UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q



[X] QUARTERLY REPORT  PURSUANT TO SECTION  13 OR 15(d) OF  THE SECURITIES
    EXCHANGE ACT OF 1934
For the quarterly period ended      September 30, 1999
                               ----------------------------

                                       OR

[ ] TRANSITION  REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________

Commission file number  0-7515


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

            Michigan                                       38-2011532
-------------------------------                       --------------------------
(State or other jurisdiction of                      (I. R. S. Employer
incorporation or organization)                        Identification Number)

101 West Washington Street, Marquette, Michigan                 49855
-----------------------------------------------       --------------------------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code   (906) 228-6940
                                                   -----------------------------
                                 Not applicable
--------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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 ___


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


             CLASS                          Outstanding as of November 10, 1999
----------------------------------         -------------------------------------


Common Stock, no par value                             6,464,961
----------------------------------         -------------------------------------

<PAGE>


PART I. FINANCIAL INFORMATION

                 MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              September 30,      December 31,       September 30,
                                                                  1999               1998               1998
                                                              ------------       ------------       ------------
                                                                           (dollars in thousands)
<S>                                                           <C>                <C>                <C>
ASSETS

  Cash and due from banks                                     $     33,165       $     36,863       $     29,700

  Short-term investments:
    Federal funds sold                                                                 46,450             46,000
    Money market investments                                         6,653              4,664              2,471

  Mortgage loans held for sale                                       4,730             17,186              3,826

  Securities available for sale                                    127,218             96,048             90,913

  Loans                                                            624,562            608,694            616,873
  Allowance for loan losses                                         (9,617)            (9,461)            (9,462)
                                                              ------------       ------------       ------------
                                               NET LOANS           614,945            599,233            607,411

  Premises and equipment                                            25,623             25,752             25,847
  Accrued interest receivable                                        5,541              4,769              5,259
  Other assets                                                      15,717             12,528             12,610
                                                              ------------       ------------       ------------

                                                              $    833,592       $    843,493       $    824,037
                                                              ============       ============       ============

LIABILITIES
  Noninterest bearing deposits                                $     70,081       $     75,959       $     72,038
  Interest bearing deposits                                        618,307            652,701            637,633
                                                              ------------       ------------       ------------
                                          TOTAL DEPOSITS           688,388            728,660            709,671

  Federal funds purchased                                           27,900
  Federal Home Loan Bank advance                                     3,000              3,000              3,000
  Accrued interest payable                                           3,273              3,238              3,608
  Other liabilities                                                 10,819              9,990             10,469
                                                              ------------       ------------       ------------
                                       TOTAL LIABILITIES           733,380            744,888            726,748

SHAREHOLDERS' EQUITY
  Common stock, no par value:
    Authorized shares - 10,000,000
    Shares issued and outstanding - 6,462,745 in 1999
       and 6,481,433 in 1998                                        44,978             35,741             35,741
  Retained earnings                                                 56,610             62,674             61,223
  Accumulated other comprehensive income                            (1,376)               190                325
                                                              ------------       ------------       ------------
                              TOTAL SHAREHOLDERS' EQUITY           100,212             98,605             97,289
                                                              ------------       ------------       ------------

                                                              $    833,592       $    843,493       $    824,037
                                                              ============       ============       ============
</TABLE>

See notes to consolidated financial statements.


                                        2
<PAGE>


                 MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                 Three months ended             Nine months ended
                                                    September 30                   September 30
                                                 1999           1998           1999           1998
                                             -----------    -----------    -----------    -----------
                                                      (in thousands, except per share data)
<S>                                          <C>            <C>            <C>            <C>
Interest income:
  Loans, including fees                      $    14,802    $    15,008    $    43,358    $    44,820
  Securities:
    Taxable                                        1,784          1,286          4,795          3,623
    Tax-exempt                                        47             79            165            301
  Short-term investments                             117            774          1,178          2,106
                                             -----------    -----------    -----------    -----------
                    TOTAL INTEREST INCOME         16,750         17,147         49,496         50,850
Interest expense:
  Deposits                                         6,262          6,938         19,219         20,542
  Borrowings                                         118             44            204            163
                                             -----------    -----------    -----------    -----------
                   TOTAL INTEREST EXPENSE          6,380          6,982         19,423         20,705
                                             -----------    -----------    -----------    -----------
                      NET INTEREST INCOME         10,370         10,165         30,073         30,145

