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 June 30, 1997

                                       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 August 4, 1997
             -----                            --------------------------------
   Common Stock, no par value                             5,877,601

<PAGE>


PART I.  FINANCIAL INFORMATION

                 MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               June 30,    December 31,    June 30,
                                                                 1997          1996          1996
                                                              ---------     ---------     ---------
                                                                             (dollars in thousands)
ASSETS
<S>                                                          <C>           <C>           <C>      
  Cash and due from banks                                     $  35,169     $  38,662     $  30,238

  Short-term investments:
    Federal funds sold                                            2,800                      17,350
    Money market investments                                        356           285           260

  Investment securities:
    Available for sale                                           93,511       101,959       112,874
    Held to maturity                                             13,530        18,662        20,483

  Loans                                                         622,655       598,623       568,904
  Allowance for loan losses                                      (8,698)       (8,388)       (7,786)
                                                              ---------     ---------     ---------
                                                 NET LOANS      613,957       590,235       561,118

  Premises and equipment                                         25,540        24,679        23,666
  Accrued interest receivable                                     5,527         5,208         5,575
  Other assets                                                    9,678         9,663         8,860
                                                              ---------     ---------     ---------

                                                              $ 800,068     $ 789,353     $ 780,424
                                                              =========     =========     =========

LIABILITIES
  Noninterest bearing deposits                                $  72,807     $  74,365     $  68,402
  Interest bearing deposits                                     623,764       601,743       618,785
                                                              ---------     ---------     ---------
                                            TOTAL DEPOSITS      696,571       676,108       687,187

  Federal Home Loan Bank advances                                 2,000
  Federal funds purchased                                                      16,015
  Accrued interest payable                                        3,018         2,770         2,736
  Other liabilities                                               9,057         7,847         7,943
                                                              ---------     ---------     ---------
                                         TOTAL LIABILITIES      710,646       702,740       697,866

STOCKHOLDERS' EQUITY
  Common stock, no par value:
    Authorized shares - 10,000,000
    Shares issued and outstanding - 5,877,601                    25,050        18,555        18,555
  Retained earnings                                              64,554        68,343        65,408
  Securities valuation                                             (182)         (285)       (1,405)
                                                              ---------     ---------     ---------
                                TOTAL STOCKHOLDERS' EQUITY       89,422        86,613        82,558
                                                              ---------     ---------     ---------

                                                              $ 800,068     $ 789,353     $ 780,424
                                                              =========     =========     =========

</TABLE>

See notes to consolidated financial statements 

<PAGE>


               MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES IES

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                               Three months ended        Six months ended
                                                                      June 30                 June 30
                                                                1997         1996         1997       1996
                                                              --------     --------     -------    -------
                                                                  (in thousands, except per share data)
<S>                                                           <C>          <C>          <C>        <C>    
Interest income:
  Loans, including fees                                       $ 14,833     $ 13,567     $29,042    $27,048
  Short-term investments                                           121          280         187        618
  Investment securities:
    Taxable                                                      1,433        1,642       2,895      3,225
    Tax-exempt                                                     168          247         370        533
                                                              --------     --------     -------    -------
                                     TOTAL INTEREST INCOME      16,555       15,736      32,494     31,424
Interest expense:
  Deposits                                                       6,458        6,083      12,568     12,236
  Borrowings                                                        28            1         119          1
                                                              --------     --------     -------    -------
                                    TOTAL INTEREST EXPENSE       6,486        6,084      12,687     12,237
                                                              --------     --------     -------    -------
                                       NET INTEREST INCOME      10,069        9,652      19,807     19,187

Provision for loan losses                                          454          330         658        530
                                                              --------     --------     -------    -------
                                 NET INTEREST INCOME AFTER
                                 PROVISION FOR LOAN LOSSES       9,615        9,322      19,149     18,657

Noninterest income:
  Trust department income                                        1,092        1,002       2,177      1,997
  Fees for other customer services                                 941          801       1,771      1,531
  Other                                                            638          470       1,202        925
  Investment securities losses                                                  (13)                   (13)
                                                              --------     --------     -------    -------
                                                                 2,671        2,260       5,150      4,440
                                                              --------     --------     -------    -------
                                                                12,286       11,582      24,299     23,097
Noninterest expenses:
  Salaries and employee benefits                                 4,645        4,508       9,339      9,055
  Net occupancy                                                    643          646       1,357      1,293
  Furniture and equipment                                          488          406         970        817
  Data processing                                                  441          363         858        706
  Advertising                                                      345          418         637        726
  Other                                                          2,033        1,790       3,973      3,784
                                                              --------     --------     -------    -------
                                                                 8,595        8,131      17,134     16,381
                                                              --------     --------     -------    -------

