<PAGE> 1


                                   UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                                     FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE
                          SECURITIES EXCHANGE ACT OF 1934


                 For the quarterly period ended September 30, 1996
                                                ------------------


              Securities and Exchange Commission File Number 0-25722



                                 HF BANCORP, INC.

              (Exact name of registrant as specified in its charter)

DELAWARE                                                    33-0576146
(State or other jurisdiction                          (I.R.S. Employer I.D. No.)
Of incorporation or organization)


                  445 E. Florida Avenue, Hemet, California 92543
                     (Address of principal executive offices)


        Registrant's telephone number, including area code: (909) 658-4411






      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 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
                                                      ---        ---



                       APPLICABLE ONLY TO CORPORATE ISSUERS:



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

      There were 6,281,875 shares of the Registrant's  common stock  outstanding
as of November 8, 1996.






<PAGE> 2





HF BANCORP, INC. AND SUBSIDIARY
FORM 10-Q
INDEX

PART I - FINANCIAL INFORMATION                                            PAGE
         ---------------------                                            ----

ITEM 1.            FINANCIAL STATEMENTS

            Consolidated Statements of Financial Condition as of
            September 30, 1996, (unaudited) and June 30, 1996              3

            Consolidated Statements of Operations (unaudited) for the
            Three Months ended September 30, 1996 and 1995                4-5

            Changes in Stockholders Equity (unaudited)                     6

            Consolidated Statements of Cash Flows (unaudited) for the
            Three Months ended September 30, 1996 and 1995                7-8

            Notes to Consolidated Financial Statements (unaudited)       9-14


ITEM 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   ---------------------------------------
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS        15-24
                   ---------------------------------------------

PART II - OTHER INFORMATION
          -----------------

Item 1.            Legal Proceedings                                       25

Item 2.            Changes in Securities                                   25

Item 3.            Defaults Upon Senior Securities                         25

Item 4.            Submission of Matters to a Vote of Security Holders     25

Item 5.            Other Information                                       25

Item 6.            Exhibits and Reports on Form 8-K                     25-26

       Signature Page                                                     27

                                         2

<PAGE> 3

<TABLE>
<CAPTION>



                                       HF BANCORP, INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                                                                   Sept 30,         June 30,
                                                                                      1996            1996
                                                                                      ----            ----
                                                                                  (Unaudited)
                                                                                      (Dollars in thousands)

<S>                                                                              <C>                <C>     
ASSETS
Cash and cash equivalents                                                        $     29,773       $100,633
Investment securities held to maturity (estimated fair value of $33,855
 and 33,842 at September 30, 1996 and June 30, 1996,
 respectively)                                                                         34,428         34,666
Investment securities available for sale (amortized cost of $ 195,903
 and  $177,487 at  September  30, 1996 and June 30,  1996,  respectively)             192,597        173,171
Loans receivable (net of allowance for estimated loan losses of $6,113
 and  $3,068  at  September  30,  1996 and June 30,  1996,  respectively)             438,573        225,161
Mortgage-backed  securities  held to maturity  (estimated fair value of
 $164,889 and  $152,521 at  September  30, 1996 and June 30,  1996,
 respectively)                                                                        169,187        159,262
Mortgage-backed securities available for sale (amortized cost of $86,249
and $99,888 at September 30, 1996 and June 30, 1996, respectively)                     87,105        100,259
Accrued  interest  receivable                                                           7,438          6,260
Investment  in capital  stock of the Federal Home Loan Bank, at cost                    5,934          4,436
Premises and  equipment,  net                                                           8,226          6,578
Real estate owned, net
 Acquired through foreclosure                                                           3,134          1,079
 Acquired for sale or investment                                                          758            996
Other assets                                                                           27,221         14,415
                                                                                   ----------       --------

Total assets                                                                       $1,004,374       $826,916
                                                                                   ==========       ========

LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities:
Deposit accounts                                                                   $ 836,132       $669,725
Advances from the Federal Home Loan Bank                                              70,000         70,000
Accounts payable and other liabilities                                                11,434          5,278
Income taxes                                                                           6,999            842
                                                                                  ----------       --------

Total liabilities                                                                    924,565        745,845

Stockholders' equity
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued                 --             --
 Common stock, $.01 par value;  15,000,000 shares  authorized;  6,612,500 issued
 and 6,281,875 outstanding at September 30, 1996 and June 30,1996                         66             66
Additional paid-in capital                                                            51,146         51,113
Retained earnings, substantially restricted                                           38,618         40,957
Net unrealized loss on securities available for sale, net of taxes                   (1,431)        (2,309)
Deferred stock compensation                                                          (5,242)        (5,408)
Treasury stock, 330,625 shares                                                       (3,348)        (3,348)
                                                                                  ----------       --------

     Total stockholders' equity                                                       79,809         81,071
                                                                                  ----------       --------

     Total liabilities and stockholders' equity                                   $1,004,374       $826,916
                                                                                  ==========       ========

</TABLE>

See notes to consolidated financial statements


                                              3

<PAGE> 4

<TABLE>
<CAPTION>


                               HF BANCORP, INC. AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                                         (UNAUDITED)



                                                               FOR THE THREE MONTHS
                                                               ENDED SEPTEMBER 30,
                                                               --------------------
                                                                1996        1995
                                                                ----        -----
                                                             (dollars in thousands)

<S>                                                           <C>          <C>   
INTEREST INCOME:
Interest on loans                                             $ 5,009      $4,172
Interest on mortgage-backed securities                          4,655       4,783
Interest and dividends on investment securities                 4,735       2,162
                                                               -------     -------

     Total interest income                                     14,399      11,117

INTEREST EXPENSE:
Interest on deposit accounts                                    8,138       5,863
Interest on advances from the Federal Home Loan Bank
 and other borrowings                                             915         918
Net interest expense of hedging transactions                      780         825
                                                               -------     -------

     Total interest expense                                     9,833       7,606
                                                               -------     -------

NET INTEREST INCOME BEFORE PROVISION FOR
 ESTIMATED LOAN LOSSES                                          4,566       3,511

PROVISION FOR ESTIMATED LOAN LOSSES                               179         145
                                                               -------     -------

NET INTEREST INCOME AFTER PROVISION FOR
 ESTIMATED LOAN LOSSES                                          4,387       3,366

OTHER INCOME (EXPENSE):
Loan and other fees                                                51          49
Loss from real estate operations, net                             (52)        (78)
Gain on sale of mortgage-backed securities available for sale     365          --
Savings Fees                                                      171          15
Other income                                                      121         148
Amortization of intangible assets                                (237)         --
                                                               -------     -------

     Total other income (expense)                                 419         134

</TABLE>










See notes to consolidated financial statements.