Provision for loan losses                            293            100            653            700
                                             -----------    -----------    -----------    -----------
                NET INTEREST INCOME AFTER
                PROVISION FOR LOAN LOSSES         10,077         10,065         29,420         29,445

Noninterest income:
  Trust department income                          1,551          1,259          4,353          3,643
  Fees for other customer services                   730            984          2,180          2,912
  Net gains on sale of loans                         526            599          1,845          1,716
  Investment services                                556            301          1,543            827
  Net losses on sale of securities                     0              0              0            (10)
  Other                                              542            218          1,545          1,032
                                             -----------    -----------    -----------    -----------
                                                   3,905          3,361         11,466         10,120
                                             -----------    -----------    -----------    -----------
                                                  13,982         13,426         40,886         39,565
Noninterest expenses:
  Salaries and employee benefits                   5,114          4,970         15,270         14,841
  Net occupancy                                      649            660          1,997          2,022
  Furniture and equipment                            572            550          1,680          1,581
  Data processing                                    408            483          1,523          1,344
  Advertising                                        403            322          1,115            984
  Other                                            2,396          2,231          6,474          6,549
                                             -----------    -----------    -----------    -----------
                                                   9,542          9,216         28,059         27,321
                                             -----------    -----------    -----------    -----------

Income before income tax expense                   4,440          4,210         12,827         12,244
Income tax expense                                 1,498          1,370          4,149          3,938
                                             -----------    -----------    -----------    -----------
                               NET INCOME    $     2,942    $     2,840    $     8,678    $     8,306
                                             ===========    ===========    ===========    ===========

Per share data:
  Basic earnings                             $       .46    $       .44    $      1.34    $      1.28
  Diluted earnings                                   .45            .43           1.33           1.27
  Dividends paid                                     .26            .22            .76            .64
</TABLE>

See notes to consolidated financial statements.


                                        3
<PAGE>


                 MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                    Three months ended             Nine months ended
                                                       September 30                   September 30
                                                   1999            1998           1999            1998
                                               -----------     -----------    -----------     -----------
                                                                     (in thousands)
<S>                                            <C>             <C>            <C>             <C>
Net income                                     $     2,942     $     2,840    $     8,678     $     8,306
                                               -----------     -----------    -----------     -----------
Other comprehensive income (expense):
  Unrealized gains (losses) on securities -
    Unrealized holding gains (losses)
      arising during period                           (224)            404         (2,409)            496
    Reclassification adjustment for
      losses included in net income                      0               0              0              10
                                               -----------     -----------    -----------     -----------

Other comprehensive income (expense)
  before income tax                                   (224)            404         (2,409)            506
Income tax expense (credit) related to
  items of other comprehensive income                  (78)            141           (843)            177
                                               -----------     -----------    -----------     -----------
    Other comprehensive income (expense),
       net of income tax                              (146)            263         (1,566)            329

                                               -----------     -----------    -----------     -----------
                       COMPREHENSIVE INCOME    $     2,796     $     3,103    $     7,112     $     8,635
                                               ===========     ===========    ===========     ===========
</TABLE>


                                        4
<PAGE>


                 MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Nine months ended
                                                                                  September 30
                                                                              1999            1998
                                                                          -----------     -----------
                                                                                 (in thousands)
<S>                                                                       <C>             <C>
OPERATING ACTIVITIES
   Net income                                                             $     8,678     $     8,306
   Adjustments to reconcile net income to net
      cash provided by operating activities:
         Proceeds from sale of mortgage loans held for sale                    52,953          72,174
         Origination of mortgage loans held for sale                          (38,652)        (70,829)
         Realized gain on sale of loans                                        (1,845)         (1,716)
         Depreciation and amortization                                          1,820           1,704
         (Increase) decrease in interest receivable                              (772)             67
         Provision for loan losses                                                653             700
         Increase in interest payable                                              35             299
         Net (accretion) amortization of investment securities                     13             (34)
         Realized investment securities losses                                                     10
         Other                                                                 (1,513)           (554)
                                                                          -----------     -----------

