<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, 1997
                                               ------------------

             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 10, 1997.




<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, 1997 (unaudited), and June 30, 1997            3-4

            Consolidated Statements of Operations (unaudited) for the
            Three Months ended September 30, 1997, and 1996              5-6

            Changes in Stockholders' Equity (unaudited)                   7

            Consolidated Statements of Cash Flows (unaudited) for the
            Three Months ended September 30, 1997 and 1996               8-10

            Introduction                                                  11

            Description of Business                                     12-16

            Notes to Consolidated Financial Statements (unaudited)      17-21

            Recent Developments                                         22-23

ITEM 2.                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                        ---------------------------------------
                        FINANCIAL CONDITION AND RESULTS OF OPERATIONS   24-48
                        ---------------------------------------------

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

Item 1.              Legal Proceedings                                     49

Item 2.              Changes in Securities                                 49

Item 3.              Defaults Upon Senior Securities                       49

Item 4.              Submission of Matters to a Vote of Security Holders   49

Item 5.              Other Information                                     50

Item 6.              Exhibits and Reports on Form 8-K                      50

            Signature Page                                                 51


                                        2

<PAGE> 3

<TABLE>
<CAPTION>



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


                                                                             Sept. 30         June 30,
                                                                                 1997            1997
                                                                                 ----            ----

                                                                          (Unaudited)

                                                                           (Dollars In Thousands)
ASSETS

<S>                                                                               <C>               <C>    
Cash and cash equivalents                                                         $ 25,624          $18,411
Investment securities held to maturity (estimated fair value of $18,630
 and $26,557 at September 30, 1997 and June 30, 1997, respectively)                 18,530           26,794
Investment securities available for sale (amortized cost of $132,077
 and $147,507 at September 30, 1997 and June 30, 1997, respectively)               131,573          144,997
Loans held for sale                                                                  2,921              335
Loans receivable (net of allowance for estimated loan losses of $4,301
 and $4,780 at September 30, 1997 and June 30, 1997, respectively)                 524,085          484,334
Mortgage-backed securities held to maturity (estimated fair value of $143,560
 and $148,907 at September 30, 1997 and June 30, 1997, respectively)               144,472          151,369
Mortgage-backed securities available for sale (amortized cost of $154,267
 and $108,771 at September 30, 1997 and June 30, 1997, respectively)               155,683          109,493
Accrued interest receivable                                                          7,032            7,332
Investment in capital stock of the Federal Home Loan Bank, at cost                   6,318            6,224
Premises and equipment, net                                                          7,932            8,289
Real estate owned, net of valuation allowances
 Acquired through foreclosure                                                        5,573            5,298
 Acquired for sale or investment                                                       149              418
Repossessed Consumer Assets                                                             14               --
Intangible assets                                                                   13,883           14,471
Other assets                                                                         6,588            6,984
                                                                                 ---------        ---------

Total assets                                                                    $1,050,377         $984,749
                                                                                ==========         ========

</TABLE>


                                                      3

<PAGE> 4

<TABLE>
<CAPTION>


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


                                                                                   Sept 30         June 30,
                                                                                      1997             1997
                                                                                      ----             ----
               
                                                                               (Unaudited)

                                                                           (Dollars In Thousands Except Per Share Amounts)
<S>                                                                               <C>              <C>     
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Checking deposits                                                              $ 74,619         $ 73,771
   Savings deposits                                                                107,854          111,742
   Money market deposits                                                            50,723           38,620
   Certificates of deposit                                                         623,833          615,522
                                                                                   -------          -------
Total deposits                                                                    $857,029         $839,655

Advances from the Federal Home Loan Bank                                            95,000           50,000
Accounts payable and other liabilities                                               6,736            6,888
Income taxes                                                                         8,318            7,179
                                                                                ----------         --------

     Total liabilities                                                             967,083          903,722


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, 1997 and June 30, 1997                     66               66
Additional paid-in capital                                                          51,450           51,355
Retained earnings, substantially restricted                                         38,943           38,441
Net unrealized gain (loss) on securities available for sale, net of taxes              536           (1,050)
Deferred stock compensation                                                         (4,353)          (4,437)
Treasury stock, 330,625 shares at September 30, 1997 and June 30, 1997              (3,348)          (3,348)
                                                                                ----------         --------

     Total stockholders' equity                                                     83,294           81,027
                                                                                ----------         --------

Total liabilities and stockholders' equity                                      $1,050,377         $984,749
                                                                                ==========         ========



Nominal book value per share                                                        $13.26           $12.90
Tangible book value per share                                                       $11.58           $11.15
Average market price per share on the final trading day of the period               $16.50           $14.38

Shares utilized in above book value calculations                                 6,281,875        6,281,875


See notes to consolidated financial statements
</TABLE>



                                                  4

<PAGE> 5

<TABLE>
<CAPTION>



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

                                                                 FOR THE THREE MONTHS
                                                                 ENDED SEPTEMBER 30,
                                                                ---------------------        
 
                                                                    1997          1996
                                                                    ----          ----
                                                                 (Dollars In Thousands)
<S>                                                                  <C>        <C>   
INTEREST INCOME:
Interest on loans                                                    $9,829     $5,009
Interest on mortgage-backed securities                                4,617      4,655
Interest and dividends on investment securities                       3,789      4,735
                                                                     ------     ------

     Total interest income                                           18,235     14,399

INTEREST EXPENSE:
Interest on deposit accounts                                         10,383      8,138
Interest on advances from the Federal Home Loan
 Bank and other borrowings                                            1,246        915
Net interest expense of hedging transactions                            486        780
                                                                     ------     ------

     Total interest expense                                          12,115      9,833
                                                                     ------     ------

NET INTEREST INCOME BEFORE PROVISION
 FOR ESTIMATED LOAN LOSSES                                            6,120      4,566

PROVISION FOR ESTIMATED LOAN LOSSES                                     100        179
                                                                     ------     ------

NET INTEREST INCOME AFTER PROVISION
 FOR ESTIMATED LOAN LOSSES                                            6,020      4,387

OTHER INCOME (EXPENSE):
Loan and other fees                                                      97         51
Loss from real estate operations, net                                  (443)       (52)
Gain on sale of mortgage-backed and investment
   securities available for sale                                         56        365
Gain on sale of loans held for sale                                      27         --
Savings fees                                                            451        171
Other income                                                             60        121
Amortization of intangible assets                                      (588)      (237)
                                                                     -------    -------

     Total other income (expense)                                      (340)       419




See notes to consolidated financial statements
</TABLE>




                                               5

<PAGE> 6

<TABLE>
<CAPTION>


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


                                                                 FOR THE THREE MONTHS
                                                                 ENDED SEPTEMBER 30,
                                                                 -----------------------

                                                                     1997         1996
                                                                     ----         ----

<S>                                                                 <C>        <C>    
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and employee benefits                                      $ 2,545    $ 1,997
Occupancy and equipment expense                                         982        630
FDIC insurance and other assessments                                    181        322
SAIF special assessment                                                   0      4,757
Legal and professional services                                         124        168
Data processing service costs                                           471        292
Marketing                                                                88        158
Savings expense                                                          28        101
Other                                                                   403        350
                                                                   --------    -------

     Total general and administrative expenses                        4,822      8,775

EARNINGS (LOSS) BEFORE INCOME TAX
EXPENSE (BENEFIT)                                                       858     (3,969)

INCOME TAX EXPENSE (BENEFIT)                                            356     (1,630)
                                                                      -----    --------

NET EARNINGS (LOSS)                                                   $ 502    $(2,339)
                                                                      =====    ========

Net earnings (loss) per share                                         $0.08    $ (0.41)

Weighted average common shares utilized in earnings
   per share calculations                                         5,999,068  5,700,619



See notes to consolidated financial statements
</TABLE>








                                              6

<PAGE> 7

<TABLE>
<CAPTION>


                                        HF BANCORP, INC.
                    CONSOLIDATED  STATEMENT OF CHANGES IN  STOCKHOLDERS'  EQUITY
                              Three Months Ended September 30, 1997
                                           (Unaudited)



                                        Common   Additional   Retained   Unrealized   Deferred stock    Treasury    Total
                                         stock     paid-in    earnings   gain (loss)   compensation       stock
                                                   capital                       on
                                                                         securities
                                                                          available
                                                                           for sale
                                       -----------------------------------------------------------------------------------
                                                          (Dollars In Thousands)
                          
<S>                                      <C>     <C>         <C>           <C>           <C>           <C>        <C>    
Balance at June 30, 1997                  $66     $51,355     $38,441      ($1,050)      ($4,437)      ($3,348)   $81,027
Net income for the three months
ended September 30, 1997                   --          --         502           --            --            --        502
Change in net unrealized loss on
securities available for sale, net         
of taxes                                   --          --          --        1,586            --            --      1,586
Change in deferred stock
compensation                               --          95          --           --            84             --       179

                                        -----------------------------------------------------------------------------------
Balance at September 30, 1997             $66     $51,450     $38,943         $536       ($4,353)       ($3,348)  $83,294
                                        ===================================================================================


See notes to consolidated financial statements
</TABLE>








                                                  7

<PAGE> 8


<TABLE>
<CAPTION>

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

                                                                                        FOR THE THREE MONTHS
                                                                                        ENDED SEPTEMBER 30
                                                                                        ---------------------
                                                                                             1997         1996
                                                                                             ----         ----

                                                                                        (Dollars In Thousands)

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

Net earnings (loss)                                                                     $    502     $ (2,339)

Adjustments to reconcile  net earnings  (loss)
 to net cash provided by (used in) operating activities:

Origination of loans held for sale                                                        (4,133)           --
Proceeds from sale of loans held for sale                                                  2,275            --
Provisions for estimated loan and real estate losses                                         526           209
Direct write-offs from real estate operations                                                 --             2
Depreciation and amortization                                                                350           217
Amortization of deferred loan fees                                                          (214)         (118)
Amortization (accretion) of premiums (discounts) on loans
 and investment and mortgage-backed securities, net                                           98            68
Amortization of intangible assets                                                            588           237
Federal Home Loan Bank stock dividend                                                        (94)          (89)
Gain on sales of loans held for sale                                                         (27)           --
Loss (gain) on sales of real estate, net                                                      (2)           10
Gain on sale of mortgage-backed and investment securities, available for sale                (56)         (365)
Loss (gain) on sale of premises and equipment                                                  1           (10)
Decrease (increase) in accrued interest receivable                                           300        (1,178)
(Decrease) increase in accounts payable and other liabilities                               (152)        5,621
Decrease (increase) in other assets                                                          396        (2,188)
Other, net                                                                                   205        (1,340)
                                                                                       ---------       --------

