# EXHIBIT 13

# MANAGEMENTS
DISCUSSION AND ANALYSIS OF THECORPORATIONS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# Forward-looking
Statements

This
report includes forward-looking statements as that term is used in the
securities laws. All statements regarding the Corporations expected financial
position, business and strategies are forward-looking statements. In addition, the words
anticipates, believes, estimates, seeks,
expects, plans, intends, and similar expressions, as
they relate to the Corporation and its management, are intended to identify
forward-looking statements. The presentation and discussion of the provision and allowance
for loan and lease losses, determining the fair value of securities and other financial
instruments, the valuation of mortgage servicing rights and statements concerning future
profitability or future growth or increases, are examples of inherently forward looking
statements in that they involve judgments and statements of belief as to the outcome of
future events. The Corporations ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have a material
adverse affect on the Corporations 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 the Corporations market area and
accounting principles, policies and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should not be
placed on such statements. Further information concerning the Corporation and its
business, including additional factors that could materially affect the Corporations
financial results, is included in its filings with the Securities and Exchange Commission.

The
following section presents additional information to assess the financial condition and
results of operations of the Corporation and our banks. This section should be read in
conjunction with the consolidated financial statements and the supplemental financial data
contained elsewhere in this Appendix.

# Overview

Clarkston Financial Corporation (the
Corporation, us or we) is a Michigan corporation
incorporated on May 18, 1998. The Corporation is the bank holding company for
Clarkston State Bank (CSB) and Huron Valley State Bank (HVSB)
(collectively the Banks). CSB commenced operations on January 4, 1999, and
HVSB commenced operations on August 15, 2005. The Banks are chartered by the State of
Michigan with depository accounts insured by the Federal Deposit Insurance Corporation. As
such, our primary business is concentrated in a single industry segment  commercial
banking. The Banks provide a full range of banking services to individuals, commercial
businesses and industries located in their service areas. The Banks maintain diversified
loan portfolios, including loans to individuals for home mortgages, automobiles and
personal expenditures, and loans to business enterprises for current operations and
expansion. The Banks also offer a variety of deposit products, including checking
accounts, savings accounts, money market accounts, individual retirement accounts and
certificates of deposit.

The principal markets for financial
services provided are in northern Oakland County communities in which the Banks are
located and the areas immediately surrounding these communities. The Banks serve these
markets through 7 locations in or near their communities. The Banks do not have any
material foreign assets or income.

1

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Our principal source of revenue is
interest and fees on loans. On a consolidated basis, interest and fees on loans accounted
for 76.1% of total revenue in 2006, essentially flat compared to 76.6% in 2005. Interest
from investments share of revenue increased to 17.4% in 2006 from 15.4% in 2005, largely
the result of deposit promotions at Huron Valley outpacing loan growth. Service fees on
deposit accounts declined slightly from 6.3% to 4.8% in 2005 and 2006, respectively. This
decrease in revenue share was due to faster growth in other revenue sources, as the
deposit fee income as a percentage of checking accounts was flat at 3.1% in 2005 and 2006.

The formation of HVSB in 2005 was a
significant event for Clarkston Financial Corporation. We own 55% of the outstanding
shares of common stock of HVSB. The remaining 45% is owned by private investors. We expect
to recognize operating losses from HVSB in the near term as the Bank grows out of the de
novo stage.

# Critical Accounting
Policies

Allowance for Loan Losses The allowance for loan losses for each Bank 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 of that Bank believes the
uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are
credited to the allowance.

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 we 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.

2

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Large groups of homogeneous loans are
collectively evaluated for impairment. Accordingly, we do not separately identify
individual consumer and residential mortgage loans for impairment disclosures.

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 Under the Corporations stock-based incentive plans, the Corporation may grant
restricted stock awards or options to its directors, officers, and employees for up to
110,000 shares of common stock. Prior to January 1, 2006, we accounted for stock awards
and options under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. We adopted the fair
value recognition provisions of Statement of Financial Standards (SFAS) No. 123 (R), Share
Based Payment effective January 1, 2006 using the modified-prospective transition method.
SFAS No. 123(R), Share Based Payment, established a fair value method of accounting for
stock options whereby compensation expense would be recognized based on the computed fair
value of the options on the grant date. We recognize compensation expense related to
restricted stock awards over the period the services are performed. No options were
granted during 2006. We determined that implementation of SFAS No. 123(R) did not have a
material impact on our financial results.

Recent Accounting
Pronouncements:

In May 2005, the FASB issued
SFAS 154, Accounting Changes and Error Corrections, which changes the accounting for
and reporting of a change in accounting principle. This statement applies to all voluntary
changes in accounting principle and changes required by an accounting pronouncement in the
unusual instance that the pronouncement does not include specific transition provisions.
This statement requires retrospective application to prior period financial statements of
changes in accounting principle, unless it is impractical to determine either the
period-specific or cumulative effects of the change. SFAS 154 was effective for
accounting changes made in fiscal years beginning after December 15, 2005. The
adoption of this standard did not have a material effect on financial condition, results
of operations, or liquidity.

In September 2006, the FASB issued
SFAS No. 157, Fair Value Measurements. SFAS No. 157 enhances existing guidance for
measuring assets and liabilities using fair value. Prior to the issuance of SFAS No. 157,
guidance for applying fair value was incorporated in several accounting pronouncements.
SFAS No. 157 provides a single definition of fair value, together with a framework for
measuring it, and requires additional disclosure about the use of fair value to measure
assets and liabilities. SFAS No. 157 also emphasizes that fair value is a market-based
measurement, not an entity-specific measurement, and sets out a fair value hierarchy with
the highest priority being quoted prices in active markets. Under SFAS No. 157, fair value
measurements are disclosed by level within that hierarchy. While SFAS No. 157 does not add
any new fair value measurements, it does change current practice. Changes to practice
include: (1) a requirement for an entity to include its own credit standing in the
measurement of its liabilities; (2) a modification of the transaction price presumption;
(3) a prohibition on the use of block discounts when valuing large blocks of securities
for broker-dealers and investment companies; and (4) a requirement to adjust the
value of restricted stock for the effect of the restriction even if the restriction lapses
within one year. SFAS No. 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal years.
The Corporation has not determined the impact of adopting SFAS No. 157 on its financial
statements.

In July 2006, the FASB issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation
of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax
positions. This Interpretation requires that we recognize in the financial statements, the
impact of a tax position, if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The provisions of FIN 48 are
effective as of the beginning of our 2007 fiscal year, with the cumulative effect of the
change in accounting principle recorded as an adjustment to opening retained earnings. We
are currently evaluating the impact of adopting FIN 48 on our financial statements.

3

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# Off Balance Sheet
Transactions

Other
than unfunded loan commitments and standby letters of credit, there are no off balance
sheet commitments. The Banks do not syndicate loans, have not sold loan participations
under an agreement to repurchase and are not obligated to assume any liability not noted
in their respective balance sheets. Our borrowings contain no loan agreement covenants or
conditions that will restrict its growth or ability to manage its assets. Clarkston State
Bank has arranged for liquidity lines of credit with two lenders, one commercial bank and
the Federal Reserve Bank of Chicago. Moreover, Clarkston State Bank is a member of the
Federal Home Loan Bank of Indianapolis, further providing access to lower interest bearing
funds as needed.

# Financial Condition

Summary.  Our total assets increased to $220.3 million at December 31, 2006, from
          $195.6 million at December 31, 2005, an increase of $24.7 million, or 12.6%.
          More than 50% of the growth in total assets can be attributed to HVSB, which
          opened for business in the third quarter of 2005. As discussed below, all major
          categories of assets showed growth over 2005 and the growth in assets was funded
          primarily with deposits. We anticipate that our assets will continue to grow in
          2007 and that our primary funding source will continue to be deposits.

Cash
and Cash Equivalents. Cash and cash equivalents, which include federal funds sold and
short term investments, increased $5.2 million, or 64.2%, to $13.3 million at December 31,
2006, from $8.1 million at December 31, 2005. This increase is primarily due to deposit
growth at HVSB outpacing loan growth. Some of the promotional time deposits will likely
roll off as they were originated at rates considerably higher than the banks current
offering rates. Therefore, the cash and equivalent balances are anticipated to decrease in
the near term as those amounts will be used to fund growth in the loan portfolio.

Securities. Our securities held at December 31, 2006, totaled $43.9 million
          compared to $49.0 million at December 31, 2005, a decrease of $5.1 million, or
          10.4%. All securities are classified as Available for Sale and may
          be sold to meet our liquidity needs. The primary objective of our investment
          activity is to provide for the safety of the principal invested. Secondary
          considerations include earnings, liquidity and overall exposure to changes in
          interest rates. It has been the policy and practice to accept very little credit
          risk in the investment portfolio in compliance with our primary investment
          objective. Excluding investments in U.S. Treasury and U.S. Government Agency
          Securities, there were no investments in securities of any one issuer, which
          exceeded 10% of shareholders equity.

4

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Securities Available for
Sale Portfolio at Carrying Value (in thousands)

|                                           | Year Ended December 31
|------------------------------------------ | ----------------------
|                                           |                       
|                                           |                       
|                                           |                       
|                                           |                       
|U.S. Treasury and U.S. Government Agencies |                       
|Mortgage-backed securities                 |                       
|Municipal bonds                            |                       
|Collateralized Mortgage Obligations        |                       
|                                           |                       
|Total                                      |                       
|                                           |                       

The following table presents the
maturity schedule of securities (based on estimated fair value) held and weighted average
yield of those securities, as of December 31, 2006 (000s omitted):

|                           | Within One Year | After One but
Within Five Years | After Five but
within Ten | After Ten Years | Total
|-------------------------- | --------------- | ------------------------------- | ------------------------- | --------------- | -----
|                           |                 |                                 |                           |                 |      
|                           |                 |                                 |                           |                 |      
|                           |                 |                                 |                           |                 |      
|                           |                 |                                 |                           |                 |      
|U.S. Treasury and U.S.     |                 |                                
|Government Agencies        |                 |                                 | $                         | 2,046           |      
|Mortgage-backed securities |                 |                                 |                           | -               |      
|Municipal bonds            |                 |                                 |                           | -               |      
|Collateralized Mortgage    |                 |                                
|Obligations                |                 |                                 |                           | -               |      
|                           |                 |                                 |                           |                 |      
|                           |                 |                                
|Total                      |                 |                                 | $                         | 2,046           |      
|                           |                 |                                 |                           |                 |      

Maturity information does not
incorporate any call provisions that the various securities may contain. An analysis of
the amortized cost and estimated fair market value of the investment portfolio is
contained in Note 2 to the Corporations Consolidated Financial Statements.