                                         4

<PAGE> 5

<TABLE>
<CAPTION>


                              HF BANCORP, INC. AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS(CONTINUED)
                                         (UNAUDITED)



                                                                  FOR THE THREE MONTHS
                                                                  ENDED SEPTEMBER 30,
                                                                  ----------------------
                                                                  1996              1995
                                                                  ----              ---- 
                                                               (dollars in thousands except
                                                                    earnings per share)

<S>                                                             <C>              <C>      
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and employee benefits                                  $   1,997        $   1,636
Occupancy and equipment expense                                       630              521
FDIC insurance and other assessments                                5,079              338
Legal and professional services                                       168              112
Data processing service costs                                         292              215
Marketing                                                             158               66
Savings Expense                                                       101               67
Other                                                                 350              174
                                                                 --------         --------

     Total general and administrative expenses                      8,775            3,129

EARNINGS (LOSS) BEFORE INCOME TAXES EXPENSE (BENEFIT)              (3,969)             371
INCOME TAX EXPENSE (BENEFIT)                                       (1,630)             157
                                                                 --------         --------

NET EARNINGS(LOSS)                                                 (2,339)             214
                                                                 ========         ========

Net earnings (loss) per share                                       ($.41)            $.03

Weighted average common shares outstanding                      5,700,619        6,157,340


</TABLE>



See notes to consolidated financial statements
























                                          5

<PAGE> 6

<TABLE>
<CAPTION>












                                                         HF BANCORP, INC.
                                  CONSOLIDATED  STATEMENT OF CHANGES IN  STOCKHOLDER'S  EQUITY
                                              Three Months Ended September 30, 1996
                                                           (Unaudited)


                                       Common     Additional    Retained   Unrealized   Deferred stock   Treasury        Total
                                        stock     paid-in       earnings   loss on      compensation     stock
                                                  capital                  securities
                                                                           available
                                                                           for sale
                                   -----------------------------------------------------------------------------------------------
                                                                (In Thousands)
<S>                                        <C>      <C>          <C>          <C>           <C>           <C>           <C>    
Balance at July 1, 1996                    $66      $51,113      $40,957      ($2,309)      ($5,408)      ($3,348)      $81,071

Net loss for the three months 
ended September 30, 1996                    --           --       (2,339)          --            --            --        (2,339)

Change in net unrealized loss on
securities available for sale, net          --
of taxes                                    --           --           --          878            --            --           878

Deferred stock compensation                 --           33           --           --           166            --           199
 
                                   ------------------------------------------------------------------------------------------------
Balance at September 30, 1996              $66      $51,146      $38,618      ($1,431)      ($5,242)      ($3,348)      $79,809
                                   ================================================================================================

</TABLE>


















                                               6

<PAGE> 7

<TABLE>
<CAPTION>



                                 HF BANCORP, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENT OF CASH FLOWS
                                           (UNAUDITED)

                                                                             FOR THE THREE MONTHS
                                                                             ENDED SEPTEMBER 30,
                                                                             --------------------
                                                                                1996         1995
                                                                                ----         ----
                                                                            (Dollars in thousands)

<S>                                                                         <C>             <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings(loss)                                                           (2,339)        $ 214
Adjustments to reconcile net earnings (loss)
 to net cash provided by (used in) operating activities:
Provisions for estimated loan and real estate losses                            209           156
 Direct write-offs from real estate operations                                    2            22
Depreciation and amortization                                                   217           192
Amortization of deferred loan fees                                             (118)          (74)
(Accretion) amortization of (discounts) premiums on loans
  and investment and mortgage-backed securities, net                             68            76
Amortization of intangible assets                                               237            --
Federal Home Loan Bank stock dividend                                           (89)          (51)
 Loss (Gain) on sales of real estate, net                                        10           (19)
 Gain on sale of mortgage-backed securities, available for sale                (365)           --
 Gain on sale of premises and equipment                                         (10)           --
Increase in accrued interest receivable                                      (1,178)         (771)
Increase(Decrease) in accounts payable and other liabilities                  5,621       (27,004)
Increase in other assets                                                     (2,188)       (3,053)
Other, net                                                                    1,340            51
                                                                            --------      --------

Net cash provided by (used in) operating activities                           1,417       (30,261)

CASH FLOWS FROM INVESTING ACTIVITIES:

Net increase in loans receivable                                            (50,597)         (117)
Purchases of mortgage-backed securities held to maturity                    (15,039)           --
Purchases of mortgage-backed securities available for sale                   (9,888)      (16,154)
Principal repayments on mortgage-backed securities held to maturity           5,058         5,851
Principal repayments on mortgage-backed securities available for sale         3,576         2,707
Purchases of investment securities held to maturity                              --       (32,804)
Purchases of investment securities available for sale                       (34,970)           --
Principal repayments on investment securities held to maturity                  247           171
Principal repayments on investment securities available for sale              1,577         1,735
Proceeds from sales of mortgage-backed securities available for sale         21,150            --
Proceeds from sales of real estate owned                                        365         1,053
Additions to real estate owned                                                   (5)          (62)
Proceeds from sale of premises and equipment                                      5             4
Additions to premises and equipment                                            (703)          (53)
Maturities of investment securities available for sale                       19,930            --
Cash payment for acquisition, net of cash received                          (14,707)           --
                                                                            --------      --------

     Net cash used in investing activities                                  (74,001)      (37,669)

</TABLE>


See notes to consolidated financial statements



                                                 7

<PAGE> 8

<TABLE>
<CAPTION>




                                  HF BANCORP, INC. AND SUBSIDIARY
                       CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                            (UNAUDITED)


                                                                        FOR THE THREE MONTHS
                                                                        ENDED SEPTEMBER 30,
                                                                        --------------------
                                                                           1996         1995
                                                                           ----         ----
                                                                        (Dollars in thousands)




<S>                                                                     <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES:


Net increase in certificate accounts                                      2,424        1,186
Net decrease in NOW, passbook, money market investment and
 non-interest -bearing accounts                                            (700)      (3,235)
                                                                        --------      -------
Net cash used in financing activities                                     1,724       (2,049)
                                                                        --------      -------


NET DECREASE IN CASH AND CASH EQUIVALENTS                               (70,860)     (69,979)

CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                       100,633       88,642
                                                                        --------     --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                               29,773     $ 18,663
                                                                        ========    =========


SUPPLEMENTAL CASH FLOW DISCLOSURES-

Cash paid during the period for:
Interest on deposit accounts and other borrowings                       $ 1,403     $   698
                                                                        ========    ========

Income Taxes                                                                 --          --
                                                                        ========    ========

SUPPLEMENTAL DISCLOSURES OF NON CASH
 INVESTING AND FINANCING ACTIVITIES:
  Real estate acquired through foreclosure                             $     21   $     901
   Common stock acquired by ESOP                                             --   $      92

Loans to facilitate sale of real estate through foreclosure            $     99   $      91

Purchase of  Palm Springs Savings Bank:
Fair value of assets purchased, excluding cash                         $184,321          --
Fair value of liabilities assumed                                      $169,614          --
                                                                       --------

     Cash payment for acquisition, net of cash received               $  14,707          --
                                                                    ===========
</TABLE>





                                               8

<PAGE> 9


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996

(UNAUDITED)



1. Company Description and Basis of Presentation
   ---------------------------------------------

      HF Bancorp, Inc. is a savings and loan holding company incorporated in the
State of Delaware  that was  organized  for the purpose of acquiring  all of the
capital stock of Hemet Federal Savings and Loan  Association  (the  Association)
upon its conversion from a federally  chartered mutual savings  association to a
federally  chartered  stock savings  association.  On June 30, 1995, HF Bancorp,
Inc.  completed  its  sale of  6,612,500  shares  of its  common  stock  through
subscription and community offerings to the Association's  depositors,  Board of
Directors,  management,  employees and the public and used  approximately 50% of
the net  proceeds  from such sales to purchase all of the  Association's  common
stock issued in the Association's  conversion to stock form. Net proceeds of the
initial  offering  were $51.1 million and $25.5 million was used for purchase of
the Association's  common stock. Such business  combination was accounted for at
historical cost in a manner similar to a pooling of interests.

