FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                          ----------------------------


                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1999

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

               For the transition period from _______ to ________

                        Commission file number 333-63685

                         CLARKSTON FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

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

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

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

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

   Securities registered pursuant to Section 12(g) of the Exchange Act: None.

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

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

Check here if there is no disclosure  by  delinquent  filers in response to Item
405 of Regulation  S-B is not  contained in this form and no disclosure  will be
contained,  to the  best of  Registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB.[X}

The registrant's  revenues for 1999 were $1,226,000.  The aggregate market value
of the  voting  and  non-voting  common  equity  held by  non-affiliates  of the
Registrant,  based on a per  share  price of $5.25  as of March  27,  2000,  was
$3,785,617  (common  stock,  no par  value).  As of March 27,  2000,  there were
outstanding 931,600 shares of the Company's common stock (no par value).

Portions of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held May 9, 2000 are  incorporated  by reference into Part II and Part III
of this Report.
<PAGE>
                                     PART I

ITEM 1:   Business


The Company

     Clarkston Financial Corporation (the "Company") was incorporated on May 18,
1998  under  Michigan  law  and  is a bank  holding  company  owning  all of the
outstanding  common  stock of  Clarkston  State Bank (the  "Bank").  The Bank is
organized as a Michigan  chartered bank with depository  accounts insured by the
Federal Deposit Insurance  Corporation (the "FDIC").  The Bank's initial primary
service area is Independence Township, which includes the City of Clarkston, and
the adjacent  township of Waterford,  both of which are located in North Oakland
County,  Michigan.  The Bank  provides a full range of  commercial  and consumer
banking services for small to medium size businesses as well as individuals. The
Bank's lending  strategy is to focus on commercial and consumer lending and to a
lesser extent  residential  mortgage  lending.  The Bank offers a broad array of
deposit  products  and may also  provide  customers  with  credit  cards,  trust
services, insurance products and investment products through third-party service
providers.

     The Company  completed an underwritten  initial public offering in November
1998.  The Company  issued  950,000 shares of common stock in the initial public
offering,  resulting in net proceeds to the Company of $8.8 million. On December
18, 1998, the Company transferred $8,496,860 to the Bank to capitalize the Bank.
The Bank opened for business on January 4, 1999.

     As of December  31, 1999,  the Company had total  assets of $33.3  million,
total  deposits of $25.3  million,  approximately  2,695  deposit  accounts  and
shareholders' equity of $7.8 million.

     The  Company's  and the  Bank's  main  office is  located  at 15 South Main
Street,  Clarkston,  Michigan 48346, and its telephone number is (248) 625-8585.
Unless the context clearly indicates otherwise,  financial information and other
references to the Company include the Bank.

Products and Services

     Commercial  Loans.  Commercial  loans  are  made  primarily  to  small  and
mid-sized businesses. These loans are and will be both secured and unsecured and
are made available for general operating  purposes,  acquisition of fixed assets
including  real  estate,  purchases  of equipment  and  machinery,  financing of
inventory  and accounts  receivable,  as well as any other  purposes  considered
appropriate. The Bank generally looks to a borrower's business operations as the
principal  source  of  repayment,  but  will  also  receive,  when  appropriate,
mortgages on real estate,  security interests in inventory,  accounts receivable
and other personal property and/or personal guarantees.

     Although the Bank takes a progressive and competitive  approach to lending,
it  stresses  high  quality in its loans.  Because of the Bank's  local  nature,
management  believes  that  quality  control  should be  achievable  while still
providing  prompt  and  personal  service.  On a  monthly  basis,  the  Board of
Directors  reviews  selected loans made in the preceding  month. In addition,  a
loan  committee of the Board of Directors of the Bank also reviews  larger loans
for prior approval when the loan request exceeds the established  limits for the
senior officers.

     Commercial real estate lending involves more risk than residential lending,
because loan balances are greater and repayment is dependent upon the borrower's
operation. The Bank attempts to minimize risk associated with these transactions
by generally  limiting its exposure to owner  operated  properties of well-

                                      -2-
<PAGE>
known customers or new customers with an established profitable history. In many
cases,  risk is further  reduced by (i) limiting the amount of credit to any one
borrower  to an amount  less  than the  Bank's  legal  lending  limit;  and (ii)
avoiding certain types of commercial real estate financings.

     Residential  Real Estate Loans.  The Bank originates  residential  mortgage
loans,  which are  generally  long-term  with either fixed or variable  interest
rates. The Bank's general policy,  which is subject to review by management as a
result of changing  market and  economic  conditions  and other  factors,  is to
retain all or a portion of variable  interest rate mortgage  loans in the Bank's
loan  portfolio  and to sell all fixed rate loans in the secondary  market.  The
Bank also offers home  equity  loans.  The Bank  retains  servicing  rights with
respect to residential mortgage loans that it originates.  The Bank has not sold
any residential mortgage loans as of December 31, 1999.

     Personal  Loans and  Credit.  The Bank  makes  personal  loans and lines of
credit  available to  consumers  for various  purposes,  such as the purchase of
automobiles,  boats and  other  recreational  vehicles,  home  improvements  and
personal  investments.  The Bank  expects  to retain  substantially  all of such
loans.

     Consumer loans  generally have shorter terms and higher interest rates than
residential mortgage loans and, except for home equity lines of credit,  usually
involve more credit risk than  mortgage  loans because of the type and nature of
the collateral.  While the Bank does not use a formal credit scoring system, the
Bank  underwrites its loans  carefully,  with a strong emphasis on the amount of
the down payment, credit quality, employment stability and monthly income. These
loans are expected  generally to be repaid on a monthly repayment  schedule with
the source of repayment tied to the  borrower's  periodic  income.  In addition,
consumer  lending  collections  are  dependent  on  the  borrower's   continuing
financial  stability,  and are thus likely to be adversely affected by job loss,
illness and personal  bankruptcy.  In many cases,  repossessed  collateral for a
defaulted  consumer loan will not provide an adequate source of repayment of the
outstanding  loan balance because of depreciation of the underlying  collateral.
The Bank believes that the generally higher yields earned on consumer loans help
compensate  for the increased  credit risk  associated  with such loans and that
consumer  loans are  important  to its efforts to serve the credit  needs of the
communities and customers that it serves.

     Loan Policy. As a routine part of the Bank's business,  the Bank expects to
make loans to individuals and businesses  located within the Bank's market area.
The Bank has adopted a Loan Policy that contains general lending  guidelines and
is subject to review and revision by the Board of  Directors  from time to time.
The Company  seeks to make sound loans,  while  recognizing  that lending  money
involves a degree of business risk.

     Regulatory and supervisory  loan-to-value limits are established by Section
304 of  the  Federal  Deposit  Insurance  Corporation  Improvement  Act of  1991
("FDICIA").  The Bank's  internal  limitations  will follow  those limits and in
certain cases will be more restrictive than those required by the regulators.

     Deposit  Services.  The Bank  offers a broad  range  of  deposit  services,
including interest bearing and non-interest  bearing checking accounts,  savings
accounts  and time  deposits of various  types.  Transaction  accounts  and time
certificates are tailored to the principal market area at rates competitive with
those  offered in the area.  All deposit  accounts are insured by the FDIC up to
the maximum  amount  permitted by law. The Bank  solicits  these  accounts  from
individuals,  businesses,  associations,  financial  institutions and government
authorities.  The Bank  may also use  alternative  funding  sources  as  needed,
including  conduit financing and the packaging of loans for  securitization  and
sale.

     Other Services.  The Bank may establish  relationships  with  correspondent
banks and other  independent  financial  institutions  to provide other services
requested by its customers, including loan

                                      -3-
<PAGE>
participations  where the requested loan amounts  exceed the Bank's  policies or
legal lending limits. The Bank may consider providing additional services in the
future,  such as personal  computer based at-home banking.  Management  believes
that the Bank's  personalized  service approach benefits from customer visits to
the Bank.  Management  will  continue to  evaluate  the  desirability  of adding
telephone, electronic and at-home banking services. Should the Bank choose to do
so, the Bank could provide one or more of these  services at a future date using
a third-party service provider.

Competition

     There are many thrift  institution,  credit union and bank offices  located
within the Bank's primary  market area of North Oakland  County,  Michigan.  The
Bank faces competition from thrift institutions,  credit unions, and other banks
as  well  as  finance  companies,   insurance  companies,   mortgage  companies,
securities  brokerage firms, money market funds and other providers of financial
services.  Most of the  Bank's  competitors  have been in  business  a number of
years,  have  established  customer  bases,  are larger and have higher  lending
limits  than the Bank.  The Bank  competes  for loans  principally  through  its
ability to  communicate  effectively  with its customers and understand and meet
their needs.  Management  believes that its personal service philosophy enhances
its ability to compete favorably in attracting individuals and small businesses.
The Bank  actively  solicits  retail  customers and will compete for deposits by
offering  customers  personal  attention,  professional  service,  off-site  ATM
capability, and competitive interest rates.

Environmental Matters

     The Company does not believe that existing  environmental  regulations will
have  any  material  effect  upon  the  capital  expenditures,   earnings,   and
competitive position of the Company.

Employees

     As of December  31,  1999,  the Company  had 10  full-time  and 5 part-time
employees.  The  Company  has  assembled  a  staff  of  experienced,   dedicated
professionals  whose  goal  is to  provide  outstanding  service.  None  of  the
Company's employees are represented by collective bargaining agents.

Selected Statistical Data

     Selected Statistical Data for Clarkston Financial  Corporation is presented
for 1999 in  Management's  Discussion  and Analysis of Financial  Condition  and
Results of Operations.  Clarkston State Bank commenced  operations on January 4,
1999, and therefore the Guide 3 Statistical Disclosure by Bank Holding companies
would not be meaningful for 1998 and is not included.

                                      -4-
<PAGE>
                           SUPERVISION AND REGULATION

     The following is a summary of certain  statutes and  regulations  affecting
the Company and the Bank.  This  summary is  qualified  in its  entirety by such
statutes and regulations.  A change in applicable laws or regulations may have a
material effect on the Company, the Bank and the business of the Company and the
Bank.

General

     Financial   institutions  and  their  holding   companies  are  extensively
regulated  under  federal and state law.  Consequently,  the growth and earnings
performance  of the Company and the Bank can be affected not only by  management
decisions and general economic conditions, but also by the statutes administered
by,  and the  regulations  and  policies  of,  various  governmental  regulatory
authorities.  Those  authorities  include,  but are not limited to, the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), the FDIC,
the Commissioner of the Michigan Financial Institutions Bureau ("Commissioner"),
the Internal Revenue Service,  and state taxing authorities.  The effect of such
statutes,  regulations and policies can be significant,  and cannot be predicted
with a high degree of certainty.

     Federal and state laws and  regulations  generally  applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments,  reserves against deposits, capital levels relative to
operations,   lending  activities  and  practices,  the  nature  and  amount  of
collateral for loans, the establishment of branches, mergers, consolidations and
dividends.  The system of supervision  and regulation  applicable to the Company
and  the  Bank  establishes  a  comprehensive  framework  for  their  respective
operations  and is intended  primarily for the  protection of the FDIC's deposit
insurance  funds,  the  depositors  of the Bank,  and the  public,  rather  than
shareholders of the Bank or the Company.

     Federal law and regulations  establish  supervisory standards applicable to
the  lending  activities  of  the  Bank,  including  internal  controls,  credit
underwriting,  loan documentation and loan-to-value  ratios for loans secured by
real property.

Recent Legislation

     Recently enacted federal legislation (the  Gramm-Leach-Bliley  Act of 1999)
eliminates many Federal and state law barriers to  affiliations  among banks and
other financial services  providers.  The legislation,  which takes effect March
11, 2000,  establishes a statutory framework pursuant to which full affiliations
can occur between banks and securities  firms,  insurance  companies,  and other
financial  companies.  The  legislation  provides some degree of  flexibility in
structuring  these new  affiliations,  although  certain  activities may only be
conducted  through a holding company  structure.  The legislation  preserves the
role of the Board of  Governors  of the Federal  Reserve  System as the umbrella
supervisor  for  holding  companies,  but  incorporates  a system of  functional
regulation pursuant to which the various Federal and state financial supervisors
will   continue  to  regulate   the   activities   traditionally   within  their
jurisdictions.  The legislation  specifies that banks may not participate in the
new affiliations unless they are  well-capitalized,  well-managed and maintain a
rating under the Community  Reinvestment Act of 1977 of at least  "satisfactory"
among all affiliates.

     At this time, the Company is unable to predict the impact this  legislation
may have on the Company.

                                      -5-
<PAGE>
The Company

     General.  The Company is a bank holding company and, as such, is registered
with,  and subject to  regulation  by, the Federal  Reserve Board under the Bank
Holding  Company Act, as amended (the  "BHCA").  Under the BHCA,  the Company is
subject to periodic examination by the Federal Reserve Board, and is required to
file with the Federal Reserve Board periodic  reports of its operations and such
additional information as the Federal Reserve Board may require.

     In accordance with Federal Reserve Board policy, the Company is expected to
act as a source of  financial  strength to the Bank and to commit  resources  to
support the Bank in circumstances  where the Company might not do so absent such
policy.  In  addition,  if the  Commissioner  deems  the  Bank's  capital  to be
impaired,  the  Commissioner  may  require  the Bank to restore its capital by a
special  assessment  upon the  Company as the Bank's  sole  shareholder.  If the
Company were to fail to pay any such assessment, the directors of the Bank would
be required, under Michigan law, to sell the shares of the Bank's stock owned by
the Company to the highest bidder at either a public or private  auction and use
the proceeds of the sale to restore the Bank's capital.

     Investments and Activities.  In general, any direct or indirect acquisition
by the  Company  of any  voting  shares of any bank  which  would  result in the
Company's  direct or indirect  ownership or control of more than 5% of any class
of voting shares of such bank,  and any merger or  consolidation  of the Company
with  another  bank  company,  will  require the prior  written  approval of the
Federal  Reserve  Board  under the BHCA.  In  acting on such  applications,  the
Federal Reserve Board must consider various statutory  factors,  including among
others,  the effect of the  proposed  transaction  on  competition  in  relevant
geographic and product markets, and each party's financial condition, managerial
resources,  and record of  performance  under the  Community  Reinvestment  Act.
Effective  September 29, 1995, bank holding  companies may acquire banks located
in any state in the United States without regard to geographic  restrictions  or
reciprocity   requirements   imposed  by  state  law,  but  subject  to  certain
conditions,  including  limitations on the aggregate amount of deposits that may
be held by the acquiring company and all of its insured  depository  institution
affiliates.

     The merger or  consolidation  of an existing bank subsidiary of the Company
with another bank, or the  acquisition by such a subsidiary of assets of another
bank, or the assumption of liability by such a subsidiary to pay any deposits in
another bank, will require the prior written approval of the responsible Federal
depository institution regulatory agency under the Bank Merger Act, based upon a
consideration of statutory  factors similar to those outlined above with respect
to the BHCA. In addition, in certain such cases an application to, and the prior
approval of, the Federal  Reserve  Board under the BHCA and/or the  Commissioner
under the Michigan Banking Code, may be required.

     With certain limited  exceptions,  the BHCA prohibits any bank company from
engaging,  either directly or indirectly  through a subsidiary,  in any activity
other  than  managing  or  controlling  banks  unless the  proposed  non-banking
activity is one that the Federal  Reserve Board has  determined to be so closely
related to banking or managing or controlling  banks as to be a proper  incident
thereto.  Under current  Federal  Reserve Board  regulations,  such  permissible
non-banking  activities  include  such  things as  mortgage  banking,  equipment
leasing,  securities  brokerage,  and consumer and  commercial  finance  company
operations.  As a result of recent amendments to the BHCA,  well-capitalized and
well-managed  bank  holding  companies  may engage de novo in  certain  types of
non-banking  activities  without  prior  notice to, or approval  of, the Federal
Reserve Board,  provided that written notice of the new activity is given to the
Federal  Reserve  Board within 10 business days after the activity is commenced.
If a bank  company  wishes to engage in a  non-banking  activity by  acquiring a
going concern,  prior notice and/or prior  approval will be required,  depending
upon

                                      -6-
<PAGE>
the  activities in which the company to be acquired is engaged,  the size of the
company  to be  acquired  and the  financial  and  managerial  condition  of the
acquiring bank company.