The
Loan Portfolio.Both of our subsidiary banks are located in high growth Northern
Oakland County. Loans outstanding grew by $24.5 million, or 18.4% for the period from
December 31, 2005 to December 31, 2006. HVSB contributed $10.0 million of this growth with
the rest provided by CSB. Commercial real estate loans continue to comprise the largest
portion of the portfolio, growing from $62.8 million at December 31, 2005 to $91.0 million
at December 31, 2006, an increase of $28.2 million, or 44.9%. Residential mortgage loans
also showed a positive trend, increasing $4.3 million, or 28.7% to a balance of $19.3
million at December 31, 2006 from $15.0 million at December 31, 2005. The only portfolio
to show a material decrease from 2005 was the construction portfolio, which decreased $7.6
million, or 26.4% from December 31, 2005 to December 31, 2006. This decrease is primarily
due to 2 factors, construction loans being termed out into commercial real estate loans
(partially explaining the increase in that portfolio) and the slow movement of the local
real estate market. Consolidated loan growth for the year was slightly behind projected
amounts. Both of our subsidiary banks continue to focus on commercial lending as shown by
the fact that 73% of the loan portfolio is made up of commercial loans (not counting
commercial construction loans). The lenders at both banks have significant experience in
the commercial lending arena, with virtually all having at least 10 years experience.
Commercial lending is also a significant contributor to the demand deposit portfolio which
along with credit quality, are the key focuses of management in the coming year. We
anticipate this concentration in commercial lending to continue in the future, with the
decreased focus on construction lending also continuing.

5

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Loan Portfolio
Composition (in thousands of dollars)

|                            | Year Ended December 31
|--------------------------- | ----------------------
|                            |                       
|                            |                       
|                            |                       
|                            |                       
|                            |                       
|Commercial                  |                       
|Real Estate                 |                       
|Commercial                  |                       
|Residential                 |                       
|Construction                |                       
|Consumer                    |                       
|Total Loans                 |                       
|                            |                       
|Less:                       |                       
|Allowance for Loan Losses   |                       
|                            |                       
|Total Loans Receivable, Net |                       
|                            |                       

Maturities and Sensitivities
of Loans to Changes in Interest Rates (in thousands of dollars)

The following tables present the
maturity of total loans outstanding, as of December 31, 2005, according to scheduled
repayments of principal on fixed rate loans and repricing frequency on variable rate
loans.

|             | Within one Year | After one but
Within Five Years | After five years | Total 
|------------ | --------------- | ------------------------------- | ---------------- | ------
|             |                 |                                 |                  |       
|Commercial   |                 |                                 | $                | 16,053
|Real Estate  |                 |                                
|Commercial   |                 |                                 |                  | 22,501
|Residential  |                 |                                 |                  | 13,082
|Construction |                 |                                 |                  | 18,728
|Consumer     |                 |                                 |                  | 847   
|             |                 |                                 |                  |       
|Totals       |                 |                                 | $                | 71,211
|             |                 |                                 |                  |       
|             |                 |                                
|Fixed        |                 |                                 | $                | 14,962
|Variable     |                 |                                 |                  | 56,249
|             |                 |                                 |                  |       
|Totals       |                 |                                 | $                | 71,211
|             |                 |                                 |                  |       

Non-Performing
Assets.Non-performing assets consist of nonperforming, foreclosed, restructured and
non-accrual loans.

Loan
performance is reviewed regularly by external loan review specialists, loan officers, and
senior management to assure that policies are being followed and loan quality standards
are being maintained. Whenever reasonable doubt exists concerning the collectibility of
interest or principal as well as collateral position on a loan, that loan will be placed
in non-accrual status. Any interest previously accrued but not collected at that time will
be reversed and charged against current earnings. We are not aware of any recommendations
by regulatory agencies, which, if implemented, would have a material impact on our
liquidity, capital or operations.

We
have responded to the significant increase in charge-offs over the past two fiscal years
by improving underwriting standards, centralizing the credit function under the Holding
Company under the supervision of the Holding Company President, the adding an experienced
credit officer and loan officers who have considerable credit backgrounds. Additionally,
during 2006 an in depth loan review was performed by an independent third party at the
request of management. All commercial relationships greater than $250,000 were reviewed,
and all relationships between $50,000 and $250,000 were reviewed by senior management. No
additional problem credits were identified through this review and management believes
that the allowance is adequate.

6

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The
following table sets forth information with respect to our non-performing assets for the
respective years ending December 31 (dollars in thousands):

|                                                                    | 2006 | 2005 | 2004
|------------------------------------------------------------------- | ---- | ---- | ----
|                                                                    |      |      |     
|                                                                    |      |      |     
|Loans accounted for on a non-accrual basis                          |      |      | $   
|Accruing loans past due 90 days or more                             |      |      |     
|                                                                    |      |      |     
|Total non-performing loans                                          |      |      |     
|Repossessed assets                                                  |      |      |     
|                                                                    |      |      |     
|Total non-performing assets                                         |      |      | $   
|                                                                    |      |      |     
|                                                                    |      |     
|Non-performing loans as a percent of total loans                    |      |      |     
|Accruing loans past due 90 days or more as a percent of total loans |      |      |     
|Non-performing assets as a percent of total assets                  |      |      |     
|Non-performing loans as a percent of the loan loss reserve          |      |      |     

The non-accrual balance above is
comprised of 10 relationships. Approximately $2.2 million, or 91% of the outstanding
balances of those loans are secured by real estate. Of those loans secured by real estate,
approximately 49% are secured by residential real estate. Approximately $500,000 is
currently reserved against the $2.4 million in non-accrual assets. Though the local
economic climate and real estate markets are weak, management is confident that the
reserves against these loans are adequate, and no further charges to expense are expected.
The other loans 90 days or more past due are all well secured and management does not
anticipate any further expense specifically relating to these credits. Of the loans that
were on non-accrual at December 31, 2005, $859,000 was charged-off in the current year,
and $207,000 was paid off with no loss to the company. As for the loans which were 90 days
or more past due and still accruing as of December 31, 2005, only one loan, in the amount
of $264,000, remains on the books, and it is included in the non-accrual balance as of
December 31, 2006. Gross charge-offs of these credits during 2006 totaled $403,000, though
approximately $375,000 of this has been recovered during 2006 and 2007. The remaining
$746,000 was resolved either through payoff or the customer making the payments current,
either of which resulted in no loss to the company.

Non-performing loan roll-forward(dollars in thousands):

|                             | Secured By Real Estate | Not Secured By Real Estate |  
|---------------------------- | ---------------------- | -------------------------- | -
|                             |                        |                            |  
|                             |                        |                            |  
|                             |                        |                            |  
|Balance at December 31, 2005 |                        |                            | $
|Charged-off                  |                        |                            |  
|Paid-off/Brought current     |                        |                            |  
|Sold                         |                        |                            |  
|Migrated                     |                        |                            |  
|New credits added            |                        |                            |  
|                             |                        |                            |  
|Balance at December 31, 2006 |                        |                            | $
|                             |                        |                            |  

7

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# Loan Loss Experience (in
thousands)

The
following table summarizes changes in the allowance for credit losses arising from
additions to the allowance which have been charged to expense, selected ratios, and the
allocation of the allowance for credit losses.

|                                                     | Amount as of December 31,
|---------------------------------------------------- | -------------------------
|                                                     |                          
|                                                     |                          
|                                                     |                          
|                                                     |                          
|Total loans at year end                              |                          
|Average daily balances of loans for the year         |                          
|Allowance for credit losses at beginning of period . |                          
|                                                     |                          
|Loan charge-offs during the period                   |                          
|Commercial                                           |                          
|Real Estate                                          |                          
|Commercial                                           |                          
|Residential                                          |                          
|Construction                                         |                          
|Consumer                                             |                          
|                                                     |                          
|Total charge-offs                                    |                          
|                                                     |                          
|Loan recoveries during the period                    |                          
|Commercial                                           |                          
|Real Estate                                          |                          
|Commercial                                           |                          
|Residential                                          |                          
|Construction                                         |                          
|Consumer                                             |                          
|                                                     |                          
|Total recoveries                                     |                          
|                                                     |                          
|                                                     |                          
|Net recoveries/(charge-offs)                         |                          
|                                                     |                          
|Provision charged to expense                         |                          
|                                                     |                          
|                                                     |                          
|Allowance for credit losses at end of period         |                          
|                                                     |                          
|                                                     |                          
|Ratio of net recoveries/(charge-offs) during the     |                          
|period to loans outstanding at year-end              |                          
|                                                     |                          
|Allowance for loan losses to loans outstanding       |                          
|at year-end                                          |                          

8

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# Allocation of the
Allowance for Loan Losses (in thousands)

|             | Year Ended December 31
|------------ | ----------------------
|             |                       
|             |                       
|             |                       
|             |                       
|             |                       
|             |                       
|Commercial   |                       
|Real Estate  |                       
|Commercial   |                       
|Residential  |                       
|Construction |                       
|Consumer     |                       
|Unallocated  |                       
|             |                       
|             |                       
|Total        |                       
|             |                       

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 regard to loan type.

# Allowance for Loan Losses

The
allowance for loan losses as of December 31, 2006 was $2.8 million representing
approximately 1.74% of gross loans outstanding and at December 31, 2005, was $1.9 million,
which represented approximately 1.45% of gross loans outstanding at that time.

The
calculation methodology for the allowance for loan losses is consistent with 2005. In
portfolios where there has been historical loss, the banks own history is being
used. In portfolios in which the banks have never experienced a loss, peer loss rates are
being used.

Management prepares an evaluation
comprised of a risk rating system to segregate the loan portfolio by classification and
rating. These portfolio metrics are then applied against industry standards, peer data,
economic conditions, portfolio composition, historical loss experience as well as
collateral position to determine an appropriate allowance for loan losses. This analysis
is performed every quarter and is scrutinized by internal auditors as well as senior
management for reasonableness.

The
allowance for loan and lease losses represents our estimate of probable credit losses
related to specifically identified loans as well as probable credit losses inherent in the
remainder of the loan portfolio that have been incurred as of the balance sheet date. The
allowance for loan and lease losses is maintained at an adequate level through additions
to the provision for loan losses. An appropriate level of the risk allocated allowance is
determined based on the application of risk percentages to graded loans by categories.
Specific reserves are established for individual loans when deemed necessary by
management. In addition, management considers other factors when determining the
unallocated allowance, including loan quality, changes in the size and character of the
loan portfolio, consultation with regulatory authorities, amount of non-performing loans,
delinquency trends, economic conditions and industry trends. Identified problem loans,
which exhibit characteristics (financial or otherwise) that could cause the loans to
become nonperforming or require restructuring in the future, are included on the internal
Watch List which is reviewed frequently by senior management.

9

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Inherent
risks and uncertainties related to the operation of a financial institution require us to
rely on estimates, appraisals and evaluations of loans to prepare our financial
statements. Changes in economic conditions and the financial prospects of borrowers may
result in abrupt changes to the estimates, appraisals or evaluations used. In addition, if
actual circumstances and losses differ substantially from managements assumptions
and estimates, the allowance for loan and lease losses may not be sufficient to absorb all
future losses, and net income could be significantly impacted.

Premises
and Equipment.Premises and equipment increased $819,000 or 21.0% from $3.9 million at
December 31, 2005 to $4.7 million at December 31, 2006. The increase is due to the
purchase of the building in which the holding companys operations are housed, offset
by the normal annual depreciation of the other fixed assets of the company.

