# Exhibit 13

# MANAGEMENTS
DISCUSSION AND ANALYSIS OF THE CORPORATION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.

---



Our principal source of revenue is
interest and fees on loans. On a consolidated basis, interest and fees on loans accounted
for 77.4% of total revenue in 2005 compared to 72.0% in 2004. Interest and fees on loans
increased in the current year as a result of growth in the loan portfolio. This growth in
the loan portfolio is due in part to the addition of HVSB and also to continued growth in
CSBs loan portfolio. The increase in revenue share for loans came at the expense of
interest from investments, which decreased to 15.4% in 2005 from 19.9% in 2004. Service
fees on deposit accounts declined slightly from 8.0% to 7.1% in 2004 and 2005,
respectively. This decrease in revenue share was due to faster growth in other revenue
sources, as the deposit fee income as a % of checking accounts increased slightly from
2.2% in 2004 to 2.6% in 2005.

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
denovo 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, the Corporation does not separately
identify individual consumer and residential 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
 We apply the provisions of APB Opinion No. 25, Accounting for Stock-basedCompensation, accounting for all employee stock option grants using the intrinsic
value method. Compensation expense in the pro forma disclosures is not indicative of
future amounts, as options vest over several years and additional grants may be made each
year.

Recent Accounting
Pronouncements:

In December 2004, the Financial
Accounting Standards Board (FASB) issued SFAS No. 123(R), Accounting for
Stock-Based Compensation (SFAS 123R). SFAS 123R requires all share-based
payments to employees, including grants of employee stock options, to be recognized as
expense in the income statement based on their fair values. Prior to SFAS 123R, only
certain pro forma disclosures of fair value were required. The amount of compensation is
measured at the fair value of the options when granted, and this cost is expensed over the
required service period, which is normally the vesting period of the options. SFAS 123R
will apply to awards granted or modified after January 1, 2006. Compensation cost will
also be recorded for prior option grants that vest after the date of adoption. The future
effect of the adoption of the new accounting principle on results of operations will
depend on the level of future option grants, the vesting period for those grants, and the
fair value of the options granted at such future date. There are no existing options that
are scheduled to vest subsequent to the adoption date, therefore no additional expense is
anticipated.

In May 2005, the Financial
Accounting Standards Board issued SFAS No. 154, Accounting Changes and Error
Corrections.This Statement replaces APB Opinion No. 20,
Accounting Changes,and FASB Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements.SFAS 154 carries forward the
guidance contained in Opinion 20 for reporting the correction of an error in previously
issued financial statements and a change in accounting estimate. However, SFAS 154 changes
the requirements for the accounting for and reporting of a change in accounting principle.
Under this Statement, every voluntary change in accounting principle requires
retrospective application to prior periods financial statements, unless it is
impracticable. It also applies to changes required by an accounting pronouncement in the
unusual instance that the pronouncement does not include specific transition provisions.
When a pronouncement includes specific transition provisions, those provisions should be
followed. This Statement is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005, although earlier application
is permitted for changes and corrections made in fiscal years beginning after June 1,
2005. The Corporation expects no significant effect on its financial statements as a
result of the adoption of this Statement.

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. The Corporations 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 $195.6 million at December 31, 2005, from
          $163.4 million at December 31, 2004, an increase of $32.2 million, or 19.7%.
          Approximately 40% of the growth in total assets can be attributed to HVSB, which
          opened for business in the third quarter of 2005. HVSBs initial equity was
          $8.2 million, of which CFC contributed $4.5 million. As discussed below, all
          major categories of assets showed growth over 2004 and the growth in assets was
          funded primarily with deposits. We anticipate that our assets will continue to
          grow in 2006.

Cash
and Cash Equivalents. Cash and cash equivalents, which include federal funds sold and
short term investments, increased $4.2 million, or 107.7%, to $8.1 million at December 31,
2005, from $3.9 million at December 31, 2004. This increase is primarily due to
HVSBs equity not yet being deployed into higher yielding loans. 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.Oursecurities held at December 31, 2005, totaled $49.0 million
          compared to $44.4 million at December 31, 2004, an increase of $4.6 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, 2005 (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            |                 | $     991                       |                           | 3.50            | %    
|Mortgage-backed securities          |                 | -                               |                           | 4.33            | %    
|Municipal bonds                     |                 | -                               |                           | 4.33            | %    
|Collateralized Mortgage Obligations |                 | -                               |                           | 4.33            | %    
|                                    |                 |                                 |                           |                 |      
|Total                               |                 | $     991                       |                           |                 |      
|                                    |                 |                                 |                           |                 |      

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 $20.7 million, or 18.7% for the period from
December 31, 2004 to December 31, 2005. Approximately $3.1 million of this growth was from
Huron Valley State Bank. Commercial real estate loans continue to comprise the largest
portion of the portfolio, growing from $57.3 million at December 31, 2004 to $62.8 million
at December 31, 2005, an increase of $14.5 million, or 9.6%. The remainder of the increase
in the loan portfolio was in real estate construction loans, which increased $13.3
million, or 85.8% to a balance of $28.8 million at December 31, 2005 from $15.5 million at
December 31, 2004, and commercial loans which increased $1.4 million, or 6.0% from
December 31, 2004 to December 31, 2005. Management is hopeful that the increase in
construction lending will lead to additional, longer-term commercial real estate loans as
the projects are completed, or fee income from the sale of end mortgage loans as it
relates to residential construction loans. Loan growth for the year was slightly behind
projected amounts and the growth projections for 2006 are lower than the levels
historically seen due primarily to economic conditions and a very competitive environment
in the banks primary markets.

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 table shows the amount of total loans out standing as of December 31, 2005
which, based on remaining scheduled repayments of principal, are due in the periods
indicated.

|             | Maturing
|------------ | --------
|
|Commercial   |         
|Real Estate  |         
|Commercial   |         
|Residential  |         
|Construction |         
|Consumer     |         
|             |         
|Totals       |         
|             |         

Below
is a schedule of the loan amounts maturing or repricing and are classified according to
their sensitivity to changes in interest rates.

|                                     | Interest Sensitivity
|------------------------------------ | --------------------
|
|
|Due within three months              |                     
|Due after three months within 1 year |                     
|Due after one but within five years  |                     
|Due after five years                 |                     
|                                     |                     
|Total                                |                     
|                                     |                     

6

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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.

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

|                                                                          | 2005 | 2004     | 2003
|------------------------------------------------------------------------- | ---- | -------- | ----
|Loans accounted for on a non-accrual basis                                |      | $  1,066 |     
|Accruing loans that are contractually past due                            |     
|90 days or more as to interest or principal payments                      |      | 1,413    |     
|                                                                          |      |          |     
|Total non-perfoming loans                                                 |      | 2,479    |     
|Repossessed assets                                                        |      | 205      |     
|                                                                          |      |          |     
|Total non-performing assets                                               |      | $  2,684 |     
|                                                                          |      |          |     
|                                                                          |     
|Non-performing loans as a percent of total loans                          |      | 1.86%    |     
|Loans past due 90 days or more still accruing as a percent of total loans |      | 1.06%    |     
|Non-performing assets as a percent of total assets                        |      | 1.37%    |     
|Non-performing loans as a percent of the loan loss reserve                |      | 128.45%  |     

The non-accrual balance above is
primarily made up of 3 relationships which are adequately reserved for. Approximately 60%
of the non-accrual loan balance is made up of 1 credit which is 100% reserved. No further
expenses are anticipated for this or the other loans currently on non-accrual status. 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. The repossessed
assets are related primarily to 2 of the commercial credits which were charged-off during
2005. We anticipate that the liquidation of these items will take place during 2006. The
balance is made up of 1 residential property and various machinery.