      The consolidated  financial statements include the accounts of HF Bancorp,
Inc. and its wholly-owned  subsidiary Hemet Federal Savings and Loan Association
and its wholly-owned  subsidiaries,  HF Financial Corporation,  Coachella Valley
Financial  Services  Corporation  ("CVFSC"),   PSSB  Insurance  Services,   Inc.
("PSSBI") and H.F Financial  Corporation's  subsidiary,  First Hemet Corporation
(collectively,  the Company). CVFSC served as the trustee on deeds of trust held
by Palm Springs Savings Bank ("PSSB"). This service will be transferred to First
Hemet Corporation. PSSBI was formed to offer life insurance and other investment
products to customers of PSSB. In September of 1994 PSSBI discontinued marketing
debt and equity  securities,  including  mutual funds, to the general public and
the PSSB customer base.  First Hemet  Corporation  provides trustee services for
the Association, is engaged in real estate development, and receives commissions
from the sale of mortgage life  insurance,  fire  insurance and  annuities.  All
material intercompany transactions, profits and balances have been eliminated.

      The Company is subject to regulation  by the Office of Thrift  Supervision
("OTS"),  the Federal Deposit Insurance  Corporation ("FDIC") and the Securities
and  Exchange  Commission  ("SEC").  Headquartered  in  Hemet,  California,  the
Association  conducts  business  from its main office and three  branch  offices
located in Hemet, California,  three branches in Riverside,  California and from
its other twelve branch offices  located in Sun City, San Jacinto,  Canyon Lake,
Idyllwild, Murrieta, Vista, Oceanside, Rancho Bernardo, Palm Springs, Desert Hot
Springs,  Cathedral City and Rancho Mirage, California. Its deposits are insured
up to the  applicable  limits  under  the  Savings  Association  Insurance  Fund
("SAIF") of the FDIC. The  Association is also a member of the Federal Home Loan
Bank of San Francisco  ("FHLB").  The  Association  is primarily  engaged in the
business of  attracting  funds in the form of deposits  and  supplementing  such
deposits  with FHLB and other  borrowings,  and  investing  such  funds in loans
secured by real estate, primarily one-



                                       9


<PAGE> 10
HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996

(UNAUDITED)

to-four family residential mortgage loans. The Association has, in recent years,
invested in mortgage-backed  and related  securities,  including  collateralized
mortgage   obligations.   To  a  lesser  extent,  the  Association   invests  in
multi-family mortgage loans,  commercial real estate loans,  construction loans,
acquisition, development and land loans, consumer loans, and commercial business
loans. The Association's  revenues are derived  principally from interest on its
mortgage  loans,  consumer  loans,   mortgage-backed  securities  portfolio  and
interest and dividends on its investment  securities.  The Association's primary
sources of funds are  deposits,  principal  and  interest  payments on loans and
mortgage-backed securities, FHLB advances, and other borrowings.

      The accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they 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 necessary  adjustments,
consisting  only  of  normal  recurring   adjustments,   necessary  for  a  fair
presentation  have been included.  The results of operations for the three month
period ended September 30, 1996, are not  necessarily  indicative of the results
that may be expected for the entire fiscal year.

      These  consolidated  financial  statements and the  information  under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of  Operations"  should be read in  conjunction  with the  audited  consolidated
financial  statements  and notes thereto of HF Bancorp,  Inc. for the year ended
June 30,  1996  included  in the  Company's  Annual  Report on Form 10-K for the
fiscal year ended June 30, 1996.

2.    Earnings Per Share
      ------------------

      Earnings per share for the three months ended September 30, 1996 are based
on weighted  average common shares  outstanding  of 5,700,619.  The total issued
shares of 6,612,500  have been  adjusted for the  weighted  average  unallocated
shares under the ESOP plan of 382,881,  for the reduction of outstanding  shares
purchased for the stock  compensation  plan of 198,375 and acquisition of shares
of treasury stock of 330,625 for the three months ended September 30, 1996.
(See Note 6)


3.    Termination of Swap Agreements
      ------------------------------

      On  July  10,  1995,  the  Company  terminated  four  interest  rate  swap
agreements with an aggregate outstanding notional amount of $60,000,000. At June
30, 1995, the weighted  average fixed payment rate and variable payment received
rate were 9.53% and 6.11%,  respectively.  The Company paid a termination fee of
$4,856,000 which has been deferred and is being amortized over

                                       10


<PAGE> 11


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996

(UNAUDITED)

the remaining  terms of the  respective  swap  agreements.  The expected  future
annual  amortization  is as follows:  $1,811,000,  $798,000 and $272,000 for the
years ended June 30, 1997, 1998 and 1999 respectively.  As of September 30, 1996
the remaining deferred amount was $2,373,000.


4.    Loans Receivable
      ----------------

      The Association adopted Statement of Financial Accounting Standards (SFAS)
No. 114,  Accounting by Creditors for  Impairment of a Loan." as amended by SFAS
No. 118,  "Accounting by Creditors for Impairment of a Loan - Income Recognition
and  Disclosures," as of July 1, 1995. These  statements  generally  require all
creditors to account for impaired  loans,  except those loans that are accounted
for at fair value or at the lower of cost or fair value, at the present value of
the expected future cash flows discounted at the loan's effective  interest rate
or, as a practical expedient,  at the loan's observable market price or the fair
value  of the  collateral  if the loan is  collateral  dependent.  SFAS No.  114
indicates that a creditor should evaluate the collectability of both contractual
interest and contractual principal when assessing the need for loss recognition.

      The Association applies the provisions of SFAS No. 114 to all loans in its
portfolio. In applying the provisions of SFAS No. 114, the Association considers
a loan to be impaired when it is probable that the Association will be unable to
collect all  contractual  principal and interest in accordance with the terms of
the loan agreement.  However, in determining when a loan is impaired, management
also  considers the loan  documentation,  current loan to value ratios,  and the
borrowers  current  financial  position.  The  Association  considers  all loans
delinquent  90 days or more and all loans  that have a specific  loss  allowance
applied to adjust the loan to fair value as impaired.

      As of September 30, 1996,  the  Association  had impaired  loans  totaling
$10.7 million which have related specific  reserves of $1.6 million;  there were
$4.9 million of impaired  loans as of  September  30, 1996 for which no specific
reserves had been recorded.  The average  recorded  investment in impaired loans
during the three months ended September 30, 1996 was $11.4 million.  The accrual
of interest on impaired loans is discontinued when, in managements  opinion, the
borrower  may be unable to meet  payments  as they  become  due.  When  interest
accrual is  discontinued,  all unpaid  accrued  interest is  reversed.  Interest
income is subsequently  recognized to the extent of full cash payments  received
and accepted.  As of September 30, 1996 accrued interest on impaired loans was $
70,000 and  interest of $ 153,000 was received in cash for the three months then
ended.  Interest not recognized due to non-accrual  status was $ 101,000 for the
three months ended  September 30, 1996.  Of the $10.7 million of impaired  loans
which have specific reserves  established in the amount of $1.6 million,  52.6%,
or $5.6 million are paid current.



                                       11

<PAGE> 12


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996

(UNAUDITED)


5.    Change in Accounting Principles
      -------------------------------

      During 1995, the FASB issued SFAS No. 121,  "Accounting for the Impairment
of Long- Lived Assets and for Long-Lived  Assets to be Disposed Of" and SFAS No.
122,  "Accounting for Mortgage  Servicing  Rights."  Management does not believe
that either of these  statements  will have a material  impact on the  financial
condition or results of operations of the Company.