Deposits. Our deposit gathering activities are accomplished through traditional
          means using our banks main offices and Clarkston State Banks five
          branch network as well as competitive pricing and excellent customer service. We
          offer both business and personal accounts including but not limited to checking,
          savings, money market and certificates of deposit with an array of different
          terms. These deposits are gathered from local consumers and businesses within
          the markets served by our banks. Our competitive pricing and strong customer
          service has contributed to our strong deposit growth and continues to provide a
          stable core funding base for our banks. We use brokered deposits to assist in
          funding our banks operations when the need arises.

As
of December 31, 2006, deposits totaled $182.0 million. This represents a 12.8% increase
from December 31, 2005 when deposits were $161.3 million. Non-interest bearing demand
deposits were flat relative to last year increasing only $289,000, or 1.2% Total interest
bearing deposits, however, increased 14.8% to $158.1 million at December 31, 2006,
compared to $137.7 million at December 31, 2005. One of the primary focuses of both
banks management teams is to increase the share of total deposits held by
non-interest bearing accounts, one of our historical strengths. A cohesive marketing
strategy will be utilized to achieve the aggressive deposit growth goals which have been
set for each Banks management. Additionally, the new staff of experience commercial
lenders will be highly beneficial to these deposit gathering efforts. As shown in the
tables below, the additional time deposits that have been taken on are short-term, with
the intention being to replace them with more profitable DDA and savings accounts.

Average
Daily Deposits (in thousands)

The
following table sets forth the average deposit balances and the weighted average rates
paid thereon.

|                           | Average for the Year | Average for the Year | Average for the Year
|-------------------------- | -------------------- | -------------------- | --------------------
|                           |                      |                      |                     
|                           |                      |                     
|                           |                      |                      |                     
|                           |                      |                      |                     
|                           |                      |                      |                     
|                           |                      |                      |                     
|Noninterest bearing demand |                      |                      | $                   
|MMDA/Savings/NOW           |                      |                      |                     
|Time                       |                      |                      |                     
|                           |                      |                      |                     
|Total Deposits             |                      |                      | $                   
|                           |                      |                      |                     

10

---

Maturity Distribution of
Time Deposits of $100,000 or More (in thousands)

The
following table summarizes time deposits in amounts greater than $100,000 by time
remaining until maturity:

|                                   | Year Ended December 31
|---------------------------------- | ----------------------
|                                   |                       
|                                   |                       
|                                   |                       
|                                   |                       
|Three months or less               |                       
|Over three months through one year |                       
|Over one year                      |                       
|                                   |                       
|                                   |                       
|                                   |                       

Minority
interest This balance represents the portion of equity in Huron Valley State
Bank that is not owned by Clarkston Financial Corporation. At December 31, 2006, the
Corporation owned 55.14% of the outstanding shares in Huron Valley State Bank.

Total Stockholders
Equity. Our common stock and paid in capital accounts decreased by $365,000 in the
current year due to the net loss experienced, partially offset by an increase in other
comprehensive income. Other comprehensive income is derived entirely from changes in the
market value of our securities portfolio. No other significant changes were seen in these
accounts. There were no dividends paid to shareholders in 2006 or 2005.

# Results of Operations

Summary
of Results.Wehad a net loss of $712,000 for the year ended December 31, 2006,
compared with a net loss of $24,000 in 2005. Significant fluctuations from 2005 to 2006
included a $431,000, or 7.1%, increase in net interest income before provision for loan
loss, a $993,000, or 72.6%, increase in provision for loan loss, and a $604,000, or 10.3%
increase in other operating expenses.

Performance Ratios (in
thousands, except per share data).

|                                              | Year Ended December 31
|--------------------------------------------- | ----------------------
|                                              |                       
|                                              |                       
|                                              |                       
|                                              |                       
|Net Income (Loss)                             |                       
|Weighted average number of shares outstanding |                       
|Basic Income  (Loss) per share                |                       
|Fully Diluted Income (Loss) per Share         |                       
|                                              |                       
|Earnings ratios:                              |                       
|Return on average assets                      |                       
|Return on average equity                      |                       
|Average equity to average assets              |                       
|Dividend payout ratio                         |                       

Net
Interest Income.Net interest income increased $431,000, or 7.1% from $6.1 million at
December 31, 2005 to $6.5 million at December 31, 2006. The increase in interest income
was caused by the continued growth in the loan portfolio with rising rates also
contributing. The increase in interest expense can be almost equally explained by
increased volume and rising rates. A number of time deposit promotions at HVSB and the use
of some wholesale funding were the primary causes of the rate variance on the time deposit
portfolio, while the large portion of the funding provided by this portfolio was the
reason for the volume variance. Federal Funds purchased were also used in higher amounts
than historical, which caused a negative variance in interest expense. Finally, the upward
repricing of the variable rate trust preferred securities also negatively impacted
interest expense. Additionally, the cost of FHLB advances increased significantly as the
rates at the time of maturity of some of our borrowings were much higher than they had
been when the advances were initially taken out.

11

---

The following schedule presents the
average daily balances, interest income, interest expense and average rates earned and
paid for our major categories of assets, liabilities, and shareholders equity for
the periods indicated (dollars in thousands):

|                             | 2006 | 2005 | 2004
|---------------------------- | ---- | ---- | ----
|                             |      |      |     
|                             |      |      |     
|                             |      |      |     
|                             |      |      |     
|Assets:                      |      |     
|Short term investments       |      |      | $   
|Securities:                  |      |     
|Taxable                      |      |      |     
|Tax-exempt                   |      |      |     
|Loans                        |      |      |     
|                             |      |      |     
|Total earning assets/total   |      |     
|interest income              |      |      |     
|Cash and due from banks      |      |      |     
|Unrealized Gain (Loss)       |      |      |     
|Allowance for loan loss      |      |      |     
|All other assets             |      |      |     
|                             |      |      |     
|Total assets                 |      |      |     
|Liabilities:                 |      |     
|Interest bearing deposits:   |      |     
|MMSA, Savings/NOW            |      |      |     
|Time                         |      |      |     
|Fed Funds purchased          |      |      |     
|FHLB Advances                |      |      |     
|Trust preferred securities   |      |      |     
|Other borrowings             |      |      |     
|                             |      |      |     
|Total interest bearing       |      |     
|liabilities/interest expense |      |      |     
|Noninterest bearing deposits |      |      |     
|All other liabilities        |      |      |     
|Minority interest in         |      |     
|consolidated subsidiary      |      |      |     
|Stockholders' Equity:        |      |     
|Unrealized Holding Loss      |      |      |     
|Common Stock, Surplus,       |      |     
|Retained Earnings            |      |      |     
|                             |      |      |     
|Total liabilities and        |      |      |     
|Interest spread              |      |      |     
|Net Interest Margin          |      |      |     

12

---

Rate / Volume Analysis of Net
Interest Income.The following schedule presents the dollar amount of changes in
interest income and expense for major components of earning assets and interest-bearing
liabilities, distinguishing between changes related to outstanding balances and changes
due to interest rates.

|                                  | 2006 Compared to 2005 | 2005 Compared to 2004
|--------------------------------- | --------------------- | ---------------------
|                                  |                       |                      
|                                  |                       |                      
|                                  |                       |                      
|(in thousands)                    |                      
|                                  |                       |                      
|Short term investment             |                       |                      
|Investment securities--taxable    |                       |                      
|Investment securities--tax-exempt |                       |                      
|Loans, net of unearned income     |                       |                      
|                                  |                       |                      
|Total interest income             |                       |                      
|                                  |                       |                      
|MMSA, Savings/NOW                 |                       |                      
|Time deposits                     |                       |                      
|Federal Funds purchased           |                       |                      
|FHLB Advances                     |                       |                      
|Trust preferred securities        |                       |                      
|Other borrowings                  |                       |                      
|                                  |                       |                      
|Total interest expense            |                       |                      
|                                  |                       |                      
|Net interest income               |                       |                      
|                                  |                       |                      

Composition of Average
Earning Assets and Interest Bearing Liabilities (dollars in thousands):

|                                                     | Year Ended
December 31, 2006 | Year Ended
December 31, 2005 | Year Ended
December 31, 2004
|---------------------------------------------------- | ---------------------------- | ---------------------------- | ----------------------------
|                                                     |                              |                              |                             
|As a percentage of average earning assets            |                              |                              |                             
|Loans                                                |                              |                              | $                           
|Other earning assets                                 |                              |                              |                             
|                                                     |                              |                              |                             
|Average earning assets                               |                              |                              | $                           
|                                                     |                              |                              |                             
|                                                     |                              |                             
|As a percent of average interest bearing liabilities |                              |                             
|Savings and DDA accounts                             |                              |                              | $                           
|Time deposits                                        |                              |                              |                             
|Other borrowings                                     |                              |                              |                             
|                                                     |                              |                              |                             
|Average interest bearing liabilities                 |                              |                              | $                           
|                                                     |                              |                              |                             
|                                                     |                              |                             
|Earning asset as a percent of total assets           |                              |                              |                             

Provision for Loan Loss.The provision for loan losses for the year ended December 31,
2006 was $2.4 million compared to $1.4 million at December 31, 2005. See above discussion
on non-performing loans for more detail.

Non-Interest Income.Other
operating income was flat at $940,000 in 2005 and 2006. Overdraft and NSF fee income at
CSB was elevated during 2005, causing a decrease relative to 2006. Gains on loan sales
showed a healthy 27.6%, or $58,000 increase over the prior year, offsetting the decreased
deposit fees. This was a result of the transition of the mortgage team and the success of
their efforts. The remaining items of non-interest income were relatively flat year over
year.

Non-Interest
Expense.Non-interest expense consists of monthly operating expenses and for the year
ended December 31, 2006, was $6.4 million compared with $5.8 million for the year ended
December 31, 2005, an increase of $600,000, or 10.3%. The main component of non-interest
expense is salaries and benefits which totaled $3.3 million for 2006 and $2.9 million for
2005 an increase of $325,000, or 11.0%. Approximately 81% of this variance is related to
HVSB being open and staffed for a full year. The remainder of the variance is due to
regular salary increases to staffs at CFC and CSB. Another significant component of
operating expense is occupancy expense which increased $229,000, or 27.0%, to $1.1 million
in 2006 from $849,000 in 2005. This increase is primarily due to HVSB having a full year
of occupancy expenses, expenses related to the purchase and operation of the holding
company building purchased in the current year and expense incurred to terminate a
maintenance contract on software that is no longer being used. The negative variance in
outside processing and supplies relates to HVSB having a full year of operation, and the
decrease in state taxes is the result of decreased income.

13

---

# Liquidity and Capital
Resources

Weobtained our initial equity capital in an initial public offering of our common stock
in November 1998. In December 2003, we completed an offering of $4.0 million of cumulative
preferred securities (Trust Preferred Securities) to further support our
growth.

In
July 2005 we completed a rights offering in which each holder of our common stock as of
the June 6, 2005 record date received the right to purchase one additional share of common
stock for every four shares held and an opportunity to purchase a limited number of shares
above their basic subscription right (the over-subscription privilege). A total of 165,776
shares were purchased in the rights offering, resulting in net proceeds of approximately
$2,856,000, which was used to purchase a majority interest in Huron Valley State Bank.

Also
in July 2005 we sold 28,000 shares to an individual investor through the community
offering provisions of the rights offering. These shares were sold for $18.00 per share,
resulting in net proceeds to us of $504,000.