During 2005 a new senior lender was
added at Clarkston State Bank who has a very strong credit background. Additionally, a
dedicated individual was hired to deal with problem credits. This individual has
significant experience with workout situations and provides needed expertise to minimize
the Banks losses related to problem credits. Also, the loan policy is in the process
of being updated to enhance the monitoring and credit quality functions.

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, 2005 was $1.9 million representing
approximately 1.45% of gross loans outstanding and at December 31, 2004, was $1.3 million,
which represented approximately 1.14% of gross loans outstanding at that time. The large
growth in the construction portfolio necessitated a significant increase in the amount of
allowance allocated to that portfolio as shown in the table below. This was caused in
large part by the use of a new methodology for calculating the allowance for loan loss.
Historically, given CSBs relatively short history, peer data was used to develop the
historical charge-off rates. Beginning in 2005, in portfolios where there has been
historical loss, CSBs own history is being used. In portfolios in which CSB has
never experienced a loss, the peer rates are still being used. The overall level of the
allowance is also elevated due to one large non-accrual credit being fully reserved at the
end of the year. We anticipate resolution of this credit during 2006 at which time the
charge-off of this loan will reduce the allowance.
Additionally, management enhanced the analysis of the allowance for loan loss during the
current year, which caused some of the other shifts in the amounts or reserves allocated
to the individual portfolios, particularly within the real estate portfolio.

Clarkston
State Bank experienced its first material credit losses in six years of operations during
the year ended December 31, 2005. As stated above, we consider these charge-offs to be
isolated cases and are not indicative of an overall deterioration in the quality of the
portfolio taken as a whole. Huron Valley State Bank has not experienced any material
credit losses. The allowance for loan losses is maintained at a level management feels is
adequate based on internal quarterly assessments, external loan review and other industry
standards.

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.

9

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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.

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 its 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.

Over
the past five years the allowance has increased as a result of increased loan production.
Due to the lack of seasoning of our portfolio as well as continued soft economic
conditions and the problems discussed herein we feel it is prudent to continue to
contribute to our loan loss allowance. We expect to continue to grow our loan portfolio
and likewise will likely continue to contribute to the allowance. Moreover, it is also
expected that the level of loan losses may increase in the future as our portfolio
continues to grow and becomes more seasoned. However, we currently feel we have an
adequate allowance for loan loss to mitigate any potential losses inherent within the loan
portfolio.

Premises
and Equipment.Premises and equipment increased $1.5 million or 62.5% from $2.4
million at December 31, 2004 to $3.9 million at December 31, 2005. Approximately $1.0
million of the increase is due to CSBs purchase of a piece of land which is planned
to be the site of CSBs sixth branch location, expected to come on line in 2007. No
commitments have been entered into with relation to the construction of this branch. The
remainder of the increase is due primarily to the equipment and leasehold improvements for
Huron Valley State Bank.

Deposits.Ourdeposit 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. Moreover, we use no brokered deposits
          outside of our designated market area to assist in funding our banks
          operations.

10

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As
of December 31, 2005, deposits totaled $161.3 million. This represents a 21.0% increase
from December 31, 2004 when deposits were $133.3 million. Non-interest bearing demand
deposits increased by 19.2% or $3.8 million from $19.8 million at December 31, 2004 to
$23.6 million at December 31, 2005. Likewise, interest bearing deposits increased 21.3% to
$137.7 million at December 31, 2005, compared to $113.5 million at December 31, 2004. New
deposit relationships continue to be a residual benefit of the growth in the commercial
loan portfolio. The addition of HVSB and CSBs fifth branch location, which opened
for business in December 2004, have also contributed significantly to the deposit growth.

Average
Daily Deposits (in thousands)

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

|                           | Average for the Year2005 | Average for the Year2004 | Average for the Year2003
|-------------------------- | ------------------------ | ------------------------ | ------------------------
|
|Noninterest bearing demand |                          | $    24,733              |                         
|MMDA/Savings/NOW           |                          | 69,454                   |                         
|Time                       |                          | 58,118                   |                         
|                           |                          |                          |                         
|Total Deposits             |                          | $  152,305               |                         
|                           |                          |                          |                         

# 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 as of December 31, 2005, 2004, and 2003:

|                                   | 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, 2005, the Corporation owned 55.14% of the
outstanding shares in Huron Valley State Bank.

Common Stock/Additional Paid-In
Capital. The Corporations common stock and paid in capital accounts increased by
$3.4 million in the current year as a result of the stock rights offering completed in the
3rd quarter of the year. The rights offering gave every existing shareholder
the opportunity to purchase 1 share for every 4 shares owned at a 10% discount to the
market value on the date that the offering commenced. The primary purpose of the rights
offering was to fund the Corporations investment in Huron Valley State Bank without
diluting the ownership of our current shareholder base. No other significant changes were
seen in these accounts.

Retained Earnings. Consists of
retained earnings less any dividends paid to shareholders.As of December 31, 2005,
we had retained earnings of $3.6 million as compared to $3.6 million at December 31, 2004.
There were no dividends paid to shareholders in 2005 or 2004.

# Results of Operations

Summary
of Results.Wehad a net loss of $24,000 for the year ended December 31, 2005,
compared with net income of $1.3 million in 2004. Significant fluctuations from 2004 to
2005 included a $1.0 million, or 19.1%, increase in net interest income before provision
for loan loss, a $1.0 million, or 303.0%, increase in provision for loan loss, a $100,000,
or 14.0%, increase in other operating income and a $1.9 million, or 47.9% increase in
other operating expenses.

11

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# 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 $1.0 million, or 19.1% from $5.2
million at December 31, 2004 to $6.2 million at December 31, 2005. The increase in
interest income was caused by the continued growth in the loan portfolio and a rising rate
environment. This rising rate environment was also the primary contributor to the
increased interest expense, as more than 50% of the interest bearing deposit portfolio is
variable rate. This fact coupled with the extremely competitive market for time deposits
in the banks market caused interest expense to increase faster than interest income
during 2005. The Corporation took some steps during the 3rd quarter to slow the
increase in the cost of the money market accounts, which mitigated some of the effect of
the rising short term rate environment. 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.

