# 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, 2005

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

6600 Highland Road,
Suite 24, Waterford, Michigan 48327(Address of principal
executive offices) (Zip Code)

Registrants
telephone number, including area code: (248) 922-6940

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 is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [__]

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 Form 10-KSB. [X]

Indicate by checkmark
 whether the  registrant is a shell  company (as defined in Rule 12b-2 of the Exchange
 Act). Yes [__]      No [X]

The registrants revenues for
2005 were $11.9 million. 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 $14.30 as
of March 15, 2006, was $17.8 million (common stock, no par value). As of March 15, 2006,
there were outstanding 1,245,722 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 2, 2006, are incorporated
by reference into Part II and Part III of this Report.

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# PART I

# ITEM 1: Business

# The Company

Clarkston
Financial Corporation 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 and
55.1% of the outstanding common stock of Huron Valley State Bank. As of December 31, 2005,
we had total assets of $195.6 million, total deposits of $161.3 million, approximately
8,200 deposit accounts and shareholders equity of $15.1 million.

Clarkston
State Bank is organized as a Michigan chartered bank with depository accounts insured by
the Federal Deposit Insurance Corporation (the FDIC). Clarkston State
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. Clarkston State Bank provides a full range of commercial and
consumer banking services for small to medium size businesses as well as individuals.
Clarkston State Banks lending strategy is to focus on commercial, consumer and
residential real estate lending. Clarkston State Bank offers a broad array of deposit
products and may also provide customers with trust services through third-party service
providers. As of December 31, 2005, Clarkston State Bank had total assets of $181.3
million, total deposits of $156.7 million, approximately 7,900 deposit accounts and
shareholders equity of $13.1 million.

Huron
Valley State Bank is also organized as a Michigan chartered bank with depository accounts
insured by the FDIC. Huron Valley State Banks initial primary service area is the
Village of Milford, Milford Township, Commerce Township, White Lake Township, Highland
Township and Hartland Township in Oakland County, Michigan. Huron Valley State Bank
provides a full range of commercial and consumer banking services for small to medium size
businesses as well as individuals. Huron Valley State Banks lending strategy is to
focus on commercial, consumer and residential real estate lending. Huron Valley State Bank
offers a broad array of deposit products and may also provide customers with trust
services through third-party service providers. As of December 31, 2005, Huron Valley
State Bank had total assets of $13.5 million, total deposits of $5.7 million,
approximately 300 deposit accounts and shareholders equity of $7.7 million.

Our
main office is located at 6600 Highland Road, Suite 24, Waterford, Michigan 48327, and our
telephone number is 248-922-6940. Unless the context clearly indicates otherwise,
financial information and other references to us include Clarkston State Bank and Huron
Valley State 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. We generally look 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
we take a progressive and competitive approach to lending, it stresses high quality in its
loans. Because of our local nature, management believes that quality control should be
achievable while still providing prompt and personal service. In addition, a loan
committee of the Board of Directors of Clarkston State Bank and Huron Valley State Bank also reviews larger loans for
prior approval when the loan request exceeds the established limits for the senior
officers.

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Commercial
real estate lending involves more risk than residential lending, because loan balances are
greater and repayment is dependent upon the borrowers operation. We attempt to
minimize risk associated with these transactions by generally limiting its exposure to
owner operated properties of well-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 our legal lending limit; and (ii)
avoiding certain types of commercial real estate financings.

Residential
Real Estate Mortgage Loans. We originate residential mortgage loans which
are generally underwritten to secondary market standards and sold to investors. These
loans are sold on a servicing released basis. Moreover, from time to time management may
hold mortgage loans in its portfolio based on changing market and economic conditions.
This policy is subject to review by management based on the aforementioned conditions. In
addition to mortgage loans we also offer equity loans.

Personal
Loans and Credit. We make 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. We expect to retain
substantially all of such loans.

Consumer
loans generally have shorter terms and higher interest rates than residential mortgage
loans and usually involve more credit risk than mortgage loans because of the type and
nature of the collateral. While we do not use a formal credit scoring system, we
underwrite our 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. We believe 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 our business, we make loans to individuals and
businesses located within our market area. We have 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. We seek 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). Our internal
limitations follow those limits and in certain cases are more restrictive than those
required by the regulators.