                             NET CASH PROVIDED BY OPERATING ACTIVITIES         21,370          10,127


INVESTING ACTIVITIES

   Purchases of available for sale securities                                 (56,531)        (42,434)
   Net (increase) decrease in short-term investments                           44,461         (32,380)
   Proceeds from calls and maturities of available for sale securities         22,901          34,958
   Net (increase) decrease in loans                                           (16,365)         14,395
   Purchases of premises and equipment                                         (1,669)         (2,079)
   Proceeds from sale of premises and equipment                                    12              22
   Proceeds from calls and maturities of held to maturity securities                            4,269
   Proceeds from sale of available for sale securities                                            831
                                                                          -----------     -----------

                                 NET CASH USED BY INVESTING ACTIVITIES         (7,191)        (22,418)


FINANCING ACTIVITIES

   Net increase (decrease) in deposits                                        (40,272)         14,868
   Increase in Federal Funds purchased                                         27,900
   Cash dividends                                                              (4,905)         (4,142)
   Common stock repurchased                                                      (648)
   Proceeds from exercise of stock options                                         48              57
   Decrease in Federal Home Loan borrowings                                                    (2,000)
                                                                          -----------     -----------

                      NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES        (17,877)          8,783
                                                                          -----------     -----------


                                   DECREASE IN CASH AND DUE FROM BANKS         (3,698)         (3,508)

Cash and due from banks at beginning of year                                   36,863          33,208
                                                                          -----------     -----------

                              CASH AND DUE FROM BANKS AT END OF PERIOD    $    33,165     $    29,700
                                                                          ===========     ===========
</TABLE>


See notes to consolidated financial statements.


                                        5
<PAGE>


                 MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q, and therefore do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been reflected in the financial statements.
However, the results of operations for the three and nine month periods ended
September 30, 1999 and 1998 are not necessarily indicative of the results to be
expected for the full year.

For further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1998.


NOTE B - SECURITIES AVAILABLE FOR SALE

A comparison of the carrying amount and approximate market value follows:


                               September 30, 1999          December 31, 1998
                             -----------------------    -----------------------
                             Amortized   Approximate    Amortized   Approximate
                               Cost     Market Value      Cost     Market Value
                             ---------  ------------    ---------  ------------
                                               (in thousands)

U.S. Treasury and
  government agencies        $116,587     $114,595       $78,710      $78,848
Mortgage-backed securities      4,748        4,672         7,733        7,773
State and political
  subdivisions                  3,496        3,532         5,158        5,259
Other securities                4,504        4,419         4,155        4,168
                             --------     --------       -------      -------

                     TOTAL   $129,335     $127,218       $95,756      $96,048
                             ========     ========       =======      =======


NOTE C - EARNINGS PER SHARE


                                       6
<PAGE>


A reconciliation of the numerators and denominators of the earnings per share
computations is presented below. Weighted-average share amounts are presented in
thousands.

                                         Three months ended    Nine months ended
                                            September 30         September 30
                                          1999       1998       1999       1998
                                          ----       ----       ----       ----
Basic Earnings Per Share
   Net income                            $2,942     $2,840     $8,678     $8,306
                                         ======     ======     ======     ======

   Weighted-average common shares
    outstanding                           6,462      6,480      6,472      6,480
                                          =====      =====      =====      =====

       Basic Earnings Per Share            $.46       $.44      $1.34      $1.28
                                           ====       ====      =====      =====

Diluted Earnings Per Share
   Net income                            $2,942     $2,840     $8,678     $8,306
                                         ======     ======     ======     ======

   Weighted-average common shares
    outstanding                           6,462      6,480      6,472      6,480
   Add dilutive effects of assumed
    exercises under stock options            47         56         41         51
                                          -----      -----      -----      -----

   Weighted-average common and dilutive
    potential common shares outstanding   6,509      6,536      6,513      6,531
                                          =====      =====      =====      =====

       Diluted Earnings Per Share          $.45       $.43      $1.33      $1.27
                                           ====       ====      =====      =====


NOTE D - SEGMENT INFORMATION

The Company and its subsidiaries are primarily organized to operate in the
banking industry. Substantially all revenues are derived from banking products
and services in the Upper Peninsula of Michigan and in northeastern Wisconsin.
While the Company's chief decision makers monitor various products and services,
operations are managed and financial performance is evaluated on a firmwide
basis. Accordingly, all of the Company's banking operations are considered by
management to be aggregated in a single operating segment - commercial banking.


