##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission file number: 0-24100.
 HMN FINANCIAL, INC.
  Delaware
    
    41-1777397(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)1016 Civic Center Drive Northwest, PO Box 6057Rochester, Minnesota
    
    55901(Address of Principal Executive Offices)
    
    (Zip Code)
 (507) 535-1200
 
 o þ
 o þ
 þ o
 o
  Large accelerated filer   o
    
    Accelerated filer   þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company   o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



TABLE OF CONTENTS
 PagePART IItem 1.
    
    BusinessGeneral
    
    
    4Market Area
    
    
    4Lending Activities
    
    
    5Origination, Purchases and Sales of Mortgage-Backed and Related Securities
    
    
    12Classified Assets and Delinquencies
    
    
    14Investment Activities
    
    
    15Sources of Funds
    
    
    19Other InformationService Corporations of the Bank
    
    
    22Competition
    
    
    23Other Corporations Owned by HMN
    
    
    23Employees
    
    
    23Regulation and Supervision
    
    
    23Executive Officers
    
    
    27Item 1A.
    
    Risk Factors
    
    
    28Item 1B.
    
    Unresolved Staff Comments
    
    
    32Item 2.
    
    Properties
    
    
    32Item 3.
    
    Legal Proceedings
    
    
    32Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    32PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    33Item 6.
    
    Selected Financial Data
    
    
    34Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34Item 7A.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    35Item 8.
    
    Financial Statements and Supplementary Data
    
    
    35Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    35Item 9A.
    
    Controls and Procedures
    
    
    35Item 9B.
    
    Other Information
    
    
    37PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    37Item 11.
    
    Executive Compensation
    
    
    37Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    38Item 13.
    
    Certain Relationships and Related Transactions
    
    
    38Item 14.
    
    Principal Accountant Fees and Services
    
    
    38PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    39Signatures
    
    
    40Index to Exhibits
    
    
    41Employee Stock Ownership Plan, as amendedPortions of Annual Report to Security HoldersSubsidiariesConsent of KPMG LLPCertification of Chief Executive OfficerCertification of Chief Financial OfficerSection 1350 Certifications
  2




---



##### Table of Contents



Forward-Looking Statements
  3




---



##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 
 General
   
 Market Area
     4




---



##### Table of Contents



Lending Activities
 General.
 5




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(Dollars in thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentFixed rate LoansReal Estate:One-to-four familyGEM
    
    $
    11,854
    
    
    
    1.34
    %
    
    $
    13,335
    
    
    
    1.70
    %
    
    $
    14,812
    
    
    
    1.84
    %
    
    $
    16,133
    
    
    
    2.01
    %
    
    $
    13,387
    
    
    
    1.89
    %Other
    
    
    80,663
    
    
    
    9.14
    
    
    
    62,184
    
    
    
    7.92
    
    
    
    55,700
    
    
    
    6.94
    
    
    
    59,937
    
    
    
    7.48
    
    
    
    65,004
    
    
    
    9.17Total one-to-four family
    
    
    92,517
    
    
    
    10.48
    
    
    
    75,519
    
    
    
    9.62
    
    
    
    70,512
    
    
    
    8.78
    
    
    
    76,070
    
    
    
    9.49
    
    
    
    78,391
    
    
    
    11.06Multi-family
    
    
    5,914
    
    
    
    0.67
    
    
    
    6,193
    
    
    
    0.79
    
    
    
    5,956
    
    
    
    0.74
    
    
    
    6,387
    
    
    
    0.79
    
    
    
    6,471
    
    
    
    0.91GEM  multi-family
    
    
    38
    
    
    
    0.01
    
    
    
    45
    
    
    
    0.01
    
    
    
    51
    
    
    
    0.01
    
    
    
    57
    
    
    
    0.01
    
    
    
    61
    
    
    
    0.01Commercial
    
    
    69,276
    
    
    
    7.84
    
    
    
    100,562
    
    
    
    12.80
    
    
    
    89,905
    
    
    
    11.19
    
    
    
    51,390
    
    
    
    6.41
    
    
    
    52,563
    
    
    
    7.42Construction or development
    
    
    16,519
    
    
    
    1.87
    
    
    
    6,640
    
    
    
    0.84
    
    
    
    12,919
    
    
    
    1.61
    
    
    
    27,557
    
    
    
    3.44
    
    
    
    17,215
    
    
    
    2.43Total fixed rate real estate loans
    
    
    184,264
    
    
    
    20.87
    
    
    
    188,959
    
    
    
    24.06
    
    
    
    179,343
    
    
    
    22.33
    
    
    
    161,461
    
    
    
    20.14
    
    
    
    154,701
    
    
    
    21.83Consumer loans:Savings
    
    
    358
    
    
    
    0.04
    
    
    
    814
    
    
    
    0.10
    
    
    
    605
    
    
    
    0.07
    
    
    
    454
    
    
    
    0.06
    
    
    
    494
    
    
    
    0.07Automobile
    
    
    1,730
    
    
    
    0.20
    
    
    
    3,093
    
    
    
    0.39
    
    
    
    5,462
    
    
    
    0.68
    
    
    
    9,496
    
    
    
    1.18
    
    
    
    14,754
    
    
    
    2.08Home equity
    
    
    20,249
    
    
    
    2.29
    
    
    
    21,181
    
    
    
    2.70
    
    
    
    19,289
    
    
    
    2.40
    
    
    
    20,019
    
    
    
    2.50
    
    
    
    18,742
    
    
    
    2.65Mobile home
    
    
    1,699
    
    
    
    0.19
    
    
    
    2,052
    
    
    
    0.26
    
    
    
    2,299
    
    
    
    0.29
    
    
    
    2,896
    
    
    
    0.36
    
    
    
    3,665
    
    
    
    0.52Land/Lot Loans
    
    
    2,616
    
    
    
    0.30
    
    
    
    1,426
    
    
    
    0.18
    
    
    
    1,234
    
    
    
    0.15
    
    
    
    818
    
    
    
    0.10
    
    
    
    754
    
    
    
    0.11Other
    
    
    2,007
    
    
    
    0.23
    
    
    
    2,192
    
    
    
    0.28
    
    
    
    2,569
    
    
    
    0.32
    
    
    
    3,134
    
    
    
    0.39
    
    
    
    3,105
    
    
    
    0.43Total consumer loans
    
    
    28,659
    
    
    