     In  evaluating  a  proposal  to  engage  (either  de  novo or  through  the
acquisition of a going concern) in a non-banking  activity,  the Federal Reserve
Board will consider  various  factors,  including among others the financial and
managerial  resources of the bank company,  and the relative public benefits and
adverse  effects  which may be expected to result  from the  performance  of the
activity by an  affiliate of the bank  company.  The Federal  Reserve  Board may
apply  different  standards to  activities  proposed to be commenced de novo and
activities commenced by acquisition, in whole or in part, of a going concern.

     Capital  Requirements.  The Federal  Reserve  Board uses  capital  adequacy
guidelines  in its  examination  and  regulation of bank holding  companies.  If
capital falls below minimum guidelines,  a bank company may, among other things,
be  denied  approval  to  acquire  or  establish  additional  banks or  non-bank
businesses.

     The Federal  Reserve  Board's  capital  guidelines  establish the following
minimum  regulatory  capital  requirements  for bank  holding  companies:  (i) a
leverage capital requirement expressed as a percentage of total assets, and (ii)
a  risk-based  requirement  expressed  as a  percentage  of total  risk-weighted
assets. The leverage capital  requirement  consists of a minimum ratio of Tier 1
capital (which consists principally of shareholders'  equity) to total assets of
3% for the most highly rated  companies,  with minimum  requirements of 4% to 5%
for all others. The risk-based  requirement consists of a minimum ratio of total
capital to total risk-weighted  assets of 8%, of which at least one-half must be
Tier 1 capital.

     The risk-based and leverage standards presently used by the Federal Reserve
Board are minimum  requirements,  and higher  capital levels will be required if
warranted by the particular circumstances or risk profiles of individual banking
organizations.  For example,  Federal  Reserve  Board  regulations  provide that
additional  capital  may be required to take  adequate  account of,  among other
things,  interest  rate risk and the risks  posed by  concentrations  of credit,
nontraditional activities or securitie trading activities.  Further, any banking
organization  experiencing or anticipating  significant growth would be expected
to maintain capital ratios,  including  tangible capital positions (i.e., Tier 1
capital less all intangible assets),  well above the minimum levels. The Federal
Reserve Board has not advised the Company of any specific minimum Tier 1 Capital
leverage ratio applicable to it.

     Dividends.  The Company is a  corporation  separate and  distinct  from the
Bank.  Most of the  Company's  revenues  will be  received  by it in the form of
dividends,  if  any,  paid by the  Bank.  Thus,  the  Company's  ability  to pay
dividends  to  its   shareholders   will  indirectly  be  limited  by  statutory
restrictions on its ability to pay dividends.  See "Supervision and Regulation -
the Bank - Dividends."  Further,  the Federal  Reserve Board has issued a policy
statement  on the payment of cash  dividends  by ban holding  companies.  In the
policy  statement,  the Federal  Reserve  Board  expressed  its view that a bank
company experiencing earnings weaknesses should not pay cash dividends exceeding
its net  income  or which can only be  funded  in ways  that  weakened  the bank
company's  financial  health,  such as by borrowing.  Additionally,  the Federal
Reserve Board possesses enforcement powers over bank holding companies and their
non-bank  subsidiaries  to prevent or remedy  actions that  represent  unsafe or
unsound  practices o violations of applicable  statutes and  regulations.  Among
these powers is the ability to  proscribe  the payment of dividends by banks and
bank holding companies.  Similar  enforcement powers over the Bank are possessed
by the FDIC.  The  "prompt  corrective  action"  provisions  of federal  law and
regulation  authorizes  the Federal  Reserve  Board to  restrict  the payment of
dividends  by the  Company  for an insured  bank which  fails to meet  specified
capital levels.

     In addition to the restrictions on dividends imposed by the Federal Reserve
Board,  the Michigan  Business  Corporation  Act provides that  dividends may be
legally declared or paid only if after the

                                      -7-
<PAGE>
distribution a corporation,  such as the Company, can pay its debts as they come
due in the usual course of business and its total assets equal or exceed the sum
of its  liabilities  plus  the  amount  that  would be  needed  to  satisfy  the
preferential  rights upon  dissolution  of any holders of preferred  stock whose
preferential  rights are  superior  to those  receiving  the  distribution.  The
Company is not authorized to issue  preferred  stock and has no current plans to
seek to authorize any preferred stock.

The Bank

     General.  The  Bank is a  Michigan  banking  corporation  and  its  deposit
accounts are insured by the Bank  Insurance  Fund (the "BIF") of the FDIC.  As a
BIF-insured  Michigan  chartered  bank, the Bank is subject to the  examination,
supervision,  reporting and enforcement requirements of the Commissioner, as the
chartering  authority for Michigan banks,  and the FDIC, as administrator of the
BIF.  These  agencies and the federal and state laws  applicable to the Bank and
its operations,  extensively  regulate  various aspects of the banking  business
including,   among  other  things,  permissible  types  and  amounts  of  loans,
investments and other activities, capital adequacy, branching, interest rates on
loans and on deposits,  the  maintenance  of  non-interest  bearing  reserves on
deposit accounts, and the safety and soundness of banking practices.

     Deposit Insurance. As an FDIC-insured institution,  the Bank is required to
pay deposit  insurance  premium  assessments to the FDIC. The FDIC has adopted a
risk-based assessment system under which all insured depository institutions are
placed into one of nine categories and assessed insurance  premiums,  based upon
their  respective  levels of  capital  and  results of  supervisory  evaluation.
Institutions  classified  as  well-capitalized  (as  defined  by the  FDIC)  and
considered  healthy pay the lowest premium while institutions that are less than
adequately  capitalized  (as defined by the FDIC) and  considered of substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.

     The Federal Deposit  Insurance Act ("FDIA")  requires the FDIC to establish
assessment  rates at levels which will maintain the Deposit  Insurance Fund at a
mandated  reserve  ratio of not less than 1.25% of estimated  insured  deposits.
Accordingly,  the FDIC established the schedule of BIF insurance assessments for
the first semi-annual assessment period of 1998, ranging from 0% of deposits for
institutions in the lowest risk category to .27% of deposits for institutions in
the highest risk category.

     The FDIC may  terminate  the deposit  insurance  of any insured  depository
institution if the FDIC determines, after a hearing, that the institution or its
directors have engaged or are engaging in unsafe or unsound  practices,  or have
violated any applicable  law,  regulation,  order,  or any condition  imposed in
writing by, or written  agreement with, the FDIC, or if the institution is in an
unsafe or unsound  condition to continue  operations.  The FDIC may also suspend
deposit  insurance  temporarily  durin  the  hearing  process  for  a  permanent
termination of insurance if the institution has no tangible capital.

     Commissioner  Assessments.  Michigan banks are required to pay  supervisory
fees to the Commissioner to fund the operations of the Commissioner.  The amount
of  supervisory  fees paid by a bank is based upon the bank's total  assets,  as
reported to the Commissioner.

     FICO  Assessments.  Pursuant to federal  legislation  enacted September 30,
1996,  the Bank, as a member of the BIF, is subject to  assessments to cover the
payments on outstanding  obligations of the Financing Corporation ("FICO"). FICO
was created in 1987 to finance the  recapitalization  of the Federal Savings and
Loan Insurance  Corporation,  the predecessor to the FDIC's Savings  Association
Insurance  Fund (the "SAIF") which insures the deposits of thrift  institutions.
Until  January 1, 2000,  the FICO  assessments  made against BIF members may not
exceed  20% of the  amount  of  FICO  assessments  made  against  SAIF  members.
Currently,  SAIF members pay FICO  assessments at a rate equal to  approximately
0.063% of

                                      -8-
<PAGE>
deposits while BIF members pay FICO assessments at a rate equal to approximately
0.013% of deposits.  Between January 1, 2000 and the maturity of the outstanding
FICO  obligations  in 2019,  BIF members and SAIF members will share the cost of
the interest on the FICO bonds on a pro rata basis.  It is  estimated  that FICO
assessments during this period will be less than 0.025% of deposits

     Capital  Requirements.  The  FDIC has  established  the  following  minimum
capital standards for  state-chartered,  FDIC-insured  non-member banks, such as
the Bank: a leverage requirement consisting of a minimum ratio of Tier 1 capital
to total assets of 3% for the most highly-rated banks with minimum  requirements
of 4% to 5% for all others, and a risk-based capital requirement consisting of a
minimum  ratio of total  capital to total  risk-weighted  assets of 8%, at least
one-half of which must be Tier 1 capital. Tier 1 capital consists principally of
shareholders'  equity.  These  capital  requirements  are minimum  requirements.
Higher   capital  levels  will  be  required  if  warranted  by  the  particular
circumstances  or risk profiles of individual  institutions.  For example,  FDIC
regulations provide that higher capital may be required to take adequate account
of, among other things, interest rate risk and the risks posed by concentrations
of credit,  nontraditional  activities or securities  trading  activities.  As a
condition to regulatory approval of the Bank's formation,  the Bank was required
to have an  initial  capitalization  sufficient  to  provide  a ratio  of Tier 1
capital to total estimated assets of at least 8% at the end of the third year of
operation.

     Federal law provides  the federal  banking  regulators  with broad power to
take  prompt  corrective  action to resolve  the  problems  of  undercapitalized
institutions.  The extent of the  regulators'  powers  depends  on  whether  the
institution  in  question  is  "well  capitalized,"   "adequately  capitalized,"
"undercapitalized,"    "significantly    undercapitalized,"    or    "critically
undercapitalized."  Federal  regulations  define  these  capital  categories  as
follows:
<TABLE>
                                               Total                  Tier 1
                                             Risk-Based             Risk-Based
                                           Capital Ratio           Capital Ratio       Leverage Ratio
                                           -------------          --------------       --------------
<S>                                        <C>                     <C>                  <C>
Well capitalized                           10% or above            6% or above          5% or above
Adequately capitalized                      8% or above            4% or above          4% or above
Undercapitalized                           Less than 8%            Less than 4%         Less than 4%
Significantly undercapitalized             Less than 6%            Less than 3%         Less than 3%
Critically undercapitalized                          --                      --         A ratio of tangible
                                                                                        equity to total assets
                                                                                        of 2% or less
</TABLE>

     Depending  upon the capital  category to which an  institution is assigned,
the regulators' corrective powers include: requiring the submission of a capital
restoration plan; placing limits on asset growth and restrictions on activities;
requiring  the  institution  to  issue   additional   capital  stock  (including
additional  voting  stock)  or to be  acquired;  restricting  transactions  with
affiliates;  restricting  the interest rate the institution may pay on deposits;
ordering a new election of directors of the  institution;  requiring that senior
executive  officers or directors be dismissed;  prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to divest
certain  subsidiaries;  prohibiting  the  payment of  principal  or  interest on
subordinated debt; and ultimately, appointing a receiver for the institution.

     In  general,  a  depository  institution  may be  reclassified  to a  lower
category  than is indicated  by its capital  levels if the  appropriate  federal
depository  institution  regulatory  agency  determines  the  institution  to be
otherwise  in an unsafe or  unsound  condition  or to be engaged in an unsafe or
unsound practice.  This

                                      -9-
<PAGE>
could   include  a  failure  by  the   institution,   following   receipt  of  a
less-than-satisfactory  rating on its most recent examination report, to correct
the deficiency.

     Dividends.  Under  Michigan  law, the Bank is  restricted as to the maximum
amount  of  dividends  it may pay on its  common  stock.  The  Bank  may not pay
dividends  except out of net profits after deducting its losses and bad debts. A
Michigan state bank may not declare or pay a dividend  unless the bank will have
a surplus  amounting  to at least 20% of its  capital  after the  payment of the
dividend.  If the Bank has a surplus less than the amount of its capital, it may
not  declare  or pay any  dividend  unti an amount  equal to at least 10% of net
profits for the preceding one-half year (in the case of quarterly or semi-annual
dividends) or full-year (in the case of annual  dividends) has been  transferred
to surplus. A Michigan state bank may, with the approval of the Commissioner, by
vote of  shareholders  owning 2/3 of the stock  eligible  to vote  increase  its
capital  stock by a  declaration  of a stock  dividend,  provided that after the
increase  the  bank's  surplus  equals at least  20% of its  capital  stock,  as
increased.  The Bank may not declare or pay any  dividend  until the  cumulative
dividends on preferred  stock (should any such stock be issued and  outstanding)
have been paid in full. The Bank's  Articles of  Incorporation  do not authorize
the  issuance  of  preferred  stock and there are no current  plans to seek such
authorization.

     Federal law generally  prohibits a depository  institution  from making any
capital distribution  (including payment of a dividend) or paying any management
fee  to  its  company  if  the  depository   institution   would  thereafter  be
undercapitalized.  The FDIC may prevent an insured bank from paying dividends if
the  bank is in  default  of  payment  of any  assessment  due to the  FDIC.  In
addition,  the FDIC may prohibit  the payment of dividends by the Bank,  if such
payment is determined,  by reason of the financial  condition of the Bank, to be
an unsafe and unsound banking practice.

     Insider  Transactions.  The Bank is subject to certain restrictions imposed
by the  Federal  Reserve Act on any  extensions  of credit to the Company or its
subsidiaries,  on investments in the stock or other securities of the Company or
its  subsidiaries  and the  acceptance  of the stock or other  securities of the
Company or its  subsidiaries  as collateral for loans.  Certain  limitations and
reporting  requirements  are also placed on  extensions of credit by the Bank to
its  directors  and  officers,  to directors and officers of the Company and its
subsidiaries,  to  principal  shareholders  of  the  Company,  and  to  "related
interests" of such directors,  officers and principal shareholders. In addition,
federal law and  regulations may affect the terms upon which any person becoming
a director or officer of the Company or one of its  subsidiaries  or a principal
shareholder  of the  Company  may obtain  credit  from banks with which the Bank
maintains a correspondent relationship.

     Safety and Soundness  Standards.  The federal banking agencies have adopted
guidelines to promote the safety and soundness of federally  insured  depository
institutions.  These  guidelines  establish  standards  for  internal  controls,
information  systems,   internal  audit  systems,  loan  documentation,   credit
underwriting,  interest  rate  exposure,  asset growth,  compensation,  fees and
benefits,  asset quality and earnings.  In general, the guidelines prescribe the
goals to be achieved in each area, and each  institution will be responsible for
establishing its own procedures to achieve those goals. If an institution  fails
to  comply  with  any  of  the  standards  set  forth  in  the  guidelines,  the
institution's  primary federal regulator may require the institution to submit a
plan for achieving and  maintaining  compliance.  The preamble to the guidelines
states that the agencies expect to require a compliance plan from an institution
whose  failure to meet one or more of the  standards is of such severity that it
could  threaten  the safe and sound  operation  of the  institution.  Failure to
submit an acceptable  compliance plan, or failure to adhere to a compliance plan
that has been accepted by the appropriate  regulator,  would constitute  grounds
for further enforcement action.

     State Bank Activities. Under federal law and FDIC regulations, FDIC-insured
state  banks are  prohibited,  subject to  certain  exceptions,  from  making or
retaining equity investments of a type, or in an

                                      -10-
<PAGE>
amount,  that  are  not  permissible  for  a  national  bank.  Federal  law,  as
implemented by FDIC  regulations,  also prohibits  FDIC-insured  state banks and
their subsidiaries, subject to certain exceptions, from engaging as principal in
any  activity  that is not  permitted  for a  national  bank  or its  subsidiary
respectively,  unless  the  bank  meets,  and  continues  to meet,  its  minimum
regulatory  capital  requirements and the FDIC determines the activity would not
pose a  significant  risk to the deposit  insurance  fund of which the bank is a
member.   Impermissible   investments   and  activities   must  be  divested  or
discontinued  within  certain  time  frames set by the FDIC in  accordance  with
federal law. These  restrictions  are not currently  expected to have a material
impact on the operations of the Bank.

