# 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, 2005

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
incorporation or organization) | (I.R.S. Employer
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:
1,049,159 shares of the Corporations Common Stock (no par
value) were outstanding as of May 6, 2005.

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

---



# INDEX

|           |  |                                                      
|---------- |  | -----------------------------------------------------
|Part I     |  | Financial Information (unaudited):                   
|           | 
|           |  | Item 1.                                              
|           |  | Condensed Consolidated Financial Statements          
|           |  | Notes to Condensed Consolidated Financial Statements 
|           | 
|           |  | Item 2.                                              
|           |  | Management's Discussion and Analysis of              
|           |  | Financial Condition and Results of Operations        
|           | 
|           |  | Item 3.                                              
|           |  | Controls & Procedures                                
|           | 
|Part II    |  | Other Information                                    
|           | 
|           |  | 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, 2005
(unaudited) and December 31, 2004(dollars in thousands)

|                                                     | March 31,2005 | December 31,2004
|---------------------------------------------------- | ------------- | ----------------
|                                                     |               |                 
|                                                     | (Unaudited)  
|ASSETS                                               |               |                 
|                                                     |               |                 
|Cash and cash equivalents                            |               |                 
|Total cash and due from banks                        |               |                 
|Federal funds sold                                   |               |                 
|                                                     |               |                 
|Total cash and cash equivalents                      |               |                 
|                                                     |               |                 
|Securities available for sale, at fair value         |               |                 
|                                                     |               |                 
|Loans                                                |               |                 
|Total loans                                          |               |                 
|Less: Allowance for loan losses                      |               |                 
|                                                     |               |                 
|Net loans                                            |               |                 
|                                                     |               |                 
|Banking premises and equipment                       |               |                 
|Interest receivable                                  |               |                 
|Deferred tax asset                                   |               |                 
|Other assets                                         |               |                 
|                                                     |               |                 
|Total assets                                         |               |                 
|                                                     |               |                 
|                                                     |               |                 
|LIABILITIES AND SHAREHOLDERS' EQUITY                 |               |                 
|                                                     |               |                 
|Deposits                                             |               |                 
|Noninterest-bearing                                  |               |                 
|Interest-bearing                                     |               |                 
|                                                     |               |                 
|Total deposits                                       |               |                 
|Federal funds purchased                              |               |                 
|Advances from Federal Home Loan Bank of Indianapolis |               |                 
|Junior subordinated debentures held by               |               |                 
|unconsolidated subsidiary trust                      |               |                 
|Interest payable and other liabilities               |               |                 
|                                                     |               |                 
|                                                     |               |                 
|Total liabilities                                    |               |                 
|                                                     |               |                 
|Shareholders' equity                                 |               |                 
|Common stock, no par value: 10,000,000               |               |                 
|Shares authorized; 1,045,909 shares                  |               |                 
|issued and outstanding as of March 31, 2005          |               |                 
|and December 31, 2004                                |               |                 
|Capital surplus                                      |               |                 
|Restricted stock - unearned compensation             |               |                 
|Retained earnings                                    |               |                 
|Accumulated other comprehensive (loss)               |               |                 
|                                                     |               |                 
|Total shareholders' equity                           |               |                 
|                                                     |               |                 
|                                                     |               |                 
|Total liabilities and shareholders' equity           |               |                 
|                                                     |               |                 

See accompanying
notes to consolidated financial statements

3

---



CLARKSTON FINANCIAL
CORPORATION
CONSOLIDATED
STATEMENT OF INCOME Three Month Periods Ended March 31, 2005 and March 31, 2004 (dollars in thousands,
except per share data) (unaudited)