12

---



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):

|                               | 2005 | 2004        | 2003
|------------------------------ | ---- | ----------- | ----
|
|Assets:                        |      |             |     
|Short term investment          |      | $     5,581 |     
|Securities:                    |     
|Taxable                        |      | 32,056      |     
|Tax-exempt                     |      | 10,247      |     
|Loans                          |      | 128,208     |     
|                               |      |             |     
|Total earning assets/total     |     
|interest income                |      | 176,092     |     
|Cash and due from banks        |      | 4,191       |     
|Unrealized Gain (Loss)         |      | (647        | )   
|All other assets               |      | 4,358       |     
|Allowance for loan loss        |      | (1,538      | )   
|                               |      |             |     
|Total assets                   |      | 182,456     |     
|Liabilities and                |     
|Stockholders'                  |     
|Equity                         |     
|Interest bearing deposits:     |     
|MMDA, Savings/NOW              |     
|accounts                       |      | 69,454      |     
|Time                           |      | 58,118      |     
|Fed Funds purchased            |      | 673         |     
|FHLB Advances                  |      | 10,378      |     
|Trust preferred securities     |      | 11,236      |     
|                               |      |             |     
|Total interest bearing         |     
|liabilities/interest expense   |      | 142,623     |     
|Noninterest bearing deposits   |      | 24,733      |     
|All other liabilities          |      | 1,469       |     
|Stockholders' Equity:          |     
|Unrealized Holding Gain (Loss) |      | (423        | )   
|Common Stock, Surplus,         |     
|Retained Earnings              |      | 14,054      |     
|                               |      |             |     
|Total  liabilities and         |     
|stockholders' equity           |      | 182,456     |     
|Interest spread                |      |             |     
|Net interest  income - FTE     |      |             |     
|Net Interest Margin as a       |     
|Percentage of Average          |     
|Earnings Assets - FTE          |      | 176,092     |     

13

---



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.

|                                  | 2005 Compared to 2004 | 2004 Compared to 2003
|--------------------------------- | --------------------- | ---------------------
|
|
|Federal funds sold                |                       | $    130             
|Investment securities--taxable    |                       | 38                   
|Investment securities--tax-exempt |                       | (28                  
|Loans, net of unearned income     |                       | 431                  
|                                  |                       |                      
|Total interest income             |                       | 571                  
|                                  |                       |                      
|Interest bearing deposits         |                       | 921                  
|Federal Funds purchased           |                       | (1                   
|FHLB Advances                     |                       | 106                  
|                                  |                       |                      
|Trust preferred securities        |                       | 80                   
|                                  |                       |                      
|Total interest expense            |                       | 1,106                
|                                  |                       |                      
|Net interest income               |                       | $    491             
|                                  |                       |                      

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

|                                          | Year Ended    December 31, 2005 | Year Ended    December 31, 2004 | Year Ended    December 31, 2003
|----------------------------------------- | ------------------------------- | ------------------------------- | -------------------------------
|As a percentage of average earning assets |                                 |                                 |                                
|Loans                                     |                                 | $  128,208                      |                                
|Other earning assets                      |                                 | 47,884                          |                                
|                                          |                                 |                                 |                                
|Average earning assets                    |                                 | $  176,092                      |                                
|                                          |                                 |                                 |                                
|As a percent of average interest bearing  |                                
|liabilities                               |                                
|Savings and DDA accounts                  |                                 | $    69,454                     |                                
|Time deposits                             |                                 | 58,118                          |                                
|Other borrowings                          |                                 | 15,051                          |                                
|Average interest bearing liabilities      |                                 | $  142,623                      |                                
|                                          |                                 |                                 |                                
|Earning asset ratio                       |                                 | 81.0%                           |                                

Provision for Loan Loss.The
provision for loan losses for the year ended December 31, 2005 was $1.4 million compared
to $330,000 at December 31, 2004. As discussed above in the allowance for loan losses
section, a small number of commercial relationships warranted either charge-off or large
specific reserves in anticipation of charge-off during the current year. It is not
anticipated that this level of provision will be required in future periods, as management
feels that the credit quality of the portfolio is good, with the exception of the few
problems identified during the year.

Non-Interest Income.Other
operating income increased from $700,000 in 2004 to $800,000 in 2005, a 14.3% increase.
The primary cause of this increase was elevated overdraft and NSF fee income at CSB. A
portion of this increase in abuse fees could be attributed to a small number of customers
in the first two quarters of the year who resolved their issues later in the year, causing
the fee income to drop at that time. The amount of NSF fees in the latter half of the year are
more indicative of the anticipated fee income for the future. The remaining items of
non-interest income were flat year over year.

14

---



Non-Interest Expense.Non-interest expense consists of monthly operating expenses and for the year ended
December 31, 2005, was $5.8 million compared with $4.0 million for the year ended December
31, 2004, an increase of $1.8 million, or 45.0%. The main component of non-interest
expense is salaries and benefits which totaled $2.9 million for 2005 and $1.9million for
2004 an increase of $1.0 million, or 52.6%. This increase is directly attributable to
adding more staff to further support growth, including additional lending personnel, staff
at CSBs fifth branch office and personnel related to the opening of HVSB. Another
significant component of operating expense is occupancy expense which increased $340,000,
or 66.8%, to $849,000 in 2005 from $509,000 in 2004. This increase is primarily due to
increased rents at various locations, a full year of rent at our loan center and the land
on which our newest branch sits and rent on HVSBs main office. Advertising expense
increased $124,000, or 81.1% from $153,000 to $277,000. This increase was due to the
opening of HVSB and additional marketing costs related to the residential mortgage
division. Finally, professional fees saw a $174,000, or 59.4% increase, from $293,000 for
2004 to $467,000 for 2005. The increase in this expense was due mostly to an increase in
legal and other fees, primarily associated with the costs of organization and opening of
HVSB.

# 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 2005, we obtained a line of credit with a third party financial institution secured
by our interest in the consolidated subsidiaries in the amount of $10 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, 2005, there was no outstanding balance on this line of
credit.

Our
cash and equivalents increased $4.2 million, from $3.9 million at December 31, 2004 to
$8.1 million at December 31, 2005. The primary sources of this increase in cash were $3.4
million from the above mentioned rights offering, $3.4 million provided by Huron
Valleys minority shareholders, $28.1 million from increased deposit accounts, and
operating activities which provided $810,000. The primary uses of funds were increased
loan balances of $22.1 million, $5.6 million of net purchases of securities, $2.0 million
in net repayments of FHLB advances and $1.8 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. One of the growth strategies we intend to pursue, which could have an
effect on our equity and or require additional capital, is growth through acquisition or
the start up of additional DeNovo banks.

15

---



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

|                                   | Tier 1 Ratio | Tier 1 Capital Ratio | Total Risk-Based Capital Ratio
|---------------------------------- | ------------ | -------------------- | ------------------------------
|Minimum regulatory requirement for |              |                      |                               
|Capital adequacy                   |              | 4                    | .00%                          
|Well capitalized regulatory level  |              | 5                    | .00%                          
|Consolidated                       |              | 12                   | .58%                          
|CSB                                |              | 7                    | .62%                          
|HVSB                               |              | 62                   | .43%                          

# Capital Resources at
December 31, 2004 (in thousands)

|                                   | Tier 1 Ratio | Tier 1 Capital Ratio | Total Risk-Based Capital Ratio
|---------------------------------- | ------------ | -------------------- | ------------------------------
|Minimum regulatory requirement for |              |                      |                               
|Capital adequacy                   |              | 4                    | .00%                          
|Well capitalized regulatory level  |              | 5                    | .00%                          
|Consolidated                       |              | 10                   | .06%                          
|CSB                                |              | 8                    | .29%                          

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
|---------------------------------------- | --------------- | ------------------------- | ------------------------
|                                         |                 |                           |                         
|Consolidated                             |                 | (in thousands of dollars)
|Capital balances at December 31, 2005    |                
|Required regulatory capital              |                 | $  6,311                  |                         
|Capital in excess of regulatory minimums |                 | 13,539                    |                         
|                                         |                 |                           |                         
|Actual capital balances                  |                 | $19,850                   |                         
|                                         |                 |                           |                         
|Clarkston State Bank                     |                
|Capital balances at December 31, 2005    |                
|Required regulatory capital              |                 | $  7,221                  |                         
|Capital in excess of regulatory minimums |                 | 6,532                     |                         
|                                         |                 |                           |                         
|Actual capital balances                  |                 | $13,753                   |                         
|                                         |                 |                           |                         
|Huron Valley State Bank                  |                
|Capital balances at December 31, 2005    |                
|Required regulatory capital              |                 | $     498                 |                         
|Capital in excess of regulatory minimums |                 | 7,273                     |                         
|                                         |                 |                           |                         
|Actual capital balances                  |                 | $  7,771                  |                         
|                                         |                 |                           |                         

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.