Income before income tax expense                                 3,691        3,451       7,165      6,716
Income tax expense                                               1,155        1,050       2,206      1,979
                                                              --------     --------     -------    -------
                                                NET INCOME    $  2,536     $  2,401     $ 4,959    $ 4,737
                                                              ========     ========     =======    =======

                       WEIGHTED AVERAGE SHARES OUTSTANDING       5,878        5,878       5,878      5,878

Per share data:
  Net income                                                  $    .43     $    .41     $   .84    $   .81
                                                              ========     ========     =======    =======
  Dividends paid                                              $    .19     $    .17     $   .38    $   .32
                                                              ========     ========     =======    =======

</TABLE>

See notes to consolidated financial statements.

<PAGE>


                MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                    Six months ended
                                                                        June 30
                                                                   1997         1996
                                                                 --------     --------
                                                                     (in thousands)
<S>                                                              <C>          <C>     
OPERATING ACTIVITIES
   Net income                                                    $  4,959     $  4,737
   Adjustments to reconcile net income to net
      cash provided by operating activities:
         Proceeds from sale of mortgage loans held
            for sale                                               12,134       20,900
         Origination of mortgage loans held for sale              (10,800)     (21,375)
         Depreciation and amortization                              1,027          898
         Provision for loan losses                                    658          530
         Realized gain on sale of loans                              (330)        (101)
         (Increase) decrease in interest receivable                  (319)         204
         Increase (decrease) in interest payable                      248         (100)
         Amortization of investment securities premium                 41          107
         Realized investment securities losses                                      13
         Other                                                      1,092         (756)
                                                                 --------     --------

                    NET CASH PROVIDED BY OPERATING ACTIVITIES       8,710        5,057


INVESTING ACTIVITIES
   Net increase in loans                                          (25,384)      (7,770)
   Proceeds from maturities of available for sale
      securities                                                   12,553       25,503
   Proceeds from maturities of held to maturity
      securities                                                    5,132        4,362
   Purchases of available for sale securities                      (3,988)     (27,032)
   Net (increase) decrease in short-term investments               (2,871)          37
   Purchases of premises and equipment                             (1,851)      (1,697)
   Proceeds from sale of available for sale securities                           1,487
   Proceeds from sale of premises and equipment                        11           19
                                                                 --------     --------

                        NET CASH USED BY INVESTING ACTIVITIES     (16,398)      (5,091)


FINANCING ACTIVITIES
   Net increase in deposits                                        20,463           33
   Decrease in federal funds purchased                            (16,015)
   Cash dividends                                                  (2,253)      (1,904)
   Federal Home Loan Bank advances                                  2,000
                                                                 --------     --------

             NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES       4,195       (1,871)


                          DECREASE IN CASH AND DUE FROM BANKS      (3,493)      (1,905)
                                                                 --------     --------

Cash and due from banks at beginning of year                       38,662       32,143
                                                                 --------     --------

                     CASH AND DUE FROM BANKS AT END OF PERIOD    $ 35,169     $ 30,238
                                                                 ========     ========

</TABLE>

See notes to consolidated financial statements.

<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 six month periods ended
June 30, 1997 and 1996 are not necessarily indicative of the results to be
expected for the full year.

For further information, refer to the consolidated financial statements and
foot- notes included in the Company's annual report on Form 10-K for the year
ended December 31, 1996.


NOTE B - ACCOUNTING CHANGE

Effective January 1, 1997, the Company adopted Financial Accounting Standards
Board ("FASB") Statement 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." Statement 125 revises the
accounting for transfers of financial assets, such as loans and securities, and
for distinguishing between sales and secured borrowings. It is effective for
some transactions in 1997 and others in 1998. The statement is not expected to
have a material effect on the Company's consolidated financial position or
results of operations.