     Consumer  Protection Laws. The Bank's business includes making a variety of
types of loans to  individuals.  In making these  loans,  the Bank is subject to
State usury and regulatory  laws and to various  federal  statutes,  such as the
Equal  Credit  Opportunity  Act,  the Fair Credit  Reporting  Act,  the Truth in
Lending Act, the Real Estate  Settlement  Procedures  Act, and the Home Mortgage
Disclosure  Act, and the  regulations  promulgated  thereunder,  which  prohibit
discrimination, specify disclosures to be made to borrowers regarding credit and
settlement  costs,  and regulate the mortgage loan  servicing  activities of the
Bank,  including  the  maintenance  and  operation  of escrow  accounts  and the
transfer of mortgage loan servicing.  In receiving deposits, the Bank is subject
to extensive  regulation under State and federal law and regulations,  including
the Truth in Savings Act, the Expedited Funds Availability Act, the Bank Secrecy
Act, the Electronic  Funds Transfer Act, and the Federal Deposit  Insurance Act.
Violation of these laws could result in the  imposition of  significant  damages
and fines upon the Bank and its directors and officers.

     Branching  Authority.  Michigan banks, such as the Bank, have the authority
under  Michigan  law to  establish  branches  anywhere in the State of Michigan,
subject to receipt of all required regulatory  approvals (including the approval
of the Commissioner and the FDIC).

     Effective  June 1, 1997 (or earlier if expressly  authorized  by applicable
state law), the Riegle-Neal  Interstate Banking and Branching  Efficiency Act of
1994 (the "IBBEA") allows banks to establish  interstate branch networks through
acquisitions of other banks,  subject to certain  conditions,  including certain
limitations  on the  aggregate  amount  of  deposits  that  may be  held  by the
surviving bank and all of its insured  depository  institution  affiliates.  The
establishment  of de novo  interstate  branches or the acquisition of individual
branches  of a  bank  in  another  state  (rather  than  the  acquisition  of an
out-of-state  bank in its  entirety)  is allowed  by IBBEA only if  specifically
authorized by state law. The legislation  allowed individual states to "opt-out"
of interstate branching authority by enacting  appropriate  legislation prior to
June 1, 1997.

     Michigan  did not opt out of IBBEA,  and now permits both U.S. and non-U.S.
banks to  establish  branch  offices in  Michigan.  The  Michigan  Banking  Code
permits, in appropriate circumstances and with the approval of the Commissioner,
(i)  the  acquisition  of  all  or   substantially   all  of  the  assets  of  a
Michigan-chartered  bank by an FDIC-insured  bank,  savings bank, or savings and
loan  association   located  in  another  state,   (ii)  the  acquisition  by  a
Michigan-chartered  bank  of  all or  substantially  all  of  the  assets  of an
FDIC-insured  bank,  savings  bank or savings  and loan  association  located in
another state, (iii) the consolidation of one or more  Michigan-chartered  banks
and FDIC-insured banks,  savings banks or savings and loan associations  located
in other states having laws  permitting such  consolidation,  with the resulting
organization  chartered by Michigan,  (iv) the  establishment by a foreign bank,
which has not previously  designated any other state as its home state under the
International Banking Act of 1978, of branches located in Michigan,  and (v) the
establishment  or  acquisition  of branches in  Michigan by  FDIC-insured  banks
located in other  states,  the  District  of  Columbia  or U.S.  territories  or
protectorates  having  laws  permitting  Michigan-chartered  banks to  establish
branches in such jurisdiction.  Further, the Michigan Banking Code permits, upon
written notice to the Commissioner,  (i) the acquisition by a Michigan-chartered
bank of one or more  branches (not  comprising  all or  substantially  all of th
assets) of an FDIC-insured  bank,  savings bank or savings and loan

                                      -11-
<PAGE>
association  located in another  state,  the  District  of  Columbia,  or a U.S.
territory or protectorate, (ii) the establishment by Michigan-chartered banks of
branches located in other states, the District of Columbia,  or U.S. territories
or protectorates,  and (iii) the consolidation of one or more Michigan-chartered
banks and  FDIC-insured  banks,  savings banks or savings and loan  associations
located in other  states,  with the resulting  organization  chartered by one of
such other states.

ITEM 2:   Description of Property.

     The Bank is leasing a building  located at 15 South Main Street in downtown
Clarkston,  Michigan  for  use as the  Bank's  main  office  and  the  Company's
headquarters.  This building  consists of  approximately  3,890 square feet. The
building  was  formerly  a branch of a large  regional  bank and has been a bank
branch since 1911.  The building has a night deposit box, safe deposit boxes and
a complete security system, and has an ATM machine.  The Bank believes that this
space will be adequate  for its present  needs.  In order to conserve the Bank's
capital,  eight  directors  agreed to purchase the building in  September,  1998
specifically  for the purpose of leasing the property to the Bank.  The building
is leased on an arms-length basis from an entity owned by eight of the Company's
and the  Bank's  directors.  See  Item 12  "Certain  Relationships  and  Related
Transactions." The lease for the Bank's office has an initial term of five years
and the Bank has three  renewal  options of five years each.  The monthly  lease
payments are $5,000 per month for the first two years and thereafter  $5,165 per
month. In addition,  the Bank is required to make payments for taxes,  insurance
and other operating expenses.

     The Company believes its facilities are well-maintained, adequately insured
and primarily utilized.


ITEM 3:   Legal Proceedings.

     As the date hereof, there were no material pending legal proceedings, other
than routine  litigation  incidental  to the  business of banking,  to which the
Company or any of its  subsidiaries is a party of or which any of its properties
is the subject.


ITEM 4:   Submission of Matters to a Vote of Security Holders.

     No matters were  submitted  during the fourth  quarter of 1999 to a vote of
the Registrant's stockholders.


                                      -12-
<PAGE>
                                     PART II

ITEM 5:    Market for Common Equity and Related Stockholder Matters.

     The Company's common stock has traded in the over-the-counter  market since
the completion of the company's  initial public  offering in November 1998. High
and low bid prices, as reported on the OTC Bulletin Board are as follows for the
periods indicated:
<TABLE>
                                                      High              Low
                                                      ----              ---
         1998
         ----
         <S>                                         <C>              <C>
         Fourth Quarter.........................     $10.50           $8.75

         1999
         ----
         First Quarter..........................     $ 9.75           $7.00
         Second Quarter.........................       9.50            7.13
         Third Quarter..........................       8.25            5.94
         Fourth Quarter.........................       7.00            5.00
</TABLE>
These quotations reflect inter-dealer prices, without retail mark-up,  mark-down
or  commission  and may not  represent  actual  transactions.  Quotations do not
include intra-day highs and lows. On December 31, 1999, there were approximately
50 owners of record and approximately  1,1000 beneficial owners of the Company's
common stock.

     No cash dividends have been declared to date on the Company's common stock.
The Company  expects that all earnings,  if any, will be retained to finance the
growth of the Company and the Bank and that no cash  dividends  will be paid for
the foreseeable future. If and when dividends are declared,  the Company will be
dependent  upon  dividends  paid to it by the bank for funds to pay dividends on
the common stock.


ITEM 6:   Management's Discussion and Analysis of Financial Condition and
          Results of Operations.

     The  information  set forth in Appendix A, under the caption  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Registrant's  definitive  Proxy  Statement  dated  March  30,  2000,  is  hereby
incorporated  by reference and is filed as Exhibit 13 to this Form 10-KSB Annual
Report.


ITEM 7:   Financial Statements.

     The  information  set forth in Appendix A, under the caption  "Consolidated
Financial  Statements,"  of the  Registrant's  definitive  Proxy Statement dated
March 30, 2000, is hereby  incorporated  by reference and is filed as Exhibit 13
to this Form 10-KSB Annual Report.


ITEM 8:  Changes in and Disagreements With Accountants and Financial Disclosure.

     There have been no  disagreements  with the  Company's  independent  public
accountants.

                                      -13-
<PAGE>
                                    PART III

ITEM 9:   Directors, Executive Officers, Promotors and Control Persons;
          Compliance with Section 16(a) of the Exchange Act.

     The information set forth on page 3, under the caption  "Information  About
Directors" of the Registrant's  definitive Proxy Statement dated March 30, 2000,
is hereby  incorporated  by  reference  and is filed as  Exhibit 13 to this Form
10-KSB Annual Report.

     The Company's common stock is not registered under the Securities  Exchange
Act of 1934, and therefore the Company's officers and directors are not required
to and do not file beneficial ownership reports pursuant to Section 16(a) of the
Securities Exchange Act of 1934.


ITEM 10:  Executive Compensation.

     Information relating to compensation of the Registrant's executive officers
and  directors is contained on Exhibit 13, under the captions  "Compensation  of
Directors" and "Executive  Compensation,"  in the Registrant's  definitive Proxy
Statement dated March 30, 2000, and is  incorporated  herein by reference and is
filed as Exhibit 13 to this Form 10-KSB Annual Report.


ITEM 11:  Security Ownership of Certain Beneficial Owners and Management.

     Information relating to security ownership of certain beneficial owners and
management  is  contained  on page 6, under the caption  "Security  Ownership of
Management" in the Registrant's definitive Proxy Statement dated March 30, 2000,
and is incorporated  herein by reference and is filed as Exhibit 13 to this Form
10-KSB Annual Report.


ITEM 12:  Certain Relationships and Related Transactions.

     Information  relating to certain  relationships and related transactions is
contained on page 6, under the caption  "Transactions  Involving  Management" in
the  Registrant's  definitive  Proxy  Statement  dated  March 30,  2000,  and is
incorporated  herein by reference and is filed as Exhibit 13 to this Form 10-KSB
Annual Report.

                                      -14-
<PAGE>
ITEM 13:  Exhibits, Financial Statements, Schedules, and Reports on Form 8-K.

(a)  Financial Statements.

     1.  The following documents are filed as part of Item 7 of this report:

         Report of Independent Auditors
         Consolidated Balance Sheets as of December 31, 1999 and 1998
         Consolidated  Statements  of  Operations  for the  year  ended
                  December 31,  1999,  and the period from May 18, 1998
                  (inception) to December 31, 1998
         Consolidated Statements of Changes in Stockholders' Equity for
                  the year ended December 31, 1999, and the period from
                  May 18, 1998 (inception) to December 31, 1998
         Consolidated  Statement  of  Cash  Flows  for the  year  ended
                  December 31,  1999,  and the period from May 18, 1998
                  (inception) to December 31, 1998
         Notes to Consolidated Financial Statements

     2.  Schedules to the consolidated financial statements required by
         Article 9 of Regulation S-X are not required under the related
         instructions or are inapplicable, and therefore have been omitted.

     3.  The following exhibits are filed as part of this report: Reference is
         made to the exhibit index which follows the signature page of this
         report.

         The  Registrant  will  furnish  a copy of any  exhibits  listed on the
         Exhibit Index to any shareholder of the Registrant without charge upon
         written request of David T. Harrison, Clarkston Financial Corporation,
         15 South Main Street, Clarkston, Michigan 48346.

(b)  Reports on Form 8-K

     During  the last  quarter of the period  covered  by this  report,  the
     Registrant filed no Current Reports on Form 8-K.


                                      -15-
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, dated March 24, 2000.

                                    CLARKSTON FINANCIAL CORPORATION


                                    /s/ David T. Harrison
                                    David T. Harrison
                                    Chief Executive Officer and President
                                    (Principal Executive Officer)


                                    /s/ James L. Richardson
                                    James L. Richardson
                                    Treasurer
                                    (Principal Financial and Accounting Officer)


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed  below on March 24,  2000,  by the  following  persons on
behalf of the Registrant and in the capacities  indicated.  Each director of the
Registrant, whose signature appears below, hereby appoints David T. Harrison and
James L. Richardson,  and each of them severally,  as his  attorney-in-fact,  to
sign in his name and on his behalf, as a director of the Registrant, and to file
with the Commission any and all Amendments to this Report on Form 10-KSB.



             Signature
             ---------

 /s/ David T. Harrison                                            March 24, 2000
David T. Harrison, Principal Executive Officer and a Director


 /s/ James L. Richardson                                          March 24, 2000
James L. Richardson, Principal Financial and Accounting Officer


 /s/ Edwin L. Adler                                               March 24, 2000
Edwin L. Adler, Chairman of the Board and a Director


_____________________________                                     March 24, 2000
Louis D. Beer, Director


                                      -16-
<PAGE>
/s/Charles L. Fortinberry                                         March 24, 2000
Charles L. Fortinberry, Director


 /s/ William J. Clark                                             March 24, 2000
William J. Clark, Director


 /s/ Bruce H. McIntyre                                            March 24, 2000
Bruce H. McIntyre, Secretary and a Director


 /s/ Robert A. Olsen                                              March 24, 2000
Robert A. Olsen, Director


 /s/ John H. Welker                                               March 24, 2000
John H. Welker, Director




                                      -17-
<PAGE>
                                  EXHIBIT INDEX



                                                                    Sequentially
                                                                      Numbered
                   Exhibit Number and Description                       Page
                   ------------------------------                     ---------

3.1     Articles   of   Incorporation    of   Clarkston    Financial
        Corporation, incorporated by reference to Exhibit 3.1 to the
        Clarkston Financial  Corporation  Registration  Statement on
        Form SB-2 (Registration No. 333-63685).

3.2     Bylaws of Clarkston Financial  Corporation,  incorporated by
        reference  to  Exhibit  3.2  to  the   Clarkston   Financial
        Corporation    Registration    Statement    on   Form   SB-2
        (Registration No. 333-63685).

4       Specimen   stock   certificate   of   Clarkston    Financial
        Corporation,  incorporated  by reference to Exhibit 4 to the
        Clarkston Financial  Corporation  Registration  Statement on
        Form SB-2 (Registration No. 333-63685).

10.1    Clarkston  Financial  Corporation Stock  Compensation  Plan,
        incorporated  by reference to Exhibit 10.1 to the  Clarkston
        Financial  Corporation  Registration  Statement on Form SB-2
        (Registration No. 333-63685).

10.2    Clarkston  Financial  Corporation  1998  Founding  Directors
        Stock Option Plan, incorporated by reference to Exhibit 10.2
        to  the   Clarkston   Financial   Corporation   Registration
        Statement on Form SB-2 (Registration No. 333-63685).

10.3    Lease  Agreement  dated September 10, 1998, for the facility
        located at 15 South Main Street, Clarkston, Michigan, 48346,
        incorporated  by reference to Exhibit 10.3 to the  Clarkston
        Financial  Corporation  Registration  Statement on Form SB-2
        (Registration No. 333-63685).

10.4    Data Processing Agreement between Jack Henry and Associates,
        Inc.  And  Clarkston   State  Bank  dated   October,   1998,
        incorporated  by reference to Exhibit 10.4 to the  Clarkston
        Financial  Corporation  Registration  Statement on form SB-2
        (Registration No. 333-63685).

10.5    Lease  between  Clarkston  State  Bank and  Foodtown,  Inc.,
        incorporated  by  reference  to Exhibit 10 to the  Clarkston
        Financial  Corporation  Quarterly  Report on Form 10-QSB for
        the quarter ended June 30, 1999.

                                      -18-
<PAGE>
13      Proxy Statement to  shareholders.  This exhibit,  except for
        those portions  expressly  incorporated by reference in this
        filing,  is furnished for the  information of the Securities
        and Exchange Commission and is not deemed "filed" as part of
        this filing.

21      Subsidiaries of the Registrant

23      Consent  of  Plante  &  Moran,   LLP,   independent   public
        accountants

24      Power of Attorney (included on the signature page on page 15
        of the Annual Report on Form 10-KSB)

27      Financial Data Schedule



                                      -19-
<PAGE>
Exhibit 13

                                     [LOGO]

                         CLARKSTON FINANCIAL CORPORATION

                              15 South Main Street
                            Clarkston, Michigan 48346



                                 March 30, 2000



Dear Shareholder:

     We invite  you to attend the 2000  Annual  Meeting  of  Shareholders.  This
year's meeting will be held on Tuesday, May 9, 2000, at 10:00 a.m., at Deer Lake
Racquet Club, 6167 White Lake Road, Clarkston, Michigan 48346.

     Our audited financial  statements are included in an appendix to this Proxy
Statement.

