Exhibit 10.18
 HOME FEDERAL SAVINGS BANK  Cash Retention Award Agreement
    Percentage of Award WhichScheduled Vesting Date(s)
    
    Becomes VestedDecember 31, 2011
December 31, 2012
December 31, 2013
    
    33 1/3%
33 1/3%
33 1/3%
 Agreement Bank
 Recitals
   Terms and Conditions
 1. Grant of Award . Award
 2. Vesting .
 (a)
    
    Scheduled Vesting.Unless the Employee earlier vests in an Award or portion
thereof pursuant to subsection (b) of this Section 2, the Employee shall vest in a
portion of the Award in the percentages and on the scheduled vesting dates specified in
the vesting




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schedule in the table at the beginning of this Agreement, provided that the
Employee has not incurred a Termination of Employment prior to the scheduled vesting
date for
such portion. For purposes of this Agreement, a Termination of Employment
means that the Employees employment with the Bank; its parent company, HMN
Financial, Inc. (HMN) ; or a corporation or other entity controlled by,
controlling or under common control with HMN or the Bank (an Affiliate),
is terminated for any reason, whether by the Employees then employer with or
without cause, or voluntarily or involuntarily by the Employee; provided, however,
that neither the transfer of the Employee among any combination of the Bank, HMN or
any Affiliate, nor a leave of absence granted to the Employee by the Employees then
employer, will be deemed a Termination of Employment.(b)
    
    Other Vesting Events.Notwithstanding the provisions of Section 2(a), if the
Employees Termination of Employment occurs during a calendar year because of the
Employees death or Disability (as hereinafter defined), the Employee will vest in the
unvested portion of the Award that would otherwise have vested had the Employee
remained employed on the scheduled vesting date in such year.
 3. Forfeiture .
 4. Payment .
 5. Employees Rights Limited . EESA
 OTS
 By executing this Agreement, the Employee expressly acknowledges and confirms that:
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(a)
    
    the Employees rights and entitlements under this Agreement, including but not
limited to the vesting and payment of the Award or any portion thereof, shall be
limited in such manner and to such extent as the Bank, in its sole discretion, deems
necessary or advisable to avoid violation by HMN or the Bank of, or any failure by HMN
or the Bank to comply with, the TARP Restrictions and/or the Supervisory Restrictions;(b)
    
    the Bank shall not be bound by any term of this Agreement which the Bank
determines, in its sole discretion, to be impermissible under, or would constitute a
failure to comply with, the TARP Restrictions and/or the Supervisory Restrictions;(c)
    
    the Employee understands that, as a result of the limitations described in this
Section 5, the Employee may be permanently deprived of any right whatsoever to the
vesting and/or payment of amounts under this Agreement; and(d)
    
    the amounts paid to the Employee under this Agreement shall be fully
recoverable by the Bank if, and to the extent that, the Bank, in its sole discretion,
determines the recovery of such amounts to be necessary in order for HMN, the Bank or
any of their Affiliates to comply with the TARP Restrictions, the Supervisory
Restrictions, or any other applicable law, regulation, directive, order, or consent
agreement, or pursuant to any policy of HMN or the Bank in effect from time to time,
and the Employee shall promptly repay such amounts upon receipt of demand for repayment
therefor from the Bank pursuant to this subsection (d).
 6. Definition of Certain Additional Terms .
 (a)
    
    Cause means (1) an act or acts of dishonesty undertaken by
the Employee and intended to result in substantial gain or personal enrichment of the
Employee at the expense of HMN or the Bank; (2) incompetence or misconduct that is
willful and deliberate on the Employees part and that, in either event, is injurious
to HMN or the Bank; (3) the conviction of the Employee of a felony; (4) the intentional
failure of the Employee to perform the Employees stated duties or to satisfy the
Employees obligations as an officer or employee of HMN or the Bank, which failure has
not been cured by the Employee within 30 days after written notice thereof to the
Employee from HMN or the Bank, as applicable; (5) any breach of the Employees
fiduciary duty to HMN or the Bank involving personal profit to the Employee; (6) the
willful violation by the Employee of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order; or (7) material
breach, not caused by HMN or the Bank, of any of the terms and conditions of this
Agreement or of any employment agreement between the Employee and the HMN or the Bank,
which breach has not been cured by the Employee within ten days after written notice
thereof to the Employee from HMN or the Bank.(b)
    
    Disability means any medically determinable physical or mental
impairment that causes the Employee to be unable to carry out the Employees job
responsibilities
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for a continuous period of more than six months, in the sole determination of the
Board of Directors of the Bank (the Bank Board).
 7. No Assurance of Future Awards
 8. Binding Effect; Successors and Assigns
 9. Choice of Law
 10. Entire Agreement
 11. Amendment and Waiver
 12. Section 409A of the Internal Revenue Code .
 13. Required Provisions Under 12 CFR §563.39 .
 (a)
    
    This Agreement will not give the Employee the right to continued employment or
service with the Bank, HMN or any Affiliate, and the Employees then employer may
terminate the Employees employment or service at any time and otherwise deal with the
Employee without regard to the effect it may have upon the Employee under this
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Agreement. Any termination of the Employees employment or service other than
termination for Cause shall not prejudice the Employees vested right to
compensation or other benefits under this Agreement. The Employee shall have no
right to receive compensation or other benefits under this Agreement for any period
after termination for Cause.(b)
    
    If the Employee is suspended and/or temporarily prohibited from participating
in the conduct of the affairs of the Bank by a notice served under Section 8(e)(3) or
(g)(1) of Federal Deposit Insurance Act (12 U.S.C. §1818(e)(3) and (g)(1)), the Banks
obligations under this Agreement shall be suspended as of the date of service unless
stayed by appropriate proceedings. If the charges in the notice are dismissed, the
Bank may in its discretion (i) pay the Employee all or part of the compensation
withheld while its obligations under this Agreement were suspended, and (ii) reinstate
(in whole or in part) any of its obligations which were suspended.(c)
    
    If the Employee is removed and/or permanently prohibited from participating in
the conduct of the Banks affairs by an order issued under Section 8(e)(4) or (g)(1) of
the Federal Deposit Insurance Act (12 U.S.C. §1818(e)(4) or (g)(1)), all obligations of
the Bank under this Agreement shall terminate as of the effective date of the order,
but vested rights of the contracting parties under this Agreement shall not be
affected.(d)
    
    If the Bank is in default (as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act), all obligations under this Agreement shall terminate as of the date of
default, but this paragraph 13(d) shall not affect any vested rights of the contracting
parties under this Agreement.(e)
    
    All obligations under this Agreement shall be terminated, except to the extent
determined that continuation of this Agreement is necessary to the continued operation
of the Bank:
 (1)
    
    By the Director of the Office of Thrift Supervision or his or
her designee, at the time the Federal Deposit Insurance Corporation or
Resolution Trust Corporation enters into an agreement to provide assistance to
or on behalf of the Bank under the authority contained in 13(c) of the Federal
Deposit Insurance Act; or(2)
    
    By the Director of the Office of Thrift Supervision or his or
her designee, at the time the Director or his or her designee approves a
supervisory merger to resolve problems related to operation of the Bank or when
the Bank is determined by the Director to be in an unsafe or unsound condition.
 Any rights of the parties to this Agreement that have already vested, however, shall
not be affected by such action.
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IN WITNESS WHEREOF,
 HOME FEDERAL SAVINGS BANK
    
    EMPLOYEEBy:Its:
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