      In October 1995, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards (SFAS) No. 123,  "Accounting for Stock-Based
Compensation," which became effective for the Company beginning January 1, 1996.
SFAS  No.  123  requires  expanded   disclosures  of  stock-based   compensation
arrangements  with employees and encourages (but does not require)  compensation
cost to be measured  based on the fair value of the equity  instrument  awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes  compensation  cost  based  on the  intrinsic  value  of  the  equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation  awards to employees and will disclose the required pro
forma effect on net income and earnings per share.
(See note 6)

6.    Stock Plans
      -----------

      The Company established for eligible employees an Employee Stock Ownership
Plan and Trust  ("ESOP")  which  became  effective  upon the  conversion  of the
Association from a mutual to a stock  association (the  "Conversion").  The ESOP
subscribed  for 7% of the  shares  of  common  stock  issued  in the  Conversion
pursuant to the  subscription  rights  granted  under the ESOP plan. On June 30,
1995,  the  ESOP  borrowed  $3,703,000  from  the  Company  in order to fund the
purchase of common stock.  The loan to the ESOP will be repaid  principally from
the  Company's  contributions  to the ESOP  over a period  of ten  years and the
collateral for the loan is the common stock  purchased by the ESOP. The interest
rate for the ESOP loan is 9%. As of September  30, 1996 a total of 46,288 shares
of common  stock was  allocated  to employee  accounts,  leaving a remainder  of
416,587 shares to be allocated over the next nine years.

      At the Company's  Annual Meeting of  Shareholders on January 11, 1996, the
shareholders approved the HF Bancorp, Inc. 1995 Master Stock Option Plan ("Stock
Option Plan") and the Hemet Federal  Savings and Loan  Association  Master Stock
Compensation Plan (the "Stock  Compensation  Plan")  (collectively the "Plans").
These Plans became effective as of the date of approval.  The Stock Compensation
Plan was  authorized  to  acquire  198,375  shares of  common  stock in the open
market.  The Association  contributed  funds to the Stock  Compensation  Plan to
enable the Stock  Compensation  Plan trustees to acquire the necessary shares of
the common stock. On February 28, 1996, the Association  acquired 198,375 shares
in the open market at a price of

                                     12

<PAGE> 13


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996

(UNAUDITED)

$10.00 per share.  Stock  shares are held in trust.  The plan  allocated  34,700
shares to directors with the remaining shares allocated to employees as follows:
75% as a base grant and 25% as a performance grant to employees  (provided goals
are met) which will vest over a 5 year period.  The total shares authorized were
awarded to  directors  and  employees  in key  management  positions in order to
provide them with a proprietary  interest in the Company in a manner designed to
encourage such employees to remain with the Company.  The amount  contributed to
the Stock  Compensation  Plan will be amortized to  compensation  expense as the
Association's  employees and directors become vested in those shares. During the
three months ended September 30, 1996, $98,000 was amortized to expense.

      The Stock Option Plan  provides  for the grant of up to 661,250  shares of
Common Stock to employees in key management  positions and directors and similar
to the Stock  Compensation  Plan, it is intended to provide key  management  and
directors with a proprietary  interest in the Company and therefore an incentive
to remain with the Company.

7.     Recent Developments
       -------------------

Deposit Insurance Funds Act of 1996
-----------------------------------

      On September 30, 1996, the President signed into law the Deposit Insurance
Funds Act of 1996 (the "Funds Act") which, among other things, imposes a special
one-time assessment on SAIF member institutions,  including the Association,  to
recapitalize  the SAIF. As required by the Funds Act, the FDIC imposed a special
assessment of 65.7 basis points on SAIF assessable deposits held as of March 31,
1995,  payable  November 27, 1996.  The special  assessment was recognized as an
expense in the third quarter of 1996 and is tax deductible. The Association took
a pre-tax charge of $4.8 million as a result of the FDIC special assessment.

      The Funds Act also spreads the  obligations  for payment of the  Financing
Corporation  ("FICO")  bonds  across all SAIF and Bank  Insurance  Fund  ("BIF")
members.  Beginning on January 1, 1997,  BIF deposits  will be assessed for FICO
payments  at a rate of 20% of the  rate  assessed  on SAIF  deposits.  Based  on
current  estimates by the FDIC,  BIF deposits will be assessed a FICO payment of
1.3 basis points,  while SAIF deposits will pay an estimated 6.5 basis points on
the FICO bonds.  Full pro rata sharing of the FICO payments between BIF and SAIF
members  will  occur on the  earlier  of January 1, 2000 or the date the BIF and
SAIF are merged. The Funds Act specifies that the BIF and SAIF will be merged on
January 1, 1999 provided no savings associations remain as of that time.

      As a result of the Funds Act,  the FDIC  recently  proposed to  lower SAIF
assessments  to 0 to  27  basis  points  effective  January  1,  1997,  a  range
comparable to that of BIF members.  However,  SAIF members will continue to make
the higher FICO payments described above. Management


                                       13

<PAGE> 14


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996

(UNAUDITED)

cannot  predict the level of FDIC insurance  assessments  on an on-going  basis,
whether the savings  association  charter will be  eliminated or whether the BIF
and SAIF will eventually be merged.


Palm Springs Savings Bank Acquisition
-------------------------------------

      On  September  27,  1996,  Hemet  Federal  Savings  and  Loan  Association
consummated  the  acquisition of Palm Springs  Savings Bank (PSSB) by purchasing
their 1,131,446 shares of common stock for $16.3 million.  The purchase included
acquiring a net loan portfolio of $160.7  million with an average  weighted rate
of 8.47% and savings account deposits of $164.7 million with an average weighted
rate of 4.09%.




















                                       14

<PAGE> 15



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

of Operations
-------------

General
-------

HF Bancorp,  Inc.  ("Bancorp" or the  "Company")  was organized by Hemet Federal
Savings and Loan Association  ("Association" or "Hemet Federal") for the purpose
of  acquiring  all of the  capital  stock of the  Association  to be  issued  in
connection with the  Association's  conversion from mutual to stock form,  which
was  consummated  on  June  30,  1995,  (the  "Conversion").   The  Company  was
incorporated  under  Delaware  law.  The Company is a savings  and loan  holding
company  and is  subject  to  regulation  by the  Office of  Thrift  Supervision
("OTS"),  the Federal Deposit Insurance  Corporation ("FDIC") and the Securities
and Exchange Commission ("SEC"). Headquartered in Hemet, California, the Company
conducts  business  from its main  office and three  branch  offices  located in
Hemet,  California,  three branches in Riverside,  California and from its other
twelve branch offices located in Sun City, San Jacinto,  Canyon Lake, Idyllwild,
Murrieta,  Vista,  Oceanside,  Rancho  Bernardo,  Palm Springs,  Cathedral City,
Rancho Mirage and Desert Hot Springs,  California.  The Association is regulated
by the OTS and the FDIC and its deposits are insured up to the applicable limits
under  the  Savings  Association  Insurance  Fund  ("SAIF")  of  the  FDIC.  The
Association  is also a member of the  Federal  Home  Loan Bank of San  Francisco
("FHLB").

The Company is primarily engaged in the business of attracting funds in the form
of deposits and supplementing such deposits with FHLB and other borrowings,  and
investing  such funds in loans  secured by real  estate,  primarily  one to four
family  residential  mortgage loans. The Company had in past recent years,  when
mortgage demand was not as high as presently  exists,  made  investments in U.S.
agency backed investment  securities and mortgage-backed and related securities,
including collateralized mortgage obligations ("CMOs") that generally are either
guaranteed by a Federal agency, a government  sponsored  entity,  or are private
issuer securities that have an investment grade of AAA. The current direction is
to serve the loan demand in our  expanded  market areas that have grown with the
branch acquisitions in northern San Diego County from Hawthorne Savings,  F.S.B.
and through the  purchase-acquisition  of Palm Springs  Savings Bank that serves
the Coachella  Valley  communities.  To a lesser extent,  the Company invests in
multi-family mortgage loans,  commercial real estate loans,  construction loans,
acquisition,  development and land loans, commercial business loans and consumer
loans.