|                                         | Three Months 
    Ended     
March 31, 2005 | Three Months
     Ended
March 31, 2004
|---------------------------------------- | ------------------------------------------- | --------------------------------------
|                                         |                                             |                                       
|Interest Income                          |                                             |                                       
|Loans, including fees                    |                                             |                                       
|Securities                               |                                             |                                       
|Taxable                                  |                                             |                                       
|Tax-exempt                               |                                             |                                       
|Federal funds sold                       |                                             |                                       
|                                         |                                             |                                       
|Total interest income                    |                                             |                                       
|                                         |                                             |                                       
|Interest Expense                         |                                             |                                       
|Deposits                                 |                                             |                                       
|Borrowings                               |                                             |                                       
|                                         |                                             |                                       
|Total Interest Expense                   |                                             |                                       
|                                         |                                             |                                       
|                                         |                                             |                                       
|Net Interest Income                      |                                             |                                       
|                                         |                                             |                                       
|Provision for loan losses                |                                             |                                       
|                                         |                                             |                                       
|                                         |                                             |                                       
|Net interest income                      |                                             |                                       
|After provision for loan losses          |                                             |                                       
|                                         |                                             |                                       
|Noninterest income                       |                                             |                                       
|Gain on sale of securities               |                                             |                                       
|Gain on sale of loans                    |                                             |                                       
|Service charges and other fees           |                                             |                                       
|Other income                             |                                             |                                       
|                                         |                                             |                                       
|Total noninterest income                 |                                             |                                       
|                                         |                                             |                                       
|                                         |                                             |                                       
|Noninterest expense                      |                                             |                                       
|Salaries and benefits                    |                                             |                                       
|Occupancy expense                        |                                             |                                       
|Computer and data processing expenses    |                                             |                                       
|Advertising and public relations         |                                             |                                       
|Professional fees                        |                                             |                                       
|Other expense                            |                                             |                                       
|                                         |                                             |                                       
|Total noninterest expense                |                                             |                                       
|                                         |                                             |                                       
|                                         |                                             |                                       
|Income before federal income tax expense |                                             |                                       
|                                         |                                             |                                       
|Federal income tax expense               |                                             |                                       
|                                         |                                             |                                       
|Net income                               |                                             |                                       
|                                         |                                             |                                       
|Basic earnings per share                 |                                             |                                       
|                                         |                                             |                                       
|Diluted earnings per share               |                                             |                                       
|                                         |                                             |                                       

See accompanying
notes to consolidated financial statements.

4

---



CLARKSTON FINANCIAL
CORPORATIONCONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY Three Month Period
ended March 31, 2005(dollars in thousands) (Unaudited)

|                                  | Common
 Stock | Capital
Surplus | Unearned
  Comp. | Retained
Earnings | Accumulated
    Other    
Comprehensive
   Income | Total
Stockholders'
   Equity
|--------------------------------- | ------------- | --------------- | ---------------- | ----------------- | ------------------------------------------------- | -----------------------------
|                                  |               |                 |                  |                   |                                                   |                              
|Balance December 31, 2004         |               |                 | $                | 4,444             |                                                   | $                            
|                                  |               |                
|Recognition of compensation for   |               |                
|restricted stock award            |               |                 |                  | -                 |                                                   |                              
|                                  |               |                
|Comprehensive income:             |               |                
|                                  |               |                
|Net income for three months ended |               |                
|March 31, 2005                    |               |                 |                  | -                 |                                                   |                              
|Change in unrealized loss on      |               |                
|securities available for sale     |               |                
|- net of tax of ($145)            |               |                 |                  | -                 |                                                   |                              
|                                  |               |                 |                  |                   |                                                   |                              
|Net comprehensive income          |               |                 |                  |                   | (102                                              | )                            
|                                  |               |                 |                  |                   |                                                   |                              
|Balance March 31, 2005            |               |                 | $                | 4,444             |                                                   | $                            
|                                  |               |                 |                  |                   |                                                   |                              