Also
during 2006, we obtained a line of credit with a third party financial institution secured
by our interest in the consolidated subsidiaries in the amount of $3 million. This line of
credit is to be used for general corporate purposes and has no specific use identified at
this time. As of December 31, 2006, there was no outstanding balance on this line of
credit.

Our
cash and equivalents increased $5.2 million, from $8.1 million at December 31, 2005 to
$13.3 million at December 31, 2006. The primary sources of this increase in cash were
$19.9 million from increased deposits, $5.0 million in advances from the Federal Home Loan
Bank, $5.1 million of proceeds from sales of securities (net of purchases) and cash flow
from operations of $2.8 million. The primary uses of funds were increased loan balances of
$25.8 million and $1.2 million of fixed asset purchases.

We
believe that our current capital will provide us with adequate capital to support our
expected level of deposit and loan growth and to otherwise meet its capital requirements
for the next year.

14

---

Capital Resources at
December 31, 2006 (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  |                       |                      |                               
|CSB                                |                       |                      |                               
|HVSB                               |                       |                      |                               
|Consolidated                       |                       |                      |                               

Capital Resources at
December 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  |                       |                      |                               
|CSB                                |                       |                      |                               
|HVSB                               |                       |                      |                               
|Consolidated                       |                       |                      |                               

The following table shows the dollar
amounts by which our 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)               
|                                         |                 |                |                         
|Clarkston State Bank                     |                 |               
|Capital balances at December 31, 2006    |                 |               
|Required regulatory capital              |                 |                | $                       
|Capital in excess of regulatory minimums |                 |                |                         
|                                         |                 |                |                         
|Actual capital balances                  |                 |                | $                       
|                                         |                 |                |                         
|                                         |                 |               
|Huron Valley State Bank                  |                 |               
|Capital balances at December 31, 2006    |                 |               
|Required regulatory capital              |                 |                | $                       
|Capital in excess of regulatory minimums |                 |                |                         
|                                         |                 |                |                         
|Actual capital balances                  |                 |                | $                       
|                                         |                 |                |                         
|                                         |                 |               
|Consolidated                             |                 |               
|Capital balances at December 31, 2006    |                 |               
|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

15

---

# Report of Independent
Registered Public Accounting Firm

To the Board of Directors
and StockholdersClarkston Financial Corporation

We have audited the accompanying
consolidated balance sheet of Clarkston Financial Corporation as of December 31, 2006 and
2005 and the related consolidated statements of income, changes in stockholders
equity, and cash flows for each year in the three-year period ended December 31, 2006.
These consolidated financial statements are the responsibility of the Corporations
management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Clarkston Financial Corporation as of December 31, 2006
and 2005 and the consolidated results of their operations and their cash flows for each
year in the three-year period ended December 31, 2006, in conformity with accounting
principles generally accepted in the United States of America.

| | /s/ Plante & Moran, PLLC
| | ------------------------

Auburn Hills, Michigan
March 15, 2007



---

Clarkston Financial
Corporation

---

# Consolidated Balance
Sheet(000s omitted)

|                                                        | December 31
|------------------------------------------------------- | -----------
|                                                        |            
|                                                        |            
|                                                        |            
|                                                        |            
|Assets                                                  |            
|                                                        |            
|Cash and cash equivalents:                              |            
|Cash and due from banks                                 |            
|Federal funds sold                                      |            
|                                                        |            
|Total cash and cash equivalents                         |            
|                                                        |            
|Securities - Available for sale (Note 2)                |            
|                                                        |            
|Loans held for sale                                     |            
|                                                        |            
|Loans (Note 3)                                          |            
|Allowance for possible loan losses (Note 4)             |            
|                                                        |            
|Net loans                                               |            
|                                                        |            
|Banking premises and equipment (Note 5)                 |            
|Accrued interest receivable and other assets            |            
|                                                        |            
|Total assets                                            |            
|                                                        |            
|                                                        |            
|Liabilities and Stockholders' Equity                    |            
|Liabilities                                             |            
|Deposits                                                |            
|Noninterest-bearing demand deposits                     |            
|Interest-bearing (Note 6)                               |            
|                                                        |            
|Total deposits                                          |            
|                                                        |            
|Federal Home Loan Bank advances (Note 7)                |            
|Junior subordinated debentures (Note 15)                |            
|Accrued interest payable and other liabilities          |            
|                                                        |            
|Total liabilities                                       |            
|                                                        |            
|Minority interest in consolidated subsidiary            |            
|                                                        |            
|Stockholders' Equity                                    |            
|Common stock - No par value:                            |            
|Authorized - 10,000,000 shares                          |            
|Issued and outstanding - 1,262,279 and 1,245,722 shares |            
|at December 31, 2006 and 2005, respectively             |            
|Paid-in capital                                         |            
|Restricted stock--Unearned compensation                 |            
|Retained earnings                                       |            
|Accumulated other comprehensive loss                    |            
|                                                        |            
|                                                        |            
|Total stockholders' equity                              |            
|                                                        |            
|                                                        |            
|Total liabilities and stockholders' equity              |            
|                                                        |            

See notes to Consolidated
Financial Statements

2

---

# Clarkston Financial
Corporation

---

# Consolidated Statement
of Income(000s omitted, except per share data)

|                                                               | Year Ended December 31
|-------------------------------------------------------------- | ----------------------
|                                                               |                       
|                                                               |                       
|                                                               |                       
|                                                               |                       
|Interest Income                                                |                       
|Interest and fees on loans                                     |                       
|Interest on investment securities:                             |                       
|Taxable securities                                             |                       
|Tax-exempt securities                                          |                       
|Interest on federal funds sold                                 |                       
|                                                               |                       
|Total interest income                                          |                       
|                                                               |                       
|Interest Expense                                               |                       
|Deposits                                                       |                       
|Borrowings                                                     |                       
|                                                               |                       
|Total interest expense                                         |                       
|                                                               |                       
|                                                               |                       
|Net Interest Income                                            |                       
|                                                               |                       
|Provision for Possible Loan Losses (Note 4)                    |                       
|                                                               |                       
|                                                               |                       
|Net Interest Income - after provision for possible loan losses |                       
|                                                               |                       
|Other Operating Income (Loss)                                  |                       
|Service fees on loan and deposit accounts                      |                       
|Gain/(loss) on sale of securities (Note 2)                     |                       
|Gain on sale of mortgage loans                                 |                       
|Other                                                          |                       
|                                                               |                       
|Total other operating income                                   |                       
|                                                               |                       
|Other Operating Expenses                                       |                       
|Salaries and employee benefits (Note 12)                       |                       
|Occupancy (Note 10)                                            |                       
|Advertising                                                    |                       
|Outside processing                                             |                       
|Professional fees                                              |                       
|Supplies                                                       |                       
|Other                                                          |                       
|                                                               |                       
|Total other operating expenses                                 |                       
|                                                               |                       
|                                                               |                       
|Income (Loss) - Before income taxes and minority interest      |                       
|                                                               |                       
|Income Tax Expense (Benefit) (Note 8)                          |                       
|                                                               |                       
|                                                               |                       
|Income (Loss) - Before minority interest                       |                       
|                                                               |                       
|Minority Interest                                              |                       
|                                                               |                       
|                                                               |                       
|Net Income (Loss)                                              |                       
|                                                               |                       
|                                                               |                       
|Income (Loss) per Share of Common Stock (Note 1)               |                       
|Basic                                                          |                       
|Fully diluted                                                  |                       

See Notes to Consolidated
Financial Statements

3

---

# Clarkston Financial
Corporation

---

# Consolidated Statement
of Changes in Stockholders Equity(000s omitted, except per share data)

|                              | Common
Stock | Paid-in
Capital | Restricted
Stock -
Unearned
Compensation | Retained
Earnings | Accumulated
Other
Comprehensive
Income (Loss) | Total
Stockholders'
Equity
|----------------------------- | ------------ | --------------- | ---------------------------------------- | ----------------- | --------------------------------------------- | --------------------------
|                              |              |                 |                                          |                   |                                               |                           
|                              |              |                 |                                          |                   |                                               |                           
|Balance - January 1, 2004     |              |                 | $                                        | 4,376             |                                               | $                         
|                              |              |                
|Issuance of stock             |              |                 |                                          | 25                |                                               |                           
|Issuance of restricted stock  |              |                 |                                          | 43                |                                               |                           
|Recognition of compensation   |              |                
|For restricted stock award    |              |                 |                                          | --                |                                               |                           
|Comprehensive income:         |              |                
|Net income                    |              |                 |                                          | --                |                                               |                           
|Change in unrealized loss on  |              |                
|securities available for sale |              |                
|- Net of tax effect of $(202) |              |                 |                                          | --                |                                               |                           
|                              |              |                 |                                          |                   |                                               |                           
|Net comprehensive income      |              |                 |                                          |                   |                                              
|                              |              |                 |                                          |                   |                                               |                           
|                              |              |                 |                                          |                   |                                               |                           
|                              |              |                
|Balance - December 31, 2004   |              |                 |                                          | 4,444             |                                               |                           
|                              |              |                
|Issuance of stock             |              |                 |                                          | 1,691             |                                               |                           
|Issuance of restricted stock  |              |                 |                                          | 28                |                                               |                           
|Recognition of compensation   |              |                
|for restricted stock award    |              |                 |                                          | --                |                                               |                           
|Comprehensive income:         |              |                
|Net loss                      |              |                 |                                          | --                |                                               |                           
|Change in unrealized gain on  |              |                
|securities available for sale |              |                
|- Net of tax effect of $(247) |              |                 |                                          | --                |                                               |                           
|                              |              |                 |                                          |                   |                                               |                           
|Net comprehensive loss        |              |                 |                                          |                   |                                               |                           
|                              |              |                 |                                          |                   |                                               |                           
|                              |              |                
|Balance - December 31, 2005   |              |                 | $                                        | 6,163             |                                               | $                         
|                              |              |                 |                                          |                   |                                               |                           
|                              |              |                
|Issuance of stock             |              |                 |                                          | 82                |                                               |                           
|Recognition of compensation   |              |                
|for restricted stock award    |              |                 |                                          | --                |                                               |                           
|Comprehensive income:         |              |                
|Net loss                      |              |                 |                                          | --                |                                               |                           
|Change in unrealized gain on  |              |                
|securities available for sale |              |                
|- Net of tax effect of $92    |              |                 |                                          | --                |                                               |                           
|                              |              |                 |                                          |                   |                                               |                           
|Net comprehensive loss        |              |                 |                                          |                   |                                               |                           
|                              |              |                 |                                          |                   |                                               |                           
|                              |              |                
|Balance - December 31, 2006   |              |                 | $                                        | 6,245             |                                               | $                         
|                              |              |                 |                                          |                   |                                               |                           