The  Company's  revenues are derived  principally  from interest on its mortgage
loan and mortgage-backed  securities portfolio and interest and dividends on its
investment  securities.  The Company's primary sources of funds are deposits and
principal and interest payments on loans and  mortgage-backed  securities,  FHLB
advances, and other borrowings.  Through subsidiaries,  the Company also engages
in residential real estate development and receives commissions from the sale of
mortgage life  insurance,  fire insurance,  annuities,  mutual funds and derives
income from trustee services.

Changes in Financial Condition from June 30, 1996 to September 30, 1996
-----------------------------------------------------------------------

Total assets of the Company  increased $ 177.5 million,  or 21.5 %, from $ 826.9
million at June 30, 1996 to $1.004 billion at September 30, 1996, primarily as a
result of the  acquisition of Palm Springs  Savings Bank (PSSB).  (See Note # 7,
Palm Springs Savings Bank Acquisition). Loans


                                       15

<PAGE> 16



receivable net;  increased $213.4 million,  or 94.8% from $225.2 million at June
30, 1996 to $438.6  million at September  30, 1996  primarily as a result of net
loans  acquired  in the  PSSB  acquisition  totalling  $160.7  million  and  the
remainder as a result of increased  lending  activity at the Association  level,
which included $36.9 million in whole loan,  adjustable rate  residential  loans
purchased  in  the  secondary  market.   Mortgage-backed  and  other  investment
securities increased by only $16.0 million, from $467.4 million at June 30, 1996
to $483.3 million at September 30, 1996. Investment in capital stock of the FHLB
increased  from $4.4 million to $5.9 million when comparing the balances at June
30, 1996 to September 30, 1995;  primarily as a result of acquiring $1.4 million
in stock previously owned by PSSB and dividends credited as stock for $93,000.

Deposit account balances  increased $166.4 million or 24.8%, from $669.7 million
at June 30, 1996 to $836.1  million at September 30, 1996,  primarily due to the
PSSB  acquisition  that  added  accounts  totalling  $164.7  million  in deposit
accounts.  Total equity  decreased  $1.3 million from $81.1  million at June 30,
1996 to 79.8 million at September  30, 1996,  or 1.6%  primarily due to the $2.3
million net loss for the three months ended  September  30, 1996 which  includes
the $2.8 million  after tax impact of the one-time  SAIF  assessment  accrual at
September  30,  1996,  which  was  partially  offset by  improvement  in the net
unrealized  loss position on securities  available for sale that added $878,000,
net of taxes, to equity at September 30, 1996.

Managing Interest Rate Risk and Hedging Activities
--------------------------------------------------

In an effort to manage the  Company's  vulnerability  to interest  rate changes,
management closely monitors interest rate risk on an ongoing basis.

The Company has limited its exposure to interest rate risk, in part, through the
origination  and  purchase  of ARM  loans  and  shorter-term  fixed-rate  loans.
Management believes that, although investment in ARM loans may reduce short-term
earnings below amounts  obtainable  through  investments in fixed-rate  mortgage
loans, an ARM loan portfolio reduces the Company's  exposure to adverse interest
rate  fluctuations  and enhances longer term  profitability.  During the quarter
ended September 30, 1996 the Association  purchased  adjustable rate residential
whole loans in the secondary  market totalling $36.9 million with a net weighted
average  coupon of 7.0% . Within this group $22.8 million are indexed to the one
year constant  maturity  treasury  index  adjusting on an annual basis and $14.1
million were  structured as three/one  adjustable rate loans whereby the rate is
fixed for the first  three  years of the loan's  life and then  reverts to a one
year adjustable based on the one year constant  maturity  treasury index.  There
can be no  assurance  that any  substantial  amount  of ARM  loans  meeting  the
Association's  underwriting  standards will be available for  origination in the
future.  The overall  investment policy of the Company is designed to manage the
interest rate sensitivity of its overall assets and  liabilities,  to generate a
favorable  return without  incurring undue interest rate risk, to supplement the
Company's  lending  activities,  and to  provide  and  maintain  liquidity.  The
Company's  objective is to control  interest  rate risk through  investments  in
instruments  with shorter terms to maturity or average lives to better match the
repricing of  liabilities.  As of June 30, 1996,  pursuant to the results of the
OTS Risk  Management  Model,  the  Association's  Net Portfolio  Value was $71.1
million compared to its book value of $ 60.7 million.


The Company has also utilized a variety of financial  instruments and strategies
to manage the
                                     16

<PAGE> 17



interest  rate risk  associated  with its  interest  rate  sensitive  assets and
liabilities,  including  off-balance sheet  transactions,  such as interest rate
agreements,  including  swaps,  caps and floors,  which the  Company  originally
entered into to synthetically  adjust the duration of the Company's  liabilities
to more closely match that of its assets. At September 30, 1996, the Company had
two interest swap agreements with an aggregate notional amount of $35.0 million.
One swap will mature on January 6, 1999 in the notional amount of $20.0 million,
and the other will mature on January 30,  1999 in the  notional  amount of $15.0
million.  On July 10, 1995 the  Association  terminated  four interest rate swap
contracts  with an  aggregate  notional  amount  of  $60.0  million  invoking  a
termination  fee of $4.9  million  which is being  amortized to expense over the
individual  remaining  contract  lives of each swap.  At September  30, 1996 the
deferred loss for  termination  fees was $2.4  million.  During the three months
ended September 30, 1996 the Association amortized $509,000 of the deferred loss
to interest expense and charged  interest  expense for $270,000  relating to the
$35.0 million of current existing interest rate swaps.

Liquidity and Capital Resources
-------------------------------

The  Company's  primary  sources of funds are  deposits,  principal and interest
payments on loans, mortgage-backed and related securities, retained earnings and
FHLB advances and other borrowings.  While maturities and scheduled amortization
of  loans  are  predictable  sources  of  funds,   deposit  flows  and  mortgage
prepayments  are  greatly   influenced  by  general  interest  rates,   economic
conditions,  and  competition.  The  Association  has  continued to maintain the
required  minimum  levels of liquid assets as defined by OTS  regulations.  This
requirement,  which may be varied at the  direction  of the OTS  depending  upon
economic  conditions and deposit  flows,  is based upon a percentage of deposits
and short-term borrowings. The required ratio is currently 5%. The Association's
liquidity  ratio was 11.8 % at September 30, 1996 compared to 12.0 % at June 30,
1996. It is the  Association's  intent to maintain  liquidity in a 5-6% range to
take  advantage  of higher  interest  income  opportunities  from  mortgage  and
consumer related investments. The ratio at June 30 and September 30, 1996 appear
high because the  Association  was still in the process of deploying  funds on a
more permanent  basis that were acquired in the purchase of three branch offices
from Hawthorne Savings, F.S.B. on June 21, 1996 that provided cash in the amount
of $177.9 million,  and from $15.6 million derived on September 24, 1996 through
the sale of three GNMA adjustable rate  Mortgage-backed  security pools, held as
available for sale.