    3.25
    
    
    
    30,758
    
    
    
    3.91
    
    
    
    31,458
    
    
    
    3.91
    
    
    
    36,817
    
    
    
    4.59
    
    
    
    41,514
    
    
    
    5.86Commercial business loans
    
    
    90,688
    
    
    
    10.27
    
    
    
    65,347
    
    
    
    8.32
    
    
    
    49,297
    
    
    
    6.14
    
    
    
    69,671
    
    
    
    8.69
    
    
    
    51,609
    
    
    
    7.28Total other loans
    
    
    119,347
    
    
    
    13.52
    
    
    
    96,105
    
    
    
    12.23
    
    
    
    80,755
    
    
    
    10.05
    
    
    
    106,488
    
    
    
    13.28
    
    
    
    93,123
    
    
    
    13.14Total fixed rate loans
    
    
    303,611
    
    
    
    34.39
    
    
    
    285,064
    
    
    
    36.29
    
    
    
    260,098
    
    
    
    32.38
    
    
    
    267,949
    
    
    
    33.42
    
    
    
    247,824
    
    
    
    34.97Adjustable rate LoansReal estate:One-to-four family
    
    
    60,456
    
    
    
    6.85
    
    
    
    58,751
    
    
    
    7.48
    
    
    
    56,563
    
    
    
    7.04
    
    
    
    62,938
    
    
    
    7.85
    
    
    
    65,924
    
    
    
    9.30Multi-family
    
    
    23,120
    
    
    
    2.62
    
    
    
    23,624
    
    
    
    3.01
    
    
    
    34,745
    
    
    
    4.33
    
    
    
    35,478
    
    
    
    4.43
    
    
    
    25,008
    
    
    
    3.53Commercial
    
    
    212,547
    
    
    
    24.08
    
    
    
    193,928
    
    
    
    24.69
    
    
    
    170,363
    
    
    
    21.21
    
    
    
    173,554
    
    
    
    21.65
    
    
    
    146,603
    
    
    
    20.69Construction or development
    
    
    94,516
    
    
    
    10.70
    
    
    
    53,538
    
    
    
    6.82
    
    
    
    67,424
    
    
    
    8.39
    
    
    
    70,841
    
    
    
    8.84
    
    
    
    78,131
    
    
    
    11.02Total adjustable rate real estate loans
    
    
    390,639
    
    
    
    44.25
    
    
    
    329,841
    
    
    
    42.00
    
    
    
    329,095
    
    
    
    40.97
    
    
    
    342,811
    
    
    
    42.77
    
    
    
    315,666
    
    
    
    44.54Consumer (home equity and other)
    
    
    51,322
    
    
    
    5.81
    
    
    
    54,328
    
    
    
    6.91
    
    
    
    60,853
    
    
    
    7.57
    
    
    
    67,154
    
    
    
    8.38
    
    
    
    54,425
    
    
    
    7.68Land/Lot loans
    
    
    1,535
    
    
    
    0.17
    
    
    
    4,076
    
    
    
    0.52
    
    
    
    8,197
    
    
    
    1.02
    
    
    
    10,754
    
    
    
    1.34
    
    
    
    9,732
    
    
    
    1.38Other
    
    
    3,393
    
    
    
    0.39
    
    
    
    686
    
    
    
    0.09
    
    
    
    390
    
    
    
    0.05
    
    
    
    248
    
    
    
    0.03
    
    
    
    234
    
    
    
    0.03Total consumer loans
    
    
    56,250
    
    
    
    6.37
    
    
    
    59,090
    
    
    
    7.52
    
    
    
    69,440
    
    
    
    8.64
    
    
    
    78,156
    
    
    
    9.75
    
    
    
    64,391
    
    
    
    9.09Commercial business loans
    
    
    132,271
    
    
    
    14.99
    
    
    
    111,423
    
    
    
    14.19
    
    
    
    144,665
    
    
    
    18.01
    
    
    
    112,698
    
    
    
    14.06
    
    
    
    80,808
    
    
    
    11.40Total other loans
    
    
    188,521
    
    
    
    21.36
    
    
    
    170,513
    
    
    
    21.71
    
    
    
    214,105
    
    
    
    26.65
    
    
    
    190,854
    
    
    
    23.81
    
    
    
    145,199
    
    
    
    20.49Total adjustable rate loans
    
    
    579,160
    
    
    
    65.61
    
    
    
    500,354
    
    
    
    63.71
    
    
    
    543,200
    
    
    
    67.62
    
    
    
    533,665
    
    
    
    66.58
    
    
    
    460,865
    
    
    
    65.03Total loans
    
    
    882,771
    
    
    
    100.00
    %
    
    
    785,418
    
    
    
    100.00
    %
    
    
    803,298
    
    
    
    100.00
    %
    
    
    801,614
    
    
    
    100.00
    %
    
    
    708,689
    
    
    
    100.00
    %LessLoans in process
    
    
    3,011
    
    
    
    
    
    
    
    5,252
    
    
    
    
    
    
    
    7,008
    
    
    
    
    
    
    
    7,561
    
    
    
    
    
    
    
    11,298Unamortized (premiums) discounts
    
    
    (11
    )
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    190
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    166Net deferred loan fees
    
    
    2,245
    
    
    
    
    
    
    
    2,021
    
    
    
    
    
    
    
    1,644
    
    
    
    
    
    
    
    1,781
    
    
    
    
    
    
    
    1,334Allowance for losses on loans
    
    
    12,438
    
    
    
    
    
    
    
    9,873
    
    
    
    
    
    
    
    8,778
    
    
    
    
    
    
    
    8,996
    
    
    
    
    
    
    
    6,940Total loans receivable, net
    
    $
    865,088
    
    
    
    
    
    
    $
    768,232
    
    
    
    
    
    
    $
    785,678
    
    
    
    
    
    
    $
    783,213
    
    
    
    
    
    
    $
    688,951
 6




---



##### Table of Contents



Real EstateMulti-family andOne-to-four family
    
    
    Commercial
    
    
    Construction
    
    
    Consumer
    
    
    Commercial Business
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedDue During Years
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageEnding December 31,
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate2008 (1)
    
    $
    11,150
    
    
    
    6.80
    %
    
    $
    88,373
    
    
    
    7.89
    %
    
    $
    54,182
    
    
    
    8.27
    %
    
    $
    17,834
    
    
    