16

---



# Market Risk Analysis

Our
primary market risk exposure is interest rate risk and, to a lesser extent, liquidity
risk. All of our transactions are denominated in U.S. dollars with no specific foreign
exchange exposure. Clarkston Financial Corporation has no agricultural-related loan
assets, and therefore has no significant exposure to changes in commodity prices. As a
result, our market risk exposure is mainly comprised of our sensitivity to interest rate
risk. Our balance sheet has sensitivity, in various categories of assets and liabilities,
to changes in prevailing rates in the U.S. for prime rate, mortgage rates, U.S. Treasury
rates and various money market indices. Our asset/liability management process aids us in
providing liquidity while maintaining a balance between interest earning assets and
interest bearing liabilities.

We
use two interest rate risk measurement techniques in our interest rate risk management.
The first is static gap analysis. This measures the difference between the dollar amounts
of interest sensitive assets and liabilities that will be refinanced or repriced during a
given time period. A significant repricing gap could result in a negative impact to our
net interest margin during periods of changing market interest rates.

Listed
in the table below is our gap position as of December 31, 2005.

# Asset / Liability GAP
Position for the Year Ended December 31, 2005 (in thousands)

|                                       | 1 to 3Months | 4 to 12Months | 12 to 60Months | Over 60Months | Total
|-------------------------------------- | ------------ | ------------- | -------------- | ------------- | -----
|Interest-Earning Assets                |              |               |                |               |      
|Federal Funds sold                     |              | $  4,785      |                | $          0  |      
|Investment securities                  |              | 0             |                | 991           |      
|Loans                                  |              | 59,244        |                | 7,404         |      
|                                       |              |               |                |               |      
|Total interest-earning assets          |              | 64,029        |                | 8,395         |      
|                                       |             
|Interest Bearing Liabilities           |             
|DDA, Money Market and Savings Accounts |              | 0             |                | 28,356        |      
|Certificates of deposit                |              | 16,242        |                | 24,704        |      
|Borrowed funds                         |              | 4,000         |                | 3,000         |      
|                                       |              |               |                |               |      
|Total interest-bearing Liabilities     |              | 20,242        |                | 56,060        |      
|                                       |             
|Rate sensitivity gap and ratios:       |             
|Gap for period                         |              | 43,787        |                | (47,665       | )    
|Cumulative gap                         |              | 43,787        |                | (3,878        | )    
|Percentage of cumulative gap           |             
|To total assets                        |              | 22.39         | %              | -1.98         | %    
|Cumulative earning assets              |             
|To cumulative bearing liabilities      |              | 3.16          |                | 0.95          |      

The
second measurement tool used, which management places more emphasis on, is cash flow
simulation. This tool measures the impact to net interest income given shifts in the
Treasury yield curve over a twenty four month time horizon. Many factors are used in this
simulation including duration cash flow, maturities, prepayment speeds associated with
loans and deposits as well as current economic and market data. Management utilizes this
data and shocks the balance sheet under a 100 and 200 basis point rising and falling
interest rate scenario in order to help predict the financial impact on our banks
net interest margin given these changes and or estimates of future market conditions.

17

---



The
first step in preparing the simulation is to populate the model with all of the cash flow
and current data from the investment, loan and deposit portfolios of our banks. This
information along with other balance sheet data are loaded and balanced to create an
opening balance sheet or constant rate scenario from which to forecast. Current prepayment
and market assumptions are then entered into the model. The model is then shocked under a
100 and 200 basis point rise and fall in interest rates. All of the instruments loaded in
the model have different behavior characteristics based on the prospective interest rate
shocks. As the behavior of these instruments changes under these scenarios management
attempts to predict through this simulation what the positive or negative impact is to net
interest income. In addition, other variables besides interest rate changes may have an
impact on the financial condition of our banks including, but not limited to, growth of
the Corporation, structure of the balance sheet, and economic and competitive factors.

Listed
in the table below are the results of the cash flow simulation under both a rising and
falling rate scenario. At the present time, the Bank is asset sensitive. The positive
shift in net interest income reflects the shift in income over a twelve-month time
horizon. This means that as the interest rate environment changes over this period of time
the re-pricing of assets and liabilities is taking place and reflects a positive increase
in net interest income.

The
economic value of equity reflects an immediate interest rate shift without any re-pricing
activity over a twelve month time horizon. Thus, being asset sensitive the changes in
economic value of equity reflect the fact that the Banks assets will re-price more
quickly than its liabilities, which in a rising rate environment will cause the value of
the Banks assets to decrease more rapidly than the slower repricing liabilities,
therefore reducing the residual, which represents the economic value of the equity.

|(dollars in thousands)  Changes in Interest Rates | Economic ValueOf Equity | PercentChange | Net InterestIncome | PercentChange
|------------------------------------------------- | ----------------------- | ------------- | ------------------ | -------------
|200 Basis Point Rise                              |                         | $14,373       |                    | (24.04       
|100 Basis Point Rise                              |                         | 16,805        |                    | (11.19       
|Base-Rate Scenario                                |                         | 18,923        |                    | -            
|100 Basis Point Decline                           |                         | 20,729        |                    | 12.87        
|200 Basis Point Decline                           |                         | 22,222        |                    | 17.43        

18

---



CLARKSTON FINANCIAL
CORPORATION

_________________

Consolidated Financial
Report

December 31, 2005

---





|                                             | Contents
|-------------------------------------------- | --------
|Report Letter                                |         
|                                             |         
|Consolidated Financial Statements            |         
|                                             |         
|Balance Sheet                                |         
|Statement of Income                          |         
|Statement of Changes in Stockholders' Equity |         
|Statement of Cash Flows                      |         
|Notes to Consolidated Financial Statements   |         

---



|Plante & Moran | Plante & Moran, PLLC
Suite 500
2601 Cambridge Court
Auburn Hills, MI 48326
Tel: 248.375.7100
Fax: 248.375.7101
plantemoran.com
|-------------- | ------------------------------------------------------------------------------------------------------------------------------

# Report of Independent
Registered Public Accounting Firm

To the Board of Directors
and Stockholders Clarkston Financial Corporation

We have audited the
accompanying  consolidated balance sheet of Clarkston Financial  Corporation as of
December 31, 2005 and 2004 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, 2005. 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, 2005 and 2004 and the consolidated  results  of their  operations  and
their  cash  flows for each year in the  three-year  period  ended December 31, 2005, in
conformity with accounting principles generally accepted in the United States of America.