Net cash provided by operating activities                                                    563         1,417

</TABLE>


                                               8

<PAGE> 9

<TABLE>
<CAPTION>

               
                                                 HF BANCORP, INC. AND SUBSIDIARY
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                                           (UNAUDITED)
                                                                                             FOR THE THREE MONTHS
                                                                                             ENDED SEPTEMBER 30
                                                                                             ----------------------
                                                                                                1997         1996
                                                                                                ----         ----

                                                                                           (Dollars In Thousands)
<S>                                                                                         <C>           <C>     
CASH FLOWS FROM INVESTING ACTIVITIES:

Net increase in loans receivable                                                            (42,544)      (50,597)
Purchases of mortgage-backed securities held to maturity                                         --       (15,039)
Purchases of mortgage-backed securities available for sale                                  (53,754)       (9,888)
Principal repayments on mortgage-backed securities held to maturity                           6,833         5,058
Principal repayments on mortgage-backed securities available for sale                         6,596         3,576
Purchases of investment securities held to maturity                                              --            --
Purchases of investment securities available for sale                                            --       (34,970)
Principal repayments on investment securities held to maturity                                  272           247
Principal repayments on investment securities available for sale                              1,415         1,577
Proceeds from sales of mortgage-backed and investment securities available for sale          15,609        21,150
Matured / called investment and mortgage backed securities held to maturity                   8,000
Matured / called investment and mortgage backed securities available for sale                    --        19,930
Proceeds from sales of real estate acquired by foreclosure                                    1,565           133
Proceeds from sales of real estate held for investment                                          278           232
Additions to real estate owned                                                                   --            (5)
Proceeds from sale of premises and equipment                                                     41             5
Additions to premises and equipment                                                             (35)         (703)
Cash payment for acquisition, net of cash received                                               --       (14,707)
                                                                                         ----------       --------

Net cash used in investing activities                                                       (55,724)      (74,001)

</TABLE>


                                               9

<PAGE> 10

<TABLE>
<CAPTION>


                                       HF BANCORP, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                                 (UNAUDITED)
                                                                             FOR THE THREE MONTHS
                                                                             ENDED SEPTEMBER 30
                                                                             ----------------------
                                                                                1997          1996
                                                                                ----          ----
                                                                              (Dollars In Thousands)
<S>                                                                         <C>               <C> 
CASH FLOWS FROM FINANCING ACTIVITIES:

Advances received from FHLB                                                 $ 45,000          $ --
Proceeds from other borrowings                                                50,000            --
Increase in certificate accounts                                               8,310         2,424
Net increase (decrease) in NOW, passbook, money market investment and
 non-interest-bearing accounts                                                 9,064          (700)
Repayment of other borrowings                                                (50,000)           --
                                                                            --------    ----------

Net cash provided by financing activities                                     62,374         1,724
                                                                             -------      --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           7,213       (70,860)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                              18,411       100,633
                                                                           ---------      --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $ 25,624      $ 29,773
                                                                            ========      ========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

Cash paid during the period for:
Interest on deposit accounts and other borrowings                           $  2,298      $  1,403
                                                                            ========      ========

Income taxes paid                                                                 --            --
                                                                            ========      ========

SUPPLEMENTAL DISCLOSURES OF NON CASH
INVESTING AND FINANCING ACTIVITIES:

Real estate acquired through foreclosure                                    $  2,289      $     21

Loans to facilitate sale of real estate through foreclosure                 $    227      $     99

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
                                                                            ========      ========


See notes to consolidated financial statements
</TABLE>



                                               10

<PAGE> 11


HF BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1997

(UNAUDITED)

                                  INTRODUCTION

      In addition to historical  information,  this document may include certain
forward looking  statements within the meaning of the Private  Securities Reform
Act of 1995 (the "Reform  Act").  These forward  looking  statements  relate to,
among  other  things,  expectations  of the  business  environment  in which the
Company operates, projections of future performance,  perceived opportunities in
the market,  and statements  regarding the Company's  mission and vision.  These
forward looking statements are based upon current management  expectations,  and
therefore may involve risks and  uncertainties.  The Company's  actual  results,
performance,  or  achievements  may  differ  materially  from  those  suggested,
expressed,  or implied by the forward looking  statements due to a wide range of
factors, including, but not limited to:

o     vacillation in general economic conditions

o     legislative and regulatory changes

o     monetary and fiscal policies of the federal government

o     changes in tax policies, rates and regulations of federal, state, and 
      local tax authorities

o     fluctuations in interest rates

o     variation in the cost of funds

o     changes in demand for the Company's products and services

o     actions by competitors

o     changes in the composition of the Company's loan and investment portfolios

o     variation in the credit quality of the Company's assets

o     alterations in accounting principles, policies, or guidelines

o     changes in other economic, competitive, government, and technological 
      factors

Further  description  of the  risks and  uncertainties  to the  Company  and its
business are presented in Form 10-K "Item 1.  Description Of Business -- Factors
That May Affect Future Results".




                                       11

<PAGE> 12


HF BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1997

(UNAUDITED)

                                     PART I

ITEM 1.     DESCRIPTION OF BUSINESS


GENERAL

      H.F. Bancorp, Inc. (referred to herein on an unconsolidated basis as "HFB"
and on a  consolidated  basis as the  "Company")  is a  savings  & 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  & Loan
Association  (the "Bank") upon its conversion from a federally  chartered mutual
savings association to a federally chartered stock savings association.  On June
30, 1995,  the Company  completed its sale of 6,612,500  shares of common stock,
and used  approximately 50% of the $51.1 million in net proceeds to purchase all
of the Bank's common stock issued in the Bank's  conversion to stock form.  Such
business combination was accounted for at historical cost in a manner similar to
a pooling of interests.

      HFB's principal business is to serve as a holding company for the Bank and
for  other  banking  or  banking  related  subsidiaries  which the  Company  may
establish  or  acquire.  As a  legal  entity  separate  and  distinct  from  its
subsidiaries,  HFB's  principal  source  of funds is its  existing  capital  and
assets,  and  future  dividends  paid  by and  other  funds  advanced  from  its
subsidiaries.  Legal limitations are imposed on the amount of dividends that may
be paid and  loans  that may be made by the Bank to HFB.  The  Company's  common
stock is  listed on the  Nasdaq  National  Market  ("NASDAQ")  under the  symbol
"HEMT".

      At September 30, 1997,  the Company had $1,050.4  million in total assets,
$524.1  million  in total net loans  receivable,  and  $857.0  million  in total
deposits.  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").  The principal executive offices of
the  Company  and the  Bank  are  located  at 445 East  Florida  Avenue,  Hemet,
California,  92543, telephone number (909) 658 - 4411, toll free (800) 540-4363,
facsimile number (909) 925 - 5398. The Bank is a member of the Federal Home Loan
Bank of San Francisco  ("FHLB") and its deposit accounts are insured by the FDIC
through the Savings  Association  Insurance  Fund ("SAIF") to the maximum extent
permitted by law.






                                       12

<PAGE> 13


HF BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1997

(UNAUDITED)

      On  September  27,  1996,   Hemet  Federal  Savings  &  Loan   Association
consummated  the  acquisition of Palm Springs Saving Bank ("PSSB") by purchasing
their  1,131,446  shares of common stock for $16.3 million.  The acquisition was
accounted for under  purchase  accounting  guidelines  and  therefore  generated
intangible assets (see "Intangible Assets").

      On June 21, 1996,  the Bank  entered the Northern San Diego County  market
through the  purchase of three  branch  offices  and the  assumption  of deposit
liabilities  totaling $185.2 million from Hawthorne Savings Bank. In conjunction
with the purchase, the Bank generated a core deposit intangible of $6.6 million,
or 3.6% of the deposits assumed (see "Intangible Assets").

      The consolidated  financial statements include the accounts of HF Bancorp,
Inc. and its  wholly-owned  subsidiary  Hemet Federal Savings & Loan Association
and its wholly-owned  subsidiaries,  HF Financial Corporation,  Coachella Valley
Financial  Services  Corporation  ("CVFSC"),   PSSB  Insurance  Services,   Inc.
("PSSBI") and HF 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.  This service has been  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.  HF  Bancorp,  Inc.  and Hemet  Federal are
currently in the process of consolidating HF Financial  Corporation,  CVFSC, and
PSSBI with and into First Hemet Corporation.  First Hemet Corporation engages in
trustee  services  for the  Bank,  and  receives  commissions  from  the sale of
mortgage  life   insurance,   fire  insurance,   and  annuities.   All  material
intercompany transactions, profits, and balances have been eliminated.



                                       13

<PAGE> 14


HF BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1997

(UNAUDITED)

      The  Company  conducts  business  from  nineteen  branch  offices  and one
centralized loan servicing center, located as follows:

Greater Hemet / San Jacinto  Valley Area 
----------------------------------------
      Hemet - Diamond Valley 
      Hemet - Downtown (Main Office) 
      Hemet - East 
      Hemet - Sanderson (Loan Service Center) 
      Hemet - West 
      Idyllwild 
      San Jacinto

Northern San Diego County           Coachella Valley
-------------------------           ----------------
      Oceanside                           Cathedral City
      Rancho Bernardo                     Desert Hot Springs
      Vista                               Palm Springs
                                          Rancho Mirage

Greater City Of Riverside Area      Southwestern Riverside County
------------------------------      -----------------------------
      Arlington                           Canyon Lake
      Canyon Crest                        Murrieta
      Tyler Mall                          Sun City

      In addition,  the Company supports its customers through 24 hour telephone
banking and ATM access  through an array of  networks  including  STAR,  CIRRUS,
PLUS, and NOVUS.




                                     14

<PAGE> 15


HF BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1997

(UNAUDITED)

      Through its network of banking offices,  the Bank emphasizes  personalized
service focused upon two primary markets:  households and small businesses.  The
Bank offers a wide complement of lending products, including:

o     a broad array of residential mortgage products, both fixed and adjustable 
      rate

o     consumer loans, including home equity lines of credit, auto loans, and 
      personal lines of credit

o     specialized financing programs to support community development

o     mortgages for apartments

o     commercial real estate loans

o     construction lending

o     commercial loans to businesses, including both revolving lines of credit 
      and term loans



      The Bank also  provides an  extensive  selection  of deposit  instruments.
These include:

o     multiple checking products for both personal and business accounts

o     various savings accounts, including those for minors

o     tiered money markets accounts

o     tax qualified deposit accounts (e.g. IRA's)

o     a broad array of certificate of deposit products, with terms from 7 days 
      to 7 years



                                       15

<PAGE> 16


HF BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1997

(UNAUDITED)

      The Bank also  supports  its  customers  by  functioning  as a federal tax
depository, providing merchant bankcard services, and supplying various forms of
electronic  funds  transfer.   In  addition,   the  Bank,  through  third  party
relationships,  makes various non FDIC insured investment  products available to
its customers, including mutual funds and selected insurance related products.