    8.31
    %
    
    $
    96,983
    
    
    
    7.58
    %
    
    $
    268,522
    
    
    
    7.84
    %2009
    
    
    8,430
    
    
    
    6.40
    
    
    
    54,982
    
    
    
    7.41
    
    
    
    16,702
    
    
    
    7.77
    
    
    
    9,345
    
    
    
    8.12
    
    
    
    32,995
    
    
    
    7.63
    
    
    
    122,454
    
    
    
    7.502010
    
    
    15,322
    
    
    
    6.81
    
    
    
    23,445
    
    
    
    7.57
    
    
    
    12,910
    
    
    
    7.00
    
    
    
    8,961
    
    
    
    8.26
    
    
    
    32,295
    
    
    
    7.54
    
    
    
    92,933
    
    
    
    7.422011 through 2012
    
    
    12,915
    
    
    
    5.87
    
    
    
    55,933
    
    
    
    7.40
    
    
    
    7,581
    
    
    
    7.62
    
    
    
    16,619
    
    
    
    8.22
    
    
    
    36,493
    
    
    
    7.47
    
    
    
    129,541
    
    
    
    7.392013 through 2017
    
    
    29,571
    
    
    
    5.99
    
    
    
    52,591
    
    
    
    7.61
    
    
    
    2,964
    
    
    
    6.52
    
    
    
    26,856
    
    
    
    8.14
    
    
    
    15,987
    
    
    
    7.50
    
    
    
    127,969
    
    
    
    7.312018 through 2032
    
    
    60,453
    
    
    
    6.02
    
    
    
    35,571
    
    
    
    6.75
    
    
    
    15,187
    
    
    
    7.12
    
    
    
    5,291
    
    
    
    7.89
    
    
    
    8,206
    
    
    
    7.06
    
    
    
    124,708
    
    
    
    6.512033 and following
    
    
    15,133
    
    
    
    5.95
    
    
    
    0
    
    
    
    0.00
    
    
    
    1,508
    
    
    
    6.05
    
    
    
    3
    
    
    
    5.63
    
    
    
    0
    
    
    
    0.00
    
    
    
    16,644
    
    
    
    5.96$
    152,974
    
    
    
    
    
    
    $
    310,895
    
    
    
    
    
    
    $
    111,034
    
    
    
    
    
    
    $
    84,909
    
    
    
    
    
    
    $
    222,959
    
    
    
    
    
    
    $
    882,771
 
 (1)
    
    Includes demand loans, loans having no stated maturity and overdraft loans.  7




---



##### Table of Contents



One-to-Four Family Residential Real Estate Lending .
  8




---



##### Table of Contents



Commercial Real Estate and Multi-Family Lending.
  9




---



##### Table of Contents



Construction Lending.
      10




---



##### Table of Contents



Consumer Lending.
    Commercial Business Lending.
 11




---



##### Table of Contents



Originations, Purchases and Sales of Loans and Mortgage-Backed and Related Securities
      12




---



##### Table of Contents



LOANS HELD FOR INVESTMENT
 Year Ended December 31,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005Originations by type:Adjustable rate:Real estate -- one-to-four family
    
    $
    13,969
    
    
    
    13,493
    
    
    
    13,064- multi-family
    
    
    1,661
    
    
    
    0
    
    
    
    258- commercial
    
    
    34,452
    
    
    
    76,797
    
    
    
    70,742- construction or development
    
    
    245,126
    
    
    
    159,278
    
    
    
    45,551Non-real estate -- consumer
    
    
    12,546
    
    
    
    11,607
    
    
    
    12,964- commercial business
    
    
    111,946
    
    
    
    94,603
    
    
    
    91,697Total adjustable rate
    
    
    419,700
    
    
    
    355,778
    
    
    
    234,276Fixed rate:Real estate -- one-to-four family
    
    
    7,822
    
    
    
    14,671
    
    
    
    1,587- multi-family
    
    
    1,612
    
    
    
    0
    
    
    
    35- commercial
    
    
    11,454
    
    
    
    31,635
    
    
    
    41,534- construction or development
    
    
    20,359
    
    
    
    5,691
    
    
    
    10,144Non-real estate -- consumer
    
    
    16,679
    
    
    
    23,127
    
    
    
    27,421- commercial business
    
    
    91,728
    
    
    
    54,261
    
    
    
    41,535Total fixed rate
    
    
    149,654
    
    
    
    129,385
    
    
    
    122,256Total loans originated
    
    
    569,354
    
    
    
    485,163
    
    
    
    356,532Purchases:Real estate -- one-to-four family
    
    
    165
    
    
    
    0
    
    
    
    130- commercial
    
    
    7,097
    
    
    
    8,874
    
    
    
    16,823- construction or development
    
    
    26,500
    
    
    
    9,700
    
    
    
    11,900Non-real estate -- commercial business
    
    
    25,911
    
    
    
    8,885
    
    
    
    3,412Total loans purchased
    
    
    59,673
    
    
    
    27,459
    
    
    
    32,265Sales, Participations and repayments:Real estate -- commercial
    
    
    45,125
    
    
    
    21,588
    
    
    
    23,974- construction or development
    
    
    177,911
    
    
    
    107,649
    
    
    
    21,646Non-real estate -- consumer
    
    
    1,157
    
    
    
    2,416
    
    
    
    1,248- commercial business
    
    
    14,190
    
    
    
    15,912
    
    
    
    8,813Total sales
    
    
    238,383
    
    
    
    147,565
    
    
    
    55,681Transfers to loans held for sale
    
    
    3,020
    
    
    
    5,994
    
    
    
    7,373Principal repayments
    
    
    285,420
    
    
    
    373,953
    
    
    
    320,869Total reductions
    
    
    526,823
    
    
    
    527,512
    
    
    
    383,923Decrease in other items, net
    
    
    (4,851
    )
    
    
    (2,990
    )
    
    
    (3,190
    )Net increase (decrease)
    
    $
    97,353
    
    
    
    (17,880
    )
    
    
    1,684
 13




---



##### Table of Contents



LOANS HELD FOR SALE
 Year Ended December 31,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005Originations by type:Adjustable rate:Real estate -- one-to-four family
    
    $
    600
    
    
    
    1,400
    
    
    
    1,389Total adjustable rate
    
    
    600
    
    
    
    1,400
    
    
    