Deposit
Services. We offer 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. We solicit these accounts
from individuals, businesses, associations, financial institutions and government
authorities.

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Other
Services. We may establish relationships with correspondent banks and other
independent financial institutions to provide other services requested by its customers,
including loan participations where the requested loan amounts exceed our policies or
legal lending limits. While management believes that our personalized service approach
benefits from customer visits we have also recognized through customer surveys that
personal computer banking is a service for which more customers would prefer. As a result,
management introduced personal computer banking in 2004 at Clarkston State Bank. This will
extend our product offerings and further complement our telephone banking service which
began in April 2000 at Clarkston State Bank. Huron Valley State Bank also offers personal
computer banking and telephone banking services.

# Competition

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

# Environmental Matters

We
do not believe that existing environmental regulations will have any material effect upon
our capital expenditures, earnings, and competitive position.

# Employees

As
of December 31, 2005, we had 41 full-time and 18 part-time employees. We have assembled a
staff of experienced, dedicated professionals whose goal is to provide outstanding
service. None of our employees are represented by collective bargaining agents.

# Selected Statistical Data

Selected
Statistical Data for Clarkston Financial Corporation is presented for 2005, 2004 and 2003
in Managements Discussion and Analysis of Financial Condition and Results of
Operations.

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# SUPERVISION AND
REGULATION

The
following is a summary of certain statutes and regulations affecting Clarkston Financial
Corporation,  Clarkston State Bank and Huron Valley State 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 Clarkston Financial Corporation, Clarkston State Bank, and Huron Valley State Bank, and the business of
Clarkston Financial Corporation,  Clarkston State Bank and Huron Valley State Bank.

# General

Financial
institutions and their holding companies are extensively regulated under federal and state
law. Consequently, our growth and earnings performance 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 Office of Financial and Insurance Services, Department of
Financial Institutions (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 us and our 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 our banks, and the public, rather than our shareholders.

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

# Clarkston Financial
Corporation

General.
          Clarkston Financial Corporation has not elected to be a financial holding
          company within the meaning of the Gramm-Leach-Bliley Act. Clarkston Financial
          Corporation 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.

Under
applicable laws, regulations and policies, the Corporation is expected to act as a source
of financial strength to each subsidiary bank and to commit resources to support each
subsidiary bank. Any insured depository institution owned by the Corporation may be
assessed for losses incurred by the Federal Deposit Insurance Corporation (the
FDIC) in connection with assistance provided to, or the failure of, any other
insured depository institution owned by the Corporation.

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Investments
and Activities. In general, any direct or indirect acquisition by us of any
voting shares of any bank which would result in our direct or indirect ownership or
control of more than 5% of any class of voting shares of such bank, and any merger or
consolidation between us and 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 ours 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.

At
some point in the future we may elect to become a financial holding company. Financial
holding companies may engage in various lending, advisory, insurance and insurance
underwriting, securities underwriting, dealing and market making, and merchant banking
activities (as well as those activities previously approved for bank holding companies by
the Federal Reserve Board) together with such other activities as may be determined by the
Federal Reserve Board (in coordination with other regulatory authorities) to be financial
in nature, incidental to any such financial activity, or complimentary to any such
financial activity, and which do not pose a substantial risk to the safety or soundness of
depository institutions or the financial system generally. In order to maintain the
benefits and flexibility of being a financial holding company, each subsidiary depository
institutions must continue to be well-capitalized and well-managed
under applicable regulatory standards and each subsidiary depository institution must
maintain at least a satisfactory or above Community Reinvestment Act rating.

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 securities 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 us of any specific minimum Tier 1 Capital leverage ratio applicable to
us.

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Dividends.
          Clarkston Financial Corporation is a corporation separate and distinct from
          Clarkston State Bank and Huron Valley State Bank. Most of our revenues will be
          received in the form of dividends, if any, paid by Clarkston State Bank
          and Huron Valley State Bank. Thus, our ability to pay dividends to our
          shareholders will indirectly be limited by statutory restrictions on our
          banks ability to pay dividends, see Supervision and Regulation
           the Banks  Dividends. Further, the Federal Reserve Board has
          issued a policy statement on the payment of cash dividends by bank 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 or 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
          Clarkston State Bank and Huron Valley State 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 us 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 distribution a corporation, such as us, 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. We are not authorized to issue preferred stock and have
no current plans to seek to authorize any preferred stock.