      The Company  participates  in the wholesale  capital  markets  through the
management  of its security  portfolio and its use of various forms of wholesale
funding.  The Company's  security  portfolio  contains a variety of instruments,
including  callable  debentures,  fixed  and  adjustable  rate  mortgage  backed
securities,   and  collateralized   mortgage   obligations.   The  Company  also
participates in the secondary  market for loans as both a purchaser and a seller
of various types of mortgage products.

      The Company's  revenues are derived from interest on its loan and mortgage
backed  securities   portfolios,   interest  and  dividends  on  its  investment
securities,  and fee income  associated  with the provision of various  customer
services.  The Company's  primary  sources of funds are deposits,  principal and
interest  payments on its asset  portfolios,  and various  sources of  wholesale
borrowings  including  FHLB  advances  and reverse  repurchase  agreements.  The
Company's most significant operating  expenditures are its staffing expenses and
the costs associated with maintaining its branch network.

      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, 1997, 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 fiscal year
ended June 30, 1997 included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997.




                                       16

<PAGE> 17


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

Earnings Per Share
------------------

      Earnings per share  ("EPS") for the three months ended  September 30, 1997
are based on weighted average common shares outstanding calculated as follows:

<TABLE>
<CAPTION>

                                                                                3 Months
                                                                                Ended
                                                                                9/30/97
                                                                                -------
     <S>                                                                        <C>      
     Total shares issued                                                        6,612,500

     Less:
        Weighted  average   unallocated  shares  under  the  ESOP  Plan           324,491
         Reduction in shares for the stock award component of the Stock Based
              Incentive Plan                                                      129,275
         Shares of treasury stock                                                 330,625

     Plus:
          Increase in shares for the stock option component of the Stock Based
               Incentive Plan                                                     170,959

     Weighted average shares outstanding for EPS calculations                   5,999,068

</TABLE>



                                             17

<PAGE> 18


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

Termination of Swap Agreements
------------------------------

      On  July  10,  1995,  the  Company  terminated  four  interest  rate  swap
agreements with an aggregate  outstanding  notional amount of $60.0 million.  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 the
remaining original terms of the respective swap agreements.  The expected future
annual  amortization  is as follows:  $798,000 and $272,000 for the fiscal years
ended  June  30,  1998 and  1999  respectively.  As of  September  30,  1997 the
remaining deferred amount was $829,000.


Defined Benefit Plan and Retirement Restoration Plan Terminations
-----------------------------------------------------------------

      In the quarter ended June 30, 1997, the Company's  management and Board Of
Directors  determined to terminate two  retirement  plans.  The defined  benefit
pension plan was a traditional  pension  program which  provided  employees with
monthly  retirement  income  based  upon  years of  service  and the  employee's
earnings during the sixty months prior to retirement. The retirement restoration
plan was a non qualified supplemental plan designed to compensate certain highly
salaried  employees  for the impact of wage caps under the  Employee  Retirement
Income  Security Act ("ERISA"),  which are applicable to qualified plans such as
the defined benefit pension plan.

      A  non-recurring  $3.0 million  charge to accrue  expenses  related to the
termination  of the two  retirement  plans was recorded in the fourth quarter of
fiscal  1997.  Management  is  currently  in the  process of  arranging  for the
distribution of vested plan assets to participants  during the second quarter of
fiscal 1998.

      Management   estimates  the  first  year  expense  savings  from  the  two
retirement plan  terminations at  approximately  $400,000 - a figure which would
have increased in future  periods if the Company  continued to add employees and
grant pay increases. In addition, the final cost associated with the termination
of the two retirement plans will not be ascertained until all of the plan assets
have been distributed and all regulatory approvals have been obtained. While the
amount accrued  represents  management's  best estimate of the total termination
costs, various future events could produce an actual expense total either higher
or lower than that accrued.









                                     18

<PAGE> 19


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

Change in Accounting Principles
-------------------------------

      Effective January 1, 1998, the Company will adopt those components of SFAS
No.  125  "ACCOUNTING  FOR  TRANSFERS  AND  SERVICING  OF  FINANCIAL  ASSETS AND
EXTINGUISHMENTS  OF  LIABILITIES"  which  were  postponed  under  SFAS  No.  127
"DEFERRAL OF THE  EFFECTIVE  DATE OF CERTAIN  PROVISIONS  OF FASB  STATEMENT NO.
125". The Company is currently in the process of updating its Master  Repurchase
Agreements  to permit  substitution  of  collateral  involved in its  repurchase
agreements  conditional upon economic  equivalency.  Management does not believe
that  the  adoption  of the  deferred  components  of SFAS No.  125 will  have a
significant impact on its financial statements.

      In February 1997, the FASB issued SFAS No. 128,  "EARNINGS PER SHARE". The
statement  establishes standards for computing and presenting earnings per share
(EPS) and applies to entities  with  publicly  held  common  stock or  potential
common stock. This statement simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, EARNINGS PER SHARE, and makes them
comparable to  international  EPS  standards.  It replaces the  presentation  of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income  statement  for all  entities
with complex capital  structures and requires a reconciliation  of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS  computation.  The disclosure  requirements  of SFAS No. 128 are
effective  for periods  ending  after  December 15,  1997.  Management  does not
believe  that the adoption of SFAS No. 128 will have  significant  impact on its
financial statements.

      In  February,   1997,  the  FASB  issued  SFAS  No.  129,  "DISCLOSURE  OF
INFORMATION ABOUT CAPITAL STRUCTURE".  The statement  establishes  standards for
disclosing  information  about an entity's  capital  structure.  The  disclosure
requirements of SFAS No. 129 are effective for periods ending after December 15,
1997.  Management  does not believe  that the adoption of SFAS No. 129 will have
significant impact on its financial statements.

      In June 1997,  the FASB,  issued  SFAS No. 130,  "REPORTING  COMPREHENSIVE
INCOME" and SFAS No. 131,  "DISCLOSURES  ABOUT  SEGMENTS  OF AN  ENTERPRISE  AND
RELATED  INFORMATION".  SFAS No. 130  establishes  standards  for  reporting and
display  of   comprehensive   income  and  its  components  in  a  full  set  of
general-purpose  financial  statements.  SFAS No. 131  establishes  standards of
reporting by publicly held business  enterprises  and  disclosure of information
about operating segments in annual financial  statements and to a lesser extent,
in interim financial  reports issued to shareholders.  SFAS Nos. 130 and 131 are
effective for fiscal years  beginning after December 15, 1997. As both SFAS Nos.
130 and 131 deal with  financial  statement  disclosure,  the  Company  does not
anticipate  the adoption of these new standards  will have a material  impact on
its financial position or results of operations.



                                       19

<PAGE> 20


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997


Stock Plans
-----------

      The Company established for eligible employees an Employee Stock Ownership
Plan and Trust ("ESOP")  which became  effective upon the conversion of the Bank
from a mutual savings & loan association to a stock company (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 9.5 years and the
collateral for the loan is the common stock  purchased by the ESOP. The interest
rate for the ESOP loan is 9.0%. As of September 30, 1997, a cumulative  total of
104,069  shares  of common  stock  had been  allocated  to  individual  employee
accounts,  leaving  a  remainder  of  358,806  shares to be  allocated  over the
remaining  life of the  ESOP.  Under  the  terms of the ESOP  plan,  shares  are
allocated to  individual  employee  accounts at the  conclusion of each calendar
year.

      At the  Company's  Annual  Meeting of  Shareholders  on January 11,  1996,
shareholders  approved the Hemet Federal Savings & Loan  Association 1995 Master
Stock Compensation Plan (the "Stock Compensation Plan") and the HF Bancorp, Inc.
1995 Master Stock Option Plan (the "Stock  Option  Plan"),  both of which became
effective  as of the date of  approval.  These two  plans  were  established  to
provide  Directors and employees in key management  positions with a proprietary
interest in the Company,  to attract and retain highly  qualified  staff, and to
more directly  align the objectives of the  individuals  with the success of the
Company.

      The Stock  Compensation  Plan was authorized to acquire  198,375 shares of
common  stock  in the  open  market.  The Bank  contributed  funds to the  Stock
Compensation  Plan to enable the Plan trustees to acquire the authorized  shares
of common stock.  On February 28, 1996, the Bank acquired  198,375 shares in the
open market at a price of $10.00 per share. Stock shares are held in trust.

      The Stock Option Plan was  authorized  to issue up to 661,250  options for
the purchase of common shares,  including  both Incentive  Stock Options and Non
Qualified Stock Options.




                                       20

<PAGE> 21


HF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

      On May 22, 1997,  the Board Of Directors of HF Bancorp,  Inc.  adopted the
Amended and Restated HF Bancorp, Inc. Stock Based Incentive Plan (the "Incentive
Plan").  The  Incentive  Plan merged the Stock  Compensation  Plan and the Stock
Option Plan, and amended the provisions of these plans to, among other things:

o     Provide  benefits  that were not  available  when the two 1995  Plans were
      adopted,  including  the  accelerated  vesting  of stock  awards and stock
      options following a change in control of the Company or the Bank

o     Eliminate a number of outdated regulatory requirements no longer necessary
      due to amendments to Section 16(b) of the Securities  Exchange Act of 1934
      (the "Exchange Act").

      At  September  30,  1997,  a total of 37,954  shares of stock  awards have
vested under the Incentive Plan. An additional  154,527  non-vested  shares have
been allocated to Directors and employees in key management  positions.  A total
of 5,894 shares  remained in the trust on an  unallocated  basis as of September
30, 1997.  Stock awards under the Incentive Plan typically vest over a five year
period.

      Of the  661,250  option  shares  authorized  under the  Incentive  Plan at
September  30, 1997,  options  representing  a total of 638,545  shares had been
granted and were outstanding as of that date. Of these 638,545 options,  a total
of 125,183 options were vested at a weighted  average  exercise price of $10.59,
with the exercise price of individual vested options ranging from a low of $9.50
per share to a high of $14.34 per share.  As of September  30, 1997,  no options
had ever been  exercised  under  the  Incentive  Plan or any of its  predecessor
plans, and 22,705 options remained available for future grant.

      At the  Company's  Annual  Meeting of  Shareholders  on October 28,  1997,
shareholders  approved an amendment to the Incentive  Plan,  which increased the
number of option shares authorized for issuance by 150,000 shares,  from 661,250
shares  to  811,250   shares.   The  Incentive  Plan  retains  the  prior  Stock
Compensation Plan's limitation of 198,375 shares authorized for stock awards.