    1,389Fixed rate:Real estate -- one-to-four family
    
    
    48,782
    
    
    
    57,277
    
    
    
    77,924- construction or development
    
    
    2,740
    
    
    
    1,340
    
    
    
    1,093Total fixed rate
    
    
    51,522
    
    
    
    58,617
    
    
    
    79,017Total loans originated
    
    
    52,122
    
    
    
    60,017
    
    
    
    80,406Sales and repayments:Real estate -- one-to-four family
    
    
    53,326
    
    
    
    65,951
    
    
    
    89,089Total sales
    
    
    53,326
    
    
    
    65,951
    
    
    
    89,089Transfers from loans held for investment
    
    
    (3,020
    )
    
    
    (5,994
    )
    
    
    (7,373
    )Total reductions
    
    
    50,306
    
    
    
    59,957
    
    
    
    81,716Net increase (decrease)
    
    $
    1,816
    
    
    
    60
    
    
    
    (1,310
    )
 MORTGAGE-BACKED AND RELATED SECURITIES
 Year Ended December 31,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005Purchases:Mortgage-backed securities:FNMA MBSs
    
    $
    4,597
    
    
    
    0
    
    
    
    0CMOs and REMICs (1)
    
    
    9,932
    
    
    
    0
    
    
    
    0Total purchases
    
    
    14,529
    
    
    
    0
    
    
    
    0Sales:Mortgage-backed securities:Principal repayments
    
    
    (2,239
    )
    
    
    (702
    )
    
    
    (2,271
    )Net increase (decrease)
    
    $
    12,290
    
    
    
    (702
    )
    
    
    (2,271
    )
 
 (1) Collateralized Mortgage Obligations and Real Estate Mortgage Investment
Conduits 
 Classified Assets and Delinquencies
 Classification of Assets .
 14




---



##### Table of Contents



CommercialOne-to-Four
    
    
    and
    
    
    
    
    
    
    Commercial
    
    
    Other(Dollars in thousands)
    
    Family
    
    
    Multi-family
    
    
    Consumer
    
    
    Business
    
    
    Assets
    
    
    TotalSubstandard
    
    $
    1,068
    
    
    
    22,184
    
    
    
    257
    
    
    
    1,679
    
    
    
    2,419
    
    
    
    27,607Doubtful
    
    
    0
    
    
    
    2,546
    
    
    
    107
    
    
    
    0
    
    
    
    34
    
    
    
    2,687Loss
    
    
    0
    
    
    
    9
    
    
    
    687
    
    
    
    328
    
    
    
    0
    
    
    
    1,024Total
    
    $
    1,068
    
    
    
    24,739
    
    
    
    1,051
    
    
    
    2,007
    
    
    
    2,453
    
    
    
    31,318
  Delinquency Procedures.
   Loans Delinquent For:
    
    
    Total Delinquent60-89 Days
    
    
    90 Days and Over
    
    
    LoansPercent
    
    
    
    
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    
    
    
    
    Percentof Loan
    
    
    
    
    
    
    
    
    
    
    of Loan
    
    
    
    
    
    
    
    
    
    
    of Loan(Dollars in thousands)
    
    Number
    
    
    Amount
    
    
    Category
    
    
    Number
    
    
    Amount
    
    
    Category
    
    
    Number
    
    
    Amount
    
    
    CategoryOne-to-four family real estate
    
    
    2
    
    
    $
    135
    
    
    
    0.09
    %
    
    
    5
    
    
    $
    1,068
    
    
    
    0.70
    %
    
    
    7
    
    
    $
    1,203
    
    
    
    0.79
    %Nonresidential
    
    
    4
    
    
    
    231
    
    
    
    0.08
    
    
    
    6
    
    
    
    3,040
    
    
    
    1.08
    
    
    
    10
    
    
    
    3,271
    
    
    
    1.16Construction or development
    
    
    1
    
    
    
    194
    
    
    
    0.17
    
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    1
    
    
    
    194
    
    
    
    0.17Consumer
    
    
    9
    
    
    
    163
    
    
    
    0.19
    
    
    
    14
    
    
    
    1,050
    
    
    
    1.24
    
    
    
    23
    
    
    
    1,213
    
    
    
    1.43Commercial business
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    3
    
    
    
    1,212
    
    
    
    0.54
    
    
    
    3
    
    
    
    1,212
    
    
    
    0.54Total
    
    
    16
    
    
    $
    723
    
    
    
    0.08
    %
    
    
    28
    
    
    $
    6,370
    
    
    
    0.72
    %
    
    
    44
    
    
    $
    7,093
    
    
    
    0.80
    %
 
 Investment Activities
  Securities.
 15




---



##### Table of Contents



16




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Amort
    
    
    Adjusted
    
    
    Market
    
    
    % of
    
    
    Amort
    
    
    Adjusted
    
    
    Market
    
    
    % of
    
    
    Amort
    
    
    Adjusted
    
    
    Market
    
    
    % of(Dollars in thousands)
    
    Cost
    
    
    To
    
    
    Value
    
    
    Total
    
    
    Cost
    
    
    To
    
    
    Value
    
    
    Total
    
    
    Cost
    
    
    To
    
    
    Value
    
    
    TotalSecurities available for sale:U.S. Government agency obligations
    
    $
    164,730
    
    
    
    2,290
    
    
    
    167,020
    
    
    
    89.97
    %
    
    $
    119,240
    
    
    
    22
    
    
    
    119,262
    
    
    
    74.68
    %
    
    $
    110,110
    
    
    
    (971
    )
    
    
    109,139
    
    
    
    71.61
    %Corporate equity (1)
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.38
    
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.44
    
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.46Preferred stock of federal agencies (1)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    2,940
    
    
    
    0
    
    
    
    2,940
    
    
    
    1.93Subtotal
    
    
    165,430
    
    
    
    
    
    
    
    167,720
    
    
    
    90.35
    
    
    
    119,940
    
    
    
    
    
    
    
    119,962
    
    
    
    75.12
    
    
    
    113,750
    
    
    
    
    
    
    
    112,779
    
    
    
    74.00Federal Home Loan Bank stock
    
    
    6,198
    
    
    
    
    
    
    
    6,198
    
    
    
    3.34
    
    
    
    7,956
    
    
    
    
    
    
    
    7,956
    
    
    
    4.98
    
    
    
    8,365
    
    
    
    
    
    
    
    8,365
    
    
    