The Company's  cash flows are comprised of three primary  classifications:  cash
flows from operating activities,  investing activities and financing activities.
See Statements of Cash Flows in the Consolidated  Financial  Statements included
herein.  The  Company's  primary  sources of funds during the three months ended
September  30, 1996 were its excess  liquidity  at the  beginning of the period,
principal repayments on loans and mortgage-backed and investment securities, and
proceeds from the sales of available for sale mortgage-backed securities.

The Company has other sources of liquidity if a need for additional funds arises
including  FHLB  advances.  At September  30, 1996,  the  Association  had $70.0
million  in  advances  outstanding  from the  FHLB;  no change  from the  amount
outstanding  at June 30,  1996.  The  Company had no other debt  outstanding  at
September 30, 1996.  The  Association  has  available  collateral in the form of
mortgage  loans,  mortgage  backed and related  securities  and U.S.  Government
Agency Notes and Bonds that may be used as collateral in securing  financing for
cash needs.

                                       17

<PAGE> 18



The  Association  must  maintain  capital  standards  as set  forth  by  federal
regulations.  As of September  30,  1996,  these  requirements  are: 1) tangible
capital of 1.5 % of adjusted  assets;  2) core capital of 3% of adjusted assets;
and 3) risk-based  capital of 8.0 % of  risk-weighted  assets.  At September 30,
1996, the Association  exceeded all minimum regulatory  capital  requirements as
shown in the table below:

<TABLE>
<CAPTION>

                                                          PERCENT OF
                                                           ADJUSTED
                                        AMOUNT           TOTAL ASSETS
                                        ------           ------------  
                                          (DOLLARS IN THOUSANDS)

<S>                                    <C>                   <C>  
Tangible Capital
----------------
Actual capital                         $53,476               5.46%

Minimum required                        14,702               1.50
                                        ------               -----
Excess                                 $38,774               3.96%
                                       =======               =====
Core Capital
------------
Actual capital                         $53,476               5.46%

Minimum required                        29,405               3.00
                                       -------               -----
Excess                                 $24,071               2.46%
                                       =======               =====

                                       AMOUNT           PERCENT OF RISK-
                                       ------
                                                        WEIGHTED ASSETS
                                                        ---------------
Risk-based Capital
------------------
Actual capital                         $57,981              15.32%

Minimum required                        30,276               8.00
                                       -------               -----
Excess                                 $27,705               7.32%
                                       =======               =====
</TABLE>


The Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
contains "prompt  corrective  action"  provisions under which insured depository
institutions  are to be classified into one of five  categories  based primarily
upon  capital  adequacy.   The  categories  range  from  "well  capitalized"  to
"critically  under  capitalized."  OTS  guidelines  define a "well  capitalized"
institution as follows: A savings  institution is "well capitalized" if it has a
total  risk-based  capital  ratio  of 10% or  greater,  has a Tier 1  risk-based
capital  ratio  (Tier 1 capital to total  assets) of 6% or  greater,  has a core
capital  ratio of 5% or greater and is not subject to any written  capital order
or  directive  to meet and  maintain a  specific  capital  level of any  capital
measure.  At September 30, 1996,  the  Association's  regulatory  capital levels
exceed  the  thresholds  required  to  be  classified  as a  "well  capitalized"
institution.  The OTS issued final  regulations  which set forth the methodology
for calculating an interest rate risk component that is being  incorporated into
the OTS regulatory

                                     18

<PAGE> 19



capital rules. Under the new regulations,  only savings institutions with "above
normal" interest rate risk exposure are required to maintain additional capital.
This  additional  capital would  increase the amount of a savings  institution's
otherwise  required  risk-based  capital  requirement.  The  final  rule  became
effective January 1, 1994 however OTS has delayed  implementation  until further
notice.  Had the regulation been in effect as of June 30, 1996 the Associations'
additional  capital  contribution for the risk based capital  requirement  would
have been $8.1  million;  raising the  requirement  to $38.3 million which would
reflect an excess of actual capital over the required risk- based requirement by
$19.5 million.

Management  believes that, under the current  regulations,  the Association will
continue to meet its minimum capital  requirements in the coming year.  However,
events beyond the control of the Association, such as changing interest rates or
a further downturn in the economy in the areas where the Association has most of
its loans and real estate projects,  could adversely affect future earnings and,
consequently,  the ability of the Association to meet its future minimum capital
requirements.

Nonperforming and Classified Assets
-----------------------------------

The  following  table  sets  forth  information   regarding   non-accrual  loans
delinquent 90 days or more and real estate acquired through foreclosure (REO).

<TABLE>
<CAPTION>


                                                      SEPTEMBER 30, 1996     JUNE 30, 1996
                                                      ------------------     -------------
                                                               (DOLLARS IN THOUSANDS)

<S>                                                         <C>                  <C>   
Non-accrual mortgage loans delinquent 90 days or
more                                                        $4,897               $1,301

Non-accrual consumer loans delinquent 90 days or
more                                                            50                  --
                                                            ------              ------
Total nonperforming loans                                    4,947               1,301

Total investment in REO                                      4,028               1,460
                                                            ------              ------
Total nonperforming assets                                  $8,975              $2,761
                                                            ======              ======
Nonperforming loans to gross loans                           1.06%                 .56%

Non performing assets to total assets                         .89%                 .33%

</TABLE>

The Association  adopted SFAS 114, as amended by SFAS 118 as of July 1, 1995 and
recognized no impact upon  adoption.  A loan is  considered  impaired when it is
probable  that  the  Association  will be  unable  to  collect  all  contractual
principal and interest in accordance with the terms of the loan agreement,  when
a loan is ninety days or more past due, or when the loan has been  classified as
"substandard" by an internal review process.

At  September  30, 1996 the  Association  had  impaired  loans  totalling  $10.7
million, which have

                                       19

<PAGE> 20



related  specific  reserves  of $1.6  million  and there  were $4.9  million  of
impaired loans as of September 30, 1996 for which no specific  reserves had been
recorded.  The average  recorded  investment in impaired  loans during the three
month period ended September 30, 1996 was $11.4 million. With the acquisition of
Palm Springs Savings Bank on September 27, 1996 the Association's impaired loans
increased by a gross outstanding loan amount of $6.2 million.

Interest is accrued on impaired  loans on a monthly basis except for those loans
that are 90 days or more delinquent  (non-accrual loans). When a loan becomes 90
days or more  delinquent,  the  accrual of  interest  ceases and all  previously
accrued  interest is reversed.  For the three months ended  September  30, 1996,
accrued  interest on impaired  loans was  $70,000 and  interest of $153,000  was
received in cash.

If all  non-accrual  loans had been performing in accordance with their original
loan terms and had been  outstanding  from the earlier of the  beginning  of the
period or origination,  the Association  would have recorded  interest income of
$101,000 during the three month period ended September 30, 1996.

The allowance for loan losses is established through a provision for loan losses
based on management's evaluation of the risks inherent in its loan portfolio and
the general economy. Management reviews the Association's loan loss allowance on
a monthly basis. In determining levels of risk,  management  considers a variety
of  factors,   including  asset  classifications,   economic  trends,   industry
experience and trends, geographic  concentrations,  estimated collateral values,
management's assessment of the credit risk inherent in the portfolio, historical
loan loss experience, and the Association's underwriting policies. The allowance
for loan losses is  maintained  at an amount  management  considers  adequate to
cover losses in loans receivable which are deemed probable and estimable.

In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically review the Association's  allowance for loan
losses.  Such agencies may require the Association to recognize additions to the
allowance based on judgments different from those of management.

While  management uses the best  information  available to make these estimates,
future  adjustments  to  the  allowances  may  be  necessary  due  to  economic,
operating,  regulatory and other conditions that may be beyond the Association's
control.