/s/ Plante & Moran,
PLLC

Auburn Hills, Michigan
March 13, 2006

---



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 (Note 3)                                                |            
|Allowance for possible loan losses (Note 4)                   |            
|                                                              |            
|Net loans                                                     |            
|                                                              |            
|Banking premises and equipment (Note 5)                       |            
|Interest receivable                                           |            
|Deferred tax asset (Note 8)                                   |            
|Other assets                                                  |            
|                                                              |            
|Total assets                                                  |            
|                                                              |            
|                                                              |            
|Liabilities and Stockholders' Equity                          |            
|Liabilities                                                   |            
|Deposits                                                      |            
|Noninterest-bearing demand deposits                           |            
|Interest-bearing (Note 6)                                     |            
|                                                              |            
|Total deposits                                                |            
|                                                              |            
|Advances from Federal Home Loan Bank of Indianapolis (Note 7) |            
|Junior subordinated debentures held by                        |            
|unconsolidated subsidiary trust (Note 15)                     |            
|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 - 1,245,722 and 1,045,909 shares       |            
|at December 31, 2005 and 2004, 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                                                       |                       
|State taxes                                                    |                       
|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, 2003     |              | $  4,311        |                                          | $  4,311          |                                               | $         --              
|                              |             
|Issuance of stock             |              | 46              |                                          | 46                |                                               | --                        
|Issuance of restricted stock  |              | 19              |                                          | 19                |                                               | (38                       
|Recognition of compensation   |             
|For restricted stock award    |              | --              |                                          | --                |                                               | 9                         
|Comprehensive income:         |             
|Net income                    |              | --              |                                          | --                |                                               | --                        
|Change in unrealized gain on  |             
|Securities available for sale |             
|- Net of tax effect of $(49)  |              | --              |                                          | --                |                                               | --                        
|                              |              |                 |                                          |                   |                                               |                           
|Net comprehensive income      |              |                 |                                          |                   |                                               |                           
|                              |              |                 |                                          |                   |                                               |                           
|                              |             
|Balance - December 31, 2003   |              | 4,376           |                                          | 4,376             |                                               | (29                       
|                              |             
|Issuance of stock             |              | 25              |                                          | 25                |                                               | --                        
|Issuance of restricted stock  |              | 43              |                                          | 43                |                                               | (86                       
|Recognition of compensation   |             
|For restricted stock award    |              | --              |                                          | --                |                                               | 35                        
|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           |                                          | 4,444             |                                               | (80                       
|                              |             
|Issuance of stock             |              | 1,691           |                                          | 1,691             |                                               | --                        
|Issuance of restricted stock  |              | 28              |                                          | 28                |                                               | (56                       
|Recognition of compensation   |             
|for restricted stock award    |              | --              |                                          | --                |                                               | 51                        
|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        |                                          | $  6,163          |                                               | $    (85                  
|                              |              |                 |                                          |                   |                                               |                           

Book value per share is $12.21,
$11.67, and $10.81 at December 31, 2005, 2004 and 2003, respectively.

See Notes to Consolidated
Financial Statements

4

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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                                                    |                       
|Loss on sale of fixed assets                                      |                       
|Gain on sale of available-for-sale securities                     |                       
|Loss on sale of available-for-sale securities                     |                       
|(Increase) decrease in interest receivable                        |                       
|(Increase) decrease in 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               |                       
|Proceeds from sales and maturities of held-to-maturity securities |                       
|Purchase of held-to-maturity investment securities                |                       
|Premises and equipment expenditures                               |                       
|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                                    |                       
|Proceeds from the issuance of subordinated debentures             |                       
|Advances from Federal Home Loan Bank                              |                       
|Repayments of Federal Home Loan Bank Advances                     |                       
|Resources provided by minority interest                           |                       
|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

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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. All adjustments, consisting of normal recurring adjustments, which in
the opinion of management are necessary for a fair presentation of financial position,
results of operations, and cash flows, have been made. The 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 Company per FASB Interpretation No.
46.

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

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

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.

6

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

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

Federal
Reserve Requirement At December 31, 2005 and 2004 required reserves at the
Federal Reserve Bank of Chicago totaled $596,000 and $549,000, respectively. These
reserves do not earn interest.

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, 2005 and 2004.

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

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

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

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

7

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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.

8

---



Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

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

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

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

Stock
Compensation Plans  The Corporation applies the provisions of APB Opinion No.
25, Accounting for Stock-based Compensation, accounting for all employee stock
option grants using the intrinsic value method. Disclosure of pro forma net income and
earnings per share amounts as if the fair value-based method has been applied in measuring
compensation costs is provided below.

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

|                                                     | 2005 | 2004        | 2003
|---------------------------------------------------- | ---- | ----------- | ----
|As reported net income (loss) available to common    |      |             |     
|stockholders                                         |      | $       (24 | )   
|                                                     |     
|Less stock-based compensation expense                |     
|determined under fair value method -
     Net of tax |      | 64          |     
|                                                     |      |             |     
|Pro forma net income (loss)                          |      | $       (88 | )   
|                                                     |      |             |     
|As reported earnings per share                       |      | $    (0.02  | )   
|Pro forma earnings per share                         |      | (0.08       | )   
|As reported earnings per diluted share               |      | (0.02       | )   
|Pro forma earnings per diluted share                 |      | (0.08       | )   

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

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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):

|                                                   | 2005 | 2004       | 2003
|-------------------------------------------------- | ---- | ---------- | ----
|Net income (loss) available to common stockholders |      | $      (24 | )   
|                                                   |      |            |     
|Average number of common shares                    |     
|outstanding                                        |      | 1,131      |     
|Effect of dilutive options                         |      | 25         |     
|                                                   |      |            |     
|Average number of common shares                    |     
|outstanding used to calculate diluted              |     
|earnings per common share                          |      | 1,156      |     
|                                                   |      |            |     
|Stock options not used in computing                |     
|diluted earnings per share because                 |     
|they were antidilutive                             |      | --         |     
|                                                   |      |            |     

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

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

10

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

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

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

|                                                 | 2005 | 2004  | 2003
|------------------------------------------------ | ---- | ----- | ----
|Unrealized holding gains/ (losses) on securities |      |       |     
|available for sale                               |      | $(727 | )   
|Reclassification adjustment for gains/ (losses)  |     
|realized in income                               |      | (1    | )   
|                                                 |      |       |     
|Net unrealized gains (losses)                    |      | (726  | )   
|                                                 |     
|Tax effect                                       |      | (247  | )   
|                                                 |      |       |     
|Net of tax amount                                |      | $(479 | )   
|                                                 |      |       |     

401(k)
          Plan The Bank has a 401(k) Plan for which all eligible employees can
          participate. Eligible employees may defer a portion of their salary. The Bank
          made matching contributions up to 5 percent of the employees contribution.
          The Banks contribution to the Plan was $16,000, $9,100 and $8,400 for the
          years ended December 31, 2005, 2004, and 2003, respectively.

# Recent Accounting
Pronouncements 

In
January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable
Interest Entities. The Corporation has followed the provisions of FIN 46 and not
consolidated Clarkston Capital Trust I, a trust sponsored by the Corporation for the sole
purpose of issuing trust preferred securities to third-party investors. Adoption of this
standard did not have a material effect on the Corporations financial statements.