    5.49Total investment securities
and Federal Home Loan Bank stock
    
    
    171,628
    
    
    
    
    
    
    
    173,918
    
    
    
    93.69
    
    
    
    127,896
    
    
    
    
    
    
    
    127,918
    
    
    
    80.10
    
    
    
    122,115
    
    
    
    
    
    
    
    121,144
    
    
    
    79.49Average remaining life of
investment securities excluding
Federal Home Loan Bank stock
    
    1.2 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.1 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7 yearsOther interest earning assets:Cash equivalents
    
    
    11,718
    
    
    
    
    
    
    
    11,718
    
    
    
    6.31
    
    
    
    31,776
    
    
    
    
    
    
    
    31,776
    
    
    
    19.90
    
    
    
    31,269
    
    
    
    
    
    
    
    31,269
    
    
    
    20.51Total
    
    $
    183,346
    
    
    
    
    
    
    
    185,636
    
    
    
    100.00
    %
    
    $
    159,672
    
    
    
    
    
    
    
    159,694
    
    
    
    100.00
    %
    
    $
    153,384
    
    
    
    
    
    
    
    152,413
    
    
    
    100.00
    %Average remaining life or term to
repricing of investment securities and
other interest earning assets, excluding
Federal Home Loan Bank stock
    
    1.1 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.8 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5 years
 
 (1) Average life assigned to corporate equity holdings and preferred stock of
federal agencies is five years. 17




---



##### Table of Contents



December 31, 2007After 1
    
    
    After 51 Year
    
    
    through 5
    
    
    through 10
    
    
    Over 10
    
    
    No Statedor Less
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Maturity
    
    
    Total SecuritiesAmortized
    
    
    Amortized
    
    
    Amortized
    
    
    Amortized
    
    
    Amortized
    
    
    Amortized
    
    
    Adjusted
    
    
    Market(Dollars in thousands)
    
    Cost
    
    
    Cost
    
    
    Cost
    
    
    Cost
    
    
    Cost
    
    
    Cost
    
    
    To
    
    
    ValueSecurities available for sale:U.S. government agency securities
    
    $
    99,965
    
    
    
    64,765
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    164,730
    
    
    
    2,290
    
    
    
    167,020Corporate equity
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    700
    
    
    
    700
    
    
    
    0
    
    
    
    700Total
    
    $
    99,965
    
    
    
    64,765
    
    
    
    0
    
    
    
    0
    
    
    
    700
    
    
    
    165,430
    
    
    
    2,290
    
    
    
    167,720Weighted average yield (1)
    
    
    4.98
    %
    
    
    5.13
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    9.47
    %
    
    
    5.06
    %
 
 (1)
    
    Yields are computed on a tax equivalent basis. Mortgage-Backed and Related Securities .
  Dec. 31,20075 Years
    
    
    5 to 10
    
    
    10 to 20
    
    
    Over 20
    
    
    Balance(Dollars in thousands)
    
    or Less
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    OutstandingSecurities available for sale:Federal Home Loan Mortgage Corporation
    
    $
    13
    
    
    
    120
    
    
    
    0
    
    
    
    0
    
    
    
    133Government National Mortgage Association
    
    
    0
    
    
    
    6
    
    
    
    0
    
    
    
    0
    
    
    
    6Federal National Mortgage Association
    
    
    0
    
    
    
    3,907
    
    
    
    0
    
    
    
    0
    
    
    
    3,907Collateralized Mortgage Obligations
    
    
    11
    
    
    
    0
    
    
    
    11,898
    
    
    
    2,513
    
    
    
    14,422Total
    
    $
    24
    
    
    
    4,033
    
    
    
    11,898
    
    
    
    2,513
    
    
    
    18,468Weighted average yield
    
    
    6.26
    %
    
    
    4.08
    %
    
    
    5.05
    %
    
    
    4.00
    %
    
    
    4.68
    %
    18




---



##### Table of Contents



Sources of Funds
 General.
 Deposits.
   Year Ended December 31,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005Opening balance
    
    $
    725,959
    
    
    
    731,537
    
    
    
    698,902Deposits
    
    
    5,736,881
    
    
    
    4,861,548
    
    
    
    4,202,022Withdrawals
    
    
    (5,599,222
    )
    
    
    (4,889,449
    )
    
    
    (4,185,251
    )Interest credited
    
    
    24,500
    
    
    
    22,323
    
    
    
    15,864Ending balance
    
    
    888,118
    
    
    
    725,959
    
    
    
    731,537Net increase (decrease)
    
    $
    162,159
    
    
    
    (5,578
    )
    
    
    32,635Percent increase (decrease)
    
    
    22.34
    %
    
    
    (0.76)
    %
    
    
    4.67
    %
 19




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent(Dollars in thousands)
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of TotalTransaction and Savings Deposits(1):Non-interest checking
    
    $
    54,998
    
    
    
    6.19
    %
    
    $
    68,990
    
    
    
    9.50
    %
    
    $
    58,430
    
    
    
    7.99
    %NOW Accounts  1.88%(2)
    
    
    118,652
    
    
    
    13.36
    
    
    
    87,074
    
    
    
    12.00
    
    
    
    101,942
    
    
    
    13.94Passbook Accounts  1.40%(3)
    
    
    39,671
    
    
    
    4.47
    
    
    
    40,445
    
    
    
    5.57
    
    
    
    84,858
    
    
    
    11.60Money Market Accounts  3.34%(4)
    
    
    182,413
    
    
    
    20.54
    
    
    
    178,694
    
    
    
    24.61
    
    
    
    96,947
    
    
    
    13.25Total Non-Certificates
    
    $
    395,734
    
    
    
    44.56
    %
    
    $
    375,203
    
    
    
    51.68
    %
    
    $
    342,177
    
    
    
    46.78
    %Certificates:0.00 - 0.99%
    
    $
    555
    
    
    
    0.06
    %
    
    $
    532
    
    
    
    0.08
    %
    
    $
    651
    
    
    
    0.09
    %1.00 - 1.99%
    
    
    2
    
    
    
    0.00
    
    
    
    157
    
    
    
    0.02
    
    
    
    5,846
    
    
    
    0.802.00 - 2.99%
    
    
    6,168
    
    
    
    0.69
    
    
    
    25,700
    
    
    
    3.54
    
    
    
    118,723
    
    
    
    16.233.00 - 3.99%
    
    
    38,388
    
    
    
