<PAGE>
 
                                 UNITED STATES

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

                [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934



               For the quarterly period ended September 30, 1997

                                      OR

            [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                          Commission File No. 0-20956

                           HFB FINANCIAL CORPORATION

A Tennessee Corporation                                       I.R.S. Employer
                                                               Identification
                                                               No. 61-1228266

Address                                                       Telephone Number
-------                                                       ----------------

1602 Cumberland Avenue                                         (606) 248-1095
Middlesboro, Kentucky  40965


Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the
preceding twelve 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    .
                                        ---    ---     


The number of shares of the registrant's $1 par value common stock outstanding
at September 30, 1997 was 1,083,626



There are a total of 15 pages filed in this document.

                                       1
<PAGE>
 
                           HFB FINANCIAL CORPORATION

                                   I N D E X
                                   ---------


                                                                        PAGE NO.
                                                                        --------

PART I - FINANCIAL INFORMATION

 ITEM  1.  FINANCIAL STATEMENTS
 
           Consolidated Balance Sheet                                         3
                                                                 
                                                                 
           Consolidated Statement of Earnings                                 4
                                                                 
                                                                 
           Consolidated Statement of Stockholders' Equity                     5
                                                                 
                                                                 
           Consolidated Statement of Cash Flows                             6-7
                                                                 
                                                                 
           Notes to Consolidated Financial Statements                      8-11

 ITEM  2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS                  11-13


PART II - OTHER INFORMATION                                                  14


SIGNATURES                                                                   15


                                       2
<PAGE>
 
                   HFB FINANCIAL CORPORATION AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEET
                                  (Unaudited)

<TABLE> 
<CAPTION> 
                                              SEPTEMBER 30,         JUNE 30,
                                                  1997                1997
                                              -------------         --------
<S>                                           <C>                 <C>
ASSETS                                                          
  Cash and due from banks                     $  3,247,973        $  3,794,637 
  Trading securities                             1,097,738             795,555
  Investment securities
    Available for sale                          24,864,760          25,112,540
    Held to maturity                            18,587,864          20,206,502
                                              ------------        ------------ 
      Total investment securities               43,452,624          45,319,042
  Loans                                        109,100,026         105,694,555
   Allowance for loan losses                      (778,123)           (710,168)
                                              ------------        ------------  
      Net loans                                108,321,903         104,984,387
  Premises and equipment                         2,106,377           2,167,393
  Federal Home Loan Bank stock                   1,190,400           1,169,100
  Interest receivable                            1,306,685           1,074,282
  Other Assets                                     151,996             152,571
                                              ------------        ------------ 
      Total assets                             160,875,696         159,456,967
                                              ============        ============ 

LIABILITIES
  Deposits
    Interest bearing                          $130,710,817        $131,130,405
    Non-interest bearing                         1,494,734           2,072,137
                                              ------------        ------------ 
      Totals                                   132,205,551         133,202,542
  Short term borrowings                          8,500,000           7,500,000
  Long term debt                                   706,406             720,753
  Interest payable                               1,146,296             548,233
  Other liabilities                              1,389,989             918,412
                                              ------------        ------------ 
      Total liabilities                        143,948,242         142,889,940
                                              ------------        ------------ 

STOCKHOLDERS' EQUITY
  Preferred stock, $1 par value
    Authorized and unissued--1,000,000 shares
  Common stock, $1 par value
    Issued and outstanding--1,285,673 shares     1,285,673           1,285,673
  Additional paid-in capital                     6,098,357           6,094,551
  Less: Common stock acquired by ESOP              (96,185)           (125,422)
      Common stock acquired by Management 
       Recognition Plan and Supplemental 
      Executive Retirement Plan                    (93,950)           (100,950)
      Common stock acquired by Rabbi trusts    
       for deferred compensation plans            (294,410)           (283,259)
  Treasury stock, at cost, 202,047 shares       (2,030,955)         (2,030,955)
  Retained earnings                             11,940,402          11,717,514
  Net unrealized gain on securities available 
   for sale                                        118,522               9,875
                                              ------------        ------------ 
      Total stockholders' equity                16,927,454          16,567,027
                                              ------------        ------------ 