NOTE E - STOCK DIVIDEND

On June 21, 1999, the Company issued 307,395 shares of common stock as a 5%
stock dividend. These shares had a value of $9,837,000 at the date of issuance.
References to the number of shares of common stock in the financial statements
and all per share data have been adjusted for the stock dividend.


                                       7
<PAGE>


NOTE F - RECLASSIFICATIONS

Certain amounts in 1998 have been reclassified to conform with the
classifications in 1999.

NOTE G - RECENT DEVELOPMENTS - PENDING ACQUISITION

On November 2, 1999, the Company and Wells Fargo & Company (Wells Fargo) entered
into a definitive agreement for Wells Fargo to acquire the Company. Under the
terms of the agreement, subject to certain possible adjustments, Wells Fargo
will issue 4,418,605 shares of its common stock in exchange for all of the
outstanding shares of the Company. The acquisition is subject to satisfaction of
a number of conditions, including customary regulatory approvals and approval by
the Company's shareholders, and is expected to close as soon as practicable
after March 15, 2000.

                                        8
<PAGE>


                 MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                            AND RESULTS OF OPERATIONS


The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and earnings
during the periods included in the accompanying consolidated financial
statements.


FINANCIAL CONDITION

A summary of the period changes in principal sources and uses of funds is shown
below in thousands of dollars, and as a percent.

                                                  Change from December 31, 1998
                                                       to September 30, 1999
                                                  -----------------------------
                                                        Increase (Decrease)
                                                        -------------------
                                                       $                 %
                                                    -------            -----
Funding sources:
  Deposits                                          (40,272)            (5.5)
  Short-term borrowings                              27,900            930.0
  Other sources, net                                  2,493              6.0
                                                    -------
                                                     (9,879)            (1.3)
                                                    =======            =====

Funding uses:
  Money market investments                          (44,461)           (87.0)
  Investment securities                              31,170             32.5
  Loans (including mortgage loans
     held for sale)                                   3,412               .5
                                                    -------
          Total uses                                 (9,879)            (1.3)
                                                    =======            =====


Aggregate deposits, the primary source of funds, decreased by $40,272,000 or
5.5% during the first nine months of 1999. Each of the various deposit types
increased (decreased) as shown below:

                                             Increase (decrease)
                                             -------------------
                                               $               %
                                            -------          -----
     Time-retail                            (23,621)          (7.5)
     Savings                                (11,806)          (4.0)
     Demand                                  (5,878)          (7.7)
     Time-jumbo                               1,033            2.5
                                            -------
                                            (40,272)          (5.5)
                                            =======          =====



Deposits decreased primarily due to expanded use of PrimeVest Financial Services
and cash management accounts. These fee-based services facilitate deposit


                                       9
<PAGE>


transfers to money market and mutual funds. As a result, total deposit levels at
September 30, 1999 showed a decrease from the end of 1998.


The loan portfolio, including mortgage loans held for sale, increased by .5%
during the first nine months of 1999. Commercial loans increased 4.5% while,
real estate mortgages and installment loans decreased by 2.7%, and 2.6%,
respectively.

In addition to the above trends in the sources and uses of funds, the Company
services loans for outside agencies, primarily Freddie Mac. At September 30,
1999 the volume of Freddie Mac loans sold with servicing being retained was $378
million. The comparable figure one year earlier was $298 million. The ability of
the Company to sell these loans enables it to more effectively manage its
funding operations.

LIQUIDITY AND CAPITAL RESOURCES

During the first nine months of 1999 there were no significant changes with
respect to the capital resources of the Company. Management feels that the
liquidity position of the Company as of September 30, 1999 is more than adequate
to meet its future cash flow needs. Management also closely monitors capital
levels to provide for normal business needs and to comply with regulatory
requirements. As summarized below, the Company's capital ratios were well in
excess of the regulatory requirements for classification as "Well Capitalized":

                                                   Actual ratios
                             Regulatory                as of
                             Minimum for           September 30,
                         "Well Capitalized"        1999     1998
                         ------------------        ----     ----
Total capital                  10.0%              17.25%   16.61%
Tier I capital                  6.0               16.00    15.36
Tier I leverage ratio           5.0               12.35    11.72


RESULTS OF OPERATIONS

A summary of the period to period changes in the principal items included in the
consolidated statements of income is shown below in thousands of dollars, and as
a percent.