         It is important that your shares are represented at the Annual Meeting.
Please carefully read the Notice of Annual Meeting and Proxy Statement.  Whether
or not you expect to attend the Annual Meeting, please sign, date and return the
enclosed Proxy in the envelope provided at your earliest convenience.

                                           Sincerely,



                                           /s/ David T. Harrison
                                           David T. Harrison
                                           Chief Executive Officer
                                           and President
<PAGE>
                         CLARKSTON FINANCIAL CORPORATION

                              15 South Main Street
                            Clarkston, Michigan 48346



                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

                             TO BE HELD MAY 9, 2000


To Our Shareholders:

     The Annual Meeting of Shareholders of Clarkston Financial  Corporation will
be held at Deer Lake Racquet  Club,  6167 White Lake Road,  Clarkston,  Michigan
48346,  on Tuesday,  May 9, 2000 at 10:00 A.M.,  local time,  for the  following
purposes:

    1.   To elect three directors, each to hold office for a three year term.

    2.   To transact such other business as may properly come before the meeting
         or at any adjournment thereof.

     Shareholders  of record at the close of business  March 15,  2000,  will be
entitled to vote at the meeting or any adjournment  thereof.  Whether or not you
expect  to be  present  in  person  at this  meeting,  you are urged to sign the
enclosed Proxy and return it promptly in the enclosed envelope. If you do attend
the  meeting  and wish to vote in  person,  you may do so even  though  you have
submitted a Proxy.

                                          By order of the Board of Directors
Dated: March 30, 2000
Clarkston, Michigan

                                          /s/ Bruce H. McIntyre
                                          Bruce H. McIntyre
                                          Secretary
<PAGE>
                                                           Dated: March 30, 2000

                         CLARKSTON FINANCIAL CORPORATION

                              15 South Main Street
                            Clarkston, Michigan 48346

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

                                 PROXY STATEMENT

                     For the Annual Meeting of Shareholders
                             to be held May 9, 2000
                               ------------------

                   SOLICITATION OF PROXIES FOR ANNUAL MEETING

     This  Proxy  Statement  is  furnished  to  the  Shareholders  of  Clarkston
Financial Corporation (the "Corporation") in connection with the solicitation by
the  Board  of  Directors  of  proxies  to be  used  at the  Annual  Meeting  of
Shareholders which will be held at Deer Lake Racquet Club, 6167 White Lake Road,
Clarkston, Michigan 48346, May 9, 2000, at 10:00 A.M., local time.

     The Annual Meeting is being held for the following purposes:

    1.   To elect three directors, each to hold office for a three year term.

    2.   To transact such other business as may properly come before the meeting
         or at any adjournment thereof.

     If a proxy in the form distributed by the Corporation's  Board of Directors
is properly executed and returned to the Corporation,  the shares represented by
the  proxy  will be voted  at the  Annual  Meeting  of  Shareholders  and at any
adjournment of that meeting. Where shareholders specify a choice, the proxy will
be voted as specified. If no choice is specified,  the shares represented by the
proxy  will be voted FOR the  nominees  named by the Board of  Directors  in the
proxy. Shares not voted at the meeting, whether by abstention,  broker non-vote,
or  otherwise,  will not be treated as votes cast at the meeting.  Votes cast at
the meeting and submitted by proxy will be tabulated by the Corporation.

     A proxy may be revoked prior to its exercise by delivering a written notice
of revocation to the secretary of the  Corporation,  executing and  delivering a
proxy of a later date or attending the meeting and voting in person.  Attendance
at the meeting does not automatically act to revoke a proxy.
<PAGE>
                 VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

     On March 15,  2000,  the  record  date for  determination  of  shareholders
entitled to vote at the Annual Meeting, there were outstanding 936,600 shares of
common stock of the  Corporation.  Shares cannot be voted unless the shareholder
is present at the meeting or is represented by proxy.

     As of  March  15,  2000,  no  person  was  known  to  management  to be the
beneficial  owner of more than 5% of the  Corporation's  common stock other than
Edwin L. Adler (who owned 70,035  shares  representing  8.0% of the  outstanding
shares) and Marian  Marvay (who owned  60,000  shares  representing  6.4% of the
outstanding shares).


                              ELECTION OF DIRECTORS

     The Corporation's Articles of Incorporation provide for the division of the
Board of  Directors  into  three  classes of nearly  equal  size with  staggered
three-year  terms of office.  The number of directors  constituting the Board of
Directors is determined  from time to time by the Board of Directors.  The Board
is currently  composed of eight  members.  Three persons have been nominated for
election  to the Board,  each to serve a  three-year  term  expiring at the 2002
Annual Meeting of Shareholders.  The Board has nominated Charles L. Fortinberry,
Bruce H. McIntyre and Robert A. Olsen, each of whom is an incumbent director.

     Holders of common stock  should  complete the  accompanying  proxy.  Unless
otherwise directed by a shareholder's  proxy, it is intended that the votes cast
upon  exercise of proxies in the form  accompanying  this  statement  will be in
favor of electing the nominees as directors for the terms indicated above.  Each
of the nominees is presently serving as a director.  The following pages of this
Proxy Statement  contain more information about the nominees and other directors
of the Corporation.

     Except for those  persons  nominated  by the Board of  Directors,  no other
persons  may  be  nominated  for  election  at  the  2000  Annual  Meeting.  The
Corporation's  Articles of Incorporation  require at least 60 days prior written
notice of any other proposed shareholder  nomination and no such notice has been
received.

     A  plurality  of the votes cast at the Annual  Meeting is required to elect
the nominees as directors of the Corporation. As such, the three individuals who
receive  this  number of votes cast by the holders of the  Corporation's  common
stock will be elected as directors.  Shares not voted at the meeting, whether by
abstention,  broker non-vote, or otherwise, will not be treated as votes cast at
the meeting.  Votes cast at the meeting and submitted by proxy will be tabulated
by the Corporation.

     If any nominee becomes  unavailable for election due to  circumstances  not
now known, the accompanying  proxy will be voted for such other person to become
a director as the Board of Directors selects.

     The Board of  Directors  recommends  a vote FOR the election of each of the
persons nominated by the Board.

                                        2
<PAGE>
                           INFORMATION ABOUT DIRECTORS

     The content of the following  table is based upon  information  as of March
15, 2000,  furnished to the Corporation by the directors.  As of March 15, 2000,
there  were  936,600  issued  and  outstanding  shares  of  common  stock of the
Corporation.
<TABLE>
                                                                                            Amount and
                                                                       Year First            Nature of          Percent of
                                                                        Became a            Beneficial            Common
                                                            Age         Director           Ownership(1)          Stock (2)

Nominees for Election as Directors for Terms
Expiring in 2003
<S>                                                         <C>           <C>                 <C>                 <C>
Charles L. Fortinberry                                      44            1998                 7,381              0.8%

Bruce H. McIntyre (a)(b)                                    70            1998                12,895              1.4%

Robert A. Olsen (b)(c)                                      55            1998                24,545              2.6%


Directors Whose Terms Expire in 2001

Edwin L. Adler (a)(b)                                       62            1998                75,035              8.0%

David T. Harrison (b)(c)                                    57            1998                29,154              3.1%

John H. Welker (c)                                          60            1998                42,362              4.5%


Directors Whose Terms Expire in 2002

Louis D. Beer                                               55            1998                10,545              1.1%

William J. Clark                                            50            1998                 8,613              0.5%
</TABLE>

(a)  Member Audit Committee
(b)  Member Executive Committee
(c)  Member Personnel Committee

(1)  Each director owns the shares  directly and has sole voting and  investment
     power or shares  voting and  investment  power with his or her spouse under
     joint  ownership.  Includes  shares of common stock that are issuable under
     options exercisable within sixty days. The share ownership of the following
     directors   includes   shares   subject  to  options  that  are   presently
     exercisable:  Mr. Harrison (654 shares); Mr. Adler (1,635 shares); Mr. Beer
     (545 shares);  Mr. Clark (163 shares);  Mr.  Fortinberr  (381 shares);  Mr.
     McIntyre  (545  shares);  Mr. Olsen (545  shares);  and Mr.  Welker  (1,362
     shares).
(2)  Calculated based on the number of shares outstanding plus 5,830 shares with
     respect  to  which  officers  and  directors  have  the  right  to  acquire
     beneficial ownership under stock options exercisable within 60 days.

                                        3
<PAGE>
     David T. Harrison is the Chief Executive Officer,  President and a director
of the  Corporation and the Bank. Mr. Harrison has 31 years of experience in the
banking  industry.  Mr. Harrison was employed by First of America Bank from 1963
to 1991, and most recently served from 1989 to 1991 as Chief  Executive  Officer
and President of First of America Bank-Southeast, in Detroit, a Michigan banking
corporation  that had over $4 billion in assets in 1991. Mr. Harrison has served
as  Chief  Executive  Officer  and  President  of  Pinnacle  Appraisal  Group of
Clarkston,  Michigan,  from 1991 to the present. Mr. Harrison has also served as
Chief Executive Officer and President of Trophy Homes, a residential builder, of
Clarkston,  Michigan,  from 1995 to the  present.  Mr.  Harrison has served as a
director of Credit Acceptance Corporation from 1991 to the present.

     Edwin L. Adler is the  Chairman and a director of the  Corporation  and the
Bank. Mr. Adler is a real estate investor. Until 1999 Mr. Adler was president of
Food Town Supermarkets, a chain of five stores in the Clarkston,  Michigan area,
where he had been employed since 1963.

     Louis D. Beer is a director of the  Corporation  and the Bank. Mr. Beer has
served since 1993 as the chairman of First  Public  Corporation,  a real estate,
financial and business consulting firm located in Saginaw, Michigan.

     William J. Clark is a director of the  Corporation  and the Bank. Mr. Clark
has  served  since  October  1996 as the  general  manager  of  Coldwell  Banker
Professionals,  a real estate brokerage firm in Clarkston,  Michigan.  Mr. Clark
was employed by Clarkston  Real Estate  Services Inc. from 1989 through  October
1996.

     Charles L.  Fortinberry is a director of the  Corporation and the Bank. Mr.
Fortinberry  is an automobile  dealer and is the president of Clarkston  Motors,
Inc., where he has been employed since 1985.

     Bruce H. McIntyre is the Secretary  and a director of the  Corporation  and
the Bank. Mr. McIntyre has served as president of McIntyre  Media,  LLC, a media
consulting  firm,  since October 1996.  From 1971 through  September  1996,  Mr.
McIntyre  was  employed  by Capital  Cities/ABC,  Inc.,  most  recently  as vice
president of the  publishing  division.  Mr.  McIntyre was the  publisher of the
Oakland Press from 1977 through February 1995.

     Robert A. Olsen is a director of the Corporation and the Bank. Mr. Olsen is
the president of Planned  Financial  Services,  Inc., where he has been employed
since 1974.

     John H. Welker is a director of the Corporation and the Bank. Mr. Welker is
president of Numatics,  Inc.,  where he has been employed since 1965.  Numatics,
Inc.  is a  global  developer  and  manufacturer  of  pneumatic  components  for
automated machinery used in various industries.

     The Board of  Directors  had 12 meetings in 1999.  The  Corporation  has no
nominating  committee.  All  directors  attended at least  three-fourths  of the
aggregate  number of meetings of the Board and Board  committees which they were
eligible to attend.

                            COMPENSATION OF DIRECTORS

     Directors of the Corporation are not paid any cash  compensation  for Board
meetings or Committee meetings attended. The Corporation did not grant any Stock
options to directors during 1999.

     A total of 71,250  shares of Common  Stock have been  reserved for issuance
under the  Corporation's  1998 Founding  Directors'  Stock Option Plan,  and the
Corporation  to date has  granted to its  directors  and  organizers  options to
purchase an aggregate of 58,318 shares.

                                        4
<PAGE>
                             EXECUTIVE COMPENSATION

     The following table sets forth the compensation  paid by the Corporation to
its Chief Executive Officer (the "Named Executive") for services rendered to the
Corporation  during  1999  and  1998  (the  Corporation's  first  full  year  of
operations). No other executive officers of the Corporation or the Bank received
annual compensation in excess of $100,000 during 1998 or 1999.
<TABLE>
                                                  Summary Compensation Table
                                                                                               Long Term
                                                              Annual Compensation            Compensation

                                                                                 Other                          All
                                                                                Annual       Securities        Other
                                                                                Compen       Underlying       Compen-
Name and Principal Position                            Year     Salary (1)     Sation($)     Options(#)       Sation
<S>                                                    <C>      <C>             <C>           <C>             <C>
David T. Harrison....................................  1999     $ 100,000        $0                0            $0
         President and                                 1998     $  16,666        $0            6,915            $0
         Chief Executive Officer
</TABLE>

(1)  Mr. Harrison's  annual salary for 1999 was $100,000.  Mr. Harrison received
     total salary compensation of $16,666 during 1998.


     Option  Grants in 1999.  No stock  options were granted  during 1999 to the
Named Executive or to any other officers or directors of the Corporation.

     Year-End  Options  Values.  Shown  below is  information  with  respect  to
unexercised options to purchase shares of the Corporation's Common Stock granted
under the  Option  Plans to the  Named  Executive  and the value of  unexercised
options at December 31,  1999.  The Named  Executive  did not exercise any stock
options during 1999.
<TABLE>
                                               Number of Shares Subject to                  Value of Unexercised
                                                Unexercised Options Held                  In-the-Money Options at
                                                  at December 31, 1999                     December 31, 1999(1)

                   Name                       Exercisable        Unexercisable       Exercisable        Unexercisable
---------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                    <C>                <C>                <C>
David T. Harrison......................           654                6,261               $0                 $0
Chief Executive Officer
and President
---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  The  value  of  unexercised  options  reflects  the  market  value  of  the
     Corporation's Common Stock from the date of grant through December 31, 1999
     (when the closing  price of the  Corporation's  Common  Stock was $5.50 per
     share).  Mr.  Harrison's stock options have an exercise price of $10.00 per
     share and were not  in-the-money  at  December  31,  1999.  Value  actually
     realized upon exercise by the Named  Executive  will depend on the value of
     the Corporation's Common Stock at the time of exercise.

     Benefits. The Corporation provides group health and life insurance benefits
and  supplemental  unemployment  benefits  to its regular  employees,  including
executive officers.

                                        5
<PAGE>
     Security  Ownership of Management.  The following  table shows, as of March
15,  2000,  the  number of  shares  beneficially  owned by the  Named  Executive
identified in the executive  compensation  tables of this proxy statement and by
all  Directors  and  Executive  Officers as a group.  Except as described in the
notes  following  the  table,  the  following   persons  have  sole  voting  and
dispositive power as to all of their respective shares.
<TABLE>
                                                                   Amount and Nature of           Percent of
Name                                                               Beneficial Ownership          Common Stock
------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                        <C>
David T. Harrison..............................................           29,154                      3.1%
  Chief Executive Officer
  and President

All Executive Officers and Directors as a Group
  (eight persons)..............................................          210,530                     22.3%
------------------------------------------------------------------------------------------------------------------
</TABLE>

                        TRANSACTIONS INVOLVING MANAGEMENT

     The Bank is leasing a building in downtown  Clarkston,  Michigan for use as
the Bank's main office and the Corporation's  headquarters.  The Bank leases the
building  from a limited  liability  company  wholly owned by Messrs.  Harrison,
Adler, Beer, Clark,  Fortinberry,  McIntyre, Olsen and Welker, each of whom is a
director of the Corporation and the Bank. Management of the Corporation believes
that the terms of the lease are no less favorable to the Corporation  than could
be obtained from non-affiliate parties.

     During  1998,   organizers   of  the   Corporation   and  the  Bank  loaned
approximately   $415,000  in  aggregate  amount  to  the  Corporation  to  cover
organizational expenses of the Bank and the Corporation. Interest was payable on
the loans at the rate of 5.0% per  annum.  These  loans  were  repaid in full in
December 1998.

     Directors  and  officers  of the  Corporation  and  their  associates  were
customers of, and had transactions  with, the  Corporation's  subsidiary Bank in
the  ordinary  course of business  during  1999.  All loans and  commitments  to
officers  and  directors  were  made  in the  ordinary  course  of  business  on
substantially the same terms, including interest rates and collateral,  as those
prevailing at the time for comparable transactions with other persons and do not
involve an unusual risk of collectibility or present other unfavorable features.