Commitments and Contingencies
-----------------------------

      At September  30, 1997,  the Company  maintained  commitments  to purchase
approximately $22.7 million in residential adjustable rate mortgage loans and to
sell  approximately  $1.9 million in residential  fixed rate mortgage  loans. In
addition,  at September  30, 1997,  the Company had committed to a $15.0 million
fixed rate advance from the FHLB that would fund during October, 1997.




                                       21

<PAGE> 22


HF BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1997

(UNAUDITED)

Recent Developments
-------------------

      Potential Federal Legislation
      -----------------------------

      The U.S.  Congress is  currently  discussing  a broad  range of  potential
legislation  which could impact the financial  services  industry in general and
the Company in particular. Key topics under discussion include:

o      the potential merger of the BIF and SAIF FDIC deposit insurance funds,

o      the potential reform of financial institution charters (including the 
       potential elimination of the federal thrift charter),

o      potential requirements for the cancellation of lender mortgage insurance 
       under certain circumstances,

o      financial services modernization, including a possible relaxation of laws
       separating commercial banking and commerce,

o      potential modifications to the Federal Home Loan Bank system, including a
       possible  relaxation of the current mandatory  membership requirement for
       thrift institutions,

o      possible federal controls on the amount and disclosure of ATM fees,

o      regulations addressing the allowable financial relationships between 
       financial institutions and mortgage brokers


       Proposed Accounting Statement
       -----------------------------

      FASB has  continued  to move  forward  towards  issuing a final  statement
entitled  "ACCOUNTING FOR DERIVATIVE AND SIMILAR  FINANCIAL  INSTRUMENTS AND FOR
HEDGING ACTIVITIES".  This extensive and complex drafted statement has generated
significant  response  throughout  industry and  government.  Management  cannot
predict what, if any, final statement  might be issued and the potential  impact
of such statement upon the Company's reported earnings and financial disclosure.






                                       22

<PAGE> 23


HF BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1997

(UNAUDITED)



      Consolidation In The Financial Services Industry
      ------------------------------------------------

      During  calendar  year  1997,  a series of  mergers  and  acquisitions  of
financial  institutions  has been  consummated  or  announced  in the  Company's
primary market areas.  Acquired  companies  range from small  community banks to
large financial services providers such as Great Western Bank. These mergers and
acquisitions  have  presented  both  opportunities  and  risks  to the  Company.
Opportunities  have included the chance to acquire former customers of purchased
institutions, many of whom are receptive to the idea of altering their financial
institution affiliation once informed that their historical bank will disappear.
Risks have included the development of an expanded number of larger competitors,
which enjoy greater  financial  resources,  market reach, and product depth than
the Company.

      The  opportunities  and risks  described above have been manifested in the
Company's  recent  experiences in various markets.  For example,  the closure of
competitor  branches in several  locations has led to an inflow of new business,
particularly  transaction  related deposit accounts.  On the other hand, in some
markets,  larger  competitors with stronger and more diversified  income streams
have priced  selected  products  and  services  very  aggressively,  causing the
Company to either lose  business  relationships  or decrease  profit  margins to
retain customers.














                                       23

<PAGE> 24



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

General
-------

      During the quarter  ended  September 30, 1997,  the Company  continued the
implementation  of the business  strategy  presented in Form 10-K for the fiscal
year ended June 30, 1997.  This strategy  centered upon the Company's  evolution
into a  community  bank  offering a more  comprehensive  array of  products  and
services while at the same time augmenting earnings.  Key objectives within this
strategy included:

o      Increasing long term shareholder returns

o      Improving customer service

o      Enhancing employee relations

o      Bolstering profitability

o      Strengthening  the  Company's  involvement  in  and  contributions to the
       communities it serves


      During  the first  quarter  of  fiscal  1998,  the  Company  realized  the
following accomplishments in support of the above objectives:

|_|   The Company's  strong equity position was more  effectively  deployed,  as
      total assets expanded by $65.6 million on the strength of $40.9 million of
      internally  originated  credit  commitments  plus  the  purchase  of $37.7
      million in adjustable rate residential mortgages in the secondary market.

|_|   On September  22, 1997,  the Company  implemented  a revised fee & service
      charge  schedule  which  had  an  immediate  beneficial  impact  upon  the
      generation of non interest income.

|_|   On September 17, 1997, Thomas R. Strait agreed to join the Bank as  Senior
      Vice  President and Director Of Retail  Banking.  Mr. Strait is a fourteen
      year  veteran  of the  banking  industry,  with a strong  track  record of
      success in both depository and lending functions.

|_|   A total  of  $426,000  in  write  downs on real  estate  acquired  through
      foreclosure  were recognized,  as management  determined to accelerate the
      liquidation of a significant portion of the troubled assets remaining from
      the PSSB acquisition.



                                       24

<PAGE> 25



|_|   One of the Company's two remaining real estate  investment  properties was
      sold, at a small gain,  with the other  property  under  contract for sale
      during the second quarter of fiscal 1998. Following the conclusion of that
      escrow,   the  Company  will  have  completely   exited  the  real  estate
      development  business,  freeing regulatory capital and other resources for
      more effective deployment elsewhere.

|_|   Additional  ATM services were  introduced  and enhanced  branch hours were
      scheduled  for  implementation,  to better serve the  Company's  expanding
      transaction account base.

|_|   Net income and average net interest  margin improved from the same quarter
      during  the  prior  fiscal  year,  while  nonperforming   assets  declined
      sequentially from the prior quarter end.

Additional  information concerning the above accomplishments is presented in the
pages which follow.

Changes In Financial Condition From June 30, 1997 to September 30, 1997
-----------------------------------------------------------------------

      Total assets of the Company increased $65.6 million,  or 6.7%, from $984.7
million at June 30, 1997 to $1,050.4  million at September  30, 1997.  Net loans
receivable rose $39.8 million,  or 8.2%, from $484.3 million at June 30, 1997 to
$524.1 million at September 30, 1997. The nominal and relative  increases in the
loan portfolio have been strategic objectives of management,  as such increases,
when conducted with prudent underwriting, provide for:

o      a more effective deployment of the Company's strong capital position

o      a greater return on shareholders' equity

o      enhanced support of the communities in which the Company operates

      Net loans held for sale  increased  from $335,000 at June 30, 1997 to $2.9
million at September  30, 1997, as the Company  continued  building its mortgage
banking operation. The Company has been expanding the volume of loans originated
for sale and the range of secondary market avenues for sale utilized in order to
better manage the Company's interest rate risk position and liquidity while also
generating gains on sale.

      Investment securities held to maturity declined from $26.8 million at June
30, 1997 to $18.5 million at September 30, 1997  primarily due to the call of an
$8.0  million  Agency  debenture  during  the  quarter.   Investment  securities
available  for sale  declined  from  $145.0  million at June 30,  1997 to $131.6
million at September 30, 1997 primarily due to the sale of $12.0 million in long
term, fixed rate Agency  debentures in conjunction  with the Company's  interest
rate risk management program (see "Interest Rate Risk Management and Exposure").
The Company did not purchase any new  investment  securities  during the quarter
ended  September  30,  1997 due to the  significant  existing  balances  of such
securities.




                                       25

<PAGE> 26



      Mortgage  backed  securities  held to maturity  declined  4.6% from $151.4
million  at June 30,  1997 to $144.5  million  at  September  30,  1997,  due to
amortization,  which  generally  increased  during  the most  recent  quarter in
conjunction  with new, 30 year, fixed rate, first mortgage loans being available
with interest rates below 8.0%.

      Mortgage  backed  securities  available  for sale rose $46.2  million,  or
42.2%,  from $109.5  million at June 30, 1997 to $155.7 million at September 30,
1997.  During the most recent  quarter,  the Company  redirected  all cash flows
which could not be deployed into whole loans into low duration  mortgage  backed
securities  designated as available for sale. All security  purchases during the
first fiscal  quarter were  composed of GNMA  adjustable  rate  mortgage  backed
securities or shorter term Agency balloon maturity  mortgage backed  securities,
in order to avoid adding  significantly to the Company's net liability sensitive
interest rate risk exposure and in order to moderate value sensitivity until the
funds could be recycled into loan originations or purchases.

      The  Company's  investment  in the capital  stock of the Federal Home Loan
Bank of San  Francisco  increased  from $6.2  million  at June 30,  1997 to $6.3
million at September 30, 1997 due to dividends credited.

      The Company's net investment in real estate acquired  through  foreclosure
rose from $5.3 million at June 30, 1997 to $5.6  million at September  30, 1997,
as the  Company  continued  to cycle  through  the  portfolio  of problem  loans
acquired in conjunction with the PSSB purchase.  Sales of foreclosed real estate
during the first quarter of fiscal 1998 totaled $1.6 million, with a significant
volume of foreclosed real estate under contract for sale at quarter end.

      Net real estate acquired for investment  decline from $418,000 at June 30,
1997 to $149,000 at September 30, 1997 due to the sale of the parcels designated
as the VISTA BONITA  development.  A gain of $9,000 was realized  upon sale.  At
September 30, 1997, the Company maintained a single remaining investment in real
estate held for investment,  MAYBERRY ESTATES, which was under contract for sale
during the second quarter of fiscal 1998.

      Other assets declined from $21.5 million at June 30, 1997 to $20.5 million
at  September  30,  1997  in  part  due to  the  continued  amortization  of the
intangible  assets  generated  in  conjunction  with the  branch  purchase  from
Hawthorne Savings Bank and the PSSB acquisition.



                                       26

<PAGE> 27



      Deposits  increased $17.4 million during the quarter,  from $839.7 million
at June 30, 1997 to $857.0  million at September  30,  1997,  due to a number of
factors, including:

o     A continuation  of management's  focus upon attracting  consumer and small
      business checking accounts as a means of lowering the Bank's cost of funds
      and  establishing  customer  relationships  for the  future  sale of other
      products.  Checking  deposits  increased  $848,000,  or 1.1%,  during  the
      quarter.

o     Customers'  positive response to the Bank's introduction of its "Platinum"
      money market  deposit  account,  which provides  competitive  money market
      interest rates for liquid funds.

o     The Bank's  conducting a new customer  acquisition  program in July, built
      around a competitively priced 4 month certificate of deposit promotion.

o     The continued  consolidation in the financial services  industry,  leaving
      more  customers  without a local branch of their former bank and therefore
      receptive to sampling Hemet Federal's quality customer service.