                                       20

<PAGE> 21



The following  tables set forth  activity in the  Association's  allowances  for
estimated  loan losses and estimated  real estate losses during the three months
ended September 30, 1996 and 1995:

<TABLE>
<CAPTION>

                                                         1996          1995
                                                         ----          ----
                                                           (IN THOUSANDS)

<S>                                                     <C>           <C>   
Allowance for loan losses:
--------------------------
   Balance at June 30                                   $3,068        $2,694

   Allowance Acquired from PSSB                          2,963            --

   Chargeoffs:

     One to four family                                    (11)          (64)

     Commercial real estate                                 --            --

     Construction loans                                     --           (16)

     Land/acquisition and development                      (86)           --

     Consumer                                               --          (45)
                                                        ------        ------
     Total chargeoffs                                      (97)        (125)

   Provision for estimated loan losses                     179          145
                                                        ------      -------
   Balance at September 30                              $6,113      $ 2,714
                                                        ======      =======
Allowance for real estate losses:
---------------------------------

   Balance at June 30                                   $1,917     $ 1,927

   Allowance acquired from PSSB                            491          --

     Chargeoffs                                             (8)        (45)

     Provision for estimated real estate losses            29           11
                                                       -------      -------
   Balance at September 30                             $2,429       $1,893
                                                       =======      =======

</TABLE>


The ratio of allowance for estimated  loan losses to gross loans  decreased from
1.33% at June 30,  1996 to 1.31% at  September  30,  1996 due to an  increase in
gross loans over the three month  period as a result of  increased  fundings and
the  acquisition of $175.9 million in gross loans  associated  with Palm Springs
Savings  Bank.  The  ratio of  allowance  for  estimated  loan  losses  to gross
non-performing  loans  decreased  from 235.75 % at June 30, 1996, to 123.56 % at
September 30, 1996 due primarily to an increase in  non-performing  loans,  from
$1.3  million  at June 30,  1996 to $4.9  million at  September  30,  1996.  The
increase in non-performing loans was due primarily to the

                                     21


<PAGE> 22



acquisition of $2.5 million in nine loans  associated  with Palm Springs Savings
Bank  and an  increase  of $1.0  million  within  the  Association's  portfolio,
excluding the loans acquired from PSSB, of  non-performing  loans totalling $2.4
million.   The  ratio  of  allowance  for  total   estimated   losses  to  total
non-performing  assets  decreased  from  94.18%  at June 30,  1996 to  78.06% at
September 30, 1996,  primarily due to an increase in the level of non-performing
assets of $6.2 million.  Such increase is primarily a result of increased levels
of  non-performing  loans of $2.5 million and real estate owned from foreclosure
in the amount of $2.7 million  acquired  with Palm  Springs  Savings  Bank.  The
$97,000 of allowance for loan loss  charge-offs  was primarily  attributable  to
non-performing  loans that  converted to real estate owned  through  foreclosure
(REO-F)  during the three  months ended  September  30,  1996.  The  Association
accounts for REO-F at fair market value upon acquisition and management believes
that adequate loss provisions have been established.

Comparison  of Operating  Results for the Three Months Ended  September 30, 1996
--------------------------------------------------------------------------------
and 1995
--------

GENERAL:  The Company  reported a net loss of $2.3  million for the three months
--------
ended  September  30, 1996  compared  to a net profit of $214,000  for the three
months ended  September 30, 1995,  primarily as a result of the pre-tax  accrued
charge of $4.8 million,  that represented the amount the Association  recognized
for the  SAIF  recapitalization  legislation  enacted  on  September  30,  1996.
Exclusive of such charge,  the Company's  profit for the quarter ended September
30, 1996 would have been $453,000. Net interest income increased $1.1 million or
30.0% from $3.5 million for the quarter ended September 30, 1995 to $4.6 million
for the quarter ended  September  30, 1996,  primarily due to an increase in the
weighted average yield on interest earning assets of 12 basis points, from 7.18%
to 7.30% for the  quarter  ended  September  30,  1995 and  1996,  respectively.
Additionally the weighted average cost of interest bearing liabilities decreased
29 basis points from 5.68% to 5.39% for the same comparable period.  Overall the
effect was an  improvement  of 41 basis  points in interest  rate spread for the
quarter  ended  September  30, 1996  compared to the same period in 1995.  Other
income  increased  from $134,000 to $419,000  primarily due to a gain on sale of
mortgage-backed  securities available for sale, in the amount of $365,000.  This
was  partially  offset by the  addition of  amortization  of  intangible  assets
expense of $237,000 for September 30, 1996 related to branch  deposits  acquired
from Hawthorne Savings, FSB on June 21, 1996.

The  Company's  reported net loss of $2.3  million  equated to ($0.41) per share
compared  to net income of  $214,000  or $0.03 per share for the same  period of
1995. Total interest  expense  increased by $2.2 million to $9.8 million for the
three months  ended  September  30, 1996  compared to $7.6 million for the three
month period  ended  September  30, 1995  primarily  due to a 41.7%  increase in
average deposit  accounts from $465.9 million to $660.1 million for the quarters
ending September 30, 1995 and September 30, 1996, respectively.

INTEREST  INCOME:  Interest income  increased $3.3 million,  or 29.5% from $11.1
-----------------
million to $14.4 million for the three months ended September 30, 1995 and 1996,
respectively,  with interest and dividends on  investment  securities  making up
$2.6 million of the increase,  primarily due to the  additional  funds  invested
from the purchase of deposits in three  branches from  Hawthorne  Savings F.S.B.
whereby the proceeds  were  invested on a short term basis until more  permanent
loan funding was  arranged.  Interest on loans also  increased  by $837,000,  or
20.1% from $4.2  million to $5.0  million  for the  comparable  quarters  ending
September 30, 1995 and September 30, 1996, respectively,  due to the increase in
average balances of net loans receivable from $201.9 to $238.5

                                     22


<PAGE> 23



for the  comparable  periods and the  improvement  of 14 basis points in average
yield from 8.26% to 8.40%. Average balances of total interest earning assets for
the quarter ended September 30, 1996 exceeded the average  balances for the same
quarter of 1995 by $170.0 million and the average weighted yield increased by 12
basis points from 7.18% for the quarter  ended  September 30, 1995 to 7.30 % for
the quarter ended September 30, 1996.

INTEREST EXPENSE:  Interest expense increased $2.2 million,  or 29.3 % from $7.6
-----------------
million for the three  months ended  September  30, 1995 to $9.8 million for the
same  period in 1996,  primarily  due to an  increase  in  interest  on  deposit
accounts of $2.3 million from $5.9 million to $8.1 million for the quarter ended
September  30, 1995 and 1996,  respectively.  Interest on advances from the FHLB
and other borrowing reflected no appreciable change for the comparative quarter,
while interest expense of hedging  transactions  decreased $45,000 from $825,000
for the quarter  ended  September  30, 1995 to  $780,000  for the quarter  ended
September 30, 1996. The average  weighted cost of interest  bearing  liabilities
decreased 29 basis points from 5.68% for the three  months ended  September  30,
1995 to 5.39% for the quarter ended September 30, 1996.

NET INTEREST  INCOME:  Net interest  income before  provision for estimated loan
---------------------
losses increased $1.1 million or 30.0%,  from $3.5 million for the quarter ended
September  30, 1995 to $4.6  million for the quarter  ended  September  30, 1996
primarily  due to a 41  basis  point  increase  in the  spread  between  average
weighted yield on interest earning assets and interest bearing  liabilities from
1.50% to 1.91% when comparing the quarter ended September 30, 1995 and September
30,  1996,  even though the average  balances  of interest  bearing  liabilities
increased  $194.2  million and the average  balances of interest  earning assets
increased $170.0 million from September 30, 1995 to September 30, 1996.

