##### 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, 2006
 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 6057
    
    55901Rochester, Minnesota
    
    (Zip Code)(Address of Principal Executive Offices)(507) 535-1200Registrants telephone number, including area code
    o þ
 o NO
þ
 þ o
 o
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



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
    
    
    28Item 1A. Risk Factors
    
    
    29Item 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
    
    
    42Index to Exhibits
    
    
    43Form of Restricted Stock AgreementPortions of Annual Report to Security HoldersSubsidiaries of RegistrantConsent of KPMG LLPRule 13a-14(a)/15d-14(a) Certification of CEORule 13a-14(a)/15d-14(a) Certification of CFOSection 1350 Certifications
  2




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Forward-Looking Statements
  3




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PART I
 
 ITEM 1. BUSINESS
 
 General
   
 Market Area
     4




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Lending Activities
 General.
 5




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##### Table of Contents



2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentFixed rate LoansReal Estate:One-to-four familyGEM
    
    $
    13,335
    
    
    
    1.70
    %
    
    $
    14,812
    
    
    
    1.84
    %
    
    $
    16,133
    
    
    
    2.01
    %
    
    $
    13,387
    
    
    
    1.89
    %
    
    $
    17,394
    
    
    
    3.18
    %Other
    
    
    62,184
    
    
    
    7.92
    
    
    
    55,700
    
    
    
    6.94
    
    
    
    59,937
    
    
    
    7.48
    
    
    
    65,004
    
    
    
    9.17
    
    
    
    74,510
    
    
    
    13.63Total one-to-four family
    
    
    75,519
    
    
    
    9.62
    
    
    
    70,512
    
    
    
    8.78
    
    
    
    76,070
    
    
    
    9.49
    
    
    
    78,391
    
    
    
    11.06
    
    
    
    91,904
    
    
    
    16.81Multi-family
    
    
    6,193
    
    
    
    0.79
    
    
    
    5,956
    
    
    
    0.74
    
    
    
    6,387
    
    
    
    0.79
    
    
    
    6,471
    
    
    
    0.91
    
    
    
    6,588
    
    
    
    1.20GEM  multi-family
    
    
    45
    
    
    
    0.01
    
    
    
    51
    
    
    
    0.01
    
    
    
    57
    
    
    
    0.01
    
    
    
    61
    
    
    
    0.01
    
    
    
    64
    
    
    
    0.01Commercial
    
    
    100,562
    
    
    
    12.80
    
    
    
    89,905
    
    
    
    11.19
    
    
    
    51,390
    
    
    
    6.41
    
    
    
    52,563
    
    
    
    7.42
    
    
    
    37,878
    
    
    
    6.93Construction or development
    
    
    6,640
    
    
    
    0.84
    
    
    
    12,919
    
    
    
    1.61
    
    
    
    27,557
    
    
    
    3.44
    
    
    
    17,215
    
    
    
    2.43
    
    
    
    17,234
    
    
    
    3.15Total fixed rate real estate loans
    
    
    188,959
    
    
    
    24.06
    
    
    
    179,343
    
    
    
    22.33
    
    
    
    161,461
    
    
    
    20.14
    
    
    
    154,701
    
    
    
    21.83
    
    
    
    153,668
    
    
    
    28.10Consumer loans:Savings
    
    
    814
    
    
    
    0.10
    
    
    
    605
    
    
    
    0.07
    
    
    
    454
    
    
    
    0.06
    
    
    
    494
    
    
    
    0.07
    
    
    
    534
    
    
    
    0.10Automobile
    
    
    3,093
    
    
    
    0.39
    
    
    
    5,462
    
    
    
    0.68
    
    
    
    9,496
    
    
    
    1.18
    
    
    
    14,754
    
    
    
    2.08
    
    
    
    11,062
    
    
    
    2.02Home equity
    
    
    21,181
    
    
    
    2.70
    
    
    
    19,289
    
    
    
    2.40
    
    
    
    20,019
    
    
    
    2.50
    
    
    
    18,742
    
    
    
    2.65
    
    
    
    21,049
    
    
    
    3.85Mobile home
    
    
    2,052
    
    
    
    0.26
    
    
    
    2,299
    
    
    
    0.29
    
    
    
    2,896
    
    
    
    0.36
    
    
    
    3,665
    
    
    
    0.52
    
    
    
    4,534
    
    
    
    0.83Land/Lot Loans
    
    
    1,426
    
    
    
    0.18
    
    
    