      Total liabilities and stockholders'
       equity                                 $160,875,696        $159,456,967
                                              ============        ============

</TABLE> 


See notes to consolidated financial statements.
                                       3
<PAGE>
 
                   HFB FINANCIAL CORPORATION AND SUBSIDIARY

                       CONSOLIDATED STATEMENT OF INCOME
                                  (Unaudited)
<TABLE>
<CAPTION> 


                                                       THREE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                         1997        1996
                                                     ------------------------- 
<S>                                                  <C>           <C> 
INTEREST INCOME
  Loans receivable                                    $2,394,912   $2,094,361
  Investment securities                                  711,540      655,765
  Other dividend income                                   27,054       20,138
  Deposits with financial institutions                    35,852       43,855
                                                     ------------------------- 
    Total interest income                              3,169,358    2,814,119
                                                     ------------------------- 

INTEREST EXPENSE
  Deposits                                             1,604,149    1,575,693
  Short term borrowings                                  108,242       20,973
  Long term debt                                          14,313       15,451
                                                     ------------------------- 
    Total interest expense                             1,726,704    1,612,117
                                                     ------------------------- 

NET INTEREST INCOME                                    1,442,654    1,202,002
  Provision for loan losses                               67,955       77,747
                                                     ------------------------- 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES    1,374,699    1,124,255
                                                     ------------------------- 

OTHER INCOME
  Service charges for deposit accounts                    99,518       72,760
  Other customer fees   `                                 11,037       10,187
  Net gain (loss) on trading securities                  167,823       53,170
  Net realized gain (loss) on sales of available for
   sale securities                                         7,623
  Other income                                             9,763       13,133
                                                     ------------------------- 
    Total other income                                   295,764      149,250 
                                                     ------------------------- 

OTHER EXPENSES
  Salaries and employee benefit                          494,018      441,896
  Net occupancy expenses                                  37,676       54,641
  Equipment expenses                                      72,591       51,441
  Data processing fees                                    61,833       48,461
  Deposit insurance expense                               21,104       70,669
  SAIF special assessment                                             705,859
  Legal and professional fees                             37,558       50,707
  Advertising                                             20,568       24,498
  State franchise and deposit taxes                       31,369       39,860
  Other expenses                                         116,767      105,473
                                                     -------------------------
     Total other expenses                                893,484    1,593,505
                                                     -------------------------

INCOME BEFORE INCOME TAX                                 776,979     (320,000)
  Income tax expense                                     326,529     (107,875)
                                                     ------------------------- 

NET INCOME                                               450,450     (212,125)
                                                     ========================= 

PER SHARE
  Net income                                          $     0.42   $     (0.20)
                                                     ========================= 

WEIGHTED AVERAGE SHARES OUTSTANDING                    1,083,626     1,051,447
                                                     =========================
</TABLE> 

See notes to consolidated financial statements.

                                       4
<PAGE>
 
                   HFB FINANCIAL CORPORATION AND SUBSIDIARY

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                     Three months ended September 30, 1997

                                  (Unaudited)

<TABLE> 
<CAPTION> 
                                                                                                                 NET
                                                                                                             UNREALIZED 
                                                                                                               GAIN ON     TOTAL
                                        ADDITIONAL               MRP                                         SECURITIES    STOCK- 
                               COMMON    PAID-IN      ESOP       AND      RABBI       TREASURY     RETAINED   AVAILABLE   HOLDERS'
                               STOCK     CAPITAL      DEBT*     SERP**    TRUSTS        STOCK      EARNINGS    FOR SALE    EQUITY
                             ---------- ---------- ---------  ---------  ---------  -----------  ----------- ---------- -----------
<S>                          <C>        <C>        <C>        <C>        <C>        <C>          <C>         <C>        <C> 
BALANCES, JUNE 30, 1997      $1,285,673 $6,094,551 $(125,422) ($100,950) ($283,259) ($2,030,955) $11,717,514  $  9,875  $16,567,027