5

---



CLARKSTON FINANCIAL
CORPORATION 
CONSOLIDATED
STATEMENT OF CASH FLOWS Three Month Periods ended March 31, 2005 and March 31, 2004(dollars in thousands) (unaudited)

|                                                     | Three Months  
     Ended     
March 31, 2005 | Three Months
     Ended
 March 31, 2004
|---------------------------------------------------- | --------------------------------------------- | ---------------------------------------
|                                                     |                                               |                                        
|Net Cash Provided by Operating Activities:           |                                               |                                        
|Net cash provided by operating activities            |                                               |                                        
|                                                     |                                               |                                        
|Cash Flows from Investing Activities:                |                                               |                                        
|Net increase in loans                                |                                               |                                        
|Purchase of available-for-sale securities            |                                               |                                        
|Proceeds from sales of available-for-sale securities |                                               |                                        
|Property and equipment expenditures                  |                                               |                                        
|                                                     |                                               |                                        
|Net cash used in investing activities                |                                               |                                        
|                                                     |                                               |                                        
|Cash Flows from Financing Activities:                |                                               |                                        
|Increase in deposits                                 |                                               |                                        
|Increase in federal funds purchased                  |                                               |                                        
|Proceeds from sale of stock                          |                                               |                                        
|                                                     |                                               |                                        
|Net Cash provided by financing activities            |                                               |                                        
|Net increase (decrease) in cash and cash equivalents |                                               |                                        
|Cash and cash equivalents at beginning of year       |                                               |                                        
|                                                     |                                               |                                        
|                                                     |                                               |                                        
|Cash and cash equivalents at March 31, 2005 and 2004 |                                               |                                        
|                                                     |                                               |                                        
|                                                     |                                               |                                        
|                                                     |                                               |                                        
|Supplemental Cash Flow Information - Cash paid for   |                                               |                                        
|                                                     |                                               |                                        
|Interest                                             |                                               |                                        
|Taxes                                                |                                               |                                        

See accompanying notes
to consolidated financial statements.

6

---



# NOTE 1  BASIS OF
FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited
consolidated interim financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America with the instructions to
Form 10-QSB. Accordingly, certain information and disclosures required by accounting
principles generally accepted in the United States of America for complete financial
statements are not included herein. The interim financial statements should be read in
conjunction with the financial statements of Clarkston Financial Corporation (the
Corporation) and the notes thereto included in the Corporations annual
report on Form 10-KSB for the year ended December 31, 2004.

All adjustments, consisting of normal
recurring adjustments, which in the opinion of management are necessary for a fair
presentation of financial position, results of operations, and cash flows, have been made.
The results of operations for the three month period ended March 31, 2005 are not
necessarily indicative of the results that may be expected for the year ended December 31,
2005.

Certain amounts in prior
periods financial statements have been reclassified to conform to the current
periods presentation.

# NOTE 2  PRINCIPLES
OF CONSOLIDATION

The Corporation is a Michigan
Corporation and the holding company for Clarkston State Bank. The consolidated
financial statements include the accounts of the Corporation and its wholly owned
subsidiary Clarkston State Bank. All significant intercompany transactions are eliminated
in consolidation.

# NOTE 3  STOCK BASED
COMPENSATION

The Corporation 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.
Disclosure of proforma net income and earnings per share amounts as if the fair
value-based method has been applied in measuring compensation costs is provided below.

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 21,495 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.

7

---



# NOTE 3  STOCK
BASED COMPENSATION (CONTINUED)

The Corporations as reported
and pro forma information for the three month period ended March 31 (000s omitted,
except per share data) is as follows:

|                                       | 2005 | 2004
|-------------------------------------- | ---- | ----
|                                       |      |     
|As reported net income available       |      |     
|to common stockholders                 |      |     
|Less: Stock-based compensation         |      |     
|expense determined under               |      |     
|fair value method - net of tax         |      |     
|                                       |      |     
|Pro forma net income                   |      |     
|                                       |      |     
|As reported basic earnings per share   |      |     
|Pro forma basic earnings per share     |      |     
|As reported diluted earnings per share |      |     
|Pro forma diluted earnings per share   |      |     

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.