      Advances from the Federal Home Loan Bank of San Francisco  increased $45.0
million during the quarter, from $50.0 million at June 30, 1997 to $95.0 million
at September 30, 1997.  The additional  advances,  all of which were fixed rate,
were  utilized to expand the  Company's  balance  sheet and thereby  bolster net
interest income,  and were composed of terms from 6 months through 3 years, with
some of the advances callable by the Federal Home Loan Bank.

      Total  stockholders'  equity increased from $81.0 million at June 30, 1997
to $83.3 million at September 30, 1997 primarily due to the net income generated
during the fiscal first quarter and because of appreciation in the portfolios of
securities  designated as available for sale. The  appreciation in available for
sale securities largely stemmed from a decline in Treasury rates, as exemplified
by the bond equivalent  yield for the 10 year Treasury Note declining from 6.49%
at June 30, 1997 to 6.11% at September 30, 1997.

Interest Rate Risk Management And Exposure
------------------------------------------

      In an effort to limit the  Company's  exposure to interest  rate  changes,
management  monitors  and  evaluates  interest  rate risk on an  ongoing  basis,
through an internal simulation and modeling process, various management reports,
and via participation  with the Office of Thrift Supervision Market Value Model.
Management  acknowledges that interest rate risk and credit risk compose the two
greatest  financial  exposures  faced by the Company in the normal course of its
business.

      In  recent   quarters,   the  Company  has   maintained  a  net  liability
sensitivity,  meaning that, in aggregate, the Company's liabilities reprice more
quickly  and by a  greater  magnitude  than do its  assets.  This net  liability
sensitivity  primarily  arises from the longer term,  higher  duration  mortgage
backed and  investment  securities  and whole loans  maintained on the Company's
balance sheet,  for which the Company's  only current match funding  sources are
demand deposit  accounts,  non interest bearing  liabilities,  a segment of core
deposit transaction accounts, certain borrowings, and capital. The net liability
sensitivity  translates  to improved  profitability  and higher  economic  value
during


                                       27

<PAGE> 28



decreasing rate environments.  Conversely, this position presents the likelihood
of  constrained  net  interest  income and  average  spreads  during  periods of
increases in general market interest rates.

      During the three months ended  September 30, 1997,  the Company  continued
its program of  moderating  interest  rate risk while  building  core  earnings.
Specific actions during the quarter ended September 30, 1997 included:

1.    The sale  of $12.0  million  and  the call of $8.0 million in longer term,
      fixed rate Agency debentures.

2.    The  sale of  $2.2  million  in  current,   fixed  rate,  residential loan
      originations.

3.    The  secondary  market  purchase  of  $37.7  million  in  adjustable  rate
      residential  mortgages  which,  when  added  to  the  impact  of  internal
      originations,  increased  the  percentage of loans  presenting  adjustable
      interest rates to 71.2% of total gross loans at September 30, 1997.

4.    The  continuation  of  the  Company's  loan   origination   program  which
      encourages the generation of adjustable rate mortgages  through  favorable
      pricing to the customer  combined with  incentives to the Company's  sales
      force.

5.    The  completion  of  development  work on a new Home Equity Line Of Credit
      product which  reprices  monthly based upon the Wall Street  Journal Prime
      Rate and that offers  customers a lower interest rate for an  introductory
      period of three billing cycles.  Management intends to aggressively market
      this new product commencing in the second quarter of fiscal 1998.

6.    The recycling of periodic cash flows from longer term, fixed rate mortgage
      backed  securities and loans into adjustable rate loans or mortgage backed
      securities presenting much lower duration.


      Management  believes that,  although investment in adjustable rate assets,
some of which present initial discount,  or teaser, rates, may reduce short term
earnings  below amounts  obtainable  through  investment in fixed rate or higher
duration  assets,  an  asset  portfolio   containing  a  greater  percentage  of
adjustable rate product reduces the Company's  exposure to adverse interest rate
fluctuations and enhances longer term  profitability and economic value. This is
consistent with the overall investment policy of the Company,  which is designed
to manage its  aggregate  interest  rate  sensitivity,  to  generate a favorable
return without  incurring  undue interest rate risk, to supplement the Company's
lending activities, and to provide and maintain liquidity. However, there can be
no assurance that any substantial  quantity of adjustable rate loans meeting the
Company's underwriting standards will be available in the future.



                                       28

<PAGE> 29



      The Company has also utilized a variety of financial instruments to manage
its  interest  rate risk,  including  off  balance  sheet  transactions  such as
interest  rate  agreements  including  swaps,  caps,  and  floors.  The  Company
originally   entered  into  its  existing   off  balance   sheet   positions  to
synthetically  adjust the duration of the Company's  liabilities to more closely
match that of its assets.  On July 10, 1995, the Bank  terminated  four interest
rate swap contracts with an aggregate notional amount of $60.0 million, invoking
a termination  fee of $4.9 million  which,  for  accounting  purposes,  is being
amortized to interest  expense over the individual  remaining  contract lives of
each swap.

      During the three  months ended  September  30,  1997,  the Bank  amortized
$241,000 of the deferred loss to interest expense,  and charged interest expense
for $245,000 related to current  existing  interest rate swaps with an aggregate
notional amount of $35.0 million.  During the quarter which will end on December
31, 1997,  the conclusion of the  amortization  period for one of the terminated
interest rate swaps will be realized,  then leaving a single  terminated swap to
be amortized  through  November 21, 1998. The  conclusion of these  amortization
periods will result in the Bank's  reporting a reduction in interest expense and
effective  cost of  funding,  all else  held  constant.  Additional  information
concerning  the Bank's  current and  terminated  interest rate swap positions is
provided in the following table:

      Summary Of Interest Rate Swaps
      ------------------------------

            Active Interest Rate Swaps
            --------------------------

<TABLE>
<CAPTION>

                                   Rate            Basis       Rate           Basis
           Notional    Maturity    Bank            Bank        Bank           Bank      Swap
             Amount        Date    Receives        Receives    Pays           Pays      Resets
             ------        ----    --------        --------    ----           ----      ------
<S>     <C>            <C>         <C>             <C>         <C>            <C>       <C>            
        $20,000,000    01/06/99    3 month LIBOR   Actual/360  9.800% Fixed   360/360   quarterly
        $15,000,000    01/30/99    3 month LIBOR   Actual/360  7.274% Fixed   360/360   quarterly

Total   $35,000,000

</TABLE>


            Terminated Interest Rate Swaps
            ------------------------------

<TABLE>
<CAPTION>

                                       Original      9/30/97             Loss           Daily
           Notional    Termination     Deferred     Deferred     Amortization            Loss
             Amount           Date         Loss         Loss       Completion    Amortization
             ------           ----         ----         ----       ----------    ------------
<S>     <C>               <C>         <C>          <C>               <C>               <C> 
        $10,000,000       07/10/95      $557,730          $0         03/27/97            $890
        $20,000,000       07/10/95    $1,338,145          $0         04/30/97          $2,024
        $10,000,000       07/10/95      $631,816     $40,668         11/25/97            $726
        $20,000,000       07/10/95    $2,328,601    $788,811         11/21/98          $1,892

Total   $60,000,000                   $4,856,292    $829,479

</TABLE>


                                       29

<PAGE> 30




INTANGIBLE ASSETS
-----------------

      The purchase of three branches from Hawthorne  Savings and the acquisition
of  PSSB  each  generated   intangible  assets.  The  following  tables  provide
information  concerning  the initial  amount of such  intangible  assets,  their
periodic amortization against income, and their current balances as of September
30, 1997. Under OTS regulations,  intangible assets reduce  regulatory  capital,
resulting in lower capital ratios than would otherwise be the case.

<TABLE>
<CAPTION>


Acquisition of Three Hawthorne Savings Branches
-----------------------------------------------

<S>                                             <C>
Transaction Date                                          06/21/96
Deposits Acquired                                       $185,189,446
Initial Core Deposit Intangible Created                  $6,642,079
Book Amortization Method / Term                 Straight Line / Seven Years
Tax Return Amortization Method / Term           Straight Line / Fifteen Years
Monthly Pre-Tax Charge To Book Income                     $79,072
Monthly Book Amortization Reported As              Non Operating Expense
Core Deposit Intangible Balance As Of 9/30/97            $5,455,993
Reduction In Regulatory Capital As Of 9/30/97            $5,455,993
Reduction In Tangible Book Value As Of 9/30/97           $5,455,993

</TABLE>




                                       30

<PAGE> 31

<TABLE>
<CAPTION>

Acquisition of Palm Springs Savings Bank ("PSSB")
-------------------------------------------------
    <S>                                                         <C>
    Transaction Date                                                     09/27/96
     Nature of Transaction                                      Non Taxable Acquisition
     Accounting Methodology Employed                             Purchase Accounting
</TABLE>


<TABLE>
<CAPTION>

<S>                                                                  <C>            <C>
Total Purchase Price                                                 $16,264,536
   Less: Net Book Value of Assets & Liabilities Acquired             $ 9,287,912
                                                                     -----------
Premium Paid Over Net Book Value                                     $ 6,976,624

Initial Accounting For The Acquisition                                 Debits        Credits
                                                                       ------        -------
     Loan Premium Created                                            $2,441,000
     Core Deposit Intangible Created                                 $9,445,475
     Deferred Tax Liability On Loan Premium                                         $1,008,284
     Deferred Tax Liability On Core Deposit Intangible                              $3,901,567
     Cash Payment For PSSB Shares Above Net Book Value                              $6,976,624
                                                                    -----------     ----------
          Total                                                     $11,886,475    $11,886,475
                                                                    -----------    -----------
</TABLE>

<TABLE>
<CAPTION>

<S>                                                                 <C>
Book Amortization Method / Term
     Loan Premium                                                      Effective Yield / Life Of Loans Acquired
     Core Deposit Intangible                                                Straight Line / Seven Years

Tax Return Amortization Method / Term
     Loan Premium                                                   Not Tax Deductible Due To Non Taxable
                                                                    Acquisition
     Core Deposit Intangible                                        Not Tax Deductible Due To Non Taxable
                                                                    Acquisition
Monthly Pre-Tax Charge To Book Income
     Loan Premium                                                   variable based upon loan amortization
     Core Deposit Intangible: Gross / Net                                    $112,446 / $65,999

Monthly Book Amortization Reported As
     Loan Premium                                                   Reduction In Interest Income
     Core Deposit Intangible                                        Non Operating Expense
</TABLE>


<TABLE>
<CAPTION>

                                                                    Nominal      Deferred
Balances As Of 09/30/97                                             Assets       Tax Liabilities    Net
                                                                    ------       ---------------   ----
     <S>                                                            <C>           <C>              <C>       
     Loan Premium                                                   $ 2,105,045   $  869,514       $1,235,531
     Core Deposit Intangible                                        $ 8,096,122   $3,344,201       $4,751,921
                                                                    -----------   ----------       ----------
          Total                                                     $10,201,167   $4,213,715       $5,987,452
</TABLE>


