Clarkston Financial Corp. Reports Q2 and 6-Month Results

Liquidity Bolstered by $3.6 million from Subsidiary Bank Sale

CLARKSTON, Mich., July 22 /PRNewswire-FirstCall/ -- Clarkston Financial
Corporation (OTC Bulletin Board: CKFC), the holding company for Clarkston
State Bank, today reported operating results for the second quarter and first
half ended June 30, 2008, along with the sale of its interest in Huron Valley
State Bank.
Q2 Results
Total revenues -- net interest income plus noninterest income -- for the
second quarter of 2008 were $1,358,000, compared with total revenues of
$1,778,000 for Q2-2007. Net interest income was off 24%, reflecting an 8%
reduction in total loans outstanding, an increase in nonperforming loans, and
margin compression, which reduced the net interest margin (NIM) to 2.91% from
3.19% for Q2 2007. NIM increased 29 basis points from Q1 2008. Noninterest
income was off 23%, chiefly from lower bank service charges and fees and
reduced gains from the sale of loans.
Results include a loan loss provision of $450,000, compared with a
provision of $967,000 for Q2-2008 and $57,000 for Q2-2007. Total nonperforming
loans stood at $3,749,000, at the close of Q2-2008 (3.2% of total loans),
materially improved from nonperforming loans of $5,752,000 at the close of
Q1-2008, but up from $2,329,000 at the close of Q2-2007.
The net loss was $645,000, or ($0.51) per share, compared with Q2-2007's
net income of $46,000, or $0.04 per share.
6-Month Results
At midyear, total revenues were $4,974,000, up 40% from revenues of
$3,556,000 during the first six months of 2007. Net interest income was off
25% as a result of reduced loans outstanding, higher nonperforming loans and
margin pressure. Noninterest income, aided by the onetime gain of $2,200,000
from the retirement of trust-preferred securities, was up four fold. Absent
the onetime gain, noninterest income was generally flat.
During the quarter, Clarkston State Bank (CSB) entered into an Order to
Cease & Desist with the Federal Deposit Insurance Corporation (FDIC) and the
Michigan Office of Financial and Insurance Regulation (OFIR). The order
requires the Bank to correct certain regulatory deficiencies and take certain
actions with respect to, among other things, board oversight, management
evaluation, asset quality, earnings, capitalization, and loan-portfolio
analysis.
The order does not restrict the Bank from conducting business and the Bank
will continue to serve its customers in all areas, including making loans,
establishing lines of credit, accepting deposits and processing banking
transactions. All customer deposits remain fully insured to FDIC limits.
J. Grant Smith, CEO, said, "The order dovetails with many of the proactive
steps that our board and management team have taken as part of our turn-around
plan. We are seeing positive results: Net interest margin has significantly
increased. Core deposits have increased and nonperforming assets have been
reduced. In addition, over $2 million in debt has been eliminated. New loan
policies and procedures are in place and a thorough analysis of our core
operating disciplines has been conducted.
"The local economy continues to be a challenge but we identified the
beginning of this problem several years ago and have been working diligently
to provide financial strength to our foundation in order to navigate through
this environment. In addition, the Bank's risk profile is better than some of
our peers as the Bank does not have a sub-prime mortgage-lending program.
Last, we are working with our regulatory partners with whom we have a great
relationship to further enhance the Bank's operations.
"In the nine and a half years since we opened our first branch, Clarkston
State Bank has built a loyal customer base and a strong team of knowledgeable
banking professionals. We are committed to returning Clarkston Financial Corp.
to profitability."
Subsequent to the close of the quarter, and in a positive move aimed at
bolstering the Bank's liquidity and capital position, Clarkston Financial
Corp. completed the sale of its majority interest in Huron Valley State Bank
(OTC Bulletin Board: HVLM), a subsidiary bank, to a group of private
investors, including two directors of Clarkston Financial Corp. and Huron
Valley State Bank. The sale comprised 452,400 shares and grossed $3,600,000.
Proceeds from the sale will add significant liquidity to Clarkston Financial
Corp. and Clarkston State Bank.
Mr. Smith noted that the sale was a "win-win" for both sides of the
transaction. Clarkston Financial Corp. gain much needed capital and Huron
Valley State Bank becomes 100% owned and controlled by Milford-area principals
in the true spirit of a community bank.
Edwin L. Adler, Board Chairman, added, "Businesses in general and
community banks in particular have been hard hit by Michigan's half-decade
downturn, difficult business conditions and depressed real estate markets.
Clarkston State Bank's operating results mirror those of many of our peer
banks, which are also struggling with high loan-default rates, eroded
loan-collateral values, and painfully high loan-loss provisioning, which
weighs heavily on earnings. We are fortunate to have a great team in place, a
CEO with several years of regulatory and turn-around experience, and a
practical plan to return the Bank to profitability and restore our shareprice
to a reasonable valuation. The additional liquidity and capital from the sale
of the Huron Valley State Bank shares, have given us a new level of confidence
in our turn-around plan and future."
Clarkston Financial Corporation is the holding company for Clarkston State
Bank, which opened in January 1999 and operates four branches and one loan
center in Clarkston, Waterford, and Independence Township.
Safe Harbor. This news release contains comments or information that
constitute forward-looking statements within the context of the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve significant risks and uncertainties.
Actual results may differ materially from the results discussed in the
forward-looking statements. Factors that may cause such a difference include:
changes in interest rates and interest-rate relationships; demand for products
and services; the degree of competition by traditional and non-traditional
competitors; changes in banking regulations; changes in tax laws; changes in
prices, levies, and assessments; the impact of technological advances;
governmental and regulatory policy changes; the outcomes of contingencies;
trends in customer behavior and their ability to repay loans; and changes in
the national and local economy. Clarkston Financial Corp. assumes no
responsibility to update forward-looking statements.