                                       10
<PAGE>


                                                    Comparison of
                                      ------------------------------------------
                                        Three months            Nine months
                                      ended September 30,    ended September 30,
                                        1999 and 1998          1999 and 1998
                                      -------------------    -------------------
                                                  Increase(Decrease)
Interest income                         $(397)    (2.3)%      $(1,354)    (2.7)%
Interest expense                         (602)    (8.6)        (1,282)    (6.2)
                                        -----                 -------
Net interest income                       205      2.0            (72)     (.2)
Provision for loan losses                 193    193.0            (47)    (6.7)
                                        -----                 -------
Net interest income after provision
  for loan losses                          12       .1            (25)     (.1)
Noninterest income                        544     16.2          1,346     13.3
Noninterest expenses                      326      3.5            738      2.7
                                        -----                 -------
Income before income tax expense          230      5.5            583      4.8
Income tax expense                        128      9.3            211      5.4
                                        -----                 -------

      Net income                        $ 102      3.6%       $   372      4.5%
                                        =====                 =======

Net Interest Income

Net interest income increased by $205,000 or 2.0% for the third quarter of 1999
from the same period in 1998. The increase was due to interest expense
decreasing more than interest income. Despite the quarterly increase, net
interest income for the first nine months of 1999 decreased by $72,000 or .2%
from the comparable period of 1998. Interest income dropped due to lower
interest rates and changes in asset mix. Interest expense decreased primarily
due to lower rates being paid on deposits.

Provision for Loan Losses

The loan loss provision increased during the third quarter of 1999 due to a
growing loan portfolio. Loan loss provision for the first nine months decreased
by $47,000 but still allowed for an increase to the allowance for loan losses of
$156,000 or 1.6% during the year. Net loan charge-offs for the first nine months
amounted to $497,000, down significantly from the amount of $771,000 in 1998. On
an annualized basis 1999 net charge-offs amounted to .11% of average loans
outstanding, down from the .17% for the comparable period in 1998.

Expressed as a percent of outstanding loans the allowance increased to 1.54%
compared to 1.52% at the same time last year. The allowance level is subject to
change during future periods as the amounts provided during any given period are
dependent upon management's ongoing review process and assessment of the
perceived loss exposure in the then outstanding loan portfolio.


                                       11
<PAGE>


Nonperforming loans increased in the first nine months of 1999 by $919,000 or
17.0%. Total nonperforming assets, which include other real estate, increased by
$1,705,000 or 24.5% from December 31, 1998.

The table below presents a comparison of nonperformings.

                                   September 30,      December 31,
                                       1999               1998
                                   -------------      ------------
                                           (in thousands)
     Nonaccrual loans                 $3,111             $3,701
     Loans past due
      90 days or more                  1,948              1,152
     Restructured loans                1,253                540
                                      ------             ------
       Total nonperforming loans       6,312              5,393
     Other real estate                 2,355              1,569
                                      ------             ------
       Total nonperforming assets     $8,667             $6,962
                                      ======             ======

     Nonperforming loans
      as a % of total loans            1.01%               .89%
                                       ====                ===

     Nonperforming assets
      as a % of total assets           1.04%               .83%
                                       ====                ===

On a percentage basis, the allowance for loan losses decreased from 175.4% of
nonperforming loans at the end of 1998 to 152.4% at September 30, 1999.



The following table shows an allocation of the allowance.


                                 September 30, 1999            December 31, 1998
                                 ------------------            -----------------

                                        Percent of                  Percent of
                                      Type of Loans               Type of Loans
                          Allowance   to Total Loans   Allowance  to Total Loans
                          ---------   --------------   ---------  --------------
                                        (Amounts in thousands)
Commercial,
 financial and
 agricultural               $4,287         43.9%         $3,019        42.8%
Real estate-
 construction                   --          2.6              --         2.2
Real estate-
 mortgage                    1,136         37.1             295        37.5
Consumer                     1,206         16.3             974        17.4
Leases                          --           .1              --          .1
Not allocated                2,988          n/a           5,173         n/a
                            ------        -----          ------       -----

                            $9,617        100.0%         $9,461       100.0%
                            ======        =====          ======       =====



The above allocation is based on estimates and subjective judgement and is not
necessarily indicative of the specific amounts on loan categories in which
losses may ultimately occur, nor does it necessarily reflect actual historical
charge-off experience.