See Notes to Consolidated
Financial Statements

4

---

# Clarkston Financial
Corporation

---

# Consolidated Statement
of Cash Flows(000s omitted)

|                                                            | Year Ended December 31
|----------------------------------------------------------- | ----------------------
|                                                            |                       
|                                                            |                       
|                                                            |                       
|                                                            |                       
|Cash Flows from Operating Activities                        |                       
|Net income (loss)                                           |                       
|Adjustments to reconcile net income (loss) to net cash      |                       
|from operating activities:                                  |                       
|Depreciation and amortization                               |                       
|Provision for loan losses                                   |                       
|Amortization (accretion) of securities                      |                       
|Recognition of compensation for restricted stock award      |                       
|Deferred taxes                                              |                       
|Gain on sale of available-for-sale securities               |                       
|Loss on sale of available-for-sale securities               |                       
|(Increase) decrease in interest receivable and other assets |                       
|Increase (decrease) in interest payable and other           |                       
|liabilities                                                 |                       
|                                                            |                       
|                                                            |                       
|Net cash provided by operating activities                   |                       
|                                                            |                       
|Cash Flows from Investing Activities                        |                       
|Purchase of securities available for sale                   |                       
|Proceeds from sale of available-for-sale securities         |                       
|Premises and equipment expenditures                         |                       
|Resources provided for (used by) minority interest          |                       
|Net increase in loans                                       |                       
|                                                            |                       
|                                                            |                       
|Net cash used in investing activities                       |                       
|                                                            |                       
|                                                            |                       
|Cash flows from Financing Activities                        |                       
|Net (decrease) increase in time deposits                    |                       
|Net increase in other deposits                              |                       
|Advances from Federal Home Loan Bank                        |                       
|Repayments of Federal Home Loan Bank Advances               |                       
|Issuance of common stock                                    |                       
|                                                            |                       
|                                                            |                       
|Net cash provided by financing activities                   |                       
|                                                            |                       
|                                                            |                       
|Net Increase (Decrease) in Cash and Cash Equivalents        |                       
|                                                            |                       
|Cash and Cash Equivalents - Beginning of year               |                       
|                                                            |                       
|                                                            |                       
|Cash and Cash Equivalents - End of year                     |                       
|                                                            |                       
|                                                            |                       
|Supplemental Cash Flow Information - Cash paid for          |                       
|Interest                                                    |                       
|Taxes                                                       |                       

See Notes to Consolidated
Financial Statements

5

---

# Clarkston Financial
Corporation

---

# Note 1  Summary of
Significant Accounting Policies

Basis
of Presentation and Consolidation  The accompanying consolidated statements have
been prepared in conformity with accounting principles generally accepted in the United
States of America. The consolidated financial statements include the accounts of Clarkston
Financial Corporation (the Corporation), its wholly owned subsidiary,
Clarkston State Bank (CSB) and its majority owned subsidiary, Huron Valley
State Bank (HVSB). The subsidiaries are collectively referred to as the
Banks. All significant intercompany transactions are eliminated in consolidation.

During 2005, the Corporation
completed a rights offering which netted proceeds of $3.0 million. The proceeds of this
offering were used to purchase a 55.1% interest in Huron Valley State Bank.

The Corporation also owns all of the
common stock of Clarkston Capital Trust I. This is a grantor trust that issued trust
preferred securities and is not consolidated with the Corporation per FASB Interpretation
No. 46.

Use
of Estimates  In preparing financial statements in conformity with accounting
principles generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and liabilities
as of the date of the balance sheet and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Material estimates
that are particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and the calculation of the deferred tax
asset.

Nature
of Operations  Clarkston State Bank provides full-service commercial banking and
consumer banking and provides other financial products and services through five branch
offices to Michigan communities in Oakland County. Huron Valley State Bank provides
full-service commercial banking and consumer banking and provides other financial products
and services through one branch office in Milford, Michigan.

Significant
Group Concentrations of Credit Risk  Most of the Corporations activities
are with customers located within southeastern Michigan. Note 2 discusses the types of
securities in which the Corporation invests. Note 3 discusses the types of lending in
which the Corporation engages. The Corporation does not have any significant
concentrations to any one industry or customer.

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.

Federal
Reserve Requirement At December 31, 2006 and 2005 required reserves at the
Federal Reserve Bank of Chicago totaled $544,000 and $596,000, respectively. These
reserves do not earn interest.

6

---

# Clarkston Financial
Corporation

---

# Note 1  Summary of
Significant Accounting Policies (continued)

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.
There were no securities classified as held to maturity at December 31, 2006 and 2005.

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 Corporation grants mortgage, commercial, and consumer loans to customers. Loans
that management has the intent and ability to hold for the foreseeable future or until
maturity or pay-off, 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 all loans,
with the exception of commercial loans, is discontinued at the time the loan is 90 days
delinquent unless the credit is well-secured and in process of collection. Commercial
loans are monitored after the loan is 90 days delinquent. Upon analysis of the
circumstances of the borrower, a decision is made by the Senior Lender, the special loans
asset team and the loan committee whether or not the loan should be placed on
nonperforming status. In all cases, nonperforming loans are charged off at an earlier date
if collection of principal or interest is considered doubtful.

Loans
held for sale  The Corporation routinely sells to investors its originated
long-term residential fixed-rate mortgage loans. Mortgage loans originated and intended
for sale in the secondary market are carried at the lower of cost or estimated fair value
in the aggregate. Net unrealized losses, if any, are recognized through a valuation
allowance by charges to income.

Mortgage loans held for sale are
generally sold with the mortgage servicing rights released. Gains or losses on sales of
mortgage loans are recognized based on the difference between the selling price and the
carrying value of the related mortgage loans sold.

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.

7

---

# Clarkston Financial
Corporation

---

# Note 1  Summary of
Significant Accounting Policies (continued)

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 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 probability 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 Corporation 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.

8

---

# Clarkston Financial
Corporation

---

# Note 1  Summary of
Significant Accounting Policies (continued)

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  Under the Corporations stock-based incentive plans,
the Corporation may grant restricted stock awards or options to its directors, officers,
and employees for up to 110,000 shares of common stock. Prior to January 1, 2006, the
Corporation accounted for stock awards and options under the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. The Corporation adopted the fair value recognition provisions of
Statement of Financial Standards (SFAS) No. 123 (R), Share Based Payment effective January
1, 2006 using the modified-prospective transition method. SFAS No. 123(R), Share Based
Payment, established a fair value method of accounting for stock options whereby
compensation expense would be recognized based on the computed fair value of the options
on the grant date. The Corporation recognizes compensation expense related to restricted
stock awards over the period the services are performed. No options were granted during
2006. The Corporation determined that implementation of SFAS No. 123(R) did not have a
material impact on the financial results of the Corporation.

The Corporation has provided below
pro forma disclosures of net income and earnings per share for the years ended December
31, 2005 and December 31, 2004, as if the Corporation had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee compensation (in thousands,
except per share data):

|                                                  | 2005 | 2004
|------------------------------------------------- | ---- | ----
|                                                  |      |     
|                                                  |      |     
|As reported net income (loss) available to common |      |     
|stockholders                                      |      |     
|                                                  |      |     
|Less stock-based compensation expense             |      |     
|determined under fair value method -              |      |     
|Net of tax                                        |      |     
|                                                  |      |     
|                                                  |      |     
|Pro forma net income (loss)                       |      |     
|                                                  |      |     
|                                                  |      |     
|As reported earnings per share                    |      |     
|Pro forma earnings per share                      |      |     
|As reported earnings per diluted share            |      |     
|Pro forma earnings per diluted 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.

9

---

# Clarkston Financial
Corporation

---

# Note 1  Summary of
Significant Accounting Policies (continued)

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 (000s omitted):

|                                                   | 2006 | 2005 | 2004
|-------------------------------------------------- | ---- | ---- | ----
|                                                   |      |      |     
|                                                   |      |      |     
|Net income (loss) 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                             |      |      |     
|                                                   |      |      |     

As of December 31, 2006 and 2005, 13
and 25 shares were not included in the diluted earnings per share calculation because they
are considered to be anti-dilutive due to the Corporations net loss.

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.

The components of other
comprehensive income and related tax effects are as follows:  (000s omitted):

|                                                 | 2006 | 2005 | 2004
|------------------------------------------------ | ---- | ---- | ----
|                                                 |      |      |     
|                                                 |      |      |     
|Unrealized holding gains/ (losses) on securities |      |     
|available for sale                               |      |      | $   
|Reclassification adjustment for gains/ (losses)  |      |     
|realized in income                               |      |      |     
|                                                 |      |      |     
|                                                 |      |     
|Net unrealized gains (losses)                    |      |      |     
|                                                 |      |     
|Tax effect                                       |      |      |     
|                                                 |      |      |     
|                                                 |      |     
|Net of tax amount                                |      |      | $   
|                                                 |      |      |     

10

---

# Clarkston Financial
Corporation

---

# Note 1  Summary of
Significant Accounting Policies (continued)

401(k)       
          Plan The Corporation has a 401(k) Plan for which all eligible
          employees can participate. Eligible employees may defer a portion of their
          salary. The Corporation made matching contributions up to 5 percent of the
          employees contribution. The Corporations contribution to the Plan
          was $20,000, $16,000 and $9,100 for the years ended December 31, 2006, 2005, and
          2004, respectively.

Recent
Accounting Pronouncements In May 2005, the FASB issued SFAS 154,
Accounting Changes and Error Corrections, which changes the accounting for and reporting
of a change in accounting principle. This statement applies to all voluntary changes in
accounting principle and changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition provisions. This
statement requires retrospective application to prior period financial statements of
changes in accounting principle, unless it is impractical to determine either the
period-specific or cumulative effects of the change. SFAS 154 was effective for
accounting changes made in fiscal years beginning after December 15, 2005. The
adoption of this standard did not have a material effect on financial condition, results
of operations, or liquidity.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157
enhances existing guidance for measuring assets and liabilities using fair value. Prior to
the issuance of SFAS No. 157, guidance for applying fair value was incorporated in several
accounting pronouncements. SFAS No. 157 provides a single definition of fair value,
together with a framework for measuring it, and requires additional disclosure about the
use of fair value to measure assets and liabilities. SFAS No. 157 also emphasizes that
fair value is a market-based measurement, not an entity-specific measurement, and sets out
a fair value hierarchy with the highest priority being quoted prices in active markets.
Under SFAS No. 157, fair value measurements are disclosed by level within that hierarchy.
While SFAS No. 157 does not add any new fair value measurements, it does change current
practice. Changes to practice include: (1) a requirement for an entity to include its own
credit standing in the measurement of its liabilities; (2) a modification of the
transaction price presumption; (3) a prohibition on the use of block discounts when
valuing large blocks of securities for broker-dealers and investment companies; and
(4) a requirement to adjust the value of restricted stock for the effect of the
restriction even if the restriction lapses within one year. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. The Corporation has not determined the impact
of adopting SFAS No. 157 on its financial statements.

11

---

# Clarkston Financial
Corporation

---

# Note 1  Summary of
Significant Accounting Policies (continued)

In
July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which clarifies
the accounting for uncertainty in tax positions. This Interpretation requires that the
Corporation recognize in the financial statements, the impact of a tax position, if that
position is more likely than not of being sustained on audit, based on the technical
merits of the position. The provisions of FIN 48 are effective as of the beginning of our
2007 fiscal year, with the cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings. The Corporation is currently
evaluating the impact of adopting FIN 48 on its financial statements.

Advertising
costs  Advertising costs are expensed as incurred.