                                        6
<PAGE>
                RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

     The consolidated financial statements of the Corporation have been examined
by  Plante  &  Moran,  LLP,   independent   certified  public   accountants.   A
representative  of Plante & Moran,  LLP is  expected to be present at the annual
meeting  to  respond  to  appropriate  questions.  It is  anticipated  that  the
Corporation's Audit Committee will select the Corporation's  auditors before the
end of this calendar year.


                    SHAREHOLDER PROPOSALSC2001 ANNUAL MEETING

     Any proposal of a  shareholder  intended to be presented  for action at the
2001 annual meeting of the Corporation must be received by the Corporation at 15
South Main Street, Clarkston, Michigan 48346, not later than January 1, 2001, if
the shareholder  wishes the proposal to be included in the  Corporation's  proxy
materials for that meeting.

                      AVAILABILITY OF 10-KSB ANNUAL REPORT

     An annual report on Form 10-KSB to the Securities  and Exchange  Commission
for the year ended December 31, 1999, will be provided free to shareholders upon
written request. Write to Clarkston Financial Corporation,  Attention:  David T.
Harrison, 15 South Main Street,  Clarkston,  Michigan 48346. The Form 10-KSB and
certain  other  periodic  filings  are filed with the  Securities  and  Exchange
Commission  (the  "Commission").  The Commission  maintains an Internet web site
that contains reports and other information  regarding companies,  including the
Corporation,  that file  electronically.  The  Commission's  web site address is
http:\\www.sec.gov.


                                  MISCELLANEOUS

     The  management is not aware of any other matter to be presented for action
at the  meeting.  However,  if any such other matter is properly  presented  for
action,  it is the  intention of the persons named in the  accompanying  form of
proxy to vote thereon in accordance with their best judgment.

     The cost of soliciting  proxies in the  accompanying  form will be borne by
the Corporation.  In addition to solicitation by mail,  proxies may be solicited
in  person,  or  by  telephone  or  telegraph,   by  regular  employees  of  the
Corporation.

                                         By order of the Board of Directors



                                         /s/ Bruce H. McIntyre
March 30, 2000.                          Bruce H. McIntyre
                                         Secretary

                                        7
<PAGE>
                                    APPENDIX


Management's Discussion and Analysis of Financial Condition and
  Results of Operations..................................................... A-2

Independent Auditors Report.................................................A-12

Consolidated Financial Statements

     Consolidated Balance Sheet.............................................A-13

     Consolidated Statement of Operations...................................A-14

     Consolidated Statement of Changes in Shareholders' Equity..............A-15

     Consolidated Statement of Cash Flows...................................A-16

     Notes to Consolidated Financial Statements.............................A-17



                                       A-1
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


     Management's  discussion and analysis of financial condition and results of
operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from those projected in such forward-looking statements.

     The  following  section  presents  additional  information  to  assess  the
financial  condition and results of operations of the  Corporation and the Bank.
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 "Company") is a Michigan  corporation
incorporated  on May 18,  1998.  The  Company is the bank  holding  company  for
Clarkston State Bank (the "Bank").  The Bank commenced  operations on January 4,
1999. The Bank is a Michigan chartered bank with depository  accounts insured by
the Federal  Deposit  Insurance  Corporation.  The Bank provides a full range of
commercial and consumer banking services,  primarily in Clarkston,  Michigan and
the surrounding market area primarily located in north Oakland County, Michigan.

     The Company's plan of operation has been to establish its  management  team
within  the  first  year of its  operations  and to grow  in a  prudent  manner,
primarily by providing prompt, quality service.  Management believes that it has
been  successful  in  establishing  a management  team that can  administer  the
Company's growth in such a manner.

     On April 6, 1999, the Bank entered into an agreement with The State Bank of
Fenton,   Michigan,  to  acquire  certain  assets  and  assume  certain  deposit
liabilities with respect to The State Bank's branch office located in the Farmer
Jack's  grocery  store  at  6555  Sashabaw  Road,  Clarkston,   Michigan.   This
transaction  was consummated on July 16, 1999 and added $1.8 million in deposits
to the  Bank's  totals.  A deposit  premium  of 9.24% of  deposits  (as  finally
adjusted) was paid to The State Bank for these deposits,  along with $17,000 for
various fixed assets and equipment. The Bank leases the branch space from Farmer
Jack's at a rental  rate of $2,750 per month under a lease which runs until July
2002.

Financial Condition

     Summary.  Total assets of the  Corporation  increased  to $33.3  million at
December  31, 1999,  from $8.7  million at December  31,  1998.  The increase in
assets is primarily  attributable  to the Bank  continuing  to attract  customer
deposits  The  fourth  quarter  of 1999  was the  Company's  fourth  quarter  of
operations,  and the number of deposit accounts increased to approximately 2,695
accounts  at December  31,  1999.  Management  attributes  the strong  growth in
deposits to quality  customer  service and the desir of customers to deal with a
local bank.  The Company  anticipates  that the Bank's  assets will  continue to
increase  during 2000,  which will be the Bank's second full year of operations.
However,  management does not believe that the rate of increase will be as rapid
as it was during the first year of operation.

                                       A-2
<PAGE>
     Cash and Cash Equivalents. Cash and cash equivalents, which include federal
funds sold and short-term  investments,  decreased $5.9 million,  or 70% to $2.5
million at December  31,  1999,  from $8.4  million at December  31,  1998.  The
decrease is the result of the  increase in the  investment  and loan  portfolios
since December 31, 1998.

     Securities.  The Bank  classifies as Held to Maturity all securities with a
maturity date of two years or more from date of purchase.  All other  securities
are  classified as Available for Sale.  Securities  available for sale were $9.3
million at December 31, 1999,  compared to $0 at December 31, 1998. The increase
is the result of the  investment  of customer  deposits  that have been obtained
since  December  31,  1998,  and also the  purchase  of  securities  using  cash
generated by a reduction in federal funds sold.  The  securities  may be sold to
meet  the  Bank's  liquidity  needs.  The  primary  objective  of the  Company's
investing  activities  is to provide for the safety of the  principal  invested.
Secondary  considerations  include  earnings,  liquidity and overall exposure to
changes in interest rates.  Excluding those holdings of the investment portfolio
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  other  than  securities  of the  following  issuers  at the  book  value
indicated as of December 31, 1999: Patts Enterprises ($1,340,000),  Kool Capital
($960,000),  Tack Capital  ($1,000,000),  Cunat (Northfield)  ($850,000) and JPV
Capital ($1,000,000).
<TABLE>
                                                                  Maturing  (Dollars in Thousands)

                                                   Due Within                         Five to Ten
                                                    One Year      One to Five Years      Years        After Ten Years     Totals

                              Amor-     Gross     Est.     Avg.     Est.     Avg.    Est.     Avg.    Est.    Avg.    Est.     Avg.
                              tized     unreal-   Market   Yield    Market   Yield   Market   Yield   Market  Yield   Market   Yield
                              Cost      ized      Value             Value            Value            Value           Value
                                        Loss
<S>                           <C>       <C>       <C>      <C>      <C>      <C>     <C>      <C>     <C>     <C>     <C>      <C>
Available for Sale
  U.S.  Government
    Agencies                   $1,313   $  2      $1,311   6.02%                                                      $1,311   6.02%
  Obligations of state and
    Political subdivisions      1,198     10         499   6.45%      $689   6.00%                                     1,188   6.19%
   Corporate securities
    Backed by letters of
    Credit                      6,130      0       6,130   5.96%                                                       6,130   5.96%
Corporate                         675     10          25   8.00%       640   5.62%                                       665   5.63%
       Total Available for     $9,316   $ 22      $7,965   6.01%    $1,329   5.81%                                    $9,294   5.98%
Sale
Hold To maturity;
   U.S. Government
    Agencies                   $9,507    $91                        $6.948   6.63%   $1,969   6.88%   $499    6.40%   $9,416   6.70%
  Corporate                        97      3                            94   7.05%                                        94   7.05%
      Total Hold to Maturity   $9,604    $94                        $7,042   6.63%   $1,969   6.88%   $499    6.88%   $9,510   6.69%
</TABLE>

     The Loan  Portfolio.  The majority of loans are made to  businesses  in the
form of commercial loans and real estate mortgages. Commercial loans account for
approximately  53% of the Bank's  total loan  portfolio.  Residential  mortgages
accounts for 22% of the  portfolio,  and consumer  loans  account for 25% of the
portfolio.

                                       A-3
<PAGE>
     Below is a schedule of the loan  amounts  maturing or  repricing  which are
classified according to their sensitivity to changes in interest rates.
<TABLE>
                                                                             Interest Sensitivity
                                                                          (in thousands of dollars)

                                                        Fixed Rate            Variable Rate       Total
<S>                                                     <C>                     <C>               <C>
Due within 3 months.................................     $   196                $1,911             $2,107
Due after 3 months within 1 year....................         465                   387                852
Due after one but within five years.................       5,246                 1,059              6,305
Due after five years................................       1,999                     0              1,999
                                                         -------               -------            -------
Total...............................................      $7,906                $3,357            $11,263
Allowance for Loan Losses...........................                                                  140
                                                                                                  -------
Total Loans Receivable, Net.........................                                              $11,123
                                                                                                  =======
</TABLE>

     Nonperforming  Assets.  There are no nonperforming loans as of December 31,
1999. Management believes that the allowance for loan losses is adequate for the
lending  portfolio.  Loan  performance  is reviewed  regularly by external  loan
review specialists,  loan officers, and senior management. When reasonable doubt
exists  concerning  collectibility  of interest or  principal,  the loan will be
placed in nonaccrual status.  Any interest  previously accrued but not collected
at that time will be  reversed  and  charged  against  current  earnings.  As of
December 31, 1999 there were no other  material  interest  bearing  assets which
required  classification.  Management  is not  aware of any  recommendations  by
regulatory agencies, which, if implemented,  would have a material impact on the
Corporation's liquidity, capital or operations.

Loan Loss Experience (in thousands)

     The  following  is a summary of loan  balances at the end of the period and
their daily average balances,  changes in the allowance for possible loan losses
arising from loans charged off and recoveries on loans  previously  charged off,
and additions to the allowance which have been expensed.
<TABLE>
                                                                              December 31, 1999
<S>                                                                             <C>
Loans:
   Average daily balance of loans for the year.......................           $   4,707
   Amount of loans outstanding at end of period......................              11,263

Allowance for loan losses:
   Balance at beginning of year......................................                   0
   Additions to allowances charged to operations.....................                 142
   Net (recoveries) charge offs......................................                   2
                                                                                ---------
        Balance at end of year.......................................           $     140
                                                                                =========

Ratios:
   Net (recoveries) charge offs to losses outstanding at year-end....                .02%
   Allowance for loan losses to loans outstanding at year end........               1.24%
</TABLE>

                                       A-4
<PAGE>
Allocation of the Allowance for Loan Losses

     The  allowance  for loan  losses as of  December  31,  1999,  was  $140,000
representing  approximately  1.24% of gross loans outstanding.  The Bank has not
experienced  any material  credit losses as of December 31, 1999.  The allowance
for loan losses is maintained at a level  management feels is adequate to absorb
losses inherent in the loan portfolio.  Management  prepares an evaluation which
is based upon a continuous  review of the Bank's loan portfolio,  the Bank's and
industry's historical loan loss experience, known and inherent risks included in
the loan  portfolio,  composition of loans,  growth of the portfolio and current
economic  conditions.  The  allowance  for loan losses is analyzed  quarterly by
management.  In so doing,  management  assigns a portion of the allowance to the
entire  portfolio by loan type and to specific credits that have been identified
as  problem  loans and  reviews  past loss  experience.  The local  economy  and
particular concentrations are considered, as well as a number of other factors.
<TABLE>
                                                                           Year Ended
                                                                        December 31, 1999

                                                                                   % of each
                                                                                   category
                                                                     Allowance     to total
                                                                      Amount         loans
<S>                                                                   <C>          <C>
Commercial....................................................          $74           .66%
Real estate mortgages.........................................           32           .28
Consumer......................................................           34           .30
Unallocated...................................................            0             0
                                                                       ----          -----
     Total....................................................         $140          1.24%
                                                                       ====          =====
</TABLE>
     The above allocations are not intended to imply limitations on usage of the
allowance. The entire allowance is available for any future loans without regard
to loan type.

     Deposits.  Deposits  are  gathered  from the  communities  the Bank serves.
Deposits increased to $25.3 million at December 31, 1999.

Average Daily Deposits (in thousands)

     The  following  table  sets  forth the  average  deposit  balances  and the
weighted average rates paid thereon.
<TABLE>
                                                   Average for the Year

                                                          1999
                                                Amount            Average Rate
<S>                                            <C>                  <C>
Noninterest bearing demand...........          $  1,320                0%
MMDA/Savings.........................             5,940             3.16%
Time.................................             4,513             5.43%
                                               --------             -----
   Total Deposits....................          $ 11,773             3.67%
</TABLE>

                                       A-5
<PAGE>
Maturity Distribution of Time Deposits of $100,000 Or More

     The following table summarizes time deposits in amounts of $100,000 or more
by time remaining until maturity as of December 31, 1999:
<TABLE>
                                                                  Amount
            <S>                                                   <C>
            Three months or less..........................         $1,153
            Over 3months through 1 year...................          2,484
            Over 1 year...................................            202
                                                                 --------
                                                                   $3,839
                                                                 ========
</TABLE>
     The Bank operates in a very competitive  environment.  Management  monitors
rates at other  financial  institutions  in the area to ascertain that its rates
are  competitive  with the  market.  Management  also  attempts  to offer a wide
variety  of  products  to meets  the  needs of its  customers.  The Bank  offers
business  and  consumer  checking  accounts,  regular and money  market  savings
accounts, and certificates having many options in their terms.

     Premises and  Equipment.  Bank  premises  and  equipment  were  $337,000 at
December 31, 1999.

     Accumulated   Deficit.  As  of  December  31,  1999,  the  Company  had  an
accumulated deficit of $753,000. The accumulated deficit is primarily the result
of losses  incurred  in starting  the bank and in the first year of  operations,
including  the impact of provisions  for loan losses which  totaled  $142,000 in
1999.


                                       A-6
<PAGE>
                              Results of Operations


     Summary of Results.  The  Company  incurred a net loss of $604,000 in 1999,
the Company's first year of operations.  The retained deficit and net losses are
primarily  the  result of costs of  opening  the  Bank's  office,  wages paid to
employees,  and fees and  expenses  incurred in forming the Company and applying
for regulatory  approvals.  Significant  ongoing additions to loan loss reserves
also contributed to net losses in 1999 as the Bank increased its loan portfolio.
Management believes that the expenditures made in 1998 and 1999 have created the
infrastructure  and laid the foundation for future growth and  profitability  in
subsequent years.