<PAGE>


NOTE C - PENDING ACCOUNTING CHANGE

In March 1997, the FASB revised the accounting requirements for calculating
earnings per share. Basic earnings per share beginning with year end 1997 will
be calculated solely on average common shares outstanding. Diluted earnings per
share will reflect the potential dilution of stock options. All prior
calculations will be restated to be comparable to the new methods. As the
Company has not had significant dilution from stock options, the new calculation
methods will not significantly affect future basic earnings per share and
diluted earnings per share.


NOTE D - INVESTMENT SECURITIES

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


                                  June 30, 1997            December 31, 1996
                             -----------------------    -----------------------
                             Amortized   Approximate    Amortized   Approximate
                               Cost     Market Value      Cost     Market Value
                             ---------  ------------    ---------  ------------
                                               (in thousands)
Available for Sale

U.S. Treasury and
  government agencies         $68,432      $68,291      $ 71,447     $ 71,256
Mortgage-backed securities     21,331       21,181        27,090       26,828
Other securities                4,028        4,039         3,860        3,875
                              -------      -------      --------     --------

                      TOTAL   $93,791      $93,511      $102,397     $101,959
                              =======      =======      ========     ========

Held to Maturity

State and political
  subdivisions                $13,530      $13,551       $18,662      $18,626
                              =======      =======      ========     ========


NOTE E - STOCK DIVIDEND

On June 20, 1997, the Company issued 279,334 shares of common stock as a 5%
stock dividend. These shares had a value of $6,495,000 at the date of issuance.

<PAGE>


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.


NOTE F - RECLASSIFICATIONS

Certain amounts in 1996 have been reclassified to conform with the
classifications in 1997.

<PAGE>


                 MICHIGAN FINANCIAL CORPORATION AND SUBSIDIARIES

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                              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, 1996
                                                         to June 30, 1997
                                                  ------------------------------
                                                  Amount of            Percent
                                                   Increase            Increase
                                                  (Decrease)          (Decrease)
                                                  ----------          ----------
Funding sources:
  Deposits                                         $ 20,463              3.0%
  Federal Home Loan Bank advances                     2,000              NMF
  Federal funds purchased                           (16,015)             NMF
  Other sources, net                                  7,223             38.0
                                                   --------
                                                   $ 13,671              1.9%
                                                   ========             ====

Funding uses:
  Loans                                            $ 24,380              4.1%
  Investment securities                             (13,580)           (11.3)
  Short-term investments                              2,871              NMF
                                                   --------
          Total uses                               $ 13,671              1.9%
                                                   ========             ====

Aggregate deposits, the primary source of funds, increased by $20,463,000 or
3.0% during the six months of 1997. Experience was mixed within the deposit
category, as shown below:

                                             Increase
                                            (Decrease)        Percent
                                            ----------        -------
      Demand                                 $(1,558)          (2.1)%
      Savings                                  1,566             .5
      Time-retail                             13,186            4.8
      Time-jumbo                               7,269           22.3
                                             -------
                                             $20,463            3.0%
                                             =======           ====

<PAGE>


As a result, total deposit levels at June 30, 1997 showed an increase from the
end of 1996.

The loan portfolio increased by 4.1% during the first six months of 1997. The
largest increase was in the commercial loan area with the real estate mortgages
also increasing. The installment loan area showed a slight decrease.

For liquidity purposes the excess funds generated during the period were mainly
placed in short-term investments.

In addition to the above trends in the sources and uses of funds, the Company
services loans for outside agencies, primarily Freddie Mac. At June 30, 1997 the
volume of Freddie Mac loans sold with servicing retained was $217 million. The
comparable figure one year earlier was $205 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 half of 1997 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 June 30, 1997 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":

                             Regulatory
                             Minimum for              June 30,
                         "Well Capitalized"        1997     1996
                         ------------------        ----     ----
Total capital                  10.0%              15.66%   15.84%
Tier I capital                  6.0               14.41    14.59
Tier I leverage ratio           5.0               11.33    10.81

<PAGE>


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.