Net earnings                                                                                         450,450                450,450

Dividends declared                                                                                  (227,562)              (227,562)

Reduction of ESOP debt                                29,237                                                                 29,237

Stock issued under MRP                                            7,000                                                       7,000

Stock purchased by Rabbi 
 trusts                                                                    (11,151)                                         (11,151)

Net change in unrealized 
 gain on securities
 available for sale                                                                                            108,647      108,647 

Tax benefit of employee                      3,806                                                                            3,806
 benefit plans 
                             ---------- ---------- ---------  ---------  ---------  -----------  ----------- ---------- -----------
BALANCES, SEPTEMBER 30, 1997 $1,285,673 $6,098,357 $ (96,185) $ (93,950) $(294,410) $(2,030,955) $11,940,402  $118,522  $16,927,454
                             ========== ========== =========  =========  =========  ===========  =========== ========== ===========
</TABLE> 

*   Employees Stock Ownership Plan (ESOP)
**  Management Recognition Plan (MRP) and Supplemental Executive Retirement 
    Plan (SERP)

See notes to consolidated financial statements.

                                       5

<PAGE>
 
                   HFB FINANCIAL CORPORATION AND SUBSIDIARY

                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION> 


                                                       THREE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                         1997        1996
                                                     ------------------------- 
<S>                                                  <C>           <C>
OPERATING ACTIVITIES
  Net income (loss)                                   $  450,450   $  (212,125)
  Adjustments to reconcile net income to net cash
   provided by operating activities
   Provision for loan losses                              67,955        77,747
   Depreciation and amortization
    Property and equipment                                61,016        57,210
    Cost of ESOP and MRP                                  36,238        29,037
    Investment securities                                  2,282         8,348
   FHLB stock dividend                                   (21,300)      (19,100)
   Deferred income tax                                     7,000           550
   Net change in
    Trading account securities                          (302,183)     (206,880)
    Interest receivable                                 (232,403)     (175,765)
    Interest payable                                     598,063       530,373
    Other assets                                             573        (4,295)
    Other liabilities                                    406,630       720,421
                                                     ------------------------- 
   Net cash provided by operating activities           1,074,321       805,521
                                                     ------------------------- 

INVESTING ACTIVITIES
  Purchases of securities available for sale          (1,702,778)     (500,000)
  Purchases of securities held to maturity                            (996,012)
  Proceeds from maturities of securities available
   for sale                                              834,903       507,887
  Proceeds from sales of securities available for 
   sale                                                1,284,398
  Proceeds from maturities of securities held to 
   maturity                                            1,618,013       319,351
  Net change in loans                                 (3,405,470)   (1,863,363)
  Purchases of premises and equipment                                  (10,779)
                                                     ------------------------- 
    Net cash used by investing activities             (1,370,934)   (2,542,916)
                                                     -------------------------
       
</TABLE> 

                                  (continued)
                                       6

<PAGE>
 
                   HFB FINANCIAL CORPORATION AND SUBSIDIARY
               CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                                  (Unaudited)