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

                                                                Year Ended
                                                             December 31, 1999
<S>                                                                <C>
Net loss                                                           $(604)
  Weighted average number of shares outstanding                      941
  Basic loss per share                                             $(.64)

Earnings (Loss) ratios:
  Return on average assets.........................               (3.03%)
  Return on average equity.........................               (7.60%)
  Average equity to average assets.................                39.9%
  Dividend payout ratio............................                  0
</TABLE>

                                       A-7
<PAGE>
     Net Interest  Income.  The  following  schedule  presents the average daily
balances, interest income and interest expense and average rates earned and paid
for the Corporation's major categories of assets, liabilities, and stockholders'
equity for the periods indicated:
<TABLE>
                                                                                        1999
                                                           Average Balance            Interest             Yield/Cost
<S>                                                            <C>                     <C>                   <C>
Assets:
   Short term investments                                         3,208                  168                 5.23%
Securities:
   Taxable                                                       10,297                  575                 5.58%
   Tax-exempt                                                       633                   37                 5.85%
   Loans                                                          4,707                  401                 8.52%
   Total earning assets/total interest income                     8,845                1,181                 6.26%
   Cash and due from banks                                          601
   Unrealized Gain (Loss)                                           (22)
   All other assets                                                 563
   Allowance for loan loss                                          (60)
      Total assets                                               19,950                1,181                 5.92%
Liabilities and Stockholders' Equity
Interest bearing deposits:
   MMDA,  Savings/NOW accounts                                    5,940                  187                 3.15%
   Time                                                           4,513                  245                 5.43%
   Fed Funds Purchased
   Other Borrowed Money
   Total interest bearing liabilities/total interest expense     10,453                  432                 4.13%
   Noninterest bearing deposits                                   1,320
      All other liabilities                                         257
Stockholders' Equity:
   Unrealized Holding Gain (Loss)                                   (34)
   Common Stock, Surplus, Retained Earnings                       7,954
   Total liabilities and stockholders' equity                    19,950                  432                 2.17%
   Interest spread                                                                       749
   Net interest income -FTE                                                              749
   Net Interest Margin as a Percentage of
      Average Earning Assets-FTE                                 18,846                  749                 3.97%
</TABLE>

                                       A-8
<PAGE>
Composition of Average Earning Assets and Interest Paying Liabilities
<TABLE>
                                                                Year Ended
                                                             December 31, 1999
<S>                                                               <C>                     <C>
As a percent of average earning assets
  Loans.............................................              $  4,707                 25.0%
  Other earning assets..............................                14,138                 75.0%
                                                                  --------                ------
     Average earning assets.........................              $ 18,845                100.0%
                                                                  ========

As a percent of average interest bearing liabilities
  Savings and DDA accounts..........................                 5,940                 56.8%
  Time deposits.....................................                 4,513                 43.2%
  Other borrowings..................................                     0                ------
                                                                  --------
     Average interest bearing liabilities...........              $ 10,453                100.0%
                                                                  ========
Earning asset ratio.................................                 94.5%
</TABLE>

     Allowance for Loan Losses. The Corporation had an allowance for loan losses
of  approximately  1.24% of total loans at December 31, 1999.  The provision for
loan losses for the year ended  December 31, 1999 was $140,000.  This amount was
provided  as a result of the  increase in the total loan  portfolio.  Management
considers it prudent  during the first years of  operations  to provide for loan
losses at a level  which is  consistent  with  levels  maintained  by banks with
similar  loan  portfolios.  Management  will  continue  to monitor its loan loss
performance and adjust its loan loss reserve to more closely align itself to its
own history of loss experience.

     Non-Interest  Income.  Non-interest  income for the year ended December 31,
1999 was  $45,000,  consisting  primarily  of service  fees on loan and  deposit
accounts.

     Non-Interest Expense.  Non-interest expense for the year ended December 31,
1999,  was $1.3  million.  The main  components  of  non-interest  expense  were
salaries and benefits  which  totaled  $553,000 for the year ended  December 31,
1999.  Other  significant   components  of  non-interest  expense  consisted  of
occupancy and equipment  expenses,  data processing fees, supplies and marketing
expenses.

                         Liquidity and Capital Resources

     The  Company  obtained  its  initial  equity  capital in an initial  public
offering of its common stock in November,  1998. The Company's plan of operation
for the next twelve  months does not  contemplate  the need to raise  additional
capital  during that period.  Management  believes that its current  capital and
liquidity will provide the Company with adequate capital to support its expected
level of deposit  and loan  growth and to  otherwise  meet its cash and  capital
requirements for at least the next two or three years.

     The  Company's  sources of liquidity  include loan  payments by  borrowers,
maturity  and sales of  securities  available  for sale,  growth of deposits and
deposit  equivalents,  federal  funds sold,  and the  issuance of common  stock.
Liquidity  management involves the ability to meet the cash flow requirements of
the Company's  customers.  These  customers may be either  borrowers with credit
needs or depositors wanting to withdraw funds.

                                      A-9
<PAGE>
               Asset Liability Management and Market Risk Analysis

     Asset liability management aids the Company in maintaining  liquidity while
maintaining  a balance  between  interest  earning  assets and interest  bearing
liabilities.  Management of interest rate  sensitivity  attempts to avoid widely
varying net  interest  margins and to achieve  consistent  net  interest  income
through periods of changing  interest rates.  Management  monitors the Company's
exposure to interest rate changes using a GAP analysis.

Asset/Liability Gap Position (in thousands)
<TABLE>
                                           1 to 3           4 to 12           1 to 5           Over 5         Total
                                           Month            Months            Years            Years
<S>                                        <C>              <C>               <C>             <C>            <C>
Interest-Earning Assets
   Federal Funds sold                      $   1,600                                                         $ 1,600
   Investment securities                       6,130        $ 1,835           $ 8,452         $ 2,480         18,897
   Loans - by maturity                         2,107            852             6,305           1,999         11,263
                                           ---------        -------           -------         -------        -------
   Total interest-earning assets               9,837          2,687            14,757           4,479         31,760

Interest Bearing Liabilities
   DDA and Money Market                          849          1,385             2,535             251          5,020
   Savings accounts                              370            926             4,628             247          6,171
   Certificates of deposit                     1,816          5,169             4,421                         11,406
                                           ---------        -------           -------         -------        -------
   Total interest-bearing Liabilities          3,035          7,480            11,584             498         22,597

   Rate sensitivity gap and ratios:
      Gap for period                           6,802         (4,793)            3,173           3,981          9,163
      Cumulative gap                           6,802          2,009             5,182           9,163          9,163
   Percentage of cumulative gap
      to total assets                         20.45%          6.04%            15.58%          27.54%         27.54%
</TABLE>
     Other  variables  besides  interest  rate changes may have an impact on the
financial  condition of the Bank  including,  but not limited to,  growth of the
company, structure of the balance sheet, and economic and competitive factors.

                                      A-10
<PAGE>
                              Year 2000 Compliance.

     Because many computerized systems use only two digits to record the year in
date fields (for example, the year 1998 is recorded as 98), such systems may not
be able to  accurately  process  dates  ending in the year 2000 and  after.  The
effects of the issue will vary from  system to system and may  adversely  affect
the ability of a financial  institution's  operations  as well as its ability to
prepare  financial  statements.  The Company and the Bank were organized in 1998
and the Company  acquired its computer  equipment  within the past twelve months
and has contracted with a leading supplier of information  processing  services.
This equipment and these  services were  purchased with  assurances of Year 2000
compliance.

     Company management has developed a comprehensive Year 2000 Compliance Plan.
The  Company  has  procedures  in place to assess  Year 2000  compliance  by the
Company and its vendors. In addition,  the Bank asks commercial  borrowers about
Year 2000 compliance as part of the loan application and review process.

     The Company  completed its Year 2000 assessment and remediation by December
31, 1999 after spending approximately $15,000 on the Year 2000 issue.

     As of March 15, 2000, the Company had not experienced any material  adverse
effects on its operations as a result of the Year 2000 issue. However, there can
be no  assurance  that the systems of other  companies  that  interact  with the
Company are sufficiently Year 2000 compliant.

                           Forward Looking Statements

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

                                      A-11
<PAGE>
                          Independent Auditor's Report



To the Board of Directors and Stockholders
Clarkston Financial Corporation and Subsidiary


We have  audited  the  accompanying  consolidated  balance  sheet  of  Clarkston
Financial  Corporation  and  subsidiary as of December 31, 1999 and 1998 and the
related consolidated  statements of operations,  changes in stockholders' equity
and cash flows for the year ended  December 31, 1999 and for the period from May
18, 1998 (inception)  through December 31, 1998.  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  generally   accepted  auditing
standards. 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 and subsidiary as of December 31, 1999 and 1998
and the  consolidated  results of their  operations and their cash flows for the
year ended  December  31, 1999 and for the period from May 18, 1998  (inception)
through  December 31, 1998, in conformity  with  generally  accepted  accounting
principles.


                                                  /s/ Plante & Moran, LLP


Troy, Michigan
January 27, 2000
                                      A-12
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                                      Consolidated Balance Sheet
                                                                  (000s omitted)
<TABLE>
                                                                                       December 31
                                                                                       -----------
                                                                                  1999                1998
                                    Assets                                        ----                ----
<S>                                                                             <S>                 <C>
Cash and cash equivalents:
Cash and due from banks                                                            $ 867            $    92
Federal funds sold                                                                 1,600              8,350
                                                                                  ------              -----
Total cash and cash equivalents                                                    2,467              8,442

Securities held to maturity (Note 2)                                               9,604                 -
Securities available for sale (Note 2)                                             9,294                 -

Loans (Note 3)                                                                    11,263                 -
Allowance for possible loan losses (Note 4)                                         (140)                -
                                                                                   -----              -----
Net loans                                                                         11,123                 -

Bank premises and equipment (Note 5)                                                 337                291
Interest receivable                                                                  256                 -
Other assets                                                                         185                 -
                                                                                    ----              -----
Total assets                                                                    $ 33,266            $ 8,733
                                                                                ========            =======
                      Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing demand deposits                                              $ 2,671            $    -
Interest-bearing (Note 6)                                                         22,595                 -
                                                                                 -------              -----
Total deposits                                                                    25,266                 -

Interest payable and other liabilities                                               163                126
                                                                                    ----                ---

Total liabilities                                                                 25,429                126

Stockholders' Equity Common stock - No par value:
Authorized - 10,000,000 shares                                                     4,306              4,378
Issued and outstanding - 931,600 shares and 951,000 shares at
December 31, 1999 and 1998, respectively
Capital surplus                                                                    4,306              4,378
Accumulated deficit                                                                 (753)              (149)
Accumulated other comprehensive loss                                                 (22)                -
                                                                                    ----              -----
Total stockholders' equity                                                         7,837              8,607
                                                                                  ------              -----
Total liabilities and stockholders' equity                                      $ 33,266            $ 8,733
                                                                                ========            =======
</TABLE>
See Notes to Consolidated Financial Statements.
                                      A-13
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                            Consolidated Statement of Operations
                                           (000s omitted, except per share data)
<TABLE>
                                                                                                    May 18, 1998
                                                                                                     (Inception)
                                                                                Year Ended            Through
                                                                                December 31,        December 31,
                                                                                   1999                 1998
<S>                                                                             <C>                 <C>
Interest Income
     Interest and fees on loans                                                   $ 401             $  -
     Interest on investment securities:
          Taxable securities                                                        575                -
          Tax-exempt securities                                                      37                -
     Interest on federal funds sold                                                 168                35
                                                                                   ----              ----
               Total interest income                                              1,181                35

Interest Expense
     Deposits                                                                       432                -
     Other                                                                            -                 4
                                                                                   ----              ----
               Total interest expense                                               432                 4
                                                                                   ----              ----
Net Interest Income                                                                 749                31

Provision for Possible Loan Losses (Note 4)                                         142                -
                                                                                   ----              ----
Net Interest Income After Provision for Possible Loan Losses                        607                31

Other Operating Income (Loss)
     Service fees on loan and deposit accounts                                       81                -
     Loss on sale of securities                                                     (48)               -
     Other                                                                           12                -
                                                                                   ----              ----
               Total other operating income                                          45                -

Other Operating Expenses
     Salaries and employee benefits                                                 553                68
     Occupancy                                                                      219                32
     Advertising                                                                    127                 8
     Outside processing                                                              98                -
     Professional fees                                                               72                -
     Supplies                                                                        35                -
     Organizational costs                                                             -                56
     Other                                                                          152                16
                                                                                   ----              ----
               Total other operating expenses                                     1,256               180
                                                                                  -----               ---
Loss - Before income taxes                                                         (604)             (149)

Provision for Income Taxes (Note 7)                                                   -                -
                                                                                 ------             -----
Net Loss                                                                        $  (604)          $  (149)
                                                                                ========          =======
Basic and Fully Diluted Loss per Share of Common Stock (Note 14)                $ (0.64)          $ (0.96)
                                                                                ========          =======
</TABLE>
See Notes to Consolidated Financial Statements.
                                      A-14
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                       Consolidated Statement of Changes in Stockholders' Equity
                                           (000s omitted, except per share data)

<TABLE>
                                                                                                     Accumulated
                                                                                                       Other             Total
                                                       Common         Capital        Accumlated     Comprehensive   Stockholders'
                                                       Stock          Surplus          Deficit          Loss           Equity
<S>                                                    <C>            <C>            <C>            <C>            <C>
Balance - May 18, 1998                                 $    -         $    -         $   -          $  -           $    -

Public stock offering                                    4,750          4,750            -             -             9,500

Cost of stock offering                                    (372)          (372)           -             -              (744)

Comprehensive income (loss) - Net loss                      -              -           (149)           -              (149)
                                                         ----           -----          -----         ----            -----
Balance - December 31, 1998                              4,378          4,378          (149)           -             8,607

Purchase of outstanding common stock                       (72)           (72)           -             -              (144)

Comprehensive income (loss):
     Net loss                                               -              -           (604)           -              (604)
     Change in unrealized loss on securities
       available for sale                                   -              -             -            (22)             (22)
                                                                                                                      ----
          Net comprehensive loss                                                                                      (626)
                                                       -------        -------        -------        ------         -------
Balance - December 31, 1999                            $ 4,306        $ 4,306        $ (753)        $ (22)         $ 7,837
                                                       =======        =======        =======        ======         =======
</TABLE>
Book  value  per  share is  $8.41  and  $9.05 at  December  31,  1999 and  1998,
respectively.

See Notes to Consolidated Financial Statements.
                                      A-15
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                            Consolidated Statement of Cash Flows
                                                                  (000s omitted)
<TABLE>
                                                                                                         May 31, 1998
                                                                                                         (Inception)
                                                                                     Year Ended            Through
                                                                                     December 31,        December 31,
                                                                                         1999                1998
<S>                                                                                  <C>                 <C>
Cash Flows from Operating Activities
     Net loss                                                                        $ (604)             $ (149)
     Adjustments to reconcile net income to net cash from operating activities:
          Depreciation and amortization                                                  91                  -
          Provision for loan losses                                                     142                  -
          Loss on sale of available-for-sale securities                                  48                  -
          Increase in interest receivable                                              (256)                 -
          Increase in other assets                                                     (195)                 -
          Increase in interest payable and  other liabilities                            37                 126
                                                                                        ---                 ---
               Net cash used in operating activities                                   (737)                (23)

Cash Flows from Investing Activities
     Purchase of securities available for sale                                      (18,663)                 -
     Proceeds from sale of available-for-sale securities                              6,742                  -
     Proceeds from maturities of available-for-sale securities                        2,557                  -
     Purchase of held-to-maturity investment securities                              (9,604)                 -
     Premises and equipment expenditures                                               (127)               (291)
     Net increase in loans                                                          (11,265)                 -
                                                                                   --------                ----
               Net cash used in investing activities                                (30,360)               (291)

Cash Flows from Financing Activities
     Proceeds from related party notes payable                                           -                  415
     Repayment of related party notes payable                                            -                 (415)
     Net increase in time deposits                                                   11,406                  -
     Net increase in other deposits                                                  13,860                  -
     Purchase of outstanding common stock                                              (144)                 -
     Net proceeds from public stock offering                                             -                8,756
                                                                                       ----               -----
               Net cash provided by financing activities                             25,122               8,756
                                                                                    -------               -----
Net Increase (Decrease) in Cash and Cash Equivalents                                 (5,975)              8,442

Cash and Cash Equivalents - Beginning of period                                       8,442                  -
                                                                                     ------               -----
Cash and Cash Equivalents - End of period                                           $ 2,467             $ 8,442
                                                                                    =======             =======
Supplemental Disclosure of Cash Flow Information - Cash paid for
     Interest                                                                       $   354             $     4
     Taxes                                                                                -                   -
</TABLE>
See Notes to Consolidated Financial Statements.
                                      A-16
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 1 - Summary of Significant Accounting Policies

     The accounting and reporting  policies of Clarkston  Financial  Corporation
     and  subsidiary  conform  to  generally  accepted  accounting   principles.
     Management is required to make  estimates and  assumptions  that affect the
     amounts reported in the consolidated  financial statements and accompanying
     notes. Actual results could differ from those estimates and assumptions.

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

     Nature of Operations - Clarkston State Bank was formed during December 1998
     for the purpose of conducting  full-service commercial and consumer banking
     and other  financial  products  and  services  to Michigan  communities  in
     Oakland  County.   Banking   operations   commenced  on  January  4,  1999.
     Accordingly,  certain of the footnotes contain  single-year  disclosures as
     applicable.