Noninterest Income

Noninterest income increased by $544,000 or 16.2% in the third quarter and
$1,346,000 or 13.3% during the first nine months of 1999. Exclusive of security
transactions, noninterest income increased by $1,336,000 or 13.2% for the first
nine months of 1999. A large part of the increase in noninterest income is due
to increases in fee-based income including trust fees and fees collected for
brokerage services. Fee-based income increased $293,000 or 11.5% for the third
quarter and $694,000 or 9.4% during the first nine months of 1999 compared to
the same periods last year. Net gains from loan sales increased $129,000 during
the first nine months of 1999 despite a decrease of $73,000 during the third
quarter.


                                       12
<PAGE>


Noninterest Expenses

The increase in noninterest expenses resulted from changes in its major
components as set forth below, indicative of the normal effects of inflation as
well as the growth of the organization. The major components of other expenses
increased (decreased) as follows:

                                           Three months          Nine months
                                              ended                 ended
                                        September 30, 1999    September 30, 1999
                                        ------------------    ------------------
    Salaries and employee benefits              2.9%                 2.9%
    Occupancy, furniture and equipment           .9                  2.1
    Data processing                           (15.5)                13.3
    Advertising                                25.2                 13.3
    Other                                       7.4                 (1.1)

Data processing expense through the first nine months increased 13.3% from the
same period last year despite a third quarter decrease of 15.5%. The nine month
increase is due to year 2000 hardware/software remediation. Increases in
advertising expense, 25.2% for the third quarter and 13.3% for the first nine
months, are due to market penetration programs initiated in 1999.


Applicable Income Tax

Applicable income tax expense is based on income, less that portion which is
exempt from federal taxation, taxed at the statutory federal income tax rate of
35%. The provision is further reduced by other smaller items. The increase in
the 1999 income tax provision reported herein for the third quarter and the
first nine months was mostly due to the increase in pre-tax income of the
Company for 1999, combined with a decrease in the portion of interest income
which is exempt from federal taxation.

Year 2000 Compliance

A significant issue has emerged in the banking industry and the economy overall
regarding how existing application software programs and operating systems can
accommodate the date value for the Year 2000. Programs and operating systems
using a two digit date rather than a four digit date may calculate incorrectly
or cease to operate after December 31, 1999. Initially this potential problem
was


                                       13
<PAGE>


believed to be limited to software programs and data applications (collectively
referred to as "Information Technology" or "IT" systems) using date-related
fields during processing. The scope of concern has since been expanded to
include "non-IT" systems such as electronically controlled elevators and
security systems.

Since 1997, the Company has been engaged in a program to ensure that all
computer systems will continue to make accurate date-related computations on and
after January 1, 2000. Early in 1997, management appointed a team of individuals
that would develop and administer a plan to address the Company's Year 2000
risks. The plan was to address both "IT" and "non-IT" systems using the
following steps: (1) Inventory: identify all items to be included in the Year
2000 program; (2) Assessment: prioritize the inventory for review and determine
the scope of remediation and testing effort required; (3) Conversion: make all
the necessary changes to become Year 2000 compliant; (4) Testing: verify through
structured testing that all inventory is in fact Year 2000 compliant; (5)
Implementation: position the inventory items back into production after testing
is complete; and (6) Contingency Planning: design a contingency plan for all
systems in the event of other unforeseen circumstances.

The Year 2000 program implemented by the Company follows closely the process
suggested by the Federal Financial Institutions Examination Council ("FFIEC").
The "FFIEC" is an interagency organization made up of regulatory agencies that
monitor the safety and soundness of banks and savings associations. The "FFIEC"
is responsible for supervising the efforts of financial institutions preparing
for the Year 2000. The regulatory agencies continue to conduct special
examinations of insured banks, including those subsidiaries of the Company, and
savings associations to verify efforts toward attaining Year 2000 readiness.