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

|                                        | 2005 | 2004
|--------------------------------------- | ---- | ----
|                                        |      |     
|                                        |      |     
|                                        |      |     
|Options Outstanding - Beginning of Year |      |     
|Options granted - Employee Plan         |      |     
|Options exercised                       |      |     
|Options expired                         |      |     
|                                        |      |     
|                                        |      |     
|Options Outstanding - End of Period     |      |     
|                                        |      |     

The following table shows summary
information about fixed stock options outstanding at March 31, 2005:

|               | Stock Options Outstanding | Stock Options Exercisable
|-------------- | ------------------------- | -------------------------
|               |                           |                          
|               |                           |                          
|               |                           |                          
|Contingent     |                           |                          
|Non-contingent |                           |                          

8

---



# NOTE 3  STOCK
BASED COMPENSATION (CONTINUED)

The Corporation has adopted the
disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, but applies the intrinsic value method to account for its plan. The
Corporation has estimated fair market value of the options granted in 2000 at $2.34 per
share, using a minimum value concept. The value was calculated using an
assumed interest rate of 6.5 percent and estimated life of five years.

Shares of restricted stock issued to
employees were valued at the market price of the stock at the award date. Compensation
expense is being recognized over the three year vesting period for the restricted stock.

# NOTE 4  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 Corporation relate solely to
outstanding stock options and are determined using the treasury stock method.

Earnings per share have been computed
based on the following for the three month period ending March 31 (000s omitted):

|                                    | 2005 | 2004
|----------------------------------- | ---- | ----
|                                    |      |     
|As reported net income available    |      |     
|to common stockholders              |      |     
|                                    |      |     
|Average number of common shares     |      |     
|outstanding                         |      |     
|Effect of dilutive options          |      |     
|                                    |      |     
|Average number of common shares     |      |     
|outstanding used to calculate       |      |     
|diluted earnings per common share   |      |     
|                                    |      |     
|Stock options not used in computing |      |     
|diluted earnings per share          |      |     
|because they were antidilutive      |      |     
|                                    |      |     

9

---



# NOTE 5  SECURITIES

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

|                             | Amortized 
  Cost | Gross  
Unrealized
   Gains | Gross  
 Unrealized
   Losses | Estimated
 Market
  Value
|---------------------------- | ----------------- | --------------------------- | ----------------------------- | -------------------------
|                             |                   |                             |                               |                          
|March 31, 2005 (Unaudited)   |                   |                             |                               |                          
|Taxable variable rate demand |                   |                            
|municipal revenue bonds,     |                   |                            
|short-term corporate         |                   |                            
|commercial paper, and bonds  |                   |                            
|of government agencies       |                   |                             | $                             | 39,772                   
|                             |                   |                             |                               |                          

# NOTE 6  LOANS

Loans are as follows (000s
omitted):

|           | March 31,2005 | December 31,2004
|---------- | ------------- | ----------------
|           |               |                 
|Commercial |               |                 
|Mortgage   |               |                 
|Consumer   |               |                 
|           |               |                 
|Total      |               |                 
|           |               |                 

Activity
in the allowance for loan losses is as follows (000s omitted):

|                                | Three Months
     Ended     
March 31, 2005 
  (Unaudited) | Year Ended
December 31, 2004
|------------------------------- | ---------------------------------------------------------- | ----------------------------
|                                |                                                            |                             
|Balance - Beginning of period   |                                                            |                             
|                                |                                                            |                             
|Provision charged to operations |                                                            |                             
|Loan losses                     |                                                            |                             
|Loan loss recoveries            |                                                            |                             
|                                |                                                            |                             
|                                |                                                            |                             
|Balance - End of period         |                                                            |                             
|                                |                                                            |                             
|As a percent of total loans     |                                                            |                             
|                                |                                                            |                             

10

---



# NOTE 7  DEPOSITS

Deposits are summarized as follows
(000s omitted):

|                                             | March 31, 2005(Unaudited) | December 31, 2004
|-------------------------------------------- | ------------------------- | -----------------
|                                             |                           |                  
|Non-interest bearing demand deposit accounts |                           |                  
|Interest-bearing demand deposit accounts     |                           |                  
|Savings accounts                             |                           |                  
|Money market accounts                        |                           |                  
|Certificates of deposit                      |                           |                  
|                                             |                           |                  
|Total deposits                               |                           |                  
|                                             |                           |                  