    1,234
    
    
    
    0.15
    
    
    
    818
    
    
    
    0.10
    
    
    
    754
    
    
    
    0.11
    
    
    
    781
    
    
    
    0.15Other
    
    
    2,192
    
    
    
    0.28
    
    
    
    2,569
    
    
    
    0.32
    
    
    
    3,134
    
    
    
    0.39
    
    
    
    3,105
    
    
    
    0.43
    
    
    
    3,299
    
    
    
    0.60Total consumer loans
    
    
    30,758
    
    
    
    3.91
    
    
    
    31,458
    
    
    
    3.91
    
    
    
    36,817
    
    
    
    4.59
    
    
    
    41,514
    
    
    
    5.86
    
    
    
    41,259
    
    
    
    7.55Commercial business loans
    
    
    65,347
    
    
    
    8.32
    
    
    
    49,297
    
    
    
    6.14
    
    
    
    69,671
    
    
    
    8.69
    
    
    
    51,609
    
    
    
    7.28
    
    
    
    42,272
    
    
    
    7.73Total other loans
    
    
    96,105
    
    
    
    12.23
    
    
    
    80,755
    
    
    
    10.05
    
    
    
    106,488
    
    
    
    13.28
    
    
    
    93,123
    
    
    
    13.14
    
    
    
    83,531
    
    
    
    15.28Total fixed rate loans
    
    
    285,064
    
    
    
    36.29
    
    
    
    260,098
    
    
    
    32.38
    
    
    
    267,949
    
    
    
    33.42
    
    
    
    247,824
    
    
    
    34.97
    
    
    
    237,199
    
    
    
    43.38Adjustable rate LoansReal estate:One-to-four family
    
    
    58,751
    
    
    
    7.48
    
    
    
    56,563
    
    
    
    7.04
    
    
    
    62,938
    
    
    
    7.85
    
    
    
    65,924
    
    
    
    9.30
    
    
    
    59,662
    
    
    
    10.91Multi-family
    
    
    23,624
    
    
    
    3.01
    
    
    
    34,745
    
    
    
    4.33
    
    
    
    35,478
    
    
    
    4.43
    
    
    
    25,008
    
    
    
    3.53
    
    
    
    9,113
    
    
    
    1.67Commercial
    
    
    193,928
    
    
    
    24.69
    
    
    
    170,363
    
    
    
    21.21
    
    
    
    173,554
    
    
    
    21.65
    
    
    
    146,603
    
    
    
    20.69
    
    
    
    92,539
    
    
    
    16.92Construction or development
    
    
    53,538
    
    
    
    6.82
    
    
    
    67,424
    
    
    
    8.39
    
    
    
    70,841
    
    
    
    8.84
    
    
    
    78,131
    
    
    
    11.02
    
    
    
    44,102
    
    
    
    8.07Total adjustable rate real estate loans
    
    
    329,841
    
    
    
    42.00
    
    
    
    329,095
    
    
    
    40.97
    
    
    
    342,811
    
    
    
    42.77
    
    
    
    315,666
    
    
    
    44.54
    
    
    
    205,416
    
    
    
    37.57Consumer (home equity and other)
    
    
    54,328
    
    
    
    6.91
    
    
    
    60,853
    
    
    
    7.57
    
    
    
    67,154
    
    
    
    8.38
    
    
    
    54,425
    
    
    
    7.68
    
    
    
    52,131
    
    
    
    9.53Land/Lot loans
    
    
    4,076
    
    
    
    0.52
    
    
    
    8,197
    
    
    
    1.02
    
    
    
    10,754
    
    
    
    1.34
    
    
    
    9,732
    
    
    
    1.38
    
    
    
    2,809
    
    
    
    0.52Other
    
    
    686
    
    
    
    0.09
    
    
    
    390
    
    
    
    0.05
    
    
    
    248
    
    
    
    0.03
    
    
    
    234
    
    
    
    0.03
    
    
    
    222
    
    
    
    0.04Total consumer loans
    
    
    59,090
    
    
    
    7.52
    
    
    
    69,440
    
    
    
    8.64
    
    
    
    78,156
    
    
    
    9.75
    
    
    
    64,391
    
    
    
    9.09
    
    
    
    55,162
    
    
    
    10.09Commercial business loans
    
    
    111,423
    
    
    
    14.19
    
    
    
    144,665
    
    
    
    18.01
    
    
    
    112,698
    
    
    
    14.06
    
    
    
    80,808
    
    
    