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

12

---

# Clarkston Financial
Corporation

---

Note 2 
Securities

The
amortized cost and estimated market value of securities are as follows at
December 31, 2006 and 2005 (000s omitted):

|                                                | 2006
|----------------------------------------------- | ----
|                                                |     
|                                                |     
|                                                |     
|                                                |     
|Available-for-sale securities                   |     
|U.S. Treasury securities and obligations of     |     
|U.S. government corporations and agencies       |     
|Mortgage-backed securities                      |     
|Collateralized mortgage obligations             |     
|Obligations of state and political subdivisions |     
|                                                |     
|                                                |     
|Total                                           |     
|                                                |     

|                                                | 2005
|----------------------------------------------- | ----
|                                                |     
|                                                |     
|                                                |     
|                                                |     
|Available-for-sale securities:                  |     
|U.S. Treasury securities and obligations of     |     
|U.S. government corporations and agencies       |     
|Mortgage-backed securities                      |     
|Collateralized mortgage obligations             |     
|Obligations of state and political subdivisions |     
|                                                |     
|                                                |     
|Total                                           |     
|                                                |     

Securities
having an amortized cost of $16,518,000 and $14,999,000 (market value of $16,312,000 and
$14,533,000) were pledged at December 31, 2006, and 2005, respectively, to secure public
deposits, repurchase agreements, FHLB Advances and for other purposes required by law.

13

---

Clarkston Financial
Corporation

---

# Note 2  Securities
(continued)

The amortized cost and estimated
market value of available-for-sale securities at December 31, 2006 by contractual
maturity, are shown below. Expected maturities will differ from contractual maturities
because issuers may have the right to call or prepay obligations with or without call or
prepayment penalties (000s omitted):

|                                                                   | Available for Sale
|------------------------------------------------------------------ | ------------------
|                                                                   |                   
|                                                                   |                   
|                                                                   |                   
|                                                                   |                   
|Due on one year or less                                            |                   
|Due in one year through five years                                 |                   
|Due after five years through ten years                             |                   
|Due after ten years                                                |                   
|                                                                   |                   
|Total                                                              |                   
|Mortgage-backed securities and collateralized mortgage obligations |                   
|                                                                   |                   
|                                                                   |                   
|Total                                                              |                   
|                                                                   |                   

Information
pertaining to securities with gross unrealized losses at December 31, 2006 and 2005,
aggregated by investment category and length of time that individual securities have been
in a continuous loss position, follows:

|                                                | 2006
|----------------------------------------------- | ----
|                                                |     
|                                                |     
|                                                |     
|                                                |     
|                                                |     
|                                                |     
|Available-for-sale securities:                  |     
|U.S. Treasury securities and obligations of     |     
|U.S. government corporations and agencies       |     
|Mortgage-backed securiites                      |     
|Collateralized mortgage obligations             |     
|Obligations of state and political subdivisions |     
|                                                |     
|                                                |     
|Total                                           |     
|                                                |     

|                                                | 2005
|----------------------------------------------- | ----
|                                                |     
|                                                |     
|                                                |     
|                                                |     
|                                                |     
|                                                |     
|Available-for-sale securities:                  |     
|U.S. Treasury securities and obligations of     |     
|U.S. government corporations and agencies       |     
|Mortgage-backed securiites                      |     
|Collateralized mortgage obligations             |     
|Obligations of state and political subdivisions |     
|                                                |     
|                                                |     
|Total                                           |     
|                                                |     

14

---

Clarkston Financial
Corporation

---

# Note 2  Securities
(continued)

Included
in the tables above, at December 31, 2006, the Corporation had 65 securities in an
unrealized loss position greater than 12 months, and 7 securities in an unrealized loss
position less than 12 months. These unrealized losses are primarily attributable to
changes in interest rates and management does not believe any individual unrealized loss
as of December 31, 2006 represents an other-than-temporary impairment. All but one of the
securities had unrealized losses which were 5% or less of their respective amortized cost
basis. This individual mortgage backed securitys large unrealized loss is caused
primarily by the interest rate environment. It was purchased in March 2004, which was
close to the bottom of the interest rate cycle when the rate on the 10 year treasury bond
was 70 basis points below the December 31, 2006 rate. The Corporation has both the intent
and ability to hold the securities contained in the previous table for a time necessary to
recover the amortized costs.

For
the years ended December 31, 2006, 2005 and 2004 gross realized gains on sales of
securities were $5,000, $9,000 and $157,000, respectively. Gross realized losses amounted
to $26,000, $10,000 and $182,000, respectively. The tax benefit (provision) related to
these gains/losses was $7,000, $0 and $9,000, respectively.

# Note 3  Loans

Major
categories of loans included in the portfolio at December 31, 2006 and 2005 are as follows
(000s omitted):

|                 | 2006 | 2005
|---------------- | ---- | ----
|                 |      |     
|                 |      |     
|Commercial loans |      |     
|Mortgage loans   |      |     
|Commercial       |      |     
|Residential      |      |     
|Construction     |      |     
|Consumer         |      |     
|                 |      |     
|                 |      |     
|Total            |      |     
|                 |      |     

Certain
directors of the Corporation and the Banks, including their associates, were loan
customers of the subsidiary banks. Such loans were made in the ordinary course of business
and do not involve more than a normal risk of collectibility. The outstanding loan balance
for these persons at December 31, 2006 and 2005 totaled $6,900,000 and $4,577,000,
respectively. Advances on related party loans totaled $3,725,000 and $1,549,000, and
repayments on related party loans totaled $1,402,000 and $622,000 in 2006 and 2005,
respectively. The total unused commitments for these loans totaled $1,012,000 and $358,000
at December 31, 2006 and 2005, respectively.

15

---

Clarkston Financial
Corporation

---

# Note 3  Loans
(continued)

Loan
maturities and rate sensitivity of the loan portfolio at December 31, 2006 are as follows
(000s omitted):

|                                 | Within One
Year | One to Five
Years | After Five
Years | Total 
|-------------------------------- | --------------- | ----------------- | ---------------- | ------
|                                 |                 |                   |                  |       
|                                 |                 |                   |                  |       
|Commercial loans                 |                 |                   | $                | 16,053
|Mortgage loans                   |                 |                  
|Commercial                       |                 |                   |                  | 22,501
|Residential                      |                 |                   |                  | 13,082
|Construction                     |                 |                   |                  | 18,728
|Consumer                         |                 |                   |                  | 847   
|                                 |                 |                   |                  |       
|                                 |                 |                  
|Total                            |                 |                   | $                | 71,211
|                                 |                 |                   |                  |       
|                                 |                 |                  
|Loans at fixed interest rates    |                 |                   | $                | 14,962
|Loans at variable interest rates |                 |                   |                  | 56,249
|                                 |                 |                   |                  |       
|                                 |                 |                  
|Total                            |                 |                   | $                | 71,211
|                                 |                 |                   |                  |       

# Note 4  Allowance
for Possible Loan Losses

A
summary of the activity in the allowance for possible loan losses (ALL) is as follows
(000s omitted):

|                                | 2006 | 2005 | 2004
|------------------------------- | ---- | ---- | ----
|                                |      |      |     
|                                |      |      |     
|Balance - Beginning of year     |      |      | $   
|                                |      |     
|Provision charged to operations |      |      |     
|Loan losses                     |      |      |     
|Loan loss recoveries            |      |      |     
|                                |      |      |     
|                                |      |     
|Balance - End of year           |      |      | $   
|                                |      |      |     
|                                |      |     
|As a percent of total loans     |      |      |     
|                                |      |      |     

16

---

Clarkston Financial
Corporation

---

# Note 4  Allowance
for Possible Loan Losses

The Banks consider all nonaccrual and
reduced-rate loans (with the exception of residential mortgages and consumer loans) to be
impaired. The table below summarizes the impaired loan portfolios.

|2006                                                    | 2005 | 2004
|------------------------------------------------------- | ---- | ----
|                                                        |      |     
|                                                        |      |     
|Total Impaired Loans                                    |      |     
|                                                        |      |     
|Impaired loans with a specific reserve allocation       |      |     
|Specific reserve allocated to impaired loans            |      |     
|                                                        |      |     
|Impaired loans with no specific reserve                 |      |     
|                                                        |      |     
|Average investment in impaired loans                    |      |     
|                                                        |      |     
|Interest income recognized on impaired loans            |      |     
|Cash-basis interest income recognized on impaired loans |      |     

No additional funds are committed to
be advanced in connection with impaired loans.

Non-performing loans at December 31, 2006
and 2005 were as follows (000s omitted):

|                                        | 2006 | 2005
|--------------------------------------- | ---- | ----
|                                        |      |     
|                                        |      |     
|Loans  past due over 90 days and  still |      |     
|accruing interest                       |      |     
|Non-accrual loans                       |      |     
|                                        |      |     
|                                        |      |     
|Total                                   |      |     
|                                        |      |     

Non-performing loans consist of
smaller balance homogeneous loans that are evaluated collectively for impairment and
individually classified impaired loans.

17

---

Clarkston Financial
Corporation

---

# Note 5  Premises
and Equipment

The
following is a summary of the cost and accumulated depreciation of premises and equipment
for the years ended December 31, 2006 and 2005 (000s omitted):

|                              | 2006 | 2005
|----------------------------- | ---- | ----
|                              |      |     
|                              |      |     
|Building                      |      |     
|Building improvements         |      |     
|Land                          |      |     
|Land improvements             |      |     
|Furniture and equipment       |      |     
|                              |      |     
|Total premises and equipment  |      |     
|                              |      |     
|Less accumulated depreciation |      |     
|                              |      |     
|                              |      |     
|Net carrying amount           |      |     
|                              |      |     

Depreciation expense for the years
ended December 31, 2006, 2005 and 2004 amounted to $383,000, $306,000 and $167,000,
respectively.

# Note 6  Deposits

The
following is a summary of interest-bearing deposit accounts at December 31, 2006 and 2005
(000s omitted):

|                                | 2006 | 2005
|------------------------------- | ---- | ----
|                                |      |     
|                                |      |     
|Interest checking               |      |     
|Savings                         |      |     
|Money market                    |      |     
|Time:                           |      |     
|$100,000 and over               |      |     
|Under $100,000                  |      |     
|                                |      |     
|                                |      |     
|Total interest-bearing deposits |      |     
|                                |      |     

The
remaining maturities of certificates of deposit outstanding at December 31, 2006 are as
follows (000s omitted):

|               | Under
$100,000 | $100,000 and
Over
|-------------- | -------------- | -----------------
|               |                |                  
|               |                |                  
|2007           |                |                  
|2008           |                |                  
|2009           |                |                  
|2010           |                |                  
|2011 and after |                |                  
|               |                |                  
|               |                |                  
|Total          |                |                  
|               |                |                  

18

---

Clarkston Financial
Corporation

---

# Note 7  Federal
Home Loan Bank Advances

The
Corporation has various term advances from the Federal Home Loan Bank of Indianapolis
(FHLB) with fixed and variable interest rates ranging from 3.75% to 5.58% at
December 31, 2006 and from 3.75% to 4.86% at December 31, 2005. The weighted average
interest rate at December 31, 2006 is 4.92%. Maturity dates range from April 2007 to
October 2010. The weighted average remaining maturity at December 31, 2006 is 483 days, or
April 27, 2008. Advances from the FHLB are collateralized by qualifying investment
securities with estimated market values of $16,300,000 and $12,210,000 at December 31,
2006 and 2005. The advances are due in full at maturity and the fixed rate advances are
subject to a prepayment penalty if repaid prior to maturity.