# Clarkston State Bank and
Huron Valley State Bank

General.
          Clarkston State Bank and Huron Valley State Bank are Michigan banking
          corporations and their deposit accounts are insured by the Bank Insurance Fund
          (the BIF) of the FDIC. As BIF-insured Michigan chartered banks, they
          are 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 Clarkston State Bank and Huron Valley State Bank
          and their respective 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 FDIC-insured institutions, Clarkston State Bank and Huron
Valley State Bank are 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.

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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 during 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,
Clarkston State Bank and Huron Valley State Bank, as members of the BIF, are 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 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 our banks: 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 banks formation, each of our banks 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:

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|                               | TotalRisk-BasedCapital Ratio | Tier 1Risk-BasedCapital Ratio | Leverage Ratio
|------------------------------ | ---------------------------- | ----------------------------- | --------------
|Well capitalized               |                              | 10% or above                  |               
|Adequately capitalized         |                              | 8% or above                   |               
|Undercapitalized               |                              | Less than 8%                  |               
|Significantly undercapitalized |                              | Less than 6%                  |               
|Critically undercapitalized    |                              | --                            |               

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 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, our banks are restricted as to the maximum amount of
          dividends it may pay on its common stock. Our banks 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
          our banks have a surplus less than the amount of its capital, they may not
          declare or pay any dividend until 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. Our banks 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. Our banks 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. Our banks are subject to certain restrictions imposed by the
Federal Reserve Act on any extensions of credit to us or our subsidiaries, on investments
in our stock or securities of our subsidiaries and the acceptance of our stock or
securities of our subsidiaries as collateral for loans. Certain limitations and reporting
requirements are also placed on extensions of credit by our bank to its directors and
officers, to our directors and officers and our subsidiaries, to our principal
shareholders, 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 our company or one of our subsidiaries
or a principal shareholder of the Company may obtain credit from banks with which our
banks maintain a correspondent relationship.

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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 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 our banks.

Consumer
Protection Laws. Our banks business includes making a variety of
types of loans to individuals. In making these loans, we are subject to State usury and
regulatory laws and to various federal statutes, including the privacy of consumer
financial information provisions of the Gramm-Leach-Bliley Act and regulations promulgated
thereunder, 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 our bank, including the maintenance and
operation of escrow accounts and the transfer of mortgage loan servicing. In receiving
deposits, our banks are 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 our banks and their respective directors and officers.

Branching
Authority. Michigan banks, such as our banks, 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).

10

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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 the assets) of an FDIC-insured bank, savings
bank or savings and loan 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.

11

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# Risk Factors.

You
should carefully consider the following risk factors, together with the other information
provided in this Annual Report on Form 10-KSB.

# Changes in economic
conditions or interest rates may negatively affect our earnings, capital and liquidity.

The
results of operations for financial institutions, including our banks, may be materially
and adversely affected by changes in prevailing local and national economic conditions,
including declines in real estate market values, rapid increases or decreases in interest
rates and changes in the monetary and fiscal policies of the federal government. Our
profitability is heavily influenced by the spread between the interest rates we earn on
investments and loans and the interest rates we pay on deposits and other interest-bearing
liabilities. Substantially all our loans are to businesses and individuals in southeastern
Michigan and any decline in the economy of this area could adversely affect us. Like most
banking institutions, our net interest spread and margin will be affected by general
economic conditions and other factors that influence market interest rates and our ability
to respond to changes in such rates. At any given time, our assets and liabilities may be
such that they are affected differently by a given change in interest rates.

# Our credit losses
could increase and our allowance for loan losses may not be adequate to cover actual loan losses.

The
risk of nonpayment of loans is inherent in all lending activities and nonpayment, if it
occurs, may have a material adverse affect on our earnings and overall financial condition
as well as the value of our common stock. We make various assumptions and judgments about
the collectibility of our loan portfolio and provide an allowance for potential losses
based on a number of factors. If our assumptions are wrong, our allowance for loan and
lease losses may not be sufficient to cover our losses, thereby having an adverse affect
on our operating results, and may cause us to increase the allowance in the future. The
actual amount of future provisions for loan losses cannot now be determined and may exceed
the amounts of past provisions. Additionally, federal banking regulators, as an integral
part of their supervisory function, periodically review our allowance for credit losses.
These regulatory agencies may require us to increase our provision for credit losses or to
recognize further loan or lease charge-offs based upon their judgments, which may be
different from ours. Any increase in the allowance for credit losses could have a negative
effect on our net income, financial condition and results of operations.