<TABLE> 
<CAPTION> 
                                                             THREE MONTHS ENDED
                                                                SEPTEMBER 30,
                                                             1997           1996
                                                          ----------     ----------
<S>                                                       <C>            <C> 
FINANCING ACTIVITIES         
  Net change in
    Non interest-bearing, interest-bearing and 
     savings deposits                                     $  (83,354)   $  (513,195)
    Certificates of deposit                                 (913,637)       340,989
    Short term borrowings                                  1,000,000              0
  Repayment of long-term debt                                (14,347)       (13,241)
  Cash dividends                                            (227,562)      (201,228)
  Purchase of stock                                                        (204,550)
  Sale of common stock                                                       10,000
  Common stock acquired by Rabbi trusts                      (11,151)
                                                          ----------    ----------- 
      Net cash used by financing activities                 (250,051)      (581,225)
                                                          ----------    ----------- 
NET CHANGE IN CASH AND CASH EQUIVALENTS                     (546,664)    (2,318,620)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD             3,794,637      4,744,672
                                                          ----------    ----------- 
CASH AND CASH EQUIVALENTS, END OF PERIOD                  $3,247,973    $ 2,426,052
                                                          ==========    ===========
ADDITIONAL CASH FLOWS INFORMATION
  Interest paid                                           $1,128,642    $1,081,831
  Income tax paid                                            146,314         2,002

</TABLE> 

See notes to consolidated financial statements.

                                       7
<PAGE>
 
                           HFB FINANCIAL CORPORATION

            Notes to Consolidated Financial Statements (Unaudited)

1. BASIS OF PRESENTATION:

     The unaudited consolidated financial information for the three month
     periods ended September 30, 1997 and 1996 includes the results of
     operations of HFB Financial Corporation (the "Corporation") and its wholly
     owned subsidiary Home Federal Bank, Federal Savings Bank ("Home Federal" or
     the "Bank"). The accompanying unaudited financial statements have been
     prepared in accordance with generally accepted accounting principles for
     interim financial statements and with the instructions to Form 10-Q.  It is
     suggested that these statements and notes be read in conjunction with the
     financial statements and notes thereto included in the Bank's annual report
     for the year ended June 30, 1997 on Form 10-K filed with the Securities and
     Exchange Commission.

     In the opinion of management, the financial information reflects all
     adjustments (consisting only of normal recurring adjustments) which are
     necessary for a fair presentation of the results of operations for such
     periods but should not be considered as indicative of results for a full
     year.

2. NONPERFORMING LOANS AND PROBLEM ASSETS
 
     Management reviews the Bank's loans on a regular basis.  Commercial and
     multi-family real estate loans generally are placed on non-accrual status
     if the borrower is  placed in bankruptcy proceedings, or management
     concludes that payment in full is not likely.  Consumer and commercial
     loans generally are charged off, or an allowance is established for any
     expected loss after they become more than 90 days past due.  Loans are
     charged off when management concludes that they are uncollectible.

     Real estate acquired by the Bank as a result of foreclosure is classified
     as real estate owned until such time as it is sold.  When such property is
     acquired, it is recorded at the lower of the unpaid principal balance or
     its fair value less estimated selling cost.  Any required write-down of the
     loan to its fair market value upon foreclosure is charged against the
     allowance for loan losses.

     The accrual of interest on impaired loans is discontinued when, in
     Management's opinion, the borrower may be unable to meet payments as they
     become due. When interest accrual is discontinued, all unpaid accrued is
     reversed. Interest income is subsequently recognized only to the extent
     cash payments are received.

3. NEW ACCOUNTING STANDARDS

     The Financial Accounting Standards Board has issued Statement No. 128,
     "Earnings Per Share." This statement simplifies the computation of earnings
     per share and requires dual presentation of basic and diluted earnings per
     share on the face of the income statement. The statement is effective for
     financial statements issued for periods ending after December 15, 1997,
     with earlier application not permitted. It is not expected that the
     application of this standard will have a significant impact on the
     Companies earnings per share presentation.

     The Financial Accounting Standards Board has also issued Statement No. 130,
     "Reporting Comprehensive Income," which establishes standards for reporting
     and display of comprehensive income and its components. In addition, the
     Financial Accounting Standards board has issued Statement No. 131,
     "Disclosures about Segments of an Enterprise and Related Information,"
     which 

                                       8
<PAGE>
 
     establishes standards for disclosing information about operating segments
     in interim and annual financial statements. The Company will comply with
     the new disclosure requirements beginning in fiscal 1999. The application
     of these pronouncements will not have a material impact on the Company's
     financial condition or results of operations.