    4.32
    
    
    
    126,409
    
    
    
    17.41
    
    
    
    211,019
    
    
    
    28.844.00 - 4.99%
    
    
    203,720
    
    
    
    22.95
    
    
    
    119,376
    
    
    
    16.45
    
    
    
    52,319
    
    
    
    7.155.00 - 5.99%
    
    
    243,551
    
    
    
    27.42
    
    
    
    78,582
    
    
    
    10.82
    
    
    
    797
    
    
    
    0.116.00 - 6.99%
    
    
    0
    
    
    
    0.00
    
    
    
    0
    
    
    
    0.00
    
    
    
    5
    
    
    
    0.00Total Certificates
    
    
    492,384
    
    
    
    55.44
    
    
    
    350,756
    
    
    
    48.32
    
    
    
    389,360
    
    
    
    53.22Total Deposits
    
    $
    888,118
    
    
    
    100.00
    %
    
    $
    725,959
    
    
    
    100.00
    %
    
    $
    731,537
    
    
    
    100.00
    %
 
 (1)
    
    Reflects weighted average rates paid on transaction and savings deposits at December 31,
2007.(2)
    
    The weighted average rate on NOW Accounts for 2006 was 2.54% and 2005 was 2.08%.(3)
    
    The weighted average rate on Passbook Accounts for 2006 was 1.37% and 2005 was 2.04%.(4)
    
    The weighted average rate on Money Market Accounts for 2006 was 3.31% and 2005 was 2.59%. 20




---



##### Table of Contents



(Dollars in thousands)Certificate accounts maturing in
    
    0.00-
    
    
    1.00-
    
    
    2.00-
    
    
    3.00-
    
    
    4.00-
    
    
    5.00-
    
    
    
    
    
    
    Percentquarter ending:
    
    0.99%
    
    
    1.99%
    
    
    2.99%
    
    
    3.99%
    
    
    4.99%
    
    
    5.99%
    
    
    Total
    
    
    of TotalMarch 31, 2008
    
    $
    84
    
    
    
    0
    
    
    
    870
    
    
    
    6,209
    
    
    
    47,147
    
    
    
    68,074
    
    
    
    122,384
    
    
    
    24.86
    %June 30, 2008
    
    
    115
    
    
    
    0
    
    
    
    572
    
    
    
    5,172
    
    
    
    55,091
    
    
    
    102,937
    
    
    
    163,887
    
    
    
    33.29September 30, 2008
    
    
    23
    
    
    
    0
    
    
    
    913
    
    
    
    5,768
    
    
    
    19,288
    
    
    
    59,593
    
    
    
    85,585
    
    
    
    17.38December 31, 2008
    
    
    50
    
    
    
    0
    
    
    
    1,146
    
    
    
    13,326
    
    
    
    53,370
    
    
    
    943
    
    
    
    68,835
    
    
    
    13.98March 31, 2009
    
    
    8
    
    
    
    0
    
    
    
    1,045
    
    
    
    721
    
    
    
    3,230
    
    
    
    1,457
    
    
    
    6,461
    
    
    
    1.31June 30, 2009
    
    
    12
    
    
    
    0
    
    
    
    811
    
    
    
    809
    
    
    
    4,174
    
    
    
    5,797
    
    
    
    11,603
    
    
    
    2.36September 30, 2009
    
    
    31
    
    
    
    0
    
    
    
    86
    
    
    
    1,536
    
    
    
    7,748
    
    
    
    470
    
    
    
    9,871
    
    
    
    2.00December 31, 2009
    
    
    20
    
    
    
    2
    
    
    
    101
    
    
    
    1,384
    
    
    
    1,809
    
    
    
    408
    
    
    
    3,724
    
    
    
    0.76March 31, 2010
    
    
    12
    
    
    
    0
    
    
    
    130
    
    
    
    741
    
    
    
    1,524
    
    
    
    24
    
    
    
    2,431
    
    
    
    0.49June 30, 2010
    
    
    13
    
    
    
    0
    
    
    
    17
    
    
    
    707
    
    
    
    1,483
    
    
    
    103
    
    
    
    2,323
    
    
    
    0.47September 30, 2010
    
    
    9
    
    
    
    0
    
    
    
    4
    
    
    
    323
    
    
    
    5,508
    
    
    
    3,479
    
    
    
    9,323
    
    
    
    1.89December 31, 2010
    
    
    18
    
    
    
    0
    
    
    
    3
    
    
    
    461
    
    
    
    620
    
    
    
    0
    
    
    
    1,102
    
    
    
    0.22Thereafter
    
    
    160
    
    
    
    0
    
    
    
    470
    
    
    
    1,231
    
    
    
    2,728
    
    
    
    266
    
    
    
    4,855
    
    
    
    0.99Total
    
    $
    555
    
    
    
    2
    
    
    
    6,168
    
    
    
    38,388
    
    
    
    203,720
    
    
    
    243,551
    
    
    
    492,384
    
    
    
    100.00
    %Percent of total
    
    
    0.11
    %
    
    
    0.00
    %
    
    
    1.26
    %
    
    
    7.80
    %
    
    
    41.37
    %
    
    
    49.46
    %
    
    
    100.00
    %
 21




---



##### Table of Contents



MaturityOver
    
    
    Over
    
    
    Over3 Months
    
    
    3 to 6
    
    
    6 to 12
    
    
    12(Dollars in thousands)
    
    or Less
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    TotalCertificates of deposit less than $100,000
    
    $
    109,772
    
    
    
    141,580
    
    
    
    127,893
    
    
    
    45,595
    
    
    
    424,840Certificates of deposit of $100,000 or more
    
    
    11,774
    
    
    
    21,454
    
    
    
    22,613
    
    
    
    6,095
    
    
    
    61,936Public funds less than $100,000(1)
    
    
    88
    
    
    
    153
    
    
    
    160
    
    
    
    3
    
    
    
    404Public funds of $100,000 or more(1)
    
    
    750
    
    
    
    700
    
    
    
    3,754
    
    
    
    0
    
    
    
    5,204Total certificates of deposit
    
    $
    122,384
    
    
    
    163,887
    
    
    
    154,420
    
    
    
    51,693
    
    
    
    492,384Passbook of $100,000 or more
    
    $
    271,686
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    271,686Accounts of $100,000 or more
    
    $
    284,210
    
    
    
    22,154
    
    
    
    26,367
    
    
    
    6,095
    
    
    
    338,826
 
 (1) Deposits from governmental and other public entities.  Borrowings.
  
