pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certificate
of the Chief Financial Officer of Clarkston Financial Corporation pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certificate
of the Chief Executive Officer and Chief Financial Officer of Clarkston Financial
Corporation 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  On February 5, 2004, the Company filed a Current
               Report on Form 8-K disclosing in Item 12  Results of Operations and
               Financial Condition the financial results for the fourth quarter and year
               ended December 31, 2003.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20

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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
March 31, 2004, to be signed on its behalf by the undersigned, thereunto duly authorized.

| |  | CLARKSTON FINANCIAL CORPORATION/s/ Edwin L. Adler
Edwin L. AdlerChief Executive Officer/s/ J. Grant Smith
J. Grant SmithChief Financial Officer
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

DATE: May 12, 2004

21

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EXHIBIT LIST

| | 31.1 | Certificate
of the Chief Executive Officer of Clarkston Financial Corporation pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certificate
of the Chief Financial Officer of Clarkston Financial Corporation pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certificate
of the Chief Executive Officer and Chief Financial Officer of Clarkston Financial
Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

22

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Exhibit 31.1

# CERTIFICATIONS

I, Edwin L. Adler, certify that:

|1. |  | I have reviewed this quarterly report on Form 10-QSB of Clarkston Financial
               Corporation;
|-- |  | -------------------------------------------------------------------------------------------------------

|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-15(e) and 15d-15(e)) for the registrant and we 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 quarterly 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 controls over financial reporting, to the
               registrants auditors and the audit committee of registrants board of
               directors (or persons performing the equivalent functions):
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) |  | all significant deficiencies 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
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

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|(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: May 12, 2004

| |  | /s/ Edwin L. Adler
Edwin L. AdlerChief Executive Officer
| |  | ----------------------------------------------------------------------

24

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Exhibit 31.2

# CERTIFICATIONS

I, J. Grant Smith, certify that:

|1. |  | I have reviewed this quarterly report on Form 10-QSB of Clarkston Financial
               Corporation;
|-- |  | -------------------------------------------------------------------------------------------------------

|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-15(e) and 15d-15(e)) for the registrant and we 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 quarterly 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 controls over financial reporting, to the
               registrants auditors and the audit committee of registrants board of
               directors (or persons performing the equivalent functions):
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) |  | all significant deficiencies 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
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

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|(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: May 12, 2004

| |  | /s/ J. Grant Smith
J. Grant SmithChief Financial Officer
| |  | ----------------------------------------------------------------------

26

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# EXHIBIT 32.1

Each of, Edwin L. Adler, Chief
Executive Officer, and J. Grant Smith, Chief Financial Officer, of Clarkston Financial
Corporation, 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-QSB for the quarterly period ended March 31,
          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-QSB for the
          quarterly period ended March 31, 2004 fairly presents, in all material respects,
          the financial condition and results of operations of Clarkston Financial
          Corporation.

|Date: May 12, 2004 |  | /s/ Edwin L. Adler
Edwin L. AdlerChief Executive Officer/s/ J. Grant Smith
J. Grant SmithChief Financial Officer
|------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------

27