The following sets forth information with respect to the Bank's non-performing
assets at September 30, 1997 and June 30, 1997:

                            (Dollars in thousands)
<TABLE>
<CAPTION>
 
                                                         September 30,    June 30,
                                                             1997          1997
                                                        ---------------  ---------
<S>                                                     <C>              <C>
 
     Accruing loans which are contractually past due
        90 days or more:
          Real estate                                         $ 516         $ 365
          Consumer                                               14             3      
                                                              -----         -----
                                                              $ 530         $ 368
                                                                    
     Real estate owned                                           58            58
                                                              -----         -----
        Total non-performing assets                           $ 588         $ 426
                                                              =====         =====
                                                                    
     Nonaccrual and 90 days or more past due loans                  
        as a percentage of total loans, net (1)                 .49%          .35%
                                                              =====         =====
                                                                    
     Nonaccrual and 90 days or more past due loans                  
        as a percentage of total assets                         .33%          .23%
                                                              =====         =====
 
     Non-performing assets as a percentage of total assets      .37%          .27%
                                                              =====         =====
</TABLE>

     (1) The Bank had no nonaccrual loans at September 30, 1997 and June 30,
         1997.

The Bank has several potential problem commercial real estate loans to one
borrower at September 30, 1997.  The carrying amount of these loans is
approximately $1.4 million, including a $131,000 working capital loan funded in
January 1997.  The properties securing these loans is not generating sufficient
cash flow to fund debt service payments and the borrower has been from 30 to 60
days in arrears on the loan during the quarter.  The borrower has obtained funds
from another source to make the most recent payments on this indebtedness and
the loan was brought current on October 31.  Management is currently evaluating
the collectability of this loan and assessing the possibility of any losses the
Bank could incur.

                                       9
<PAGE>
 
The following sets forth the activity in the Bank's allowance for loan losses
for the three months ended September 30, 1997:
<TABLE> 
<CAPTION> 

 
                            (Dollars in thousands)
 
     <S>                                                             <C> 
     Balance at June 30, 1997                                          $710
     Provision for loan losses                                           68  
                                                                       ----
     Balance September 30, 1997                                         778
                                                                       ====

     Ratio of net charge offs during the period to average
       loans outstanding during the period                              .00%
                                                                       ====
</TABLE> 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

GENERAL:

     HFB Financial Corporation (the "Company"), a Tennessee Corporation, was
formed in September 1992 at the direction of Home Federal Bank, Federal Savings
Bank  (the"Bank") for the purpose of becoming a holding company for the Bank as
part of its conversion from mutual to stock form.  The Corporation's  primary
operation is its' investment in the common stock of the Bank.

     The Bank is principally engaged in the business of accepting deposits from
the general public and originating permanent loans which are secured by one-to-
four family residential properties located in its market area. The Bank also
originates consumer loans and commercial real estate loans, and maintains a
substantial investment portfolio of mortgage-backed and other investment
securities.

     The operations of Home Federal, and savings institutions generally, are
significantly influenced by general economic conditions and the monetary and
fiscal policies of government regulatory agencies.  Deposit flows and costs of
funds are influenced by interest rates on competing investments and prevailing
market rates of interest. Lending activities are affected by the demand for
financing real estate and other types of loans, which in turn are influenced by
the interest rates at which such financing may be offered and other factors
related to loan demand and the availability of funds.  Just as the Bank's
operations are influenced by regulatory authorities, so are its liquidity levels
and capital resources.  As of September 30, 1997, management is not aware of any
current recommendations by regulatory authorities, which if implemented, would
have a material effect on the Bank's operations, liquidity or resources.