In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R), Accounting for Stock-Based Compensation (SFAS 123R). SFAS 123R
requires all share-based payments to employees, including grants of employee stock
options, to be recognized as expense in the income statement based on their fair values.
Prior to SFAS 123R, only certain pro forma disclosures of fair value were required. The
amount of compensation is measured at the fair value of the options when granted, and this
cost is expensed over the required service period, which is normally the vesting period of
the options. SFAS 123R will apply to awards granted or modified after January 1, 2006.
Compensation cost will also be recorded for prior option grants that vest after the date
of adoption. The future effect of the adoption of the new accounting principle on results
of operations will depend on the level of future option grants, the vesting period for
those grants, and the fair value of the options granted at such future date. There are no
existing options that are scheduled to vest subsequent to the adoption date, therefore no
additional expense is anticipated.

11

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

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

In
March 2004, the SEC issued Staff Accounting Bulletin No. 105, Application of
Accounting Principles to Loan Commitments (SAB 105). The bulletin was issued to
inform registrants of the SECs view that the fair value of the recorded loan
commitments, which are required to follow derivative accounting under FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, should not
consider the expected future cash flows related to the associated servicing of the future
loan. The provisions of SAB 105 must be applied to loan commitments accounted for as
derivatives that are entered into after March 31, 2004. The adoption of this Staff
Accounting Bulletin in the second quarter of 2004 did not have a material impact on
Clarkston Financial Corporation.

In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. This statement establishes standards for
how an entity classifies and measures certain financial instruments with characteristics
of both liabilities and equity. This statement requires that an issuer classify a
financial instrument that is within its scope as a liability. This statement is effective
for financial instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15, 2003. The
Corporation formed a business trust subsidiary in December 2003 to sell trust preferred
securities. The Corporation has recorded the instruments in accordance with SFAS No. 150
(see Note 15 for additional details).

12

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# Note 2  Securities

The
amortized cost and estimated market value of securities are as follows at
December 31, 2005 and 2004 (000s omitted):

|                                                | 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                                           |     
|                                                |     

|                                                | 2004
|----------------------------------------------- | ----
|
|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 $14,999,000 and $17,063,000 (market value of $14,533,000 and
$16,904,000) were pledged at December 31, 2005, and 2004, respectively, to secure public
deposits, repurchase agreements, FHLB Advances and for other purposes required by law.

13

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# Note 2  Securities
(continued)

The amortized cost and estimated
market value of available-for-sale securities at December 31, 2005 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                                  |                   
|                                       |                   

Information
pertaining to securities with gross unrealized losses at December 31, 2005 and 2004,
aggregated by investment category and length of time that individual securities have been
in a continuous loss position, follows:

|                                                | 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                                           |     
|                                                |     

|                                                | 2004
|----------------------------------------------- | ----
|
|
|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

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# Note 2  Securities
(continued)

For
the years ended December 31, 2005, 2004 and 2003 gross realized gains on sales of
securities were $9,000, $157,000 and $755,000, respectively. Gross realized losses
amounted to $10,000, $182,000 and $223,000, respectively. The tax benefit (provision)
related to these gains/losses was $0, $9,000 and $(180,000), respectively.

# Note 3  Loans

Major
categories of loans included in the portfolio at December 31, 2005 and 2004 are as follows
(000s omitted):

|                 | 2005 | 2004     
|---------------- | ---- | ---------
|Commercial loans |      | $  24,316
|Mortgage loans   |     
|Commercial       |      | 62,776   
|Residential      |      | 15,290   
|Construction     |      | 28,764   
|Consumer         |      | 2,398    
|                 |      |          
|Total            |      | $133,544 
|                 |      |          

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, 2005 and 2004 totaled $3,528,000 and $3,601,000,
respectively. Advances on related party loans totaled $549,000 and $2,542,000, and
repayments on related party loans totaled $622,000 and $510,000 in 2005 and 2004,
respectively. The total unused commitments for these loans totaled $358,000 and $162,000
at December 31, 2005 and 2004, respectively.

Loan
maturities and rate sensitivity of the loan portfolio at December 31, 2005 are as follows
(000s omitted):

|                                 | Within OneYear | One to FiveYears | After FiveYears | Total     
|-------------------------------- | -------------- | ---------------- | --------------- | ----------
|Commercial loans                 |                | $  15,811        |                 | $    7,983
|Mortgage loans                   |               
|Commercial                       |                | 12,684           |                 | 47,660    
|Residential                      |                | 11,807           |                 | 2,820     
|Construction                     |                | 25,897           |                 | 2,867     
|Consumer                         |                | 449              |                 | 1,255     
|                                 |                |                  |                 |           
|Total                            |                | $  66,648        |                 | $  62,585 
|                                 |                |                  |                 |           
|Loans at fixed interest rates    |                | $    9,772       |                 | $  59,855 
|Loans at variable interest rates |                | 56,876           |                 | 2,730     
|                                 |                |                  |                 |           
|Total                            |                | $  66,648        |                 | $  62,585 
|                                 |                |                  |                 |           

15

---



Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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):

|                                | 2005 | 2004    | 2003
|------------------------------- | ---- | ------- | ----
|Balance - Beginning of year     |      | $ 1,280 |     
|                                |     
|Provision charged to operations |      | 1,367   |     
|Loan losses                     |      | (720    | )   
|Loan loss recoveries            |      | 3       |     
|                                |      |         |     
|Balance - End of year           |      | $ 1,930 |     
|                                |      |         |     
|As a percent of total loans     |      | 1.45%   |     

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.

|2005                                                    | 2004 | 2003       
|------------------------------------------------------- | ---- | -----------
|Total Impaired Loans                                    |      | $       832
|                                                        |     
|Impaired loans with a specific reserve allocation       |      | 832        
|Specific reserve allocated to impaired loans            |      | 652        
|                                                        |     
|Impaired loans with no specific reserve                 |      | --         
|                                                        |     
|Average investment in impaired loans                    |      | 462        
|                                                        |     
|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, 2005
and 2004 were as follows (000s omitted):

|                                        | 2005 | 2004     
|--------------------------------------- | ---- | ---------
|Loans  past due over 90 days and  still |      |          
|accruing interest                       |      | $   1,413
|Non-accrual loans                       |      | 1,071    
|                                        |      |          
|Total                                   |      | $   2,484
|                                        |      |          

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

16

---



Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# Note 5  Bank
Premises and Equipment

The
following is a summary of the cost and accumulated depreciation of premises and equipment
for the years ended December 31, 2005 and 2004 (000s omitted):

|                                  | 2005 | 2004  
|--------------------------------- | ---- | ------
|Building                          |      | $1,944
|Building improvements             |      | 321   
|Land                              |      | 1,133 
|Land improvements                 |      | 62    
|Furniture and equipment           |      | 1,396 
|                                  |      |       
|Total Bank premises and equipment |      | 4,856 
|                                  |     
|Less accumulated depreciation     |      | 945   
|                                  |      |       
|Net carrying amount               |      | $3,911
|                                  |      |       

Depreciation expense for the years
ended December 31, 2005, 2004 and 2003 amounted to $297,000, $159,000 and $153,000,
respectively.