PROVISION FOR  ESTIMATED  LOAN LOSSES:  The provision for estimated  loan losses
--------------------------------------
increased by $34,000 from $145,000 for the quarter  ended  September 30, 1995 to
$179,000 for the quarter ended  September 30, 1996. The balance of provision for
estimated loan losses  increased from $2.7 million at September 30, 1995 to $6.1
million at September 30, 1996  primarily due to the  acquisition of Palm Springs
Savings Bank whereby the acquired  allowance for  estimated  loan losses of $3.0
million was added to the outstanding  total.  Such allowances  include valuation
reserves  provided for  specifically  identified  loan losses as well as general
valuation  allowances for loan losses. Total non-performing loans increased from
$1.7  million at  September  30, 1995 to $4.9  million at  September  30,  1996,
whereby $2.5 million of  non-performing  loans are included that were recognized
in the Palm Springs  Savings Bank  acquisition  that culminated on September 27,
1996. The ratio of non-performing loans to gross loans receivable increased from
 .80% at September  30, 1995 to 1.06% as of  September  30, 1996 and the ratio of
allowances  for estimated  loan losses to  non-performing  loans  decreased from
161.45% at September 30, 1995 to 123.56% at September 30, 1996.

OTHER  INCOME AND  EXPENSE:  Other  income and expense  increased by $285,000 to
---------------------------
$419,000 for the quarter ended  September 30, 1996 from $134,000 for the quarter
ended  September  30,  1995.  The three  month  period  increase  was  primarily
attributable  to a net gain on the sale of  mortgage-backed  securities from the
available  for sale  portfolio  in the  pre-tax  amount of  $365,000  during the
quarter ended  September 30, 1996 whereas no activity in this category  occurred
for the quarter ended September 30, 1995.  Savings fees increased  $156,000 from
$15,000

                                     23

<PAGE> 24



to $171,000 for the  comparable  periods  primarily due to the growth in savings
deposit  accounts  occurring  with the purchase of three branches from Hawthorne
Savings  F.S.B.  An  offsetting  affect to the  increase in total  other  income
(expense)  was a charge of $237,000  for the quarter  ended  September  30, 1996
resulting from the amortization of intangible  assets (core deposit  intangible)
associated with the branches purchased from Hawthorne Savings, F.S.B..

GENERAL  AND  ADMINISTRATIVE  EXPENSES:   General  and  administrative  expenses
---------------------------------------
increased  by $5.6  million or 180.4% from $3.1  million to $8.8 million for the
quarters ended September 30, 1995 and 1996 respectively,  primarily attributable
to the  increase  in FDIC  insurance  and other  assessments  as a result of the
one-time assessment to recapitalize the S.A.I.F.  which amounted to $4.8 million
that was accrued at September  30, 1996 and an increase in salaries and employee
benefits  which  increased  from $1.6  million to $2.0  million  for the quarter
September  30, 1995 and 1996,  respectively.  This  increase of $361,000 for the
quarter  ended  September  30, 1996 over the quarter  ended  September  30, 1995
reflects an  increase in staff  employees  acquired  with the  purchase of three
branches from Hawthorne  Savings  F.S.B.  and  approximately  $98,000 of accrued
employee benefit expense associated with the Company's Master Stock Compensation
Plan. All other categories of general and  administrative  expense  reflected an
aggregate  increase of $544,000 over the comparable  period ending September 30,
1995  primarily  as a result of the  growth in offices  and the market  services
area.

INCOME TAXES:  Income tax expense (benefit) changed $1.8 million from an expense
-------------
of  $157,000  for the  quarter  ended  September  30,  1995 to a benefit of $1.6
million for the quarter ended  September  30, 1996  primarily as a result of the
SAIF assessment fee imposed by the FDIC and accrued as of on September 30, 1996.
The net after tax effect of the SAIF assessment  charge of $4.8 million was $2.8
million.






















                                       24

<PAGE> 25



PART II - OTHER INFORMATION

Item 1. Legal Proceedings
        -----------------

        The Company is not involved in any material  pending  legal  proceedings
        other than routine legal proceedings occurring in the ordinary course of
        business.  Such other  routine  legal  proceedings  in the aggregate are
        believed by  management  to be  immaterial  to the  Company's  financial
        condition or results of operations.

Item 2. Changes in Securities
        ---------------------

        None.

Item 3. Defaults Upon Senior Securities
        -------------------------------

        Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------

        a) The Company's Annual Meeting of Stockholders was held on October 28,
           1996.

        b) Not Applicable.

        c) At such meeting its stockholders approved the following:

        1.  The election of  the following individuals as Directors for the term
        of three years each

<TABLE>
<CAPTION>

                                          For               Withheld
                                          ---               --------
            <S>                           <C>               <C>   
            Leonard E. Searl              5,653,343         42,458

            Norman M. Coulson             5,652,118         43,683
</TABLE>

        2.  The appointment of Deloitte & Touche, L.L.P. as independent auditors
        of the Company for the fiscal year ending June 30, 1997 was ratified and
        approved in all respects.
<TABLE>
<CAPTION>


            For                     Against                 Abstain
            ---                     -------                 -------   
            <S>                     <C>                     <C>
            5,649,604               25,448                  20,749

</TABLE>

Item 5. Other Information
        -----------------  

        Not applicable.

Item 6. Exhibits and Reports on Form 8-K
        --------------------------------  

       A.  Exhibits

                                       25

<PAGE> 26



            (3) (I) Articles of Incorporation*

                 By-laws*

            (4) Stock Certificate*

       B.  Reports on Form 8-K

           (1) A report on Form 8-K was filed with the  Securities  and Exchange
           Commission on September 4, 1996 under  commission file number 0-25722
           reflecting the pro forma financial information required by Article 11
           of  Regulation  S-X  regarding  the purchase of three  branches  with
           deposit  accounts  totalling  $185.2 million from  Hawthorne  Savings
           F.S.B.  which was  consummated on June 21,1996.


           (2) A report on form 8-K was filed with the  Securities  and Exchange
           Commission on October 1, 1996 under  commission  file number  0-25722
           stating in summary that as of September 27, 1996 the  consummation of
           the acquisition of Palm Springs Savings Bank was completed and noting
           that  pro  forma  financial  statements  would  be  filed  as soon as
           practicable.

           (3) A report on Form 8-K was filed with the  Securities  and Exchange
           Commission on November 8, 1996,  under commission file number 0-25722
           reflecting the pro forma financial information required by Article 11
           of Regulation S-X regarding the  acquisition of Palm Springs  Savings
           Bank which was completed as of the close of business on September 27,
           1996.


------------------------------------
*Incorporated  herein by reference  into this document from the Exhibits to Form
S-1  Registration  Statement and any amendments  thereto,  filed March 14, 1994,
Registration No. 33-90286.









                                       26

<PAGE> 27
















                                 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.



                                                         HF BANCORP INC.
                                                          (Registrant)

Date: November 8, 1996                          By:    /s/ J. Robert Eichinger
                                                      ------------------------
                                                      J. Robert Eichinger
                                                      Chairman/President
                                                      Chief Executive Officer



Date: November 8, 1996                          By:    /s/ Alex J. Neil
                                                      -----------------
                                                      Alex J. Neil
                                                      Vice President/Treasurer