     Issues regarding the year 2000 and the implications it may have on the
operations of the Bank, customers of the Bank and vendors of the Bank is of
grave concern to Management.  The Board of Directors has designated a senior
officer to oversee year 2000 compliance and an inventory of software, hardware,
vendors and other issues is currently being developed.  Each will be analyzed
and assessed to determine if they are year 2000 compliant.  This will be an
ongoing process involving every aspect of the Company and the Bank.

ASSET/LIABILITY MANAGEMENT

     Key components of a successful asset/liability strategy are the monitoring
and managing of interest rate sensitivity of both the interest-earning asset and
interest-bearing liability portfolios.  Home Federal has employed various
strategies intended to minimize the adverse affect of interest rate risk on
future operations by providing a better match between the interest rate
sensitivity of its assets and liabilities.  In particular, the Bank's strategies
are intended to stabilize net interest income for the long-term by protecting
its interest rate spread against increases in interest rates.  Such strategies
include the origination of adjustable-rate mortgage loans secured by one-to-four
family residential real estate and the origination of consumer and other loans
with greater interest rate sensitivities than long-

                                       10
<PAGE>
 
term, fixed-rate residential mortgage loans. Although customers typically prefer
fixed-rate mortgage loans in a low interest rate environment, Home Federal has
been successful in originating adjustable-rate loans in recent years. In
addition, the Bank has used excess funds to invest in various short-term
investments including mortgage-backed securities with terms of seven years or
less, U.S. Government Treasury and Agency securities with terms of ten years or
less and other short-term investments.

     Asset/liability management in the form of structuring cash instruments
provides greater flexibility to adjust exposure to interest rates.  During
periods of high interest rates, management believes it is prudent to offer
competitive rates on short-term deposits and less competitive rates for long-
term liabilities.  This posture allows the Bank to benefit quickly from declines
in interest rates.  Likewise, offering more competitive rates on long-term
deposits during the low interest rate periods allows the Bank to extend the
repricing and/or maturity of its liabilities thus reducing its exposure to
rising interest rates.

FINANCIAL CONDITION

     The Corporation's assets increased by .89% to $160.9 million at September
30, 1997 compared to $159.5 million at June 30, 1997.  This increase is due
primarily to an increase in loans receivable, which was funded by proceeds
generated by sales and maturities of investment securities.

     Cash and cash equivalents decreased by $547,000 to $3.2 million at
September 30, 1997 from $3.8 million at  June 30, 1997.  This decrease was
primarily the result of increased levels of loans and a decline in deposits
during the quarter ended September 30, 1997.

     The Company maintains a portfolio of trading account securities which is
comprised of common stock of other financial institutions.  The portfolio was
$1.1 million at September 30, 1997 compared to $796,000 at June 30, 1997.  Most
of this increase was attributable to market appreciation of the underlying
stocks.

     The Bank's asset composition continues to change due to volatility in
interest rates and a strong loan demand.  In the current interest rate
environment, a substantial portion of loans originated were adjustable-rate
residential mortgages.  During the three months ended September 30, 1997, the
Bank originated $7.6 million in mortgages.  Total loans receivable, net
increased 3.18% to $108.3 million at September 30, 1997 compared to $105.0
million at June 30, 1997.

     At September 30, 1997, allowance for loan losses was $778,000 or .71% of
loans receivable compared to $710,000 or .67% of loans receivable at June 30,
1997.  During the three months ended September 30, 1997, the provision for loan
losses was $68,000 and there were no charge offs or recoveries recorded.  The
Bank has several problem real estate loans to one borrower at September 30,
1997..  The carrying amount of these loans is approximately $1.4 million,
including a $131,000 working capital loan which was funded in January 1997.  The
properties securing these loans are not generating sufficient cash flow to fund
debt service payments and the borrower has been from 30 to 60 days in arrears on
these loans during the quarter.  The borrower obtained funds from another source
to make the most recent payments on this indebtedness and these loans were
brought current on October 31.  There has been no improvement in cash flows
since June 30, 1997 and Management continues to closely monitor this credit as
to its collectability and any possible losses the Bank could incur.