     Securities  -   Held-to-maturity   securities  are  those  securities  that
     management  has the  ability  and  positive  intent  to  hold to  maturity.
     Held-to-maturity securities are recorded at cost, adjusted for amortization
     of premium and accretion of discount.

     Securities  classified as available for sale are securities  management had
     identified  that may be sold in the  future to meet the  bank's  investment
     objectives of quality,  liquidity and yield and to avoid significant market
     value  deterioration.  Available-for-sale  securities  are recorded at fair
     value with unrealized gains and losses, net of income taxes,  reported as a
     component of other comprehensive income in stockholders' equity.

     Gains or losses on the sale of securities are computed on the adjusted cost
     of the specific security.

     Loan  Interest  and  Fee  Income  - Loans  are  generally  reported  at the
     principal amount  outstanding,  net of unearned income.  Nonrefundable loan
     origination  and certain  direct loan  origination  costs are  deferred and
     included  in interest  income over the term of the related  loan as a yield
     adjustment.

                                      A-17
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 1 - Summary of Significant Accounting Policies (Continued)

     Interest on loans is accrued and credited to income based on the  principal
     amount outstanding. The accrual of interest on loans is discounted when, in
     the opinion of management,  there is an indication that the borrower may be
     unable to meet payments as they become due. Upon such  discontinuance,  all
     unpaid  interest  accrued during the current year is reversed and all other
     unpaid interest is charged to allowance for possible loan losses.  Interest
     accruals are generally  resumed when all delinquent  principal and interest
     have been brought current or the loan becomes both  well-secured and in the
     process of collection.

     Allowance for Possible Loan Losses - The allowance for possible loan losses
     is maintained at a level  considered by management to be adequate to absorb
     losses inherent in existing loans and loan commitments. The adequacy of the
     allowance is based on evaluations that take into consideration such factors
     as  prior  loss  experience,  changes  in  the  nature  and  volume  of the
     portfolio,   overall  portfolio  quality,  loan  concentrations,   specific
     impaired  or problem  loans and  commitments,  and  current an  anticipated
     economic conditions that may affect the borrower's ability to pay.

     A portion of the total  allowance  for loan  losses is related to  impaired
     loans.  A loan is impaired  when it is probable  that the creditor  will be
     unable to collect all principal  and interest  amounts due according to the
     established  terms of the loan  agreement.  Loans that have been  placed on
     nonaccrual  status or  renegotiated  in a troubled debt  restructuring  are
     considered  to be impaired.  The  allowance for loan losses for an impaired
     loan is recorded at the amount by which the outstanding  recorded principal
     balance exceeds the fair value of the collateral and available cash flow on
     the  impaired  loan.  For a  loan  that  is not  collateral-dependent,  the
     allowance  for  loan  losses  is  recorded  at  the  amount  by  which  the
     outstanding recorded principal balance exceeds the current best estimate of
     the future  cash  flows on the loan,  discounted  at the  loan's  effective
     interest rate.

     Premises and Equipment - Premises and  equipment  are stated at cost,  less
     accumulated  depreciation and amortization.  Depreciation,  computed on the
     straight-line  method,  is charged to operations over the estimated  useful
     lives of the  properties.  Leasehold  improvements  are amortized  over the
     terms of their  respective  leases  or the  estimated  useful  lives of the
     improvements, whichever is shorter.

                                      A-18
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 1 - Summary of Significant Accounting Policies (Continued)

     Organization  and  Preopening  Costs - Organization  and  preopening  costs
     represent  incorporation  costs,  legal and accounting costs,  salaries and
     other costs relating to the  organization.  The organization and preopening
     costs  totaled  approximately  $180,000 for the period  ended  December 31,
     1998, which were charged to expense as incurred. There were no organization
     and preopening costs during 1999.

     Offering  Costs - Costs  related to the  offering of common stock have been
     charged  against the offering  proceeds from the sale of the  Corporation's
     stock.

     Intangible Assets - Intangible assets totaling $182,000 consist entirely of
     deposit intangibles acquired in a branch acquisition completed during 1999.
     Amortization  is  calculated  on a  straight-line  basis over the estimated
     asset life of 8 years.

     Earnings  per Share - Basic  earnings  per  share is based on the  weighted
     average  number of shares  outstanding  during each period.  Fully  diluted
     earnings per share are based on the weighted  average  shares  outstanding,
     assuming the exercise of the dilutive stock options. All potential dilutive
     securities have been excluded from the computation in 1999 and 1998 because
     their effect would be 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.

     Stock Options - The  Corporation  has two stock option plans (see Note 10).
     Options  granted to directors and key employees are accounted for using the
     intrinsic value method, under which compensation expense is recorded at the
     amount by which the  market  price of the  underlying  stock at grant  date
     exceeds the exercise price of an option. Under the Corporation's plans, the
     exercise  price on all options  granted equals or exceeds the fair value of
     the stock at the grant date. Accordingly,  no compensation cost is recorded
     as a result of stock option awards under the plan.

     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.  At
     December 31, 1999,  accumulated other comprehensive  income consists solely
     of unrealized losses on available-for-sale securities.

                                      A-19
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 1 - Summary of Significant Accounting Policies (Continued)

     Accounting  for  Derivative  Instruments  and Hedging  Activities - In June
     1998,  Statement of Financial  Accounting Standards No. 133, Accounting for
     Derivative  Instruments and Hedging  Activities  ("SFAS 133"),  was issued.
     SFAS 133 requires all derivative  instruments to be recorded on the balance
     sheet at  estimated  fair  value.  Changes in the fair value of  derivative
     instruments  are to be recorded each period  either in current  earnings or
     other comprehensive income, depending on whether a derivative is designated
     as  part  of a hedge  transaction  and,  if it is,  on the  type  of  hedge
     transaction.  SFAS 133 is effective for the year 2000.  The  Corporation is
     currently  evaluating the impact of SFAS 133. It is expected that,  because
     the Corporation is not subject to any significant  derivative  contracts as
     of December 31, 1999,  implementation  of the new standard  will not have a
     material impact on the Corporation's financial statements.

     Reclassifications  - Certain prior year amounts have been  reclassified  to
     conform to current year presentation.

Note 2 - Securities

     The amortized cost and estimated  market value of securities are as follows
     at December 31, 1999 (000s omitted):
<TABLE>
                                                                              Gross          Gross
                                                            Amortized      Unrealized     Unrealized       Estimated
                                                               Cost           Gains         Losses       Market Value
<S>                                                         <C>            <C>            <C>            <C>
Held-to-maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies                   $ 9,507        $     -          $  91        $ 9,416
Corporate securities                                             97              -              3             94
                                                            -------        -------          -----        -------
Total                                                       $ 9,604        $     -          $  94        $ 9,510
                                                            =======        =======          =====        =======
Available-for-sale securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies                   $ 1,313        $     -          $   2        $ 1,311
Obligations of state and political subdivisions               1,198              -             10          1,188
Corporate securities backed by
letters of credit                                             6,130              -              -          6,130
Corporate securities                                            675              -             10            665
                                                            -------        -------          -----        -------
Total                                                       $ 9,316        $     -          $  22        $ 9,294
                                                            =======        =======          =====        =======
</TABLE>
                                      A-20
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 2 - Securities (Continued)

     The  amortized  cost  and  estimated   market  value  of   held-to-maturity
     securities at December 31, 1999, 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):
<TABLE>
                                                          Held to Maturity                  Available for Sale
                                                       Amortized        Estimated      Amortized          Estimated
                                                         Cost         Market Value       Cost            Market Value
<S>                                                    <C>            <C>              <C>               <C>
Due in one year or less                                $    -         $     -          $ 7,969           $ 7,965
Due in one year through five years                       7,124          7,042            1,347             1,329
Due after five years through ten years                   1,981          1,969               -                -
Due after ten years                                        499            499               -                -
                                                       -------        -------          -------           -------
Total                                                  $ 9,604        $ 9,510          $ 9,316           $ 9,294
                                                       =======        =======          =======           =======
</TABLE>
     Securities  having  a  carrying  value  of  $1,060,000   (market  value  of
     $1,052,000)  were pledged at December 31, 1999 to secure  public  deposits,
     repurchase agreements and for other purposes required by law.

     Proceeds from the sale of available-for-sale securities during 1999 totaled
     $6,742,000.  Gross gains of $0 and gross losses of $48,000 were  recognized
     on those sales in 1999. There were no sales of securities during 1998.

Note 3 - Loans

     Major  categories  of loans  included in the portfolio at December 31, 1999
     are as follows (000s omitted):
<TABLE>
<S>                                                                             <C>
Commercial                                                                      $  5,936
Residential mortgage                                                               2,529
Consumer                                                                           2,798
                                                                                --------
Total                                                                           $ 11,263
                                                                                ========
</TABLE>
                                      A-21
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 3 - Loans (Continued)

     Certain  directors  of the  Bank,  including  their  associates,  were loan
     customers of the subsidiary  bank during 1999.  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, 1999 totaled $1,146,000. During 1999, $1,167,000 of new loans were made
     and repayments  totaled  $21,000.  The total unused  commitments  for these
     loans totaled $283,000 at December 31, 1999.

     Final  loan  maturities  and  rate  sensitivity  of the loan  portfolio  at
     December 31, 1999 are as follows (000s omitted):
<TABLE>
                                                 Within One      One to Five         After Five
                                                    Year            Years              Years            Total
<S>                                               <C>            <C>                 <C>              <C>
Commercial                                        $ 2,494          $ 2,594             $ 848          $  5,936
Mortgage                                               22            1,604               903             2,529
Consumer                                              443            2,107               248             2,798
                                                  -------         --------           -------          --------
Total                                             $ 2,959         $  6,305           $ 1,999          $ 11,263
                                                  =======         ========           =======          ========

Loans at fixed interest rates                     $   661         $  5,246           $ 1,999          $  7,906
Loans at variable interest rates                    2,298            1,059                 -             3,357
                                                  -------         --------           -------          --------
Total                                             $ 2,959         $  6,305           $ 1,999          $ 11,263
                                                  =======         ========           =======          ========
</TABLE>

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):
<TABLE>
<S>                                                                             <C>
Balance - Beginning of year                                                     $    -

Provision charged to operations                                                     142
Loan losses                                                                          (2)
Loan loss recoveries                                                                 -
                                                                                -------
Balance - End of year                                                           $   140
                                                                                =======
As a percent of total loans                                                       1.24%
                                                                                =======
</TABLE>

     The  Bank  considers  all  nonaccrual  and  reduced-rate  loans  (with  the
     exception of  residential  mortgages  and  consumer  loans) to be impaired.
     There are no such loans outstanding as of December 31, 1999.

                                      A-22
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 5 - Bank Premises and Equipment

<TABLE>
                                                                                 1999           1998
                                                                                 ----           ----
<S>                                                                             <C>            <C>
Building improvements                                                           $   87         $   -
Furniture and equipment                                                            332             -
Additions in process                                                                -             291
                                                                                ------         ------
Total bank premises and equipment                                                  419            291

Less accumulated depreciation                                                       82             -
                                                                                ------         ------
Net carrying amount                                                             $  337         $  291
                                                                                ======         ======
</TABLE>

Note 6 - Deposits

     The following is a summary of interest-bearing deposit accounts at December
     31, 1999:
<TABLE>
                                                                                  1999
<S>                                                                             <C>
Interest checking                                                               $ 3,111
Savings                                                                           6,170
Money market savings                                                              1,908
Time:
     $100,000 and over                                                            3,839
     Under $100,000                                                               7,567
                                                                                -------
Total interest-bearing deposits                                                 $22,595
                                                                                =======
</TABLE>
The remaining  maturities of certificates of deposit outstanding at December 31,
1999 are as follows (000s omitted):
<TABLE>
                                                                                Under $100,000      $100,000 and Over
<S>                                                                             <C>                    <C>
2000                                                                               $ 3,348             $ 3,637
2001                                                                                 4,219                 102
2002                                                                                     -                 100
                                                                                   -------             -------
Total                                                                              $ 7,567             $ 3,839
                                                                                   =======             =======
</TABLE>
                                      A-23
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 7 - Income Taxes

     The Corporation and its bank subsidiary file a consolidated  federal income
     tax return. The Corporation has net operating loss  carryforwards  totaling
     approximately  $567,000  generated  during  the  period  from May 18,  1998
     (inception)  through  December 31, 1999 that are available to reduce future
     taxable income through the year ending  December 31, 2019. The deferred tax
     asset generated by that loss  carryforward has been offset with a valuation
     allowance since the Corporation does not have a history of earnings.

     Deferred  income taxes are provided for the temporary  differences  between
     the financial reporting bases and the tax bases of the Corporation's assets
     and  liabilities.   The  source  of  such  temporary  differences  consists
     primarily of net operating loss carryforwards and the nondeductible portion
     of loan loss reserve.

     The temporary differences that comprise deferred tax assets and liabilities
     at December 31, 1999 and 1998 are as follows:
<TABLE>
                                                                                 1999           1998
<S>                                                                             <C>            <C>
Deferred tax assets:
Bad debts                                                                       $ 44           $  -
Net operating loss                                                               193              -
Organization and preopening costs                                                 33              50
Unrealized loss on securities available for sale                                   7              -
                                                                                ----           -----
Total deferred tax assets                                                        277              50

Valuation allowance for deferred tax assets                                     (274)            (50)

Deferred tax liabilities:
Depreciation                                                                       2              -
Accretion on investment securities                                                 1              -
                                                                                ----           -----
Total deferred tax liabilities                                                     3              -
                                                                                ----           -----
Net deferred tax asset                                                          $ -            $  -
                                                                                ====           =====
</TABLE>
                                      A-24
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note  8 -  Related Parties

     Notes  Payable - Notes  payable  totaling  $415,000  were advanced from and
     repaid to the Corporation's organizers during the period ended December 31,
     1999.  The  notes  paid  interest  at 5  percent  per annum and were due on
     demand.  The  Corporation  repaid the notes from the proceeds of the common
     stock offering.

     Operating  Lease - The Bank  entered  into a lease  for its main  operating
     facility under a five-year noncancelable lease expiring on October 1, 2003.
     The  facility  was leased from an entity owned by certain of the members of
     the Board of  Directors of the  Corporation  and its bank  subsidiary.  The
     lease payment  obligation is $5,000 per month through September 1, 2000 and
     $5,165  per  month  thereafter.  The  Bank is  responsible  for all  taxes,
     utilities and maintenance costs for the facility.

     The annual future minimum lease payments  required under the  noncancelable
     operating lease as of December 31, 1999 are as follows:
<TABLE>
                <S>                                            <C>
                2000                                           $ 60,495
                2001                                             61,980
                2002                                             61,980
                2003                                             46,485
</TABLE>

Note  9 -  Restriction on Dividends or Dividends from Banking Subsidiary

     Unless prior regulatory approval is obtained, banking regulations limit the
     amount of dividends that the Corporation's  banking  subsidiary can declare
     to current  year net  profits,  as defined in the Federal  Reserve Act, and
     retained net profits from prior years.  There were no dividends declared or
     paid by the Bank to the holding company during 1999 or 1998.

Note 10 - Stock-based Compensation

     The  Corporation  has  two  stock-based   compensation   plans.  Under  the
     employees' Stock  Compensation Plan ("Employee  Plan"), the Corporation may
     grant  options to key  employees  for up to 23,750  shares of common stock.
     Under the 1998 Founding  Directors Stock Option Plan ("Director Plan"), the
     Corporation  may grant  options  for up to 71,250  shares of common  stock.
     Under both plans, there is a minimum vesting period of between one to three
     years before the options may be exercised,  and all options expire 10 years
     after the date of their grant.  Certain options (contingent  options) under
     both plans vest on an  accelerated  basis upon the  achievement  of various
     future  financial and  operational  goals.  All such options vest 9.5 years
     after the date of grant  regardless of achievement  of future goals.  Under
     both plans,  the exercise  price of each option  equals the market price of
     the Corporation's common stock on the date of grant.