# Our newest
subsidiary, Huron Valley State Bank, has limited operating history and is expected to
sustain operating  losses.

This new Bank has limited operating
history. Accordingly, no assurance can be given that the financial and business forecasts
of the Bank will be met. The prospects of this institution must be evaluated in light of
the risks, expenses and difficulties frequently encountered by companies in the early
stages of development. In order to be successful, the Bank needs to build a client base;
develop and retain customer loyalty; respond to competitive developments; attract, retain
and motivate qualified management and employees; and provide high-quality and personal
service. There is no guarantee that the Bank will be able to accomplish these tasks.

Additionally, in order for the Bank
to be profitable, we will need, among other things, to attract clients to deposit and
borrow money. This will take time. We expect to report operating losses for at least 15
months. Although we believe we will be profitable, we cannot guarantee that we will ever
operate profitably. If the Bank does not reach profitability and recover its accumulated
operating losses, we could sustain significant losses and/or be required to infuse
additional capital.

12

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# Our business is
subject to various lending risks depending on the nature of the borrowers business,
its cashflow and our collateral.

Repayment
of our commercial loans is often dependent on cash flow of the borrower, which may be
unpredictable, and collateral securing these loans may fluctuate in value.Our
commercial loans are primarily made based on the cash flow of the borrower and secondarily
on the underlying collateral provided by the borrower. Most often, this collateral is
accounts receivable, inventory, equipment or real estate. In the case of loans secured by
accounts receivable, the availability of funds for the repayment of these loans may be
substantially dependent on the ability of the borrower to collect amounts due from its
customers. Other collateral securing loans may depreciate over time, may be difficult to
appraise and may fluctuate in value based on the success of the business.

Our
commercial real estate loans involve higher principal amounts than other loans, and
repayment of these loans may be dependent on factors outside our control or the control of
our borrowers. Commercial real estate lending typically involves higher loan principal
amounts, and the repayment of these loans generally is dependent, in large part, on
sufficient income from the properties securing the loans to cover operating expenses and
debt service. Because payments on loans secured by commercial real estate often depend
upon the successful operating and management of the properties, repayment of such loans
may be affected by factors outside the borrowers control, such as adverse conditions
in the real estate market or the economy or changes in government regulation. If the cash
flow from the project is reduced, the borrowers ability to repay the loan and the
value of the security for the loan may be impaired.

Our
construction loans are based upon estimates of costs to construct and value associated
with the completed project.These estimates may be inaccurate. Because of the
uncertainties inherent in estimating construction costs, as well as the market value of
the completed project, it is relatively difficult to evaluate accurately the total funds
required to complete a project and the related loan-to-value ratio. As a result,
construction loans often involve the disbursement of substantial funds with repayment
dependent, in part, on the success of the ultimate project and the ability of the borrower
to sell or lease the property, rather than the ability of the borrower or guarantor to
repay principal and interest. Delays in completing the project may arise from labor
problems, material shortages and other unpredictable contingencies. If the estimate of the
cash of construction is inaccurate, we may be required to advance additional funds to
complete construction. If our appraisal of the value of the completed project proves to be
overstated, we may have inadequate security for the repayment of the loan upon completion
of the project.

Our
consumer loans generally have a higher risk of default than our other loans. Consumer
loans entail greater risk than our other loans, particularly in the case of consumer loans
that are unsecured or secured by rapidly depreciating assets. In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of damage, loss or depreciation. The
remaining deficiency often does not warrant further substantial collection efforts against
the borrower beyond obtaining a deficiency judgment. In addition, consumer loan
collections are dependent on the borrowers continuing financial stability, and thus,
are more likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy, all of which increase when the economy is weak. Furthermore, the application
of various Federal and state laws, including Federal and state bankruptcy and insolvency
laws, may limit the amount that can be recovered on such loans.