<TABLE>
<CAPTION>

<S>                                                                 <C>
Reduction In Regulatory Capital As Of 9/30/97
     Loan Premium                                                   None
     Core Deposit Intangible, Net                                   $4,751,921

Reduction In Tangible Book Value As Of 9/30/97
     Loan Premium                                                   None
     Core Deposit Intangible, Net                                   $4,751,921
</TABLE>



                                       31

<PAGE> 32





Acquisition of Palm Springs Savings Bank ("PSSB")
-------------------------------------------------

<TABLE>
<CAPTION>

<S>                                              <C>
Subsequent Adjustment
---------------------
Adjustment Date                                                03/01/97
Nature of Adjustment                               Recognition of Additional Core Deposit
                                                 Intangible Resulting From Trigger of PSSB
                                                   Officer 24 Month Salary Continuation
                                                                Agreement
Additional Core Deposit Intangible Created                      $362,804
Book Amortization Method / Term                          Straight Line / 79 months
Tax Return Amortization Method / Term                    Straight Line / 24 months
Monthly Pre-Tax Charge To Book Income                            $4,592
Monthly Book Amortization Reported As                     Non Operating Expense
Core Deposit Intangible Balance As Of 9/30/97                   $330,657
Reduction In Regulatory Capital As Of 9/30/97                   $330,657
Reduction In Tangible Book Value As Of 9/30/97                  $330,657

</TABLE>

      In March of 1997, the Bank  commenced  payment to a former officer of Palm
Springs  Saving Bank  following the  resignation  of the executive  while he was
covered under a salary continuation  contract.  The total payments due under the
contract  were  capitalized  as an  adjustment  to the core  deposit  intangible
associated with the Palm Springs Savings Bank acquisition, as the potential cost
of the contract, which existed prior to the acquisition, was included within the
initial  valuation  of the core  deposits  acquired.  The payments due under the
contract were not  capitalized  at the date of  acquisition  due to  uncertainty
regarding  whether the contract would be triggered;  i.e.  whether the executive
would remain with the Bank. This adjustment to the core deposit  intangible will
be amortized  over the  remaining  initial life of the core deposit  intangible.
Because  the  payments  are  taxable to the  executive,  the Bank can deduct the
payments for tax purposes on a faster  schedule than they will be recognized for
book reporting  purposes,  thus  generating a deferred tax liability  under SFAS
109.



                                       32

<PAGE> 33



LIQUIDITY
---------

      Liquidity is actively managed to ensure  sufficient funds are available to
meet  the  ongoing  needs  of both  the  Company  in  general  and  the  Bank in
particular. Liquidity management includes projections of future sources and uses
of funds to ensure the availability of sufficient liquid reserves to provide for
unanticipated circumstances.

For the Bank, the primary sources of liquidity are:

o     deposits

o     principal  and interest payments on loans, mortgage backed, and investment
      securities

o     retained earnings

o     FHLB advances

o     other borrowings, including reverse repurchase agreements

For the Bank, the primary uses of funds include:

o     loan originations

o     customer drawdowns on lines of credit

o     loan purchases

o     investment and mortgage backed securities purchases

o     customer withdrawals of deposits

o     interest paid on liabilities

o     operating expenses

            The Bank's investment  portfolio is structured to provide an ongoing
source of cash from scheduled payments and anticipated prepayments from mortgage
backed securities, in addition to cash flows from periodic maturities, typically
from  securities with balloon final  payments.  The Company's  strategy over the
past year has been to  reinvest  available  monthly  cash  flows,  to the extent
economically and  operationally  feasible,  into new whole loan originations and
purchases, in order to bolster net interest income and better utilize the Bank's
strong risk based capital position.




                                       33

<PAGE> 34



      During the quarter ended  September 30, 1997, the Bank  commenced  efforts
aimed at acquiring an unsecured  "federal  funds" line of credit from one of the
institution's primary correspondent banks, as an additional means to provide for
contingent  liquidity  needs.  However,  there can be no assurance that the Bank
will be successful in securing such line of credit.

      At September 30, 1997, the Bank maintained  untapped borrowing capacity at
the FHLB-San  Francisco in the amount of $128.2  million.  At the same date, the
Bank was in the process of pledging  approximately  $100.0 million in additional
residential  mortgages  to the  FHLB-SF in order to expand the Bank's  liquidity
resources.  In addition,  due to the  Company's  relatively  low loan to deposit
ratio of 61.2% at September 30, 1997, the Company maintained  significant excess
collateral  in both loans and  securities;  collateral  which is  available  for
either  liquidation  or secured  borrowings  in order to meet  future  liquidity
requirements.

      At September 30, 1997,  cash and cash  equivalents  totaled $25.6 million,
compared to $18.4 million at June 30, 1997. The increase  during the most recent
fiscal  quarter was  associated  with the  investment of $8 million into a short
term repurchase  agreement that was slated to fund (after maturity) a whole loan
purchase  contracted  to close in October 1997.  It is  management's  intention,
while ensuring adequate cash availability for operating needs, to constrain cash
and cash  equivalent  balances in favor of higher  yielding  assets,  subject to
meeting all regulatory liquidity requirements.

      OTS  regulations  currently  present two liquidity  requirements.  The key
requirement  is based  upon  cash,  cash  equivalents,  and  certain  short term
investments  equaling at least 5.0% of deposits plus short term borrowings.  The
Bank's  regulatory  liquidity ratio for the month of September,  1997 was 9.99%,
placing the Bank in compliance.

      Liquidity  needs for HFB on a stand alone basis are met through  available
cash, periodic earnings, and cash flows from its investment portfolio.






                                       34

<PAGE> 35



CAPITAL RESOURCES
-----------------

      The  Bank  must  maintain  capital  standards  as  set  forth  by  federal
regulations.  As of  September  30 1997,  these  requirements  are:  1) tangible
capital of 1.5 % of adjusted  assets;  2) core capital of 4% of adjusted assets;
and 3) risk-based  capital of 8.0 % of  risk-weighted  assets.  At September 30,
1997, the Bank exceeded all minimum regulatory capital  requirements as shown in
the table below:

<TABLE>
<CAPTION>

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

Tangible Capital
----------------

<S>                                     <C>                   <C>  
Actual capital                          $62,659               6.07%
Minimum required                         15,479               1.50
                                         ------              -----
Excess                                  $47,180               4.57%
                                        =======               =====
Core Capital
------------
Actual capital                          $62,659               6.07%
Minimum required                         41,277               4.00
                                        -------               ----
Excess                                  $21,382               2.07%
                                        =======               =====
</TABLE>

                                                          
<TABLE>
<CAPTION>
                                                          PERCENT OF RISK-
                                        AMOUNT            WEIGHTED ASSETS
                                        ------            ---------------

<S>                                     <C>                  <C>
Risk-based Capital
------------------
Actual capital                          $65,567              15.48%
Minimum required                         33,885               8.00
                                        -------             ------
Excess                                  $31,682               7.48%
                                        =======             =======
</TABLE>



                                       35

<PAGE> 36



      OTS regulations  contain "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 one which maintains:

      A.   A  total  risk-based  capital  ratio  of 10%  or  greater,  
      B.   A Tier 1 risk-based  capital  ratio of 6% 
      C.   A core capital ratio of 5% or greater, and
      D.   Is  not subject to any written capital order or directive to meet and
           maintain a specific capital level of any capital measure.

      The Bank's Tier 1 risk based  capital  ratio as of September  30, 1997 was
14.79%. At September 30, 1997, the Bank's  regulatory  capital levels exceed the
thresholds  required to be classified as a "well capitalized"  institution.  The
Bank's capital ratios detailed above do not reflect the additional  capital (and
assets) maintained by the holding company.

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



                                       36

<PAGE> 37



CREDIT PROFILE
--------------

      Nonperforming Assets
      --------------------

      The following table sets forth information  regarding nonaccrual loans and
real estate acquired through foreclosure.

<TABLE>
<CAPTION>

                                                   Sept 30, 1997   June 30, 1997
                                                   -------------   -------------
                                                       (Dollars In Thousands)
<S>                                                       <C>            <C>   
Nonaccrual loans before valuation reserves                $3,485         $5,217
Investment in foreclosed real estate before
    valuation reserves                                     6,942          6,308
Investment in repossesed consumer assets before
    valuation reserves                                        14             10
                                                      ----------      ---------
Total nonperforming assets                               $10,441        $11,535
                                                         =======        =======
Nonperforming loans to gross loans net of
    undisbursed loan funds                                 0.65%          1.06%
Nonperforming assets to total assets                       0.99%          1.17%

</TABLE>

      The reduction in  nonperforming  assets during the first quarter of fiscal
1998  primarily  resulted  from the  Company's  continuing  to cycle through the
portfolio of troubled assets  acquired in conjunction  with the purchase of PSSB
on September 27, 1996, as highlighted by the table presented below. In addition,
a gradual recovery in real estate markets in the Company's primary lending areas
has favorably impacted the Company's aggregate credit profile.





                                       37

<PAGE> 38



      Classified Assets
      -----------------

      The following graph presents information concerning classified assets. The
category "OAEM" refers to "Other Assets Especially  Mentioned",  or those assets
which present indications of potential future credit deterioration.

<TABLE>
<CAPTION>

                                 HF Bancorp, Inc

                          History of Classified Assets

                             (Dollars In Thousands)

                             OAEM       Substandard       Loss          Total
                             ----       -----------       ----          -----
<S>                        <C>            <C>            <C>           <C>    
December 31, 1995           $9,217        $ 9,130        $2,618        $20,965
March 31, 1996              $8,287        $10,207        $3,030        $21,524
June 30,1996               $11,070        $ 8,189        $3,140        $22,399
September 30, 1996         $17,454        $22,007        $4,037        $43,498
December 31, 1996          $17,793        $20,588        $2,820        $41,201
March 31, 1997             $16,646        $18,733        $3,035        $38,414
June 30, 1997               $9,586        $19,834        $2,952        $32,372
September 30, 1997          $8,656        $15,805        $3,051        $27,512

</TABLE>

      The Company experienced an anticipated  significant increase in classified
assets upon the acquisition of PSSB in September,  1996.  Since the acquisition,
management has worked to reduce the classified asset total through various means
including  aggressive  collection efforts,  foreclosure with subsequent property
sales,  and settlement of troubled  assets for less than face value. As a result
of its due  diligence  process  in  conjunction  with the  acquisition  of PSSB,
management  required PSSB to recognize $2.2 million in additional  loan and real
estate loss provisions prior to the consummation of the acquisition.