# Note 6  Deposits

The
following is a summary of interest-bearing deposit accounts at December 31, 2005 and 2004
(000s omitted):

|                                | 2005 | 2004      
|------------------------------- | ---- | ----------
|Interest checking               |      | $    5,981
|Savings                         |      | 4,730     
|Money market                    |      | 60,179    
|Time:                           |     
|$100,000 and over               |      | 37,668    
|Under $100,000                  |      | 29,141    
|                                |      |           
|Total interest-bearing deposits |      | $137,699  
|                                |      |           

The
remaining maturities of certificates of deposit outstanding at December 31, 2005 are as
follows (000s omitted):

|               | Under $100,000 | $100,000 andOver
|-------------- | -------------- | ----------------
|2006           |                | $19,216         
|2007           |                | 5,926           
|2008           |                | 2,498           
|2009           |                | 1,226           
|2010 and after |                | 275             
|               |                |                 
|Total          |                | $29,141         
|               |                |                 

17

---



Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# Note 7  Federal
Home Loan Bank Advances

The
Company has various term advances from the Federal Home Loan Bank of Indianapolis
(FHLB) with fixed and variable interest rates ranging from 3.75% to 4.86% at
December 31, 2005 and from 1.83% to 3.75% at December 31, 2004. The weighted average
interest rate at December 31, 2005 is 4.35%. Maturity dates range from November 2006 to
October 2010. The weighted average remaining maturity at December 31, 2005 is 963 days, or
August 20, 2008. Advances from the FHLB are collateralized by qualifying investment
securities with estimated market values of $12,210,000 and $14,127,000 at December 31,
2005 and 2004. The advances are due in full at maturity and the fixed rate advances are
subject to a prepayment penalty if repaid prior to maturity.

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

|      | 
|----- | 
|2006  | 
|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, 2005, 2004 and 2003.

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

|                           | 2005 | 2004  | 2003
|-------------------------- | ---- | ----- | ----
|Current expense            |      | $ 201 |     
|Deferred (benefit) expense |      | (220  | )   
|                           |      |       |     
|Total income tax           |     
|expense (benefit)          |      | $(19  | )   
|                           |      |       |     

18

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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:

|                                      | 2005 | 2004 | 2003
|------------------------------------- | ---- | ---- | ----
|Amount computed at statutory rates    |      | $(62 | )   
|Increase (decrease) resulting from:   |     
|Tax-exempt interest                   |      | (94  | )   
|Loss from non-wholly owned subsidiary |      | 106  |     
|Other                                 |      | 31   |     
|                                      |      |      |     
|Reported tax expense (benefit)        |      | $(19 | )   
|                                      |      |      |     

The temporary differences that
comprise deferred tax assets and liabilities at December 31, 2005 and 2004 are as
follows (000s omitted):

|                                                 | 2005 | 2004   
|------------------------------------------------ | ---- | -------
|Deferred tax assets:                             |      |        
|Bad debts                                        |      | $ 532  
|Accrued compensation                             |      | 23     
|Unrealized loss on securities available for sale |      | 371    
|Organization and preopening costs                |      | 65     
|                                                 |      |        
|Total deferred tax assets                        |      | 991    
|Deferred tax liabilities:                        |     
|Unrealized gain on securities available for sale |      | $    --
|Depreciation                                     |      | (122   
|FHLB stock dividend                              |      | (9     
|Accretion on investment securities               |      | (9     
|                                                 |      |        
|Total deferred tax liabilities                   |      | (40    
|                                                 |      |        
|Net deferred tax asset                           |      | $ 851  
|                                                 |      |        

# 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

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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, 2005 and 2004, 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.

20

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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 Bank 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 the Bank. 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, 2003 |  | $62         
|December 31, 2004 |  | 93          
|December 31, 2005 |  | 93          

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
|---- |  | -----------------
|
|2006 |  | $  93            
|2007 |  | 93               
|2008 |  | 62               
|2009 |  | --               
|2010 |  | --               
|     |  |                  
|     |  | $248             
|     |  |                  

21

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

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

Banking
regulations place certain restrictions on dividends paid and loans or advances made by the
Bank to the Corporation. The total amount of dividends that may be paid at any date is
generally limited to the retained earnings of the Bank. However, dividends paid by the
Bank would be prohibited if the effect thereof would cause the Banks 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, 2005:

|                                                   | CSB | HVSB        
|-------------------------------------------------- | --- | ------------
|Amount available for payment of dividends          |     | $      3,405
|Restricted portion of Holding Company's investment |     | 9,675       
|Amount available to lend to Holding Company        |     | 1,565       

# Note 12 
Stock-based Compensation

The
Corporation has two stock-based compensation plans. 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 15,153 shares of
common stock are available for grant. 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 10,580 shares of common stock
are available for grant. Under both plans, there is a minimum vesting period of between
one to three years before the options may be exercised, and all options expire 10 years
after the date of their grant. Certain options (contingent options) under both plans vest
on an accelerated basis upon the achievement of various future financial and operational
goals. All such options vest 9.5 years after the date of grant regardless of achievement
of future goals. Under both plans, the exercise price of each option equals the market
price of the Corporations common stock on the date of grant.

The
following table summarizes stock option transactions for both plans and the related
average exercise prices for the years ended December 31, 2005, 2004 and 2003:

|                                  | 2005 | 2004   | 2003
|--------------------------------- | ---- | ------ | ----
|
|Options Outstanding - Beginning   |      |        |     
|Of year                           |      | 49,536 |     
|Options granted - Employee plan   |      | --     |     
|Options exercised                 |      | --     |     
|Options expired                   |      | --     |     
|                                  |      |        |     
|Options Outstanding - End of year |      | 49,536 |     
|                                  |      |        |     

22

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# Note 12 
Stock-based Compensation (continued)

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

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

The Corporation granted 3,250 and
4,280 restricted stock units to certain employees during 2005 and 2004. The units are not
performance related and generally vest 33 percent annually on each anniversary date of the
respective grant dates. Units are forfeited if the grantee terminates employment prior to
vesting.

The Corporation also maintains a
stock option plan at Huron Valley State Bank (the Huron Valley State Bank Equity
Compensation Plan) that provides for the issuance of HVSB stock options to employees
and directors of the Bank. The plan was adopted in 2005 upon opening of the Bank and
provides 75,000 shares of HVSB stock for awards to be granted under the plan. There are
presently 39,000 shares remaining for grant under the plan. Under the provisions of the
plan, options are to be issued with an exercise price equal to the fair market vale of the
shares on the date of grant. Options vest equally over a period of 5 years. In conformance
with FASB Statement 123R, compensation expense will be recognized at HVSB over the vesting
period of these options.