13

---



# We may experience
difficulties in managing our growth.

To
sustain our continued growth, we require additional capital to fund our expanding lending
activities. As part of our strategy to increase capital, we intend to open additional
branches. New branches often experience a period of unprofitability due to the impact of
overhead expenses and the start-up phase of generating loans and deposits. To the extent
that we continue to open additional branches, we may experience the effects of higher
operating expenses relative to operating income from the new operations, which may have an
adverse affect on our levels of net income, return on average equity and return on average
assets.

In
addition, we may acquire banks and related businesses that we believe provide a strategic
fit with our business. To the extent that we grow through acquisitions, we cannot assure
you that we will be able to adequately or profitably manage such growth. Acquiring other
banks and businesses involves risks commonly associated with acquisitions.

# We rely heavily on
our management and other key personnel, and the loss of any of them may adversely effect
our operations.

We
are and will continue to be dependent upon the services of our management team, including
our Chief Executive Officer and Chief Operating Officer, the Presidents of our Banks, and
our other senior managers and commercial lenders. Losing one or more key members of the
management team could adversely affect our operations. We do not maintain key man life
insurance on any of our officers or directors.

# Our future success is
dependent on our ability to compete effectively in the highly competitive banking
industry.

We
face substantial competition in all phases of our operations from a variety of different
competitors. Our future growth and success will depend on our ability to compete
effectively in this highly competitive environment. We compete for deposits, loans and
other financial services with numerous Michigan-based and out-of-state banks, thrifts,
credit unions and other financial institutions as well as other entities which provide
financial services. Some of the financial institutions and financial services
organizations with which we compete are not subject to the same degree of regulation as we
are. Most of our competitors have been in business for many years, have established
customer bases, are larger, and have substantially higher lending limits than we do. The
primary competitors in our market area include national, regional and local banks, credit
unions, and other financial intermediaries. The financial services industry is also likely
to become more competitive as further technological advances enable more companies to
provide financial services. These technological advances may diminish the importance of
depository institutions and other financial intermediaries in the transfer of funds
between parties.

# We are subject to
significant government regulation, and any regulatory changes may adversely affect us.

The
banking industry is heavily regulated under both federal and state law. These regulations
are primarily intended to protect customers, not our creditors or shareholders. As a bank
holding company, we are also subject to extensive regulation by the Federal Reserve, in
addition to other regulatory and self-regulatory organizations. Our ability to establish
new facilities or make acquisitions is conditioned upon the receipt of the required
regulatory approvals from these organizations. Regulations affecting banks and financial
services companies undergo continuous change, and we cannot predict the ultimate effect of
such changes, which could have a material adverse effect on our profitability or financial
condition.

14

---



# We continually
encounter technological change, and we may have fewer resources than our competitors to
continue to invest in technological improvements.

The
banking industry is undergoing rapid technological changes with frequent introductions of
new technology-driven products and services. In addition to better serving customers, the
effective use of technology increases efficiency and enables financial institutions to
reduce costs. Our future success will depend, in part, on our ability to address the needs
of our customers by using technology to provide products and services that will satisfy
customer demands for convenience as well as to create additional efficiencies in our
operations. Many of our competitors have substantially greater resources to invest in
technological improvements. There can be no assurance that we will be able to effectively
implement new technology-driven products and services or be successful in marketing such
products and services to our customers.

# Our articles of
incorporation and by-laws and Michigan laws contain certain provisions that could make a
takeover more difficult.

Our
articles of incorporation and by-laws, and the laws of Michigan, include provisions which
are designed to provide our board of directors with time to consider whether a hostile
takeover offer is in our best interest and the best interests of our shareholders. These
provisions, however, could discourage potential acquisition proposals and could delay or
prevent a change in control. The provisions also could diminish the opportunities for a
holder of our common stock to participate in tender offers, including tender offers at a
price above the then-current price for our common stock. These provisions could also
prevent transactions in which our shareholders might otherwise receive a premium for their
shares over then current market prices, and may limit the ability of our shareholders to
approve transactions that they may deem to be in their best interests.

The
Michigan Business Corporation Act contains provisions intended to protect shareholders and
prohibit or discourage certain types of hostile takeover activities. In addition to these
provisions and the provisions of our articles of incorporation and by-laws, Federal law
requires the Federal Reserve Boards approval prior to acquisition of
control of a bank holding company. All of these provisions may have the effect
of delaying or preventing a change in control at the company level without action by our
shareholders, and therefore, could adversely affect the price of our common stock.