                                       38

<PAGE> 39



      Impaired Loans
      --------------

      The Bank  adopted  Statement  of  Financial  Accounting  Standards  (SFAS)
No.114,  "ACCOUNTING  BY CREDITORS FOR  IMPAIRMENT OF A LOAN" as amended by SFAS
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 loans'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  Bank  applies  the  provision  of SFAS  No.  114 to all  loans in its
portfolio.  As a majority of the Bank's  loans are  collateral  dependent,  most
impaired loans are accounted for based upon the fair value of their  collateral.
In applying  the  provisions  of SFAS No. 114,  the Bank  considers a loan to be
impaired  when it is  probable  that the Bank  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 Bank considers all nonaccrual loans
and all loans that have a specific loss allowance  applied to adjust the loan to
fair value as impaired.

      At September 30, 1997, the Company  maintained total gross impaired loans,
before  specific  reserves,  of $12.1 million,  constituting  134 credits.  This
compares  favorably to total gross  impaired  loans of $16.3 million at June 30,
1997.  A total of $1.4 million in specific  reserves  were  established  against
impaired  loans at  September  30,  1997.  The average  recorded  investment  in
impaired  loans during the quarter ended  September 30, 1997 was $13.0  million.
The   Company's   impaired   loan   portfolio   at   September   30,   1997  was
disproportionately  represented  by  credits  originated  by PSSB  prior  to its
acquisition, as highlighted in the following table.

<TABLE>
<CAPTION>

                   Gross Impaired Loans At September 30, 1997


                             (Dollars In Thousands)

                            Originated          Originated
                                    By                  By
                                  PSSB       Hemet Federal                TOTAL
                                  ----       -------------                -----
<S>                             <C>                 <C>                 <C>   
Accrual Status                  $4,455              $4,146               $8,601

Non Accrual Status              $1,939              $1,546               $3,485

TOTAL                           $6,394              $5,692              $12,086

</TABLE>


                                       39

<PAGE> 40



      The above table also highlights that many of the Company's  impaired loans
at September 30, 1997 were either fully current or with only minor  delinquency,
as $8.6 million (71.2%) were  maintained on accrual status.  Interest is accrued
on impaired  loans on a monthly basis except for those loans that are 90 or more
days  delinquent or those loans which are less than 90 days delinquent but where
management has identified  concerns  regarding the collection of the credit. For
the three months ended  September 30, 1997,  accrued  interest on impaired loans
was $92,000 and interest of $198,000 was received in cash.

      If all  nonaccrual  loans had been  performing  in  accordance  with their
original loan terms, the Company would have recorded interest income of $232,000
during the quarter ended September 30, 1997, instead of interest income actually
recognized on cash payments of $33,000.


      Allowance for Loan Losses
      -------------------------

      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 Bank'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  Bank'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 Bank's allowance for loan losses.
Such agencies may require the Bank 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
Bank's control.




                                       40

<PAGE> 41

<TABLE>
<CAPTION>


      The  following  tables set forth  activity  in the Bank's  allowances  for
estimated  loan losses and estimated  real estate losses during the three months
ended September 30, 1997 and 1996:


                                                 Three Months Ended September 30
                                                 -------------------------------
                                                           1997           1996
                                                           ----           ----
                                                     (Dollars In Thousands)

<S>                                                      <C>            <C>   
Allowance for Loan Losses:
--------------------------
Balance at June 30                                       $4,780         $3,068
   Allowance acquired from PSSB                             ---          2,963
    Loan chargeoffs:
          Residential real estate                         (235)           (11)
          Multifamily real estate                          (57)            ---
          Commercial real estate                            ---            ---
          Construction                                      ---            ---
          Land/Lots                                       (246)           (86)
          Consumer                                         (41)            ---
          Commercial business                               ---            ---
                                                   ------------      ---------
     Total chargeoffs                                     (579)           (97)
     Loan recoveries                                        ---            ---
     Provision for estimated loan losses                    100            179
                                                      ---------       --------
Balance at September 30                                  $4,301        $ 6,113
                                                         ======        =======
</TABLE>


<TABLE>
<CAPTION>
                                                  September 30,       June 30,
                                                  -------------       --------
                                                           1997           1997
                                                           ----           ----

<S>                                                     <C>             <C>   
Allowance for estimated loan losses as a percent of
     nonperforming loans                                123.43%         91.63%
Allowance for estimated loan losses as a percent of
     gross loans receivable net of loans in process       0.81%          0.97%

</TABLE>


                                       41

<PAGE> 42

<TABLE>
<CAPTION>

                                                 Three Months Ended September 30
                                                 -------------------------------
                                                           1997           1996
                                                           ----           ----

                                                     (Dollars In Thousands)
Allowance for Losses: Real Estate Foreclosure
---------------------------------------------

<S>                                                   <C>             <C>     
Balance at June 30                                    $   1,020       $    381
   Allowance acquired from PSSB                               0            491
   Net chargeoffs                                           (77)            (8)
   Provision for estimated real estate losses               426             29
                                                     -----------    ----------
Balance at September 30                                 $ 1,369        $   893

Allowance for Losses: Real Estate-Development
---------------------------------------------
Balance at June 30                                         $577         $1,536
   Allowance acquired from PSSB                               0              0
   Net chargeoffs                                          (287)             0
   Provision for estimated losses                             0              0
                                                        --------        -------
Balance at September 30                                    $290         $1,536

Total Allowances For Real Estate Losses                  $1,659         $2,429
                                                         ======         ======
</TABLE>


      Loan charge-offs during the first quarter of fiscal 1998 were concentrated
in  credits  obtained  in  conjunction  with the  acquisition  of  PSSB,  with a
particular  concentration  in land and  developed  lot loans.  While the Company
continues to make new land and lots loans,  the terms and  underwriting for such
new credits are significantly more conservative than those historically extended
by PSSB.



                                       42

<PAGE> 43


      The ratio of  allowance  for  estimated  loan losses to  nonaccrual  loans
increased from 91.63% at June 30, 1997 to 123.43% at September 30, 1997 due to a
decline in  nonaccrual  loans from $5.2  million to $3.5  million.  The ratio of
allowance for estimated losses to gross loans receivable net of loans in process
declined  from 0.97% at June 30,  1997 to 0.81% at  September  30, 1997 due to a
combination of a lower nominal  reserve  balance and an expanded loan portfolio.
The lower ratio (0.81%) at September 30, 1997 is supported by the  reductions in
classified assets and nonaccrual loans  experienced by the Company,  the general
recovery in real estate values in the Company's primary market areas, and by the
high  concentration of residential  mortgages in the current loan portfolio.  At
September  30, 1997,  72.6% of the Bank's gross loan  portfolio was comprised of
residential  real  estate  loans,  while 97.1% of the gross loan  portfolio  was
composed of loans secured by real estate.

      A $287,000  chargeoff against the Company's  valuation  allowance for real
estate held for investment was recorded in the quarter ended  September 30, 1997
in  conjunction  with  the  sale of the  VISTA  BONITA  project.  The  remaining
valuation  reserve for real estate held for  investment is  associated  with the
MAYBERRY ESTATES parcel (six one-half acre developed home lots), which was under
contract for sale at September 30, 1997.

      The Company's inventory of foreclosed  properties and repossessed consumer
assets at September 30, 1997 is summarized  in the following  table.  During the
quarter  ended  September  30,  1997,  the Company  recognized  $426,000 in post
acquisition  writedowns  in order  to speed  the  liquidation  of the  remaining
problem assets acquired in conjunction with the PSSB purchase.

     Real Estate Acquired By Foreclosure and Repossessed Consumer Assets

<TABLE>
<CAPTION>


(Dollars In Thousands)

                                  Gross     Valuation        Net     Percent
Type Of Property                 Balance    Reserves     Balance    Of Total
----------------                 -------    --------     -------    --------
<S>                               <C>           <C>       <C>          <C>  
Residential 1 - 4 Units           $2,164        $446      $1,718       30.7%
Multifamily More Than 4 Units          0           0           0        0.0%
Commercial / Industrial            1,711         142       1,569       28.1%
Land / Developed Lots              3,067         781       2,286       40.9%
Repossessed Consumer Assets           14           0          14        0.3%
                                  ------        ----       -----       ----- 

   Total                          $6,956      $1,369      $5,587       100.0%

</TABLE>

      The Bank accounts for real estate owned through foreclosure at fair market
value upon acquisition, and management believes that adequate valuation reserves
have been  established  based upon current market  conditions.  At September 30,
1997,  approximately  $2.9 million in foreclosed real estate was in escrow under
contract for sale.



                                       43

<PAGE> 44




Comparison  Of Operating Results For the Three Months  Ended  September 30, 1997
--------------------------------------------------------------------------------
and 1996
--------

General
-------

      The Company reported net earnings of $502,000, or $0.08 per share, for the
three months ended September 30, 1997, compared to net earnings of $453,000,  or
$0.08 per share, for the same quarter the prior fiscal year, excluding the prior
year impact of the one time assessment to recapitalize  the Savings  Association
Insurance Fund of the FDIC. Including the non recurring assessment,  earnings in
the quarter ended September 30, 1996 were a loss of $2.3 million,  equivalent to
a loss of $0.41 per share.  The number of shares  utilized in earnings per share
calculations  increased  by 298,449  from the fiscal 1997  quarter to the fiscal
1998 quarter,  as shares under the Company's  deferred stock  compensation plans
continued to pro rata vest and due to the  appreciation in the Company's  common
stock,  which  leads to a  higher  number  of  shares  for  earnings  per  share
calculations  due to the impact of the treasury stock method of accounting  upon
"in the money" stock options.

      When comparing  results for the quarter ended September 30 for current and
prior year, it is important to note that the prior year quarter  included just 4
days of the impact of the PSSB acquisition,  which closed on September 27, 1996.
Due to the timing of the PSSB purchase and the growth experienced by the Company
in the most recent fiscal quarter, the Company maintained a significantly larger
average balance sheet in the current year quarter, somewhat offset by the impact
of  additional  operating  costs  associated  with  running a larger bank in the
recent period.

Net Interest Income
-------------------

      Net interest  income  increased from $4.6 million during the quarter ended
September 30, 1996 to $6.1 million during the quarter ended  September 30, 1997,
representing a rise of 34.0%. The increase resulted from both a rise in interest
earning assets and an improvement in the net interest margin realized on earning
assets.  Average  interest  earning  assets rose from  $789.1  million to $973.8
million (23.4%),  while the average margin on earning assets expanded from 2.31%
to 2.51%  (8.7%).  The ratio of  interest  earning  assets to  interest  bearing
liabilities  remained  constant  between the two quarters ended September 30, at
1.08.  During the quarter  ended  September 30, 1997,  the Company  continued to
improve its cash management,  implementing  revised transit courier schedules to
minimize lost float on checks deposited by customers.