                                                    Comparison of
                                           ---------------------------------
                                            Three months        Six months
                                           ended June 30,     ended June 30,
                                           1997 and 1996      1997 and 1996
                                           --------------     --------------
                                                   Increase(Decrease)

Interest income                            $  819     5.2%    $1,070     3.4%
Interest expense                              402     6.6        450     3.7
                                          -------             ------
Net interest income                           417     4.3        620     3.2
Provision for loan losses                     124    37.6        128    24.2
                                          -------             ------
Net interest income after provision
  for loan losses                             293     3.1        492     2.6
Noninterest income                            411    18.2        710    16.0
Noninterest expenses                          464     5.7        753     4.6
                                          -------             ------
Income before income tax expense              240     7.0        449     6.7
Income tax expense                            105    10.0        227    11.5
                                          -------             ------

      Net income                           $  135     5.6%    $  222     4.7%
                                          =======             ======


Net Interest Income

The increase in net interest income during the second quarter and the first six
months of 1997 was due to the fact that while both interest income and interest
expense increased from the comparable periods in 1996, interest income increased
more. The increase in the loan to deposit ratio to 89.4% at June 30, 1997 from
82.8% at June 30, 1996 was the major reason for the increase in interest income.
Net interest income performance in future periods will be primarily dependent
upon general interest rate developments.

Provision for Loan Losses

The loan loss provision increased during both the second quarter and the first
six months of 1997 largely due to the larger loan portfolio. The larger
provision accounted for the increase in the allowance for loan losses of
$310,000 or 3.6% during the first half of 1997. Net loan charge-offs for the
first six months 

<PAGE>


amounted to $348,000, up slightly from the amount of $333,000 for the comparable
period in 1996. On an annualized basis charge-offs amounted to .12% of average
loans outstanding for both 1997 and 1996. This is a relatively low level on an
internal historical basis as well as in comparison to peer groups.

Expressed as a percent of outstanding loans the allowance held steady at 1.40%
at both year end 1996 and June 30, 1997. The allowance level will not
necessarily be maintained at this level 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.

Nonperforming loans continue at low levels, although they did increase in the
first half of 1997 by $957,000 or 26.3%. Total nonperforming assets, which
include other real estate, also continue at low levels despite an increase of
$958,000 or 17.8% from December 31, 1996.

The table below presents a comparison of nonperformings.

                                      June 30,          December 31,
                                       1997                 1996
                                      --------          ------------
                                            (in thousands)
     Nonaccrual loans                 $2,312               $1,538
     Loans past due
      90 days or more                  1,129                  901
     Restructured loans                1,150                1,195
                                      ------               ------
       Total nonperforming loans       4,591                3,634
     Other real estate                 1,752                1,751
                                      ------               ------
       Total nonperforming assets     $6,343               $5,385
                                      ======               ======

     Nonperforming loans
      as a % of total loans             .74%                 .61%
                                      =====                =====

     Nonperforming assets
      as a % of total assets            .79%                 .68%
                                      =====                =====


On a percentage basis, the allowance for loan losses decreased from 230.8% of
nonperforming loans at the end of 1996 to 189.5% at June 30, 1997. Management

<PAGE>


intends to continue in its efforts toward maintaining the high quality of the
loan portfolio.

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         Six months
                                               ended              ended 
                                            June 30, 1997       June 30, 1997
                                            -------------       -------------
    Salaries and employee benefits               3.0%               3.1%
    Occupancy, furniture and equipment           7.5               10.3
    Data processing                             21.5               21.5
    Advertising                                (17.5)             (12.3)
    Other                                       13.6                5.0

A large part of the occupancy, furniture and equipment increase is due to a
complete upgrade and networking of the Company's personal computers. This
upgrade was started during the third quarter of 1996 and completed during the
first quarter of 1997. The increase in data processing is due to programming
charges, mainly for the combined statements now being issued, along with normal
increases. Future increases in this area will depend upon the amount of special
programming needed.

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 1997 income tax provision reported herein for the second quarter and the
first six months was mostly due to the increase in pre-tax income of the Company
for 1997, combined with a decrease in the portion of interest income which is
exempt from federal taxation.

<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 14 of this report.

(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the three
    months ended June 30, 1997




                                    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:  August 4, 1997                   /s/ HOWARD L. COHODAS
        ------------------               ---------------------------------------
                                         Howard L. Cohodas, Chairman
                                           & President
                                           (Chief Executive Officer)



Dated:  August 4, 1997                   /s/ KENNETH F. BECK
        ------------------               ---------------------------------------
                                         Kenneth F. Beck, Senior Vice President,
                                           Treasurer & Secretary
                                           (Chief Financial Officer and
                                              Chief Accounting Officer)