# Our ability to pay
dividends is limited by law and contract.

We
are a holding company and substantially all of our assets are held by our banks. Our
ability to make dividend payments to our shareholders will depend primarily on
available cash resources at the holding company and dividends from our banks. Dividend
payments or extensions of credit from our bank are subject to regulatory limitations,
generally based on capital levels and current and retained earnings, imposed by regulatory
agencies with authority over our bank. The ability of our banks to pay dividends is also
subject to its profitability, financial condition, capital expenditures and other cash
flow requirements. We also are prohibited from paying dividends on our common stock if the
required payments on our subordinated debentures have not been made. We cannot assure you
that our banks will be able to pay dividends to us in the future.

15

---



# The market price for
our common stock fluctuates.

The
market price for our common stock has fluctuated, ranging between $15.25 and $21.00 for
2005. The overall market and the price of our common stock may continue to fluctuate.
There may be a significant impact on the market price for our common stock due to, among
other things:

| |  | Variations
in our anticipated or actual operating results or the results of our competitors;
| | - | --------------------------------------------------------------------------------------------

| |  | Changes
in investorsor analysts perceptions of the risks and conditions of our
business;
| | - | ------------------------------------------------------------------------------------------

| |  | The
size of the public float of our common stock;
| | - | -------------------------------------------------

| |  | Regulatory
developments;
| | - | ------------------------

| |  | Market
conditions; and
| | - | ----------------------

| |  | General
economic conditions.
| | - | ----------------------------

Additionally,
the average daily trading volume for our common stock as reported on the OTC Bulletin
Board was 766 shares during 2005, with daily volume ranging from a low of 0 shares to a
high of 14,500 shares. There can be no assurance that a more active or consistent trading
market in our common stock will develop. As a result, relatively small trades could have a
significant impact on the price of our common stock

16

---



# ITEM 2: Description of
Property.

In
June 2002, Clarkston State Bank purchased its building located at 15 South Main Street in
downtown Clarkston, Michigan from an entity owned by the directors at a price
representative of fair value of $650,000 for use as the banks main office and
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
an ATM machine. We believe that this space will be adequate for our present needs.

Clarkston
State Bank leases space for our branch offices in Farmer Jacks grocery stores at
6555 Sashabaw Road and 7121 Dixie Highway, both in Clarkston, Michigan, at a rental rate
of $3,000 per month under leases which run until July 2010 and October 2006, respectively.

On
June 15, 2001, Clarkston State Bank opened its Waterford branch office on M-59 adjacent to
the Oakland Pontiac Airport. On December 13, 2004 the bank opened its fifth full service
branch office at 5800 S. Main Street in Clarkston, Michigan. Clarkston State Bank leases
the land on which the branch is located under a lease agreement with a 25 year term
requiring monthly payments of $5,250 through October of 2008, with the monthly payment
amount adjusting every 5 years thereafter according to changes in the Consumer Price
Index.

Clarkston
Financial Corporation operations are housed in the same building as Clarkston State
Bank's Waterford Branch.  On March 9, 2006, the building was purchased from an LLC of
which the Chariman holds an equity interest.  The purchase price of $900,000 is
representative of the fair value of the building.  During 2005 space was leased in the
same building for Clarkston Financial Corporation's opoerations.

Huron
Valley State Bank leases space for its main office 525 N. Main Street, in Milford,
Michigan, at a rental rate of $3,400 per month under a lease which runs until August 2009.

We
believe our facilities are well-maintained and adequately insured.

# ITEM 3: Legal
Proceedings.

As
the date hereof, there were no pending material legal proceedings.

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

No
matters were submitted during the fourth quarter of 2005 to a vote of our stockholders.

17

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# PART II

|ITEM 5: | Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases
of Equity  Securities.
|------- | ----------------------------------------------------------------------------------------------------------------

Our
common stock has traded in the over-the-counter market since the completion of our 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:

|               | High | Low
|-------------- | ---- | ---
|2005           |      |    
|First Quarter  |      | $21
|Second Quarter |      | $20
|Third Quarter  |      | $18
|Fourth Quarter |      | $17
|               |     
|2004           |     
|First Quarter  |      | $20
|Second Quarter |      | $20
|Third Quarter  |      | $21
|Fourth Quarter |      | $20

These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions. On March 15, 2006, there were approximately
309 owners of record and approximately 597 additional beneficial owners of our common
stock.