# NOTE 8  FHLB
ADVANCES

Advances from the Federal Home Loan
Bank (FHLB) were as follows (000s omitted):

|                                                             | March 31, 2005(Unaudited) | December 31, 2004
|------------------------------------------------------------ | ------------------------- | -----------------
|                                                             |                           |                  
|Maturity in April 2005, variable rate at 1.95%               |                           |                  
|Maturities from April 2005 through October 2009, fixed rates |                           |                  
|ranging from 1.83% to 3.75%, weighted average of 2.76%       |                           |                  
|                                                             |                           |                  
|Total FHLB Advances                                          |                           |                  
|                                                             |                           |                  

Advances from the FHLB are
collateralized by qualifying investments securities with estimated market values of
$13,340,000 and $14,127,000 at March 31, 2005 and December 31, 2004. The advances are due
in full at maturity and the fixed rate advances are subject to a prepayment penalty if
repaid prior to maturity.

# NOTE 9  MINIMUM
REGULATORY CAPITAL REQUIREMENTS

Banks and bank holding companies are
subject to regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and, additionally for Banks, prompt corrective action
regulations, involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items calculated under regulatory accounting practices. Capital amounts
and classifications are also subject to qualitative judgments by regulators. Failure to
meet capital requirements can initiate regulatory action. The prompt corrective action
regulations provide five classifications, well capitalized, adequately capitalized,
undercapitalized and critical undercapitalized, although these terms are not used to
represent overall financial condition. If adequately capitalized, regulatory approval is
required to accept brokered deposits. If undercapitalized, capital distributions are
limited, as is asset growth and expansion, and plans for capital restoration are required.
The Bank and the Corporation were well-capitalized as of March 31, 2005 and December 31,
2004.

11

---



# NOTE 9  MINIMUM
REGULATORY CAPITAL REQUIREMENTS (CONTINUED)

The Banks and
Corporations actual capital amounts and ratios as of March 31, 2005 and December 31,
2004 are presented in the following table (000s omitted):

|                          | Actual | For CapitalAdequacy Purposes | To beWell-Capitalized
|------------------------- | ------ | ---------------------------- | ---------------------
|                          |        |                              |                      
|                          |        |                              |                      
|                          |        |                              |                      
|As of March 31, 2005:     |        |                              |                      
|Total risk-based capital  |        |                             
|(to risk-weighted assets) |        |                             
|Bank                      |        |                              | $                    
|Consolidated              |        |                              |                      
|Tier I Capital            |        |                             
|(to risk weighted assets) |        |                             
|Bank                      |        |                              | $                    
|Consolidated              |        |                              |                      
|Tier I Capital            |        |                             
|(to average assets)       |        |                             
|Bank                      |        |                              | $                    
|Consolidated              |        |                              |                      
|                          |        |                             
|As of December 31, 2004:  |        |                             
|Total risk-based capital  |        |                             
|(to risk-weighted assets) |        |                             
|Bank                      |        |                              | $                    
|Consolidated              |        |                              |                      
|Tier I Capital            |        |                             
|(to risk weighted assets) |        |                             
|Bank                      |        |                              | $                    
|Consolidated              |        |                              |                      
|Tier I Capital            |        |                             
|(to average assets)       |        |                             
|Bank                      |        |                              | $                    
|Consolidated              |        |                              |                      

12

---



# NOTE 10  STANDBY
AND COMMERCIAL LETTERS OF CREDIT AND FINANCIAL GUARANTEES

The Corporation is a party to credit-related
financial instruments with off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers. These financial instruments include commitments to
extend credit, commercial and standby letters of credit, and unfunded commitments under
lines of credit. Such commitments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the consolidated balance sheet.
The Corporations exposure to credit loss is represented by the contractual amount of
these commitments. The Corporation follows the same credit policies in making commitments
as it does for on-balance-sheet instruments.