Maturities
over the next five years are as follows (000s omitted):

|      | 
|----- | 
|2007  | 
|2008  | 
|2009  | 
|2010  | 
|      | 
|      | 
|Total | 
|      | 

# Note 8  Income
Taxes

The
Corporation and Clarkston State Bank file a consolidated income tax return. As Huron
Valley State Bank is not 80% owned by Clarkston Financial Corporation, they are required
to file their own income tax return. The following is a summary of the provision for
income taxes for the years ended December 31, 2006, 2005 and 2004.

Allocation
of income taxes between current and deferred portions is as follows (000s omitted):

|                                   | 2005 | 2005 | 2004
|---------------------------------- | ---- | ---- | ----
|                                   |      |      |     
|                                   |      |      |     
|Current (benefit) expense          |      |      | $   
|Deferred (benefit) expense         |      |      |     
|                                   |      |      |     
|                                   |      |     
|Total income tax expense (benefit) |      |      | $   
|                                   |      |      |     

19

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Clarkston Financial
Corporation

---

# Note 8  Income
Taxes (continued)

The difference between reported
federal income tax expense and the amount computed by applying statutory tax rates to
income before income taxes is as follows:

|                                    | 2006 | 2005 | 2004
|----------------------------------- | ---- | ---- | ----
|                                    |      |      |     
|                                    |      |      |     
|Amount computed at statutory rates  |      |      | $   
|Increase (decrease) resulting from: |      |     
|Tax-exempt interest                 |      |      |     
|Loss from non-wholly owned          |      |     
|subsidiary                          |      |      |     
|Other                               |      |      |     
|                                    |      |      |     
|                                    |      |     
|Reported tax expense (benefit)      |      |      | $   
|                                    |      |      |     

The temporary differences that
comprise deferred tax assets and liabilities at December 31, 2006 and 2005 are as
follows (000s omitted):

|                                                 | 2006 | 2005
|------------------------------------------------ | ---- | ----
|                                                 |      |     
|                                                 |      |     
|Deferred tax assets:                             |      |     
|Bad debts                                        |      |     
|Accrued compensation                             |      |     
|Charitable contributions                         |      |     
|Unrealized loss on securities available for sale |      |     
|Organization and preopening costs                |      |     
|                                                 |      |     
|                                                 |      |     
|Total deferred tax assets                        |      |     
|                                                 |      |     
|Deferred tax liabilities:                        |      |     
|Depreciation                                     |      |     
|FHLB stock dividend                              |      |     
|Accretion on investment securities               |      |     
|                                                 |      |     
|                                                 |      |     
|Total deferred tax liabilities                   |      |     
|                                                 |      |     
|                                                 |      |     
|Net deferred tax asset                           |      |     
|                                                 |      |     

# Note 9 
Off-balance-sheet Activities

Credit-related
Financial Instruments  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, standby letters of credit, and commercial letters 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.

20

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Clarkston Financial
Corporation

---

# Note 9 
Off-balance-sheet Activities (continued)

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
December 31, 2006 and 2005, the following financial instruments were outstanding whose
contract amounts represent credit risk (000s omitted):

|                                           | Contract Amount
|------------------------------------------ | ---------------
|                                           |                
|                                           |                
|                                           |                
|Commitments to grant loans                 |                
|Unfunded commitments under lines of credit |                
|Commercial and standby letters of credit   |                

Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. The commitments for
equity lines of credit may expire without being drawn upon. Therefore, the total
commitment amounts do not necessarily represent future cash requirements. The amount of
collateral obtained, if it is deemed necessary by the Corporation, is based on
managements credit evaluation of the customer.

Unfunded
commitments under commercial lines of credit, revolving credit lines, and overdraft
protection agreements are commitments for possible future extensions of credit to existing
customers. These lines of credit are collateralized and usually do not contain a specified
maturity date and may not be drawn upon to the total extent to which the Corporation is
committed.

Commercial
and standby letters of credit are conditional commitments issued by the Corporation to
guarantee the performance of a customer to a third party. Those letters of credit are
primarily used to support public and private borrowing arrangements. Essentially all
letters of credit issued have expiration dates within one year. The Corporation generally
holds collateral supporting those commitments if deemed necessary.

21

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Clarkston Financial
Corporation

---

# Note 9 
Off-balance-sheet Activities (continued)

Collateral Requirements 
To reduce credit risk related to the use of credit-related financial instruments, the
Corporation generally obtains collateral. The amount and nature of the collateral obtained
are based on the Corporations credit evaluation of the customer. Collateral held
varies but may include cash, securities, accounts receivable, inventory, property, plant,
and equipment, and real estate.

If
the counterparty does not have the right and ability to redeem the collateral or the
Corporation is permitted to sell or repledge the collateral on short notice, the
Corporation records the collateral in its balance sheet at fair value with a corresponding
obligation to return it.

Legal
Contingencies  Various legal claims also arise from time to time in the normal
course of business which, in the opinion of management, will have no material effect on
the Corporations consolidated financial statements.

# Note 10  Related
Parties and Commitments

The
Corporation and the Banks lease certain office and branch premises under operating lease
agreements. Various facilities are leased from an entity owned by the chairman of the
Board of Directors of the Corporation and CSB. In addition, the Corporation is party to
service contracts for computer processing. Total expense for operating leases and service
contracts was as follows for the preceding 3 years ending (000s omitted):

|                  |  | Rent Expense
|----------------- |  | ------------
|                  |  |             
|                  |  |             
|                  |  |             
|                  |  |             
|December 31, 2004 |  |             
|December 31, 2005 |  |             
|December 31, 2006 |  |             

Rent
commitments under non-cancelable operating leases and service contracts are as follows,
before considering renewal options that generally are present (000s omitted):

|           |  | Lease Commitments
|---------- |  | -----------------
|           |  |                  
|           |  |                  
|           |  |                  
|           |  |                  
|2007       |  |                  
|2008       |  |                  
|2009       |  |                  
|2010       |  |                  
|2011       |  |                  
|Thereafter |  |                  
|           |  |                  
|           |  |                  
|           |  |                  

22

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Clarkston Financial
Corporation

---

# Note 11 
Restriction on Dividends, Loans, and Advances

Banking
regulations place certain restrictions on dividends paid and loans or advances made by the
Banks to the Corporation. The total amount of dividends that may be paid at any date is
generally limited to the retained earnings of the Banks. However, dividends paid by the
Banks would be prohibited if the effect thereof would cause the Banks capital to be
reduced below applicable minimum standards. Loans or advances made by the Banks to the
Corporation are generally limited to 10 percent of the Banks capital stock and
surplus. The table below outlines these restrictions as of December 31, 2006:

|                                                   | CSB | HVSB
|-------------------------------------------------- | --- | ----
|                                                   |     |     
|                                                   |     |     
|Amount available for payment of dividends          |     |     
|Restricted portion of Holding Company's investment |     |     
|Amount available to lend to Holding Company        |     |     

# Note 12 
Stock-based Compensation

The
Corporation has stock-based compensation plans which are described below. Under both
plans, there is a minimum vesting period of between one to three years before 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.

Under
the employees stock compensation plan (Employee Plan), the Corporation
may grant options and other awards to key employees for up to 27,500 shares of common
stock, of which 15,403 shares of common stock are available for grant. Restricted stock
has been the primary vehicle under the Employee Plan, as over 80% of the grants have been
in that form, and no options have been issued under this plan since 2000.

Under
the 1998 Founding Directors Stock Option Plan (Director Plan) the Corporation
may grant options and other awards to directors for up to 82,500 shares of common stock,
of which 7,920 shares of common stock are available for grant. No options have been
granted under this plan since the grants to the founding directors of the Corporation. The
directors are compensated for meeting attendance with stock awards from this plan. During
2006 and 2005, directors were awarded 2,660 and 3,970 shares from this plan. The total
expense recognized for these awards was $39,400 and $67,000 during 2006 and 2005.

23

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Clarkston Financial
Corporation

---

# Note 12 
Stock-based Compensation (continued)

The following table summarizes stock
option transactions for the plans and the related average exercise prices for the years
ended December 31, 2006, 2005 and 2004:

|                                  | 2006 | 2005 | 2004
|--------------------------------- | ---- | ---- | ----
|                                  |      |      |     
|                                  |      |      |     
|                                  |      |      |     
|                                  |      |      |     
|Options Outstanding - Beginning   |      |     
|Of year                           |      |      |     
|Options granted - Employee plan   |      |      |     
|Options exercised                 |      |      |     
|Options expired                   |      |      |     
|                                  |      |      |     
|                                  |      |     
|Options Outstanding - End of year |      |      |     
|                                  |      |      |     

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

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

The aggregate intrinsic value of
outstanding options shown in the table above represents the total pretax intrinsic value
(i.e., the difference between the Corporations closing stock price of $13.75 on
December 31, 2006 and the exercise price, times the number of shares) that would have been
received by the option holders had all option holders exercised their options on December
31, 2006. This amount changes based on the fair market value of the Corporations
stock.

The total intrinsic value of stock
options exercised was approximately $64,000 for the year ended December 31, 2006. No
options were exercised during 2005 or 2004.

The following table summarizes the
activity of restricted stock awards for the years ended December 31,:

|                                        | 2006 | 2005 | 2004
|--------------------------------------- | ---- | ---- | ----
|                                        |      |      |     
|                                        |      |      |     
|Available for Grant - Beginning of year |      |      | $   
|                                        |      |     
|Granted                                 |      |      |     
|Forfeited                               |      |      |     
|                                        |      |      |     
|                                        |      |     
|Available for Grant - End of year       |      |      | $   
|                                        |      |      |     

24

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Clarkston Financial
Corporation

---

# Note 12 
Stock-based Compensation (continued)

The total compensation cost charged
to income under these plans was $47,000 and $51,000 for 2006 and 2005, respectively. The
total income tax benefit recognized in the income statement related to stock-based
compensation was $16,000 and $17,000 for 2006 and 2005, respectively.

Restricted stock awarded is subject
to restrictions on sale, transfer, or assignment for the duration of the employees
life. Holders of restricted stock generally may forfeit ownership of all or a portion of
their award if employment is terminated before the end of the vesting period. 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.

# Note 13  Fair
Value of Financial Instruments

The
fair value of a financial instrument is the current amount that would be exchanged between
willing parties, other than in a forced liquidation. Fair value is best determined based
on quoted market prices. However, in many instances, there are no quoted market prices for
the Corporations various financial instruments. In cases where quoted market prices
are not available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Accordingly, the fair
value estimates may not be realized in an immediate settlement of the instrument. SFAS 107
excludes certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented may not
necessarily represent the underlying fair value of the Corporation.

The following methods and assumptions
were used by the Corporation in estimating fair value disclosures for financial
instruments:

Cash and Cash Equivalents
 The carrying amounts of cash and short-term investments approximate fair values.