The following table summarizes stock
option transactions for the HVSB option plan and the related average exercise prices for
the years ended December 31, 2005, 2004 and 2003:

|                                        | 2005
|--------------------------------------- | ----
|                                       
|                                        |     
|Options Outstanding -
Beginning Of year |     
|Options granted                         |     
|Options exercised                       |     
|Options expired                         |     
|                                        |     
|Options Outstanding - End of year       |     
|                                        |     

23

---



Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# Note 12 
Stock-based Compensation (continued)

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

|              | Stock Options Outstanding | Stock Options Exercisable
|------------- | ------------------------- | -------------------------
|
|Contingent    |                           | $     --                 
|Noncontingent |                           | 10.00                    

# 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

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

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):

|                               | 2005 | 2004      
|------------------------------ | ---- | ----------
|
|Assets                         |      |           
|Cash and cash equivalents      |      | $    8,090
|Securities                     |      | 48,982    
|Loans                          |      | 131,614   
|Accrued interest receivable    |      | 893       
|Liabilities                    |     
|Noninterest-bearing deposits   |      | 23,633    
|Interest-bearing deposits      |      | 137,699   
|Accrued interest payable       |      | 374       
|FHLB advances                  |      | 10,200    
|Junior subordinated debentures |      | 4,000     

25

---



Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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 Bank and the Corporation
were well-capitalized as of December 31, 2005 and 2004.

The
Banks actual capital amounts and ratios as of December 31, 2005 and 2004 are also
presented in the table.

|                          | Actual | For Capital   Adequacy Purposes | To beWell-Capitalized
|------------------------- | ------ | ------------------------------- | ---------------------
|
|As of December 31, 2005:  |        |                                 |                      
|Total risk-based capital  |       
|(to risk-weighted assets) |       
|CSB                       |        | $15,516                         |                      
|HVSB                      |        | 7,803                           |                      
|Consolidated              |        | 21,780                          |                      
|Tier I Capital            |       
|(to risk weighted assets) |       
|CSB                       |        | $13,753                         |                      
|HVSB                      |        | 7,771                           |                      
|Consolidated              |        | 19,850                          |                      
|Tier I Capital            |       
|(to average assets)       |       
|CSB                       |        | $13,753                         |                      
|HVSB                      |        | 7,771                           |                      
|Consolidated              |        | 19,850                          |                      

26

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

|                          | Actual | For Capital   Adequacy Purposes | To beWell-Capitalized
|------------------------- | ------ | ------------------------------- | ---------------------
|
|As of December 31, 2004:  |        |                                 |                      
|Total risk-based capital  |       
|(to risk-weighted assets) |       
|CSB                       |        | $14,613                         |                      
|HVSB                      |        | -                               |                      
|Consolidated              |        | 17,688                          |                      
|Tier I Capital            |       
|(to risk weighted assets) |       
|CSB                       |        | $13,333                         |                      
|HVSB                      |        | -                               |                      
|Consolidated              |        | 16,408                          |                      
|Tier I Capital            |       
|(to average assets)       |       
|CSB                       |        | $13,333                         |                      
|HVSB                      |        | -                               |                      
|Consolidated              |        | 16,408                          |                      

# 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 $10 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 3 Month LIBOR +
1.50%. As of December 31, 2005, there was no outstanding balance on this line.

27

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Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

# 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, 2005 and 2004 (with 000s omitted) is as
follows:

|                                             | 2005 | 2004      
|-------------------------------------------- | ---- | ----------
|Assets                                       |      |           
|Cash on deposit with subsidiary bank         |      | $  1,044  
|Securities - Available for sale              |      | 265       
|Investment in the Banks                      |      | 20,825    
|Investment in Capital Trust I                |      | 24        
|Accrued interest receivable and other        |      | 488       
|                                             |      |           
|Total assets                                 |      | $22,646   
|                                             |      |           
|Liabilities                                  |     
|Accounts payable                             |      | $       71
|Notes payable                                |      | 4,024     
|                                             |      |           
|Total liabilities                            |      | 4,095     
|                                             |     
|Minority interest in consolidated subsidiary |      | 3,420     
|                                             |     
|Stockholders' Equity                         |      | 15,131    
|                                             |      |           
|Total liabilities and stockholders' equity   |      | $22,646   
|                                             |      |           

28

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Clarkston Financial
Corporation

---

| | Notes
to Consolidated Financial Statements December 31, 2005, 2004 and 2003
| | ---------------------------------------------------------------------------

The condensed statement of income for
the years ended December 31, 2005, and 2004, and 2003 (000s omitted) is as follows:

|                                                       | 2005 | 2004    | 2003
|------------------------------------------------------ | ---- | ------- | ----
|Operating Income -                                     |      |         |     
|Dividends received from bank subsidiary                |      | --      |     
|Intercompany fees                                      |      | 952     |     
|Interest Income                                        |      | 29      |     
|Other Income                                           |      | --      |     
|                                                       |      |         |     
|Total Operating Income                                 |      | 981     |     
|Operating Expenses                                     |     
|Interest expense                                       |      | 255     |     
|Salaries and benefits                                  |      | 603     |     
|Professional fees                                      |      | 293     |     
|Other expense                                          |      | 191     |     
|                                                       |      |         |     
|Operating Expenses                                     |      | 1,342   |     
|                                                       |      |         |     
|Loss - Before income taxes and equity in undistributed |     
|income of subsidiary                                   |      | (361    | )   
|Provision for Income Tax Benefit                       |      | 141     |     
|                                                       |      |         |     
|Loss - Before equity in undistributed income           |     
|of subsidiary                                          |      | (220    | )   
|Equity in Undistributed Income of Subsidiary           |      | 196     |     
|                                                       |      |         |     
|Net Income                                             |      | $   (24 | )   
|                                                       |      |         |     

29

---



Clarkston Financial
Corporation

---

Notes to Consolidated
Financial Statements December 31, 2005, 2004 and 2003

The
condensed statement of cash flows for the years ended December 31, 2005, 2004 and 2003 is
as follows:

|                                                            | 2005 | 2004    | 2003
|----------------------------------------------------------- | ---- | ------- | ----
|Cash Flows from Operating Activities                        |      |         |     
|Net income                                                  |      | $   (24 | )   
|Adjustments to reconcile net income to net cash             |     
|from operating activities                                   |     
|Income from subsidiary                                      |      | (196    | )   
|Amortization/(Accretion) on securities                      |      | 14      |     
|Loss on sale of available-for-sale securities               |      | --      |     
|Recognition of restricted stock expense                     |      | 21      |     
|Increase in interest receivable and other                   |      | (278    | )   
|Decrease (Increase) in receivable from subsidiary           |      | --      |     
|Increase in accounts payable and other                      |      | 70      |     
|                                                            |      |         |     
|Net cash used in operating activities                       |      | (393    | )   
|                                                            |     
|Cash Flows from Investing Activities                        |     
|Investment in subsidiary                                    |      | (4,524  | )   
|Proceeds from sale/paydown of available-for-sale securities |      | 2,083   |     
|Purchase of available-for-sale securities                   |      | --      |     
|Investment in Capital Trust subsidiary                      |      | --      |     
|                                                            |      |         |     
|Net cash used in investing activities                       |      | (2,441  | )   
|                                                            |     
|Cash Flows from Financing Activities                        |     
|Issuance of stock                                           |      | 3,382   |     
|Proceeds from notes payable                                 |      | --      |     
|                                                            |      |         |     
|Net cash provided by financing activities                   |      | 3,382   |     
|                                                            |      |         |     
|Net Increase (Decrease) in Cash and Cash Equivalents        |      | 548     |     
|                                                            |     
|Cash and Cash Equivalents - Beginning of year               |      | 496     |     
|                                                            |      |         |     
|Cash and Cash Equivalents - End of year                     |      | $ 1,044 |     
|                                                            |      |         |     

30