CLARKSTON FINANCIAL CORPORATION
Historical Balance Sheet Data
000's omitted

Unaudited Unaudited
CFC Consolidated Jun-08 Mar-08 Dec-07 Jun-07

Total Assets $178,490 $192,090 $201,410 $207,116

Loans HFS - 705 690 348
Total Portfolio Loans 118,612 123,853 128,459 136,107
Loan Loss Reserve (1,975) (2,503) (2,304) (1,582)

Non-accrual Loans 3,749 5,667 3,487 2,216
Loans 90 days + Still Accruing - 85 308 113
Total Non-performing Loans 3,749 5,752 3,795 2,329
Repossessed Assets 1,667 575 575 584
Total Securities 17,333 20,489 29,035 31,487

Premises/Furniture & Fixtures 5,153 5,124 4,880 4,675

Noninterest-bearing Deposits 23,166 19,264 22,671 21,684
Interest bearing Deposits 105,890 124,524 127,405 126,415
Total Deposits 129,056 143,788 150,076 148,099
CD's > $100K 23,993 36,973 43,378 41,703

Trust Preferred - - 4,000 4,000
Advances from FHLB 5,200 5,200 5,200 12,200

Common Equity 11,103 12,224 11,432 14,751
Common Shares Outstanding at End
of Period 1,262 1,262 1,274 1,274
Goodwill/Intangibles - - - -

CLARKSTON FINANCIAL CORPORATION
Historical Income Statement Data
000's omitted

Unaudited Unaudited
Three Three Three Six Six
Months Months Months Months Months
Ended Ended Ended Ended Ended
Jun-08 Mar-08 Jun-07 Jun-08 Jun-07

Total Interest Income $2,210 $2,494 $3,020 $4,704 $6,133
Interest Expense 1,141 1,438 1,616 2,579 3,309
Net Interest Income 1,069 1,056 1,404 2,125 2,824

Provision for Loan Losses 450 967 57 1,417 57

Security Gains/(Losses) (1) 31 - 30 (2)
Gain on loan sales 54 71 84 126 146
Service fees on loan and
deposit accounts 167 181 185 349 384
Other Income 69 2,277 105 2,344 204
Total Other Income 289 2,560 374 2,849 732

Salary & Benefit Expense 713 843 865 1,556 1,715
Occupancy Expense 223 189 212 411 402
Other Expense 694 656 464 1,351 942
Total Other Expense 1,630 1,688 1,541 3,318 3,059

EBIT (722) 961 180 239 440
Tax (246) 327 51 81 88
Discontinued Operations (169) (119) (83) (288) (172)
Net Income $(645) $515 $46 $(130) $180
Reported EPS (diluted) ($0.51) $0.40 $0.04 ($0.10) $0.14
Dividends Per Share $- $- $- $- $-

Selected Financial Ratios:
Total Risk Based Capital -
CFC 9.79% 9.86% 13.87% 9.79% 13.87%
Tier 1 Leverage - CFC 6.02% 5.96% 9.29% 6.02% 9.29%
Total Risk Based Capital -
CSB 7.65% 7.97% 10.27% 7.65% 10.27%
Tier 1 Leverage - CSB 5.37% 5.32% 7.64% 5.37% 7.64%
Return on Average Assets -1.38% 1.02% 0.07% -0.13% 0.17%
Return on Average Equity -21.72% 17.90% 1.24% -2.22% -4.07%
Net Interest Margin 2.91% 2.62% 3.19% 2.76% 3.16%

Average Assets 187,218 201,958 211,495 194,588 205,306
Net charge-offs ($) 978 769 919 1,747 1,091
Gross charge-offs ($) 1,018 1,037 936 2,055 1,462

SOURCE Clarkston Financial Corporation

Grant Smith, CEO of Clarkston Financial Corporation, +1-248-922-6945; or Mike
Marcotte of Marcotte Financial Relations, +1-248-656-3873