                                       44

<PAGE> 45



Interest Income
---------------

      Interest  income  increased  $3.8  million,  or 26.6%,  from $14.4 million
during the quarter ended  September 30, 1996 to $18.2 million during the quarter
ended September 30, 1997. Interest income on loans nearly doubled from the prior
fiscal year quarter,  as average net loans  outstanding rose from $238.5 million
during the fiscal 1997 quarter to $494.5 million during the most recent quarter.
This favorable  volume impact was partially offset by a reduction in the average
rate  earned on the loan  portfolio,  from 8.40% in the fiscal  1997  quarter to
7.95%  during the fiscal 1998  quarter.  Interest  income from  mortgage  backed
securities  declined  slightly from $4.7 million in the quarter ended  September
30, 1996 to $4.6 million in the quarter  ended  September  30, 1997,  despite an
increase in average mortgage backed  securities  outstanding from $269.8 million
in the quarter  ended  September  30, 1996 to $284.3  million in the most recent
quarter.  The average rate earned on mortgage  backed  securities  declined from
6.90% during the fiscal 1997 quarter to 6.50% during the fiscal 1998 quarter, as
the Company sold a significant  volume of longer term,  higher  yielding,  fixed
rate  mortgage  backed  securities  over the past year in  conjunction  with its
interest rate risk management  program and because general market interest rates
were lower  during the fiscal 1998  period,  reducing  interest  income from the
Company's  significant  position in adjustable rate mortgage backed  securities.
Interest  income and dividends  from  investment  securities  declined from $4.7
million in the quarter ended  September 30, 1996 to $3.8 million during the most
recent quarter due to the Company's planned reduction of its investment security
portfolio in favor of customer loans and other more interest  sensitive  assets,
as investment  securities  declined from $227.0 million at September 30, 1996 to
$150.1 million at September 30, 1997.

Interest Expense
----------------

      Interest  expense  rose from $9.8  million  during the three  months ended
September 30, 1996 to $12.1 million during the three months ended  September 30,
1997.  This 23.2% increase  stemmed from average  interest  bearing  liabilities
expanding  from $730.1  million  during the prior  fiscal year quarter to $903.4
million during the most recent  quarter,  fractionally  offset by a reduction in
the average  rate paid on interest  bearing  liabilities  falling  from 5.39% to
5.36%. Interest expense on deposits rose from $8.1 million for the quarter ended
September 30, 1996 to $10.4 million during the quarter ended September 30, 1997,
as average  interest  bearing  deposits  expanded from $660.1  million to $819.6
million.  Interest  expense  on  borrowings  grew from $0.9  million  during the
quarter ended  September 30, 1996 to $1.2 million during the most recent quarter
due to a $13.8 million increase in the average balance of borrowings outstanding
combined with the average borrowing rate rising from 5.23% to 5.95%.  During the
quarter  ended  September 30, 1997,  the Company  increased its use of wholesale
borrowings in conjunction with expansions in its loan and securities portfolios.
Net interest expense from hedging  transactions  fell 37.7% from the fiscal 1997
to the fiscal 1998 quarter,  as the conclusions of the amortization  periods for
the deferred  losses  associated  with two  terminated  interest rate swaps were
realized in between the quarters.



                                       45

<PAGE> 46



Provision For Estimated Loan Losses
-----------------------------------

      The provision for estimated loan losses decreased from $179,000 during the
quarter ended  September 30, 1996 to $100,000 during the quarter ended September
30, 1997, as the Company has, over the past year, achieved  significant progress
in  addressing  the  troubled  assets  acquired  in  conjunction  with  the PSSB
purchase.  Nonperforming  loans  as a  percent  of gross  loans  net of loans in
process were 0.65% at  September  30, 1997,  versus 1.11% one year  earlier.  In
addition,  the real estate markets where the Company maintains the vast majority
of its  loans  have  generally  improved  in the past  year,  with the  Southern
California  economic  recovery  continuing and housing  affordability  remaining
favorable by  historical  California  standards.  The ratio of the allowance for
estimated  loan  losses  as a  percent  of  nonperforming  loans  was  123.4% at
September 30, 1997, almost unchanged from 123.6% a year earlier.

Other Income And Expense
------------------------

      Other income & expense  changed from income of $419,000 during the quarter
ended  September  30, 1996 to expense of $340,000  during the three months ended
September  30,  1997.  Loan and other fees rose from $51,000 in the prior fiscal
year quarter to $97,000 in the current fiscal year quarter,  in conjunction with
the  expansion in the loan  portfolio.  Net gains from the sale of available for
sale  securities  fell from $365,000  during the first quarter of fiscal 1997 to
$56,000  during the first  quarter  of fiscal  1998,  as the prior year  quarter
included  significant  gains on the sale of $21.2  million  in  mortgage  backed
securities.  During the most recent quarter, the Company realized gains on loans
held for sale of $27,000 in  conjunction  with the  Company's  new and gradually
expanding  mortgage  banking  operation.   The  net  expense  from  real  estate
operations  increased  significantly from $52,000 in the quarter ended September
30, 1996 to $443,000 in the most recent fiscal quarter,  as management sought to
aggressively  liquidate a significant  portion of the remaining  problem  assets
acquired  with the PSSB  purchase.  79% of the  current  quarter  writedowns  on
foreclosed real estate were associated with credits  originated by PSSB prior to
the  acquisition.  Amortization of intangible  assets increased from $237,000 in
the  fiscal  1997  quarter  to  $588,000  in the  most  recent  quarter,  as the
amortization of the premium paid for PSSB did not commence until October,  1996.
Savings fees  increased  dramatically  from  $171,000  during the quarter  ended
September 30, 1996 to $451,000  during the quarter ended  September 30, 1997 due
to the addition of the PSSB deposit base, the new fee & service charge  schedule
implemented  during the most recent fiscal  quarter,  the  Company's  continuing
focus upon  adding  transaction  accounts,  and a recent,  proactive  program by
management to validate fee waivers.



                                       46

<PAGE> 47



General & Administrative Expenses
---------------------------------

      General & administrative  expenses  increased by $804,000,  or 20.0%, from
$4.0 million to $4.8 million for the quarters ended September 30, 1996 and 1997,
respectively.  The figure for the quarter ended  September 30, 1996 excludes the
one time  assessment to  recapitalize  the SAIF  insurance fund of the FDIC. The
20.0% increase was primarily attributable to:

o     the additional  staffing and operating  overhead  associated with the four
      full  service  branches  acquired  through the PSSB  purchase,  along with
      greatly expanded loan and deposit portfolios

o     a $95,000  accrual in the most recent  fiscal  quarter  for  restructuring
      costs  anticipated to be realized in the next three months,  as management
      works to accelerate the Company's evolution into a community bank

      General &  administrative  expenses  (excluding the SAIF  recapitalization
assessment) expressed as a percentage of total assets declined from 1.95% during
the quarter ended  September  30, 1996 to 1.87% during the most recent  quarter.
This decline stemmed, in part, from the various expense reduction and efficiency
improvement initiatives implemented by management.  For example, during the most
recent quarter:

o     the  Company's  health  benefits  program  was  modified  to reduce annual
      operating expense by approximately $75,000 per year

o     two of the Company's four vehicles were sold

o     the  Company's loan  processing and servicing operations were restructured
      to provide better and more efficient customer service

o     several  vendors  were  replaced  with  more cost  effective organizations
      providing equal or better support to the Company

o     the Company realized the first ongoing cost reduction from the decision to
      terminate its defined benefit and  supplemental  retirement  pension plans
      during the quarter ended June 30, 1997

o     the  Company  commenced  aggressively  seeking  to  improve  its return on
      occupancy costs, culminating in the lease of excess space at one branch in
      the quarter just concluded for gross annual rent of $36,000



                                       47

<PAGE> 48



      Management has recently  adopted a formalized  strategic  planning process
aimed at improving profitability,  pairing the ratio of general & administrative
expenses to average  assets,  and  improving  the  Company's  efficiency  ratio.
Initiative  areas  within  this  planning  process  include a review of  Company
provided  benefits and  alternatives  for migrating more of the Company's  total
compensation  from fixed to variable,  or  incentive  based,  pay.  Salaries and
employee  benefits  composed  52.8% of total general &  administrative  expenses
during the most recent  quarter.  In addition,  the strategic  planning  process
encompasses  a review of current and  potential  delivery  alternatives  for the
Company's products and services.  However,  there can be no assurance  regarding
the degree of success to be realized from the efforts described above.


Income Taxes
------------

      Income  tax  expense  changed  from a benefit of $1.6  million  during the
quarter  ended  September  30, 1996 to expense of $356,000 in the quarter  ended
September 30, 1997 due to the change in pre-tax income between the quarters. The
Company's nominal tax rate remained substantially  unchanged between current and
prior year.




                                       48

<PAGE> 49



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,
           1997.

        b) Not applicable.

        c) At such meeting the Company's 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>   
            J. Robert Eichinger     4,687,889         35,268
            Harold L. Fuller        4,688,664         34,493
            Richard S. Cupp         4,688,194         34,963
</TABLE>

        2. The  ratification  of the  Amended  and  Restated  HF  Bancorp,  Inc.
        Stock-Based Incentive Plan and the amendment to the plan to increase the
        aggregate number of shares of common stock authorized for issuance under
        such Plan by 150,000.

<TABLE>
<CAPTION>

            For         Against           Abstain           Not Voted
            ---         -------           -------           ---------
            <S>         <C>               <C>               <C>   
            4,462,721   136,551           40,055            83,830
</TABLE>

        3. The appointment of Deloitte & Touche,  L.L.P, as independent auditors
        of the Company for the fiscal year ending June 30, 1998.

<TABLE>
<CAPTION>

            For                     Against                 Abstain
            ---                     -------                 -------
            <S>                     <C>                     <C>   
            4,689,954               14,990                  18,213

</TABLE>




                                       49

<PAGE> 50



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

        Not applicable.

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

            (3)  (i) Articles of Incorporation*
                 (ii) By-laws*

            (4)  Stock Certificate*

            (27) Financial Data Schedule


------------------------------------
*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.





                                       50

<PAGE> 51












                                   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 10, 1997                              By: /s/ Richard S. Cupp
                                                        --------------------
                                                        Richard S. Cupp
                                                        President
                                                        Chief Executive Officer



Date: November 10, 1997                              By: /s/ Mark R. Andino
                                                         -------------------
                                                         Mark R. Andino
                                                         Vice President
                                                         Treasurer





                                       51