At March 31, 2005 and December 31,
2004, the following financial instruments were outstanding whose contract amounts
represent credit risk (000s omitted):

|                                           | March 31, 2005(Unaudited) | December 31, 2004
|------------------------------------------ | ------------------------- | -----------------
|                                           |                           |                  
|Commitments to grant loans                 |                           |                  
|Unfunded commitments under lines of credit |                           |                  
|Commecial and standby letters of credit    |                           |                  

13

---



# Item 2

# MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS
OF OPERATIONS

The following analysis discusses changes
in the financial condition and results of operations of the Corporation for the periods
presented and should be read in conjunction with the Corporations Consolidated
Financial Statements and notes thereto, appearing in Part I, Item 1 of this document.

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 Corporation 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 Corporation, 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.

General

Clarkston
Financial Corporation (the Corporation) is a Michigan corporation incorporated
on May 18, 1998. The Corporation 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 seven customer service locations including
three full service branches.

Critical Accounting
Policies

The
Corporations critical accounting policies are described in the financial section of
our 2004 annual report. Management believes our critical accounting policies relate to the
allowance for loan losses, income taxes and stock based compensation.

Comparison of Financial
Condition at March 31, 2005 and December 31, 2004

Our
total assets increased by $10.0 million or 6.2% to $173.4 million at March 31, 2005, from
$163.4 million at December 31, 2004. The continued growth is attributable to ongoing
marketing efforts for deposits and an increase in lending relationships. We anticipate
that our assets will continue to grow during 2005.

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Cash
and cash equivalents, which include federal funds sold and short-term investments,
increased $1.7 million or 44.6% to $5.6 million at March 31, 2005 from $3.9 million at
December 31, 2004.

Securities
decreased $5.4 million or 12.2% to $39.0 million at March 31, 2005 from $44.4 million at
December 31, 2004. This decrease was in line with the Banks plan and is indicative
of the strong loan growth experienced in the 1st quarter, as well as the
competitive environment for deposit gathering. The bank continues to have excellent
liquidity and will monitor its level of securities to ensure proper liquidity is
maintained.

Total
loans increased by $13.3 million or 11.9% to $125.5 million at March 31, 2005 from $112.2
million at December 31, 2004. This growth rate is slightly ahead of our business plan and
a similar, or slightly slower rate is expected to continue throughout 2005. The growth in
commercial loans was primarily organic, with a $1.6 million contribution from the Huron
Valley Loan Center. Commercial and commercial real estate loans increased $11.4 Million,
or 12.2% from $93.1 million at December 31, 2004 to $104.5 million at March 31, 2005.
In addition, residential real estate loans increased by $2.1 million, or 13.7% from $15.7
million to $17.8 million for the same period. We have added staff and products in the
residential lending area to continue to grow this business and provide a complementary
product to our customers. These additional investments, as well as new technologies
expected to be implemented during 2005, should allow us to increase fee income from
mortgage banking activities as well as to expand the held for investment residential
lending portfolio.

The
allowance for loan losses as of March 31, 2005 was $1.4 million representing approximately
1.09% of total loans outstanding, compared to $1.3 million, or 1.14% of loans outstanding
as of December 31, 2004. Credit quality continues to be a strong point of our loan
portfolio, and we have experienced less than $300,000 in net charge-offs in our 6 year
history. We believe that the allowance for loan losses is sufficient to cover losses
inherent in the portfolio.

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.

The
adequacy of the allowance is based on the application of our credit risk rating system
which identifies problem credits and ranks loans by specific categories. Moreover, we use
peer comparisons and industry data for similar type loans to further assess the proper
level of the loan loss allowance. Going forward, we will closely monitor the performance
of the loan portfolio as it becomes more seasoned.