Three "IT" systems have been recognized by the Company as being "mission
critical" to its continuing operation. These systems received the highest
priority level for remediation and testing. The first such system is the data
processing service provided by Alltel Information Services, Inc. Alltel provides
deposit and loan data processing services to the bank subsidiaries of the
Company. Alltel is one of the nation's major providers of such services to
financial institutions. In


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<PAGE>


conjunction with Alltel, the Company believes it has identified all processing
applications which are date-sensitive and has successfully tested and installed
Year 2000 compliant software. This conversion began in September of 1998 and was
completed during the first quarter of 1999.

The second mission critical system identified by the Company is the payment
processing system used by the Company's banking subsidiaries. The Company
contracts with Wausau Financial Services to provide this service. All phases of
the Company's Year 2000 plan have been completed for this system and it has been
tested and determined to be Year 2000 ready. The remediated software has been in
production since September 1998.

M&I Data Services, a subsidiary of Marshall & Ilsley Corporation, provides the
third mission critical system to the Company, trust data processing and
investment services technology. The Year 2000 plan has been completed for this
system as well. Software testing was completed in March of 1999 and determined
to be Year 2000 ready.

All other third-party "IT" systems, primarily PC-based applications, have been
tested, converted and determined to be Year 2000 ready. Vendors for Year 2000
items noted as "non-IT" have been contacted in regard to their state of Year
2000 readiness. The Company acknowledges risk in this area as failure with any
of these systems is not under its control. At this time, all "non-IT" vendors
expect to be Year 2000 compliant prior to December 31, 1999.

Another aspect included in the Year 2000 program, other than "IT" and "non-IT"
computer systems, relates to the risks posed to the Company by customers.
Borrowers and depositors having significant relationships with the Company have
been identified in accordance with regulatory guidelines. The risk to the
Company arising from the failure of these customers to address their Year 2000
concerns has been identified and is included in the contingency plan for
continuing operations.


                                       15
<PAGE>


Costs to date for Year 2000 remediation have not been material to the financial
condition of the Company. All costs related to the Company's Year 2000 plan have
been expensed as incurred. Total expenses recognized to date are $798,000
including $175,000 in personnel expense and $623,000 in hardware and software
expense. Personnel expense relates to Year 2000 training, testing, customer
awareness of Year 2000 concerns and evaluation of Year 2000 efforts of
significant customers. Hardware and software costs include purchase/replacement
of equipment, upgrades to software, and vendor costs related to Year 2000
remediation. Future expenses for Year 2000 are not expected to be material.

The Company completed all six steps of its Year 2000 plan as of March 31, 1999
and believes to be Year 2000 compliant. However, due to the general uncertainty
inherent in the Year 2000 problem, the Company is unable to ensure its systems
will not be impacted by the Year 2000. The failure to correct a material Year
2000 problem could result in an interruption in, or failure of, certain normal
business activities. Such failures could materially affect the Company's results
of operations and financial condition. The Year 2000 program completed by the
Company has reduced its level of uncertainty regarding Year 2000 exposure and
has greatly reduced the possibility of significant interruptions of normal
operations.


Forward-Looking Statements

Except for the historical information contained in this report, certain
statements made herein are forward-looking statements that involve risks and
uncertainties and are subject to various factors that could cause actual results
to differ materially from these statements. Factors that might cause such a
difference include, but are not limited to, regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities, and competitive and regulatory
factors.


Quantitative and Qualitative Disclosures about Market Risk

No material changes.


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<PAGE>


PART II. OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

    Exhibit (27)  Financial Data Schedule - The required financial data schedule
    is filed as Exhibit 27 at page 20 of this report.

(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the three
    months ended September 30, 1999.




                                   SIGNATURES

Pursuant to the requirements 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.





                                            Michigan Financial Corporation
                                       -----------------------------------------
                                                    (Registrant)



Dated:  November 10, 1999               /s/ Howard L. Cohodas
        ------------------             -----------------------------------------
                                       Howard L. Cohodas, Chairman
                                         & President
                                         (Chief Executive Officer)



Dated:  November 10, 1999               /s/ Kenneth F. Beck
        ------------------             -----------------------------------------
                                       Kenneth F. Beck, Senior Vice President,
                                         Treasurer & Secretary
                                         (Chief Financial Officer and
                                            Chief Accounting Officer)


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