Securities  Fair values
for securities are based on quoted market prices.

Loans Receivable  For
variable-rate loans that reprice frequently and with no significant change in credit risk,
fair values are based on carrying values. Fair values for certain mortgage loans (e.g.,
one- to four-family residential), credit card loans, and other consumer loans are based on
quoted market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. Fair values for other
loans (e.g., commercial real estate and commercial loans) are estimated using discounted
cash flow analyses, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. Fair values for non-performing loans are
estimated using discounted cash flow analyses or underlying collateral values, where
applicable.

25

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Clarkston Financial
Corporation

---

# Note 13  Fair
Value of Financial Instruments (continued)

Deposit Liabilities  The
fair values disclosed for demand deposits (e.g., interest and non-interest checking,
passbook savings, and certain types of money market accounts) are, by definition, equal to
the amount payable on demand at the reporting date (i.e., their carrying amounts). The
carrying amounts of variable-rate, fixed-term money market accounts and certificates of
deposit approximate their fair values at the reporting date. Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow calculation that
applies interest rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits.

Federal Home Loan Bank Advances The fair value of the Corporations Federal Home Loan Bank (FHLB) advances
is estimated using discounted cash flow analyses based on the Corporations current
incremental borrowing rates for similar types of borrowing arrangements.

Junior Subordinated Debentures The carrying amounts of variable-rate, fixed-term debentures approximate their
fair values at the reporting date.

Accrued Interest  The
carrying amounts of accrued interest approximate fair value.

Other Instruments  The
fair value of other financial instruments, including loan commitments and unfunded letters
of credit, based on a discounted cash flow analyses, is not material.

The
estimated fair values and related carrying or notional amounts of the Corporations
financial instruments are as follows (000s omitted):

|                               | 2006 | 2005
|------------------------------ | ---- | ----
|                               |      |     
|                               |      |     
|                               |      |     
|                               |      |     
|Assets                         |      |     
|Cash and cash equivalents      |      |     
|Securities                     |      |     
|Loans                          |      |     
|Accrued interest receivable    |      |     
|                               |      |     
|Liabilities                    |      |     
|Noninterest-bearing deposits   |      |     
|Interest-bearing deposits      |      |     
|Accrued interest payable       |      |     
|FHLB advances                  |      |     
|Junior subordinated debentures |      |     

26

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Clarkston Financial
Corporation

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# Note 14  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, significantly undercapitalized, and critically
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 Banks and the Corporation
were well-capitalized as of December 31, 2006 and 2005.

The
Banks actual capital amounts and ratios as of December 31, 2006 and 2005 are also
presented in the table.

|                          | Actual | For CapitalAdequacy Purposes | To beWell-Capitalized
|------------------------- | ------ | ---------------------------- | ---------------------
|                          |        |                              |                      
|                          |        |                              |                      
|                          |        |                              |                      
|                          |        |                              |                      
|As of December 31, 2006:  |        |                             
|Total risk-based capital  |        |                             
|(to risk-weighted assets) |        |                             
|CSB                       |        |                              | $                    
|HVSB                      |        |                              |                      
|Tier I Capital            |        |                             
|(to risk weighted assets) |        |                             
|CSB                       |        |                              | $                    
|HVSB                      |        |                              |                      
|Tier I Capital            |        |                             
|(to average assets)       |        |                             
|CSB                       |        |                              | $                    
|HVSB                      |        |                              |                      

27

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Clarkston Financial
Corporation

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# Note 14  Minimum
Regulatory Capital Requirements (continued)

|                          | Actual | For Capital
Adequacy Purposes | To be
Well-Capitalized
|------------------------- | ------ | ----------------------------- | ----------------------
|                          |        |                               |                       
|                          |        |                               |                       
|                          |        |                               |                       
|                          |        |                               |                       
|As of December 31, 2005:  |        |                              
|Total risk-based capital  |        |                              
|(to risk-weighted assets) |        |                              
|CSB                       |        |                               | $                     
|HVSB                      |        |                               |                       
|Tier I Capital            |        |                              
|(to risk weighted assets) |        |                              
|CSB                       |        |                               | $                     
|HVSB                      |        |                               |                       
|Tier I Capital            |        |                              
|(to average assets)       |        |                              
|CSB                       |        |                               | $                     
|HVSB                      |        |                               |                       

# Note 15  Junior
Subordinated Debentures

The
Corporation has sponsored a trust, Clarkston Capital Trust I of which 100 percent of the
common equity is owned by the Corporation. The trust was formed for the sole purpose of
issuing corporation-obligated, mandatorily redeemable capital securities (trust
preferred securities) to third-party investors and investing the proceeds from the
sale of the trust preferred securities in an equivalent amount of junior subordinated
debentures of the Corporation. The debentures held by the trust are the sole assets of the
trust. Distributions on the trust preferred securities issued by the trust are payable at
the same rate and time as the interest being earned by the trust on the debentures. The
debentures carry a variable rate of interest at the three-month LIBOR plus 2.8 percent,
and have a stated maturity of 30 years. The securities are redeemable at par after five
years and, in effect, are guaranteed by the Corporation. Distributions on the trust
preferred securities are payable quarterly on March 30, June 30, September 30, and
December 30. Under certain circumstances, distributions may be deferred for up to 20
calendar quarters. However, during any such deferrals, interest accrues on any unpaid
distributions at the rate of the three-month LIBOR plus 2.8 percent.

The
trust preferred securities qualify for up to 25 percent of Tier 1 capital under regulatory
guidelines. Any amounts in excess of this limit may be included in Tier 2 capital.

# Note 16  Other
Debt Facilities

The
Corporation has a line of credit secured by its interest in the consolidated subsidiaries
in the amount of $3 million. This line is to be used for general corporate purposes and
has no specific use identified at this time. This note bears interest at Wall Street
Journal Prime, currently 8.25%. As of December 31, 2006, there was no outstanding balance
on this line.

28

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Clarkston Financial
Corporation

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# Note 17 
Parent-only Condensed Financial Information

The
condensed financial information that follows presents the financial condition of Clarkston
Financial Corporation (the Parent Company), along with the results of its
operations and its cash flows. The Parent Company has recorded its investments in its
subsidiaries at cost plus its share of the undistributed earnings of its subsidiaries
since inception. The Parent Company recognizes dividends from its subsidiaries as revenue
and undistributed earnings of its subsidiaries as other income. The Parent Company
financial information should be read in conjunction with the Corporations
consolidated financial statements.

The
condensed balance sheet as of December 31, 2006 and 2005 (with 000s omitted) is as
follows:

|                                             | 2006 | 2005
|-------------------------------------------- | ---- | ----
|                                             |      |     
|Assets                                       |      |     
|Cash on deposit with subsidiary Banks        |      |     
|Securities - Available for sale              |      |     
|Premises and equipment                       |      |     
|Investment in the Banks                      |      |     
|Investment in Capital Trust I                |      |     
|Accrued interest receivable and other        |      |     
|                                             |      |     
|                                             |      |     
|Total assets                                 |      |     
|                                             |      |     
|                                             |      |     
|Liabilities                                  |      |     
|Accounts payable                             |      |     
|Intercompany debt                            |      |     
|Notes payable                                |      |     
|                                             |      |     
|                                             |      |     
|Total liabilities                            |      |     
|                                             |      |     
|Minority interest in consolidated subsidiary |      |     
|                                             |      |     
|Stockholders' Equity                         |      |     
|                                             |      |     
|                                             |      |     
|Total liabilities and stockholders' equity   |      |     
|                                             |      |     

29

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Clarkston Financial
Corporation

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# Note 17 
Parent-only Condensed Financial Information (continued)

The condensed statement of income for
the years ended December 31, 2006, and 2005, and 2004 (000s omitted) is as follows:

|                                                       | 2006 | 2005 | 2004
|------------------------------------------------------ | ---- | ---- | ----
|                                                       |      |      |     
|                                                       |      |      |     
|Operating Income -                                     |      |     
|Dividends received from bank subsidiaries              |      |      | $   
|Intercompany fees                                      |      |      |     
|Interest Income                                        |      |      |     
|Other Income                                           |      |      |     
|                                                       |      |      |     
|Total Operating Income                                 |      |      |     
|Operating Expenses                                     |      |     
|Interest expense                                       |      |      |     
|Salaries and benefits                                  |      |      |     
|Professional fees                                      |      |      |     
|Other expense                                          |      |      |     
|                                                       |      |      |     
|Operating Expenses                                     |      |      |     
|                                                       |      |      |     
|Loss - Before income taxes and equity in undistributed |      |     
|income of subsidiaries                                 |      |      |     
|Income Tax Benefit                                     |      |      |     
|                                                       |      |      |     
|Loss - Before equity in undistributed income           |      |     
|of subsidiaries                                        |      |      |     
|Equity in Undistributed Income ( loss) of Subsidiaries |      |      |     
|                                                       |      |      |     
|Net Income                                             |      |      | $   
|                                                       |      |      |     

30

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Clarkston Financial
Corporation

---

# Note 17 
Parent-only Condensed Financial Information (continued)

The
condensed statement of cash flows for the years ended December 31, 2006, 2005 and 2004
(000s omitted) is as follows:

|                                                            | 2006 | 2005 | 2004
|----------------------------------------------------------- | ---- | ---- | ----
|                                                            |      |      |     
|                                                            |      |      |     
|Cash Flows from Operating Activities                        |      |     
|Net income                                                  |      |      | $   
|Adjustments to reconcile net income to net cash             |      |     
|from operating activities                                   |      |     
|(Income)/loss from subsidiary                               |      |      |     
|Depreciation and amortization                               |      |      |     
|Loss on sale of available-for-sale securities               |      |      |     
|Recognition of restricted stock expense                     |      |      |     
|Increase in interest receivable and other                   |      |      |     
|Decrease (Increase) in receivable from subsidiary           |      |      |     
|Increase in accounts payable and other                      |      |      |     
|                                                            |      |      |     
|                                                            |      |     
|Net cash used in operating activities                       |      |      |     
|                                                            |      |     
|Cash Flows from Investing Activities                        |      |     
|Investment in subsidiary                                    |      |      |     
|Proceeds from sale/paydown of available-for-sale securities |      |      |     
|Purchase of available-for-sale securities                   |      |      |     
|Premises and equipment expenditures                         |      |      |     
|                                                            |      |      |     
|                                                            |      |     
|Net cash used in investing activities                       |      |      |     
|                                                            |      |     
|Cash Flows from Financing Activities                        |      |     
|Issuance of stock                                           |      |      |     
|Extension of credit from subsidiaries                       |      |      |     
|Repayment of debt to subsidiaries                           |      |      |     
|                                                            |      |      |     
|                                                            |      |     
|Net cash provided by financing activities                   |      |      |     
|                                                            |      |      |     
|                                                            |      |     
|Net Increase (Decrease) in Cash and Cash Equivalents        |      |      |     
|                                                            |      |     
|Cash and Cash Equivalents - Beginning of year               |      |      |     
|                                                            |      |      |     
|                                                            |      |     
|Cash and Cash Equivalents - End of year                     |      |      | $   
|                                                            |      |      |     

31

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