No
cash dividends have been declared to date on our common stock. We expect that all
earnings, if any, will be retained to finance our growth and that no cash dividends will
be paid for the foreseeable future. If and when dividends are declared, we will be
dependent upon dividends paid to us 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 our definitive
Proxy Statement with respect to our May 2, 2006 Annual Shareholders Meeting 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 our definitive Proxy Statement with respect to our May 2, 2006 Annual
Shareholders Meeting, 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 on Accounting and Financial
Disclosure.
|------- | -------------------------------------------------------------------------------------

There
have been no disagreements with our independent public accountants.

18

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# ITEM 8A: Controls and
Procedures.

| | (a) | Evaluation of Disclosure Controls and Procedures. The companys
               Chief Executive Officer and Chief Financial Officer, after evaluating the
               effectiveness of the companys disclosure controls and procedures (as
               defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
               period covered by this Annual Report have concluded that as of the end of the
               period covered by this Annual Report, the companys disclosure controls and
               procedures were adequate and effective to ensure that material information
               relating to the company would be made known to them by others within the
               company, particularly during the period in which this Form 10-KSB Annual Report
               was being prepared.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Changes in Internal Controls. There were no significant changes in the
               companys internal controls over financial reporting during the fiscal
               quarter ended December 31, 2005, that have materially affected, or are
               reasonably likely to materially affect, the companys internal control over
               financial reporting.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 8B: Other
Information

| | None.
| | -----

19

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# PART III

|ITEM 9: | Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
16(a) ofthe Exchange Act.
|------- | ---------------------------------------------------------------------------------------------------------------

The
information set forth under the caption Information About Directors of our
definitive Proxy Statement with respect to our May 2, 2006 Annual Shareholders Meeting and
the information within that section is hereby incorporated by reference. There are no
family relationships between or among the directors and executive officers. There are no
arrangements or understandings between or among the executive officers pursuant to which
any of them was named an officer.

Our
common stock is not registered under the Securities Exchange Act of 1934, and therefore
our 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.

We
have adopted a Senior Officer Code of Ethics. A copy of our Senior Officer Code of Ethics
is available upon request by writing to the Chief Financial Officer, Clarkston Financial
Corporation, 6600 Highland Road, Suite 24, Waterford, Michigan 48327.

|ITEM 10: | Executive Compensation.
|-------- | -----------------------

Information
relating to compensation of our executive officers and directors is contained under the
captions Compensation of Directors and Executive Compensation, in
our definitive Proxy Statement with respect to our May 2, 2006 Annual Shareholders Meeting
and the information within those sections is incorporated herein by reference.

20

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|ITEM 11: | Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|-------- | -----------------------------------------------------------------------------------------------

Information
relating to security ownership of certain beneficial owners and management is contained
under the captions Security Ownership of Management, Voting Securities
and Principal Holders Thereof and Information About Directors in our
definitive Proxy Statement with respect to our May 2, 2006 Annual Shareholders Meeting and
the information within those sections is incorporated herein by reference. The following
table sets forth certain information regarding the Companys equity compensation
plans as of December 31, 2005.

|                                     | Equity Compensation Plan Information (1)
|------------------------------------ | ----------------------------------------
|
|Equity compensation                  |                                         
|plans approved by   security holders |                                         
|Equity compensation                  |                                         
|plans not approved                   |                                         
|by security holders                  |                                         
|                                     |                                         
|Total                                |                                         

(1)    
          Does not include options to purchase Huron Valley State Bank common stock under
          the Huron Valley State Bank Stock Compensation Plan. (2)    
We had not granted
          warrants or rights applicable to this chart.

|ITEM 12: | Certain Relationships and Related Transactions.
|-------- | -----------------------------------------------

Information
relating to certain relationships and related transactions is contained under the caption
Transactions Involving Management in our definitive Proxy Statement with
respect to our May 2, 2006 Annual Shareholders Meeting and the information within that
section is incorporated herein by reference.