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Total
deposit balances increased $9.0 million or 6.8% to $142.3 million at March 31, 2005 from
$133.3 million at December 31, 2004. The largest increase was in time deposits which
increased $6.3 million, or 12.5% from December 31, 2004. This was primarily due to some
promotional rates used in the first quarter to fund the higher than expected loan growth.
Money market and savings accounts also increased during the quarter to $59.1 million from
$54.7 million at December 31, 2004, an 8.1% increase. Checking accounts in total decreased
$1.7 million, or 5.9% from $28.4 million at December 31, 2004 to $26.7 million at March
31, 2005. The decrease was entirely in the interest-bearing accounts, as non-interest
bearing checking accounts actually increased $842,000 or 4.3% from December 31, 2004. The
current funding mix is in line with our growth plan and we continue to focus on deposit
gathering within our target communities.

The
Bank is a member of the Federal Home Loan Bank of Indianapolis, and utilizes advances from
this institution to bolster liquidity. At March 31, 2005, we have $12.2 million in
advances outstanding, with no change since December 31, 2005. As we expand our residential
lending area, this source of funds may be used more frequently, as the assets funded can
be collateralized.

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, 2005, we had retained earnings of $3.8 million compared to $3.6 million at
December 31, 2004. The most significant change in the equity of the Corporation was in the
accumulated other comprehensive income, which saw a decrease of $281,000, or 116.6%. This
decrease was primarily the result of changes in interest rates causing a decrease in the
market value of the Corporations security portfolio. We do not believe that the
value of any of the securities in the portfolio are permanently impaired.
Managements focus on strong expense discipline and increases in the net interest
margin, due to increases in underlying rates and changes in the asset mix, continues to
enhance profitability.

Comparison of Operating Results
for the Three Months Ended March 31, 2005 and 2004

Our
net profit was $179,000 for the first quarter of 2005 compared to net profit of $302,000
for the first quarter of 2004. Net interest income increased 23.5% or $282,000 from $1.2
million in the first quarter of 2004 to $1.5 million for 2005. Non-interest income
increased $111,000, or 83.5% for the first quarter of 2005 compared to the same period in
2004, while non-interest expense increased $501,000 or 58.9% over the same periods.

Interest
income for the first quarter of 2005 was $2.5 million, an increase of 33.5% from interest
income of $1.9 million for the first quarter of 2004. This increase resulted primarily
from increased loan balances and increased rates. The increase in interest income from
loans was partially offset by reduced interest income from securities, caused by decreased
balances outstanding. Interest expense was $1.0 million for the first quarter of 2005,
compared to $673,000 for the first quarter of 2004, a 51.4% increase. The increase is due
in large part to increased balances needed to fund loan growth, as well as an increasingly
competitive environment for deposit gathering.

We
had an allowance for loan losses of approximately 1.09% of total loans at March 31,
2005. The provision expense for loan loss for the first quarter of 2005, was $95,000.
Management believes the current rate of providing for the loan loss reserve is adequate.

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Non-interest
income was $244,000 for the first quarter of 2005, a $111,000, or 83.5% increase over the
first quarter of 2004 when non-interest income was $133,000. As discussed previously, the
Corporation has been investing additional resources in the residential lending area, and
the dividends from this investment are apparent in the $38,700, or 422.2% increase in
gains on sale of residential loans. While we anticipate that this line of business will
enhance our non-interest income in the future, we do not expect this area to become a
significant portion of our total revenue in the near future. The largest portion of the
increase in non-interest income was seen in service charges and other fee income, which
increased $75,000, or 64.7% over the same period last year. The Corporations
continued focus on checking accounts and the implementation of a bounce protection product
increased these fees significantly.