     The Bank augments its lending activities and increases its asset yields by
investing in mortgage-backed securities "MBSs " and U.S. Government securities.
During the three months ended September 30, 1997, management purchased $1.7
million in investment securities and MBSs, while the proceeds from called and
maturing investment securities, principal collected on MBSs and investments, and
the sale of investment securities totaled $3.7 million.  At September 30, 1997,
investment securities available for sale, "AFS" was $24.9 million with a net
unrealized gain of $119,000 and the balance of investment securities held to
maturity, "HTM" was $18.6 million.

     Accrued interest receivable increased by $232,000 from $1.074 million at
June 30, 1997 to $1.306 million 

                                       11
<PAGE>
 
at September 30, 1997 due to a higher volume of interest-earning assets and the
timing of interest payments.

     Total deposits decreased by $997,000 to $132.206 million at September 30,
1997 from $133.203 million at June 30, 1997.  During the three months ended
September 30, 1997, Certificates of Deposiits increased $341,000 million while
other deposits decreased by $1.338 million.

     Accrued interest on deposits increased by $598,000 to $1.146 million at
September 30, 1997 from $548,000 at June 30, 1996.  The increase was primarily
due to the timing of interest payments.

     Short term borrowings from Federal Home Loan Bank increased by $1.0 million
during the three months ended September 30, 1997 due to net increases in
borrowings, which was used to fund increases in lending activities.

     The Bank's regulatory liquidity ratio was 23.49% at September 30, 1997 as
compared to 21.50% at June 30, 1997.  At September 30, 1997 the Bank met all the
fully phased-in regulatory capital requirements under FIRREA.  Tangible, core
and risk-based capital ratios were 9.7%, 9.7% and 20.7% respectively at
September 30, 1997 as compared to 9.7%, 9.7% and 20.7% at June 30, 1997.
 
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

     Net earnings increased by $662,000 to $450,000 for the three month period
ended September 30, 1997 from $(212,000) for the three month period ended
September 30, 1996.  The primary reasons for the increase were a $241,000
increase in net interest income, a $10,000 decrease in provision for loan
losses, an $146,000 increase noninterest income and a $700,000 decrease in
noninterest expense offset by a $435,000 increase in income tax expense.

     Interest on loans receivable increased by $301,000 to $2.395 million for
the three month period ended September 30, 1997 as compared to $2.094 million
for the three month period ended September 30, 1996.  This increase is mainly
attributable to a higher weighted average balance of loans receivable
outstanding.

     Interest on investment securities increased by $56,000 to $712,000 during
the three month period ended September 30, 1997 from $656,000 for the three
month period ended September 30, 1996,  primarily due to higher yields.

     Other dividend income increased by $7,000 to $27,000 for the three month
period ended September 30, 1997 from $20,000 for the three month period ended
September 30, 1996 due primarily to increased investment in trading account
securities.

     Interest on deposits with other financial institutions decreased by $8,000
to $36,000 for the three month period ended September 30, 1997 from $44,000 for
the three month period ended September 30, 1996.  This decrease was primarily
due to decreased volume arising from funding needs.

     Interest on deposits increased by $28,000 to $1.604 million for the three
month period ended September 30, 1997 from $1.576 million for the three month
period ended September 30, 1996 as a result of  higher volume and a change in
the overall deposit mix.  Lower rate savings accounts declined, while
Certificates of Deposits increased.

     Interest on short term borrowings and long term debt increased by $87,000
to $123,000 for the three month period ended September 30, 1997 from $36,000 for
the three month period ended September 30, 1996 due to higher levels of
borrowing.