 Service Corporations of the Bank
   22




---



##### Table of Contents



Competition
   
 Other Corporations Owned by the Company
  
 Employees
  
 Regulation and Supervision
  Holding Company Regulation
  23




---



##### Table of Contents



Acquisitions by Savings and Loan Holding Companies.
 Examination and Reporting.
 Affiliate Transactions.
 Capital Adequacy.
 Bank Regulation
   Qualified Thrift Lender Test.
 OTS Assessments.
 24




---



##### Table of Contents



Transactions with Affiliates and Insiders.
 Dividend Restrictions.
 Deposit Insurance
   Capital Requirements
   Core or Tier 1 Capital to
    
    Tangible
    
    Core or Tier 1
    
    Total Capital toAdjusted
    
    Capital to
    
    Capital to Risk-
    
    Risk-WeightedTotal Assets
    
    Assets
    
    Weighted Assets
    
    AssetsRegulatory Minimum
    
    
    3.00
    % (1)
    
    
    1.50
    %
    
    
    4.00
    %
    
    
    8.00
    %The Banks Actual
    
    
    7.96
    %
    
    
    7.96
    %
    
    
    10.34
    %
    
    
    11.32
    %
 
 (1)
    
    Savings associations are required to maintain a leverage ratio of 4.00% or more to be considered adequately
capitalized. 25




---



##### Table of Contents



Capital Categories and Prompt Corrective Action
  Other Regulations and Examination Authority
   Federal Home Loan Bank (FHLB) System
   26




---



##### Table of Contents



Federal Reserve Regulation
   Community Reinvestment Act
  Bank Secrecy Act
  
 EXECUTIVE OFFICERS
  Michael McNeil , age 60.
 27




---



##### Table of Contents



Jon J. Eberle , age 42.
 Dwain C. Jorgensen , age 59.
 Susan K. Kolling , age 56.
 Bradley C. Krehbiel , age 49.
 Available Information
 www.hmnf.com
 www.sec.gov
 
 ITEM 1A. RISK FACTORS
  Changes in interest rates could negatively impact the Companys results of operations.
  28




---



##### Table of Contents



The Company has increased its commercial real estate loan originations, increasing the risk in its
loan portfolio.
  Changes in interest rates or prepayment speeds could negatively impact the value of capitalized
mortgage servicing rights.
  Declines in home values could decrease our loan originations and increase delinquencies and
defaults.
  29




---



##### Table of Contents



Regional economic changes in the Companys markets could adversely impact results from operations.
  New or revised tax, accounting and other laws, regulations, rules and standards could significantly
impact strategic initiatives, results of operations and financial condition.
   The extended disruption of vital infrastructure could negatively impact the Companys results of
operations and financial condition.
  30




---



##### Table of Contents



Strong competition within the Companys market area may limit profitability.
  Loss of large checking and money market deposit customers could increase cost of funds and have a
negative effect on results of operations.
  Because of the limited size of the Company, losses on a few large loans or lending relationships
can cause significant volatility in earnings.
  We are subject to the Community Reinvestment Act and fair lending laws, and failure to comply with
these laws could lead to material penalties.
  The USA Patriot Act and Bank Secrecy Act may subject us to large fines for non-compliance.
  31




---



##### Table of Contents



ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 st th
 
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  32




---



##### Table of Contents



PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
   (c) Total Numberof Shares (or
    
    
    (d) Maximum Number (or(b) Average
    
    
    Units) Purchased
    
    
    Approximate Dollar Value) of(a) Total Number of
    
    
    Price Paid per
    
    
    as Part of Publicly
    
    
    Shares (or Units) that MayShares (or Units)
    
    
    Share (or
    
    
    Announced Plans
    
    
    Yet Be Purchased Under thePeriod
    
    Purchased
    
    
    Unit)
    
    
    or Programs
    
    
    Plans or ProgramsOctober 1 through October 31, 2007
    
    
    40,000
    
    
    $
    27.54
    
    
    
    40,000
    
    
    
    176,000November 1 through November 30, 2007
    
    
    30,000
    
    
    
    26.68
    
    
    
    30,000
    
    
    
    146,000December 1 through December 31, 2007
    
    
    10,000
    
    
    
    23.20
    
    
    
    10,000
    
    
    
    136,000Total
    
    
    80,000
    
    
    $
    25.81
    
    
    
    80,000
  33




---



##### Table of Contents



STOCKHOLDER RETURN PERFORMANCE PRESENTATION
  
 Period EndingIndex
    
    
    12/31/02
    
    
    12/31/03
    
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07HMN Financial, Inc.
    
    
    
    100.00
    
    
    
    
    150.00
    
    
    
    
    210.01
    
    
    
    
    193.40
    
    
    
    
    232.92
    
    
    
    
    171.26NASDAQ Composite
    
    
    
    100.00
    
    
    
    
    150.01
    
    
    
    
    162.89
    
    
    
    
    165.13
    
    
    
    
    180.85
    
    
    
    
    198.60SNL Bank NASDAQ Index
    
    
    
    100.00
    
    
    
    
    129.08
    
    
    
    
    147.94
    
    
    
    
    143.43
    
    
    
    
    161.02
    
    
    
    
    126.42
 
 ITEM 6. SELECTED FINANCIAL DATA
  
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  34




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures.
 Managements Annual Report on Internal Control over Financial Reporting.
    35




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework . Managements Annual Report on Internal Control over Financial Reporting
    Internal
Control  Integrated Framework
  
 
 36




---



##### Table of Contents



Changes in internal controls.
 