Non-interest
expense was $1.35 million for the first quarter of 2005, a $500,000 or 58.9% increase over
the first quarter of 2004 when non-interest expense was $850,000. The increase is
primarily attributable to higher salary and benefit costs of $320,000, or 75.5% due to the
increase in full time equivalents needed to manage the growth of the Bank. Expenses
related to our the organization of our anticipated de novo (new) bank, to be named Huron
Valley State Bank, have also contributed to the increased operating expenses, with a
limited corresponding increase in revenue. These expenses amounted to $137,000 in the
period ended March 31, 2005. We anticipate that Huron Valley State Bank will be approved
by the appropriate regulatory agencies and open for business in the third quarter of 2005.
Our mortgage banking operation, while providing some marginal revenue, is not yet at
critical mass relative to the investment made. Occupancy expense has increased as a result
of these two items and also due to the new full service branch which opened for business
in the fourth quarter of 2004. Professional fees increased partially due to costs related
to the organization of the anticipated new de novo bank and also to the increased legal
and audit costs of being a public institution. Additionally, management has invested more
resources to its marketing efforts in an effort to continue to promote the Banks
products and services during 2005.

Liquidity and Capital
Resources

The
Corporation obtained its initial equity capital in an initial public offering of its
common stock in November 1998. We have successfully grown through our first five years of
operation. In 2003, we evaluated the need to raise additional capital in order to keep
pace with our current growth strategy. In December 2003, we completed an offering of $4.0
million of cumulative preferred securities (Trust Preferred Securities) to
further support the Corporations growth into the immediate future.

Management
believes that its current capital will provide us with adequate capital 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 intend to pursue, which could have an
effect on our equity and or require additional capital, is growth through acquisition or
the start up of additional DeNovo banks. In order to fund our portion of the initial
equity of Huron Valley State Bank, the Corporation plans to issue additional equity in the
short term. Beyond this investment, no additional equity is anticipated to be needed in
the foreseeable future.

# Capital Resources at
March 31, 2005 (in thousands)

|                                   | Tier 1
Leverage
 Ratio | Tier 1    
Capital Ratio | Total Risk-Based
  Capital Ratio
|---------------------------------- | ---------------------- | ------------------------ | --------------------------------
|                                   |                        |                          |                                 
|Minimum regulatory requirement for |                        |                          |                                 
|Capital adequacy                   |                        |                          |                                 
|Well capitalized regulatory level  |                        |                          |                                 
|Consolidated                       |                        |                          |                                 
|Bank                               |                        |                          |                                 

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

|                                         | Tier 1  
Leverage         | Tier 1 
Capital | Total
Risk-Based
  Capital
|---------------------------------------- | ------------------------- | --------------- | --------------------------
|                                         |                           |                 |                           
|                                         | (in thousands of dollars)
|Capital balances at March 31, 2005       |                           |                 |                           
|Required regulatory capital              |                           |                 | $                         
|Capital in excess of regulatory minimums |                           |                 |                           
|                                         |                           |                 |                           
|Actual capital balances                  |                           |                 | $                         
|                                         |                           |                 |                           

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.

As
indicated by the consolidated statement of cash flows, deposits continue to be the primary
source of funding for loan growth with an increase of $5.6 million, or 164.7% in cash
flows from deposits over the same period last year. Sales of securities was also an
increased source of funding in the first quarter of 2005 as compared to 2004, with net
cash flows from security activities increasing $3.98 million, or 432.1%. We anticipate
that futures loan growth will be funded primarily with deposit growth, and secondarily
with other wholesale sources of funding, not through the liquidation of the security
portfolio.

# Item 3 CONTROLS AND
PROCEDURES

| | (a) | Evaluation of Disclosure Controls and Procedures. The Corporations
               Chief Executive Officer and Chief Financial Officer, after evaluating the
               effectiveness of the Corporations disclosure controls and procedures (as
               defined in Exchange Act Rules 13a-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
               Corporations disclosure controls and procedures were adequate and
               effective to ensure that material information relating to the Corporation would
               be made known to them by others within the Corporation, 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 Corporations internal control over
               financial reporting that have materially affected or are reasonably likely to
               materially affect the Corporations internal control over financial
               reporting.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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.

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.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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, 2005, to be signed on its behalf by the undersigned, thereunto duly authorized.

| |  | CLARKSTON FINANCIAL CORPORATION/s/ Edwin L. Adler
Edwin L. AdlerChairman of the Board/s/ J. Grant Smith
J. Grant SmithChief Financial Officer
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

DATE: May 6, 2005

20

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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.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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