|ITEM 13: | Exhibits and Financial Statements.
|-------- | ----------------------------------

| | Financial
Statements.
| | ---------------------

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

| | Report of Independent
Registered Public Accounting FirmConsolidated Balance Sheets as of
December 31, 2005 and 2003Consolidated
Statements of Operations for the year ended December 31, 2005, 2004 and 2003 Consolidated
Statements of Changes in Stockholders Equity for the year ended December
31, 2005, 2004 and 2003
Consolidated
Statement of Cash Flows for the year ended December 31, 2005, 2004 and 2003 Notes to
Consolidated Financial Statements
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

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| | 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 James W. Distelrath,
Clarkston Financial Corporation, 6600 Highland Road, Suite 24, Waterford, Michigan 48327.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 14: | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

Information
relating to principal accountant fees and services is contained under the caption
Principal Accounting Fees and Services in our definitive Proxy Statement with
respect to our May 2, 2006 Annual Shareholders Meeting and the information within that
section is incorporated herein by reference.

22

---



# 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 23, 2006.

| |  | CLARKSTON FINANCIAL CORPORATIONBy: /s/ Edwin L. Adler      
      Edwin L. Adler
      Chief Executive Officer (Principal
      Executive Officer)By: /s/ James W. Distelrath      
      James W. Distelrath
      Chief Financial Officer (Principal Financial
      and Accounting Officer)
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed
below on March 23, 2006, 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 J. Grant Smith and James W. Distelrath, and each of them severally, as his
attorney-in-fact, to sign in his or her name and on his or her 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/ Edwin L. Adler
Edwin L. Adler, Chairman of the Board and a Director
/s/ Louis D. Beer
Louis D. Beer, Director
/s/ William J. Clark
William J. Clark, Director
/s/ Thomas E. Kimble
Thomas E. Kimble, Director
/s/ Mark Murvay
Mark Murvay, Director
/s/ Bruce H. McIntyre
Bruce H. McIntyre, Secretary and a Director
/s/ John H. Welker
John H. Welker, Director |  | March 23, 2006
March 23, 2006
March 23, 2006March 23, 2006March 23, 2006March 23, 2006March 23, 2006
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------

23

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# EXHIBIT INDEX

| | SequentiallyNumberedPage
| | ------------------------

# Exhibit Number and
Description

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

24

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|10.6 | Form
of  Management  Continuity  Agreement  is  incorporated  by  reference  to
                  Exhibit 10.6 to the Annual Report on Form 10-K for the year ended
 December 31,                   2003.  Clarkston Financial  Corporation has entered into
Management  Continuity                   Agreements  with Ms.  Dawn  Horner  and Mr.  J.
 Grant  Smith.  The  Agreements                   provide for a  severance  benefit
 equal to one year's  salary and bonus in the                   case of Mr. Smith and two
year's salary and bonus in the case of Ms. Horner.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 | Form
of Restricted Stock Agreement under the Clarkston Financial Corporation Stock
Compensation Plan, incorporated by reference to Exhibit 10.7 to the Clarkston Financial
Corporation Annual Report on form 10-KSB for the year ended December 31, 2004.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 | Clarkston
Financial Corporation Employee Stock Purchase Plan, incorporated by reference to Exhibit
10.8 to the Clarkston Financial Corporation Annual Report on form 10-KSB for the year
ended December 31, 2004.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 | Bank
 Servicing  Agreement  dated  April 29,  2005,  by and  between  Clarkston
                  Financial Corporation and Huron Valley State Bank.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 | Huron
Valley State Bank Stock Compensation Plan.
|----- | ------------------------------------------------

|10.11 | Form
of Huron Valley State Bank Stock Option Agreement.
|----- | -------------------------------------------------------

|10.12 | Line
of Credit Agreement between Clarkston Financial Corporation and JPMorgan Chase dated
December 19, 2005.
|----- | ------------------------------------------------------------------------------------------------------------

|13 | Appendix
A of the Proxy Statement to shareholders for the May 2, 2006, shareholders meeting. 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 PLLC, independent registered public accounting firm.
|-- | ------------------------------------------------------------------------------

|24 | Power
of  Attorney  (included  on the  signature  page on page 18 of the Annual
                  Report on Form 10-KSB).
|-- | -------------------------------------------------------------------------------------------------------------------------

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

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

|32.1 | Certificate
of the Chief Executive Officer of Clarkston Financial Corporation pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------

|32.2 | Certificate
of the Chief Financial Officer of Clarkston Financial Corporation pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------

25

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