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  37




---



##### Table of Contents



(a)
    
    
    (b)
    
    
    (c)Number of Securities to be
    
    
    Weighted-average
    
    
    Number of securities remainingissued upon exercise of
    
    
    exercise price of
    
    
    available for future issuance underoutstanding options,
    
    
    outstanding options,
    
    
    equity compensation plansPlan Category
    
    warrants and rights
    
    
    warrants and rights
    
    
    (excluding securities reflected in column (a)) (1)Equity compensation
plans approved by
stockholders
    
    
    295,395
    
    
    $
    16.75
    
    
    
    171,618Equity compensation
plans not approved
by stockholders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    295,395
    
    
    $
    16.75
    
    
    
    171,618
 
 (1)
    
    Includes securities available for future issuance under stockholder approved
compensation plans other than upon the exercise of an option, warrant or right, as follows:
171,618 shares under the Companys 2001 Omnibus Stock Plan. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  38




---



##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 1. Financial Statements
  Pages inAnnual Report Section
    
    2007 Annual ReportConsolidated Balance Sheets 
December 31, 2007 and 2006
    
    
    24Consolidated Statements of Income 
Each of the Years in the Three-Year Period Ended December 31, 2007
    
    
    25Consolidated Statements of Stockholders Equity and Comprehensive Income 
Each of the Years in the Three-Year Period Ended December 31, 2007
    
    
    26Consolidated Statements of Cash Flows 
Each of the Years in the Three-Year Period Ended December 31, 2007
    
    
    27Notes to Consolidated Financial Statements
    
    
    28Report of Independent Registered Public Accounting Firm
    
    
    49
 2. Financial Statement Schedules
  3. Exhibits
  39




---



##### Table of Contents



SIGNATURES
  HMN FINANCIAL, INC.Date: March 4, 2008
    By:
    /s/ Michael McNeilMichael McNeil,President and Chief Executive Officer  Name
    
    Title/s/ Michael McNeil

     Michael McNeil
    
    President, Chief Executive Officer and
Director (Principal Executive Officer)/s/ Jon J. Eberle

     Jon J. Eberle
    
    Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)/s/ Timothy R. Geisler

     Timothy R. Geisler
    
    Chairman of the Board/s/ Allan R. DeBoer

     Allan R. DeBoer
    
    Director/s/ Duane D. Benson

     Duane D. Benson
    
    Director/s/ Michael J. Fogarty

     Michael J. Fogarty
    
    Director/s/ Karen L. Himle

     Karen L. Himle
    
    Director/s/ Susan K. Kolling

     Susan K. Kolling
    
    Director/s/ Malcolm W. McDonald

     Malcolm W. McDonald
    
    Director/s/ Mahlon C. Schneider

     Mahlon C. Schneider
    
    Director
 40




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit
    
    Filing Status3.1
    
    Amended and Restated Certificate of Incorporation
    
    Incorporated by Reference (1)3.2
    
    Amended and Restated By-laws
    
    Incorporated by Reference (2)4
    
    Form of Common Stock Certificate
    
    Incorporated by Reference (3)10.1
    
    Change in Control Agreement with Michael McNeil dated as of
March 1, 2004
    
    Incorporated by Reference (4)10.2
    
    Employment Agreement with Michael McNeil dated as of January 1,
2002
    
    Incorporated by Reference (5)10.3
    
    Form of Change in Control Agreement with executive officers
    
    Incorporated by Reference (6)10.4
    
    Directors Deferred Compensation Plan
    
    Incorporated by Reference (7)10.5
    
    Amended and Restated HMN Financial, Inc. Stock Option and
Incentive Plan dated July 29, 1998
    
    Incorporated by Reference (8)10.6
    
    HMN Financial, Inc. 2001 Omnibus Stock Plan
    
    Incorporated by Reference (9)10.7
    
    Form of Incentive Stock Option Agreement for HMN Financial, Inc.
2001 Omnibus Stock
    
    Incorporated by Reference (10)10.8
    
    Form of Non-Statutory Stock Option Agreement for HMN Financial,
Inc. 2001 Omnibus Stock
    
    Incorporated by Reference (11)10.9
    
    Form of Restricted Stock Agreement for HMN Financial, Inc. 2001
Omnibus Stock
    
    Incorporated by Reference (12)10.10
    
    Description of Michael McNeil 2007 Bonus Plan
    
    Incorporated by Reference (13)10.11
    
    HMN Financial, Inc. Employee Stock Ownership Plan (as amended
through February 26, 2008)*
    
    Filed Electronically13
    
    Portions of Annual Report to Security Holders incorporated by
reference
    
    Filed Electronically14
    
    Code of Business Conduct and Ethics
    
    Incorporated by Reference (14)21
    
    Subsidiaries of Registrant
    
    Filed Electronically23
    
    Consent of KPMG LLP
    
    Filed Electronically24
    
    Powers of Attorney
    
    Included with Signatures31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
    
    Filed Electronically31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
    
    Filed Electronically32
    
    Section 1350 Certifications
    
    Filed Electronically
 
 
    
    Management contract or compensatory arrangement1
    
    Incorporated by reference to Exhibit 3(a) to the Companys Quarterly Report on Form 10-Q for
the period ended March 31, 1998 (File No. 0-24100).2
    
    Incorporated by reference to Exhibit 3 to the Companys Current Report on Form 8-K dated
February 22, 2005, filed on February 23, 2005 (File No. 0-24100).3
    
    Incorporated by reference to the same numbered exhibit to the Companys Registration
Statement on Form S-1 dated April 1, 1994 (File No. 33-77212).4
    
    Incorporated by reference to Exhibit 10.1 to the Companys Annual Report on Form 10-K for the
period ending December 31, 2004 (File No. 0-24100). 41




---



##### Table of Contents



5
    
    Incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for
the period ended June 30, 2002 (File No. 0-24100).6
    
    Incorporated by reference to Exhibit 10 to the Companys Quarterly Report on Form 10-Q for
the period ended June 30, 2004 (File No. 0-24100).7
    
    Incorporated by reference to the same numbered exhibit to the Companys Annual Report on Form
10-K for the period ended December 31, 1994 (File No. 0-24100).8
    
    Incorporated by reference to Exhibit 10.1(b) to the Companys Quarterly Report on Form 10-Q
for the period ended September 30, 1998 (File No. 0-24100).9
    
    Incorporated by reference to Exhibit B to the Companys Proxy Statement for its Annual
Meeting of Stockholders held on April 24, 2001 (File no. 0-24100).10
    
    Incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for
the period ended September 30, 2004 (File No. 0-24100).11
    
    Incorporated by reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for
the period ended September 30, 2004 (File No. 0-24100).12
    
    Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K dated
January 24, 2005, filed on January 28, 2005 (File No. 0-24100).13
    
    Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated
January 22, 2007, filed on January 26, 2007 (File No. 0-24100).14
    
    Incorporated by reference to Exhibit 14 to the Companys Quarterly Report on Form 10-Q for
the period ended September 30, 2005 (File No. 0-24100). 42