                                       12
<PAGE>
 
     Provision for loan losses was $68,000 for the three month period ended
September 30, 1997 as compared to $78,000 for the three month period ended
September 30, 1996.  The provision was the result of Management's evaluation of
the adequacy of the allowance for loan losses including consideration of
recoveries of loans previously charged off, the perceived risk exposure among
loan types,  actual loss experience, delinquency rates, and current economic
conditions.  The Bank's allowance for loan losses as a percent of total loans at
September 30, 1997 was .71%.

     Non-interest income increased by $146,000 to $295,000 for the three month
period ended September 30, 1997 as compared to $149,000 for the same period in
1996.  The increase was attributable to realized and unrealized gains on trading
account securities and realized gains on investment securities available for
sale of $122,000, an increase of $27,000 in deposit service charge income and a
net decrease of $3,000 in all other categories.  Trading account securities are
equity securities, which are subject to market fluctuations.

     Non-interest expense decreased by $700,000 to $893,000 for the three month
period ended September 30, 1997 as compared to $1.593 million for the same
period in 1996.  Compensation and benefits increased by $52,000 to $494,000 for
the three month period ended September 30, 1997 as compared to $442,000 for the
same period in 1996.  This decrease was primarily attributable to increased
salaries and wages.

     Net occupancy expense decreased by $17,000 to $38,000 for the three month
period ended September 30, 1997 compared to $55,000 for the same period in 1996.
This decrease was mainly the result of decreased repairs and maintenance and
depreciation expense.

     Equipment expense increased by $22,000 to $73,000 for the three month
period ended September 30, 1997 from $51,000 for the three month period ended
September 30, 1996 primarily due to increased depreciation expense associated
with the Bank's New Tazewell branch.

     Data processing expense increased by $14,000 to $62,000 for the three month
period ended September 30, 1997 from $48,000 for the three month period ended
September 30, 1996 due to increased services rendered by the Bank's service
provider.
 
     Deposit insurance premiums decreased by $50,000 to $21,000 for the three
month period ended September 30, 1997 as compared to $71,000 for the three month
period ended September 30, 1996 due to lower deposit insurance premiums.  The
Bank paid a one time special assessment of $706,000 to recapitalize the Savings
Association Insurance Fund during the three months ended September 30, 1996.

     Professional services decreased by $13,000 for the three month period
ended September 30, 1997 as compared to the three months ended September 30,
1996 primarily due to lower accounting and consulting fees.

     Advertising expense decreased by $4,000 for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996 due to
new programs implemented during the three month period ended September 30, 1996.

     State franchise and deposit taxes decreased by $9,000 to $31,000 for the
three month period ended September 30, 1997 compared to $40,000 for the three
month period ended September 30, 1996 due to a change in the Bank's estimated
liability.

     Other expense increased by $11,000 to $116,000 for three the month period
ended September 30, 1997 from $105,000 for the three month period ended
September 30, 1996 as the result of small increases in several expense
categories.

     Income taxes increased by $435,000 to $327,000 for the three month period
ended September 30, 1997 compared to ($108,000) for the three months ended
September 30, 1996 due to higher earnings.

                                       13
<PAGE>
 
                           HFB FINANCIAL CORPORATION

                                    PART II

                               OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

           None

ITEM 2.  CHANGES IN SECURITIES

           None

ITEM 3.  DEFAULTS IN SENIOR SECURITIES

           None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE
           OF SECURITY HOLDERS

           None

ITEM 5.  OTHER INFORMATION

           None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

           a. Exhibits
 
           None
 
 

                                       14
<PAGE>
 
                           HFB FINANCIAL CORPORATION

                                  Signatures


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned, thereunto duly authorized.



                             HFB FINANCIAL CORPORATION
 
                             By: /s/ David B. Cook
                                -----------------------------
                                 David B. Cook
                                 President and
                                 Chief Executive Officer


                             By: /s/ Stanley Alexander, Jr.
                                -----------------------------
                                 Stanley Alexander, Jr.
                                 Chief Financial Officer



Dated: November 7, 1997

                                       15