                                      A-25
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 10 - Stock-based Compensation (Continued)

     The following table summarizes stock option transactions for both plans and
     the related  average  exercise prices for the years ended December 31, 1999
     and 1998:
<TABLE>
                                                                  1999                              1998
                                                                           Weighted                        Weighted
                                                         Number of         Average         Number of       Average
                                                          Shares        Exercise Price      Shares       Exercise Price
<S>                                                      <C>              <C>              <C>            <C>
Options outstanding - Beginning of period                58,318           $ 10.00              -           $    -

Options granted                                              -                 -           58,318            10.00
Options exercised                                            -                 -               -                -
Options expired                                              -                 -               -                -
                                                         ------           -------          ------          -------
Options outstanding - End of period                      58,318           $ 10.00          58,318          $ 10.00
                                                         ======           =======          ======          =======
</TABLE>

     The  following  table shows summary  information  about fixed stock options
     outstanding at December 31, 1999:
<TABLE>
                                                    Stock Options Outstanding                            Stock Options Exercisable
                             -----------------------------------------------------------------------   -----------------------------
                                                                     Weighted
                                                                      Average          Weighted         Number of        Weighted
                                Range of          Number of          Remaining          Average           Shares          Average
                             Exercise Prices       Shares        Contractual Life    Exercise Price    Exerciseable   Exercise Price
<S>                          <C>                  <C>               <C>                 <C>               <C>           <C>
Contingent                   $ 10.00               29,160           8.9 years           $ 10.00               -         $ 10.00
Noncontingent                  10.00               29,158           8.9 years             10.00           5,830           10.00
</TABLE>

     The Corporation has adopted the disclosure-only  provisions of Statement of
     Financial  Accounting  Standards (SFAS) No. 123, Accounting for Stock-Based
     Compensation,  but applies the  intrinsic  value  method to account for its
     plan. The  Corporation has estimated fair value of the options at $3.81 and
     $2.74 per share for  contingent  and  noncontingent  shares,  respectively,
     using a "minimum  value"  concept.  The  values  were  calculated  using an
     assumed  interest rate of 6.5 percent and estimated  lives of 7.5 years and
     5.0 years for contingent and  noncontingent  shares,  respectively.  If the
     Corporation had elected to recognize compensation costs for the plans based
     on the fair value of awards at the grant date,  net loss per share on a pro
     forma  basis  would have been as follows  (000s  omitted,  except per share
     data):

                                      A-26
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

<TABLE>
                                                                    1999                              1998
                                                       As Reported      Pro Forma         As Reported      Pro Forma
<S>                                                    <C>              <C>               <C>              <C>
Net loss                                               $   (604)         $  (635)         $  (149)         $ (153)
Net loss per common share - Basic
     and fully diluted                                    (0.64)           (0.67)           (0.96)          (0.99)
</TABLE>

Note 11 - Financial Instruments

     Fair Values of Financial  Instruments - The carrying  amounts and estimated
     fair values of the Corporation's financial instruments are presented below.
     Certain assets,  the most significant being premises and equipment,  do not
     meet the  definition of a financial  instrument  and are excluded from this
     disclosure.   Similarly,  deposit  base  and  other  customer  relationship
     intangibles are not considered financial  instruments and are not discussed
     below.  Accordingly,  this fair value  information  is not intended to, and
     does not, represent the Corporation's  underlying value. Many of the assets
     and  liabilities  subject to the disclosure  requirements  are not actively
     traded,  requiring  fair  values  to  be  estimated  by  management.  These
     estimates  necessarily  involve the use of judgment about a wide variety of
     factors,  including,  but not limited  to,  relevancy  of market  prices of
     comparable instruments, expected future cash flows and appropriate discount
     rates.
<TABLE>
                                                                       1999                            1998
                                                              Carrying        Estimated       Carrying       Estimated
                                                               Amount         Fair Value      Amount         Fair Value
<S>                                                           <C>             <C>             <C>            <C>
Assets
     Cash and short-term investments                          $ 2,467         $ 2,467         $ 8,442        $ 8,442
     Securities                                                18,898          18,804               -              -
     Loans                                                     11,123          10,995               -              -
     Accrued interest receivable                                  256             256               -              -

Liabilities
     Noninterest-bearing deposits                               2,671           2,671               -              -
     Interest-bearing deposits                                 22,595          22,531               -              -
     Accrued interest payable                                      78              78               -              -
</TABLE>

     The terms and short-term nature of certain assets and liabilities result in
     their carrying amount  approximating fair value. These include cash and due
     from  banks,  interest-bearing  deposits in banks,  federal  funds sold and
     securities  purchased  under  resale  agreements,   customers'   acceptance
     liabilities,  short-term  borrowings and bank acceptance  outstanding.  The
     following  methods and  assumptions  were used by the Bank to estimate  the
     fair values of the remaining classes of financial instruments.

     Securities are valued based on quoted market prices,  where  available.  If
     quoted  market  prices are not  available,  fair values are based on quoted
     market prices of comparable instruments.

                                      A-27
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998

Note 11 - Financial Instruments (Continued)

     For variable rate loans that reprice  frequently,  fair values are based on
     carrying amounts,  as adjusted for estimated credit losses. The fair values
     for other loans are  estimated  using  discounted  cash flow  analyses  and
     employ  interest rates currently being offered for loans with similar terms
     to borrowers of similar credit quality.

     The fair  values of demand  deposits,  savings  accounts  and money  market
     deposits are, by  definition,  equal to the amount  payable on demand.  The
     fair values of fixed rate time deposits are estimated by  discounting  cash
     flows using interest rates  currently  being offered on  certificates  with
     similar maturities.

     The fair value of loan commitments and standby letters of credit, valued on
     the basis of fees currently  charged for commitments for similar loan terms
     to new borrowers with similar credit profiles, is not considered material.

     Off-balance-sheet  Risk - The Bank is party to 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 and financial  guarantees.  These  instruments
     involve, to varying degrees, elements of credit and interest rate risk that
     are not recognized in the statement of financial condition.

     Commitments  to extend credit are  agreements to lend to a customer as long
     as there are no violations of any  conditions  established in the contract.
     Commitments  generally  have fixed  expiration  dates or other  termination
     clauses  and  may  require  payment  of a  fee.  Fees  from  issuing  these
     commitments  to extend credit are  recognized  over the period to maturity.
     Since a portion of the  commitments  is  expected to expire  without  being
     drawn upon, the total commitments do not necessarily  represent future cash
     requirements.  The Bank evaluates  each  customer's  creditworthiness  on a
     case-by-case  basis.  The amount of collateral  obtained upon  extension of
     credit is based on management's credit evaluation of customers.

     Exposure to credit loss in the event of  nonperformance  by others,  in the
     form of standby  letters  of  credit,  is  represented  by the  contractual
     notional amount of those items. The Bank generally  requires  collateral to
     support such financial  instruments in excess of the  contractual  notional
     amount of those instruments.

     The  Bank  has  outstanding   loan  origination   commitments   aggregating
     $6,294,000  at  December  31,  1999,  on  which  loans of  $2,393,000  were
     outstanding  at year end and included in the balance  sheet.  There were no
     standby letters of credit outstanding as of December 31, 1999.

                                      A-28
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998


Note 12 - Regulatory Matters

     The Corporation  and its bank subsidiary are subject to various  regulatory
     capital  requirements  administered by federal and state banking  agencies.
     Failure to meet minimum capital requirements can initiate certain mandatory
     and  discretionary  actions by regulators that could have a direct material
     effect on the Corporation's  financial  statements.  Under capital adequacy
     guidelines  and the  regulatory  framework,  the Bank  must  meet  specific
     capital guidelines that involve quantitative measures of the Bank's assets,
     liabilities  and  certain   off-balance-sheet  items  as  calculated  under
     regulatory accounting practices.

     For 1999,  since the Bank is  considered  a de novo or start-up  bank,  the
     minimum total capital  ratio is 8.0 percent.  As of December 31, 1999,  the
     most  recent   notification   from  the  FDIC   categorized   the  bank  as
     well-capitalized  under the regulatory  framework.  The regulations  define
     well-capitalized  levels of total  capital,  Tier 1 and Tier 1 leverage  as
     10.0  percent,  6.0 percent  and 5.0  percent,  respectively.  There are no
     conditions or events since that notification that management  believes have
     changed the Bank's capital category.
<TABLE>
                                                                                  For Capital             To be Well-
                                                              Actual           Adequacy Puuposes          capitalized
                                                       Amount       Ratio      Amount      Ratio      Amount      Ratio
<S>                                                    <C>          <C>        <C>          <C>       <C>         <C>
As of December 31, 1999:
     Total capital
          (to risk-weighted assets)                    $ 7,799      32.31%     $ 1,931      8.00%     $ 2,414     10.00%
     Tier I capital
          (to risk-weighted assets)                    $ 7,659      38.73%       $ 966      4.00%     $ 1,448      6.00%
     Tier I capital
          (to average assets)                          $ 7,659      38.39%       $ 798      4.00%       $ 998      5.00%


As of December 31, 1998:
     Total capital
          (to risk-weighted assets)                    $ 8,607     438.98%       $ 157      8.00%       $ 196     10.00%
     Tier I capital
          (to risk-weighted assets)                    $ 8,607     438.98%        $ 78      4.00%       $ 118      6.00%
     Tier I capital
          (to average assets)                          $ 8,607     319.13%       $ 108      4.00%       $ 135      5.00%
</TABLE>
                                      A-29
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998


Note 13 - 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  subsidiary at cost plus its share of the
     undistributed  earnings  of the  subsidiary  since  inception.  The  Parent
     Company   recognizes   dividends   from  the   subsidiary  as  revenue  and
     undistributed  earnings of the  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, 1999 and 1998 (with 000s
     omitted) is as follows:
<TABLE>
                                                                                 1999            1998
<S>                                                                             <C>            <C>
Assets
Cash on deposit with correspondent bank                                         $     -        $    31
Receivable from subsidiary bank                                                      27            229
Investment in subsidiary bank                                                     7,832          8,387
                                                                                 ------         ------
Total assets                                                                    $ 7,859        $ 8,647
                                                                                =======        =======
Liabilities - Accounts payable                                                  $     -        $    40

Stockholders' Equity
Common stock                                                                      4,306          4,378
Capital surplus                                                                   4,306          4,378
Retained earnings                                                                  (753)          (149)
                                                                                  -----          -----
Total stockholders' equity                                                        7,859          8,607
                                                                                 ------          -----
Total liabilities and stockholders' equity                                      $ 7,859        $ 8,647
                                                                                =======        =======
</TABLE>
                                      A-30
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998


Note 13 - Parent-only Condensed Financial Information (Continued)

     The condensed  statement of operations for the year ended December 31, 1999
     and the period from May 18,  1998  (inception)  to December  31, 1998 (000s
     omitted) is as follows:
<TABLE>
                                                                                  1999            1998
<S>                                                                             <C>              <C>
Operating Income                                                                $    -            $  21

Operating Expenses                                                                  49               60
                                                                                ------            -----
Loss - Before income taxes and equity in undistributed
loss of subsidiary                                                                 (49)             (39)

Provision for Income Taxes                                                           -                -
                                                                                ------            -----
Loss - Before equity in undistributed loss of subsidiary                           (49)             (39)

Equity in Undistributed Loss of Subsidiary                                        (555)            (110)
                                                                                ------           ------
Net Loss                                                                        $ (604)          $ (149)
                                                                                ======           ======
</TABLE>
                                      A-31
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998


Note 13 - Parent-only Condensed Financial Information (Continued)

     The condensed  statement of cash flows for the year ended December 31, 1999
     and the period from May 18,  1998  (inception)  to December  31, 1998 (000s
     omitted) is as follows:
<TABLE>
                                                                                 1999            1998
<S>                                                                             <C>            <C>
Cash Flows from Operating Activities
     Net loss                                                                   $ (604)         $ (149)
     Adjustments to reconcile net loss to net cash from
       operating activities:
          Equity in undistributed loss of subsidiary                               555             110
          Decrease (increase) in receivable from
            subsidiary bank                                                        202            (229)
          Increase (decrease) in accounts payable                                  (40)             40
                                                                                ------           -----
               Net cash provided by (used in)
                 operating activities                                              113            (228)

Cash Flows from Investing Activities - Investment
     in common stock of bank subsidiary                                              -          (8,497)

Cash Flows from Financing Activities
     Payment for stock repurchase                                                 (144)              -
     Proceeds from related party notes payable                                       -             415
     Repayment of related party notes payable                                        -            (415)
     Net proceeds from public stock offering                                         -           8,756
                                                                                ------          ------
               Net cash provided by (used in)
                 financing activities                                             (144)          8,756
                                                                                ------          ------
Net Increase (Decrease) in Cash and Cash
     Equivalents                                                                   (31)             31

Cash and Cash Equivalents - Beginning of year                                       31               -
                                                                                ------          ------
Cash and Cash Equivalents - End of year                                         $    -          $   31
                                                                                ======          ======
</TABLE>
                                      A-32
<PAGE>
Clarkston Financial Corporation and Subsidiary
--------------------------------------------------------------------------------
                                      Notes to Consolidated Financial Statements
                                                      December 31, 1999 and 1998


Note 14 - Earnings per Share

     Earnings  (loss) per share data is the  amount of  earnings  (loss) for the
     period  available  to each  share of common  stock  outstanding  during the
     reporting period. All potential dilutive securities have been excluded from
     the computation because their effect would be antidilutive. The calculation
     of earnings  (loss) per share for the year ended  December 31, 1999 and the
     period from May 18, 1998 (inception) to December 31, 1998 is as follows:
<TABLE>
                                                                                 1999            1998
<S>                                                                             <C>             <C>
Net loss                                                                        $  (604)        $  (149)
Weighted average number of shares outstanding
     for period                                                                     941             155
Net loss per common share                                                       $ (0.64)        $ (0.96)
</TABLE>
                                      A-33
<PAGE>
                             SHAREHOLDER INFORMATION


Notice of Annual Meeting

     The Company's Annual Meeting of Shareholders  will be held at 10:00 a.m. on
May 9, 2000,  at Deer Lake  Racquet  Club,  6167  White  Lake  Road,  Clarkston,
Michigan 48346.


Transfer Agent and Registrar

     Continental  Stock  Transfer & Trust Company  serves as transfer  agent and
registrar of the  Company's  Common  Stock.  Their  address is 2 Broadway,  19th
Floor, New York, New York 10004 (telephone 212-509-4000).


Market Makers

     The Company had two market  makers at December 31, 1999:  Raymond James and
Hilliard Lyons.


                        EXECUTIVE OFFICERS AND DIRECTORS

Executive Officers:

          David T. Harrison, President and Chief Executive Officer of the
            Company and the Bank
          Bruce H. McIntyre, Secretary of the Company and the Bank
          Terry Wolf, Controller of the Bank

Directors:

          Edwin L. Adler, Director of the Company and the Bank
          Louis D. Beer, Director of the Company and the Bank
          William J. Clark, Director of the Company and the Bank
          Heather Coats, Director of the Bank
          Charles L. Fortinberry, Director of the Company and the Bank
          David T. Harrison, Director of the Company and the Bank
          Bruce H. McIntyre, Director of the Company and the Bank
          Lee McNew, Director of the Bank
          Robert A. Olsen, Director of the Company and the Bank
          Dennis Ritter, Director of the Bank
          Ken Rogers, Director of the Bank
          Ted J. Simon, Director of the Bank
          John H. Welker, Director of the Company and the Bank
<PAGE>
Exhibit 21
SUBSIDIARIES OF REGISTRANT

         Clarkston State Bank - 100% owned
         Incorporated as a Michigan Banking Corporation
         15 South Main Street
         Clarkston, Michigan 48346
<PAGE>
Exhibit 23
                          INDEPENDENT AUDITORS' CONSENT

Board of Directors
Clarkston Financial Corporation

We consent to the  incorporation by reference in the registration  statements on
Form S-8 (File No. 333-70297 and File No. 333-70299) of our report dated January
27, 2000, on our audit of the  consolidated  financial  statements  for the year
ended  December  31,  1999,  and for the period  from May 18,  1998  (inception)
through  December  31, 1998,  which report is included in this Annual  report on
form 10-KSB.

                                                  /s/ PLANTE & MORAN, LLP
March 28, 2000
Troy, Michigan