    11.40
    
    
    
    48,989
    
    
    
    8.96Total other loans
    
    
    170,513
    
    
    
    21.71
    
    
    
    214,105
    
    
    
    26.65
    
    
    
    190,854
    
    
    
    23.81
    
    
    
    145,199
    
    
    
    20.49
    
    
    
    104,151
    
    
    
    19.05Total adjustable rate loans
    
    
    500,354
    
    
    
    63.71
    
    
    
    543,200
    
    
    
    67.62
    
    
    
    533,665
    
    
    
    66.58
    
    
    
    460,865
    
    
    
    65.03
    
    
    
    309,567
    
    
    
    56.62Total loans
    
    
    785,418
    
    
    
    100.00
    %
    
    
    803,298
    
    
    
    100.00
    %
    
    
    801,614
    
    
    
    100.00
    %
    
    
    708,689
    
    
    
    100.00
    %
    
    
    546,766
    
    
    
    100.00
    %LessLoans in process
    
    
    5,252
    
    
    
    
    
    
    
    7,008
    
    
    
    
    
    
    
    7,561
    
    
    
    
    
    
    
    11,298
    
    
    
    
    
    
    
    6,826Unamortized discounts
    
    
    40
    
    
    
    
    
    
    
    190
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    142Net deferred loan fees
    
    
    2,021
    
    
    
    
    
    
    
    1,644
    
    
    
    
    
    
    
    1,781
    
    
    
    
    
    
    
    1,334
    
    
    
    
    
    
    
    1,068Allowance for losses on loans
    
    
    9,873
    
    
    
    
    
    
    
    8,778
    
    
    
    
    
    
    
    8,996
    
    
    
    
    
    
    
    6,940
    
    
    
    
    
    
    
    4,824Total loans receivable, net
    
    $
    768,232
    
    
    
    
    
    
    $
    785,678
    
    
    
    
    
    
    $
    783,213
    
    
    
    
    
    
    $
    688,951
    
    
    
    
    
    
    $
    533,906
 6




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##### 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
    
    
    Rate2007 (1)
    
    $
    6,747
    
    
    
    6.13
    %
    
    $
    69,478
    
    
    
    8.64
    %
    
    $
    39,682
    
    
    
    8.95
    %
    
    $
    14,394
    
    
    
    9.19
    %
    
    $
    95,587
    
    
    
    8.34
    %
    
    $
    225,888
    
    
    
    8.55
    %2008
    
    
    6,782
    
    
    
    6.33
    
    
    
    65,870
    
    
    
    8.16
    
    
    
    612
    
    
    
    7.25
    
    
    
    10,575
    
    
    
    8.55
    
    
    
    26,591
    
    
    
    8.16
    
    
    
    110,430
    
    
    
    8.082009
    
    
    5,744
    
    
    
    5.76
    
    
    
    37,402
    
    
    
    7.93
    
    
    
    439
    
    
    
    6.31
    
    
    
    9,408
    
    
    
    8.72
    
    
    
    20,653
    
    
    
    7.99
    
    
    
    73,646
    
    
    
    7.872010 through 2011
    
    
    12,344
    
    
    
    5.75
    
    
    
    42,837
    
    
    
    7.62
    
    
    
    1,207
    
    
    
    6.93
    
    
    
    18,595
    
    
    
    8.98
    
    
    
    20,307
    
    
    
    8.32
    
    
    
    95,290
    
    
    
    7.782012 through 2016
    
    
    29,318
    
    
    
    5.88
    
    
    
    66,798
    
    
    
    7.42
    
    
    
    10,060
    
    
    
    8.32
    
    
    
    28,769
    
    
    
    9.22
    
    
    
    11,194
    
    
    
    7.33
    
    
    
    146,139
    
    
    
    7.522017 through 2031
    
    
    57,392
    
    
    
    5.97
    
    
    
    41,967
    
    
    
    7.35
    
    
    
    6,749
    
    
    
    6.36
    
    
    
    8,100
    
    
    
    8.67
    
    
    
    2,405
    
    
    
    6.74
    
    
    
    116,613
    
    
    
    6.692032 and following
    
    
    15,943
    
    
    
    5.96
    
    
    
    0
    
    
    
    0.00
    
    
    
    1,429
    
    
    
    5.92
    
    
    
    7
    
    
    
    3.64
    
    
    
    33
    
    
    
    8.00
    
    
    
    17,412
    
    
    
    5.96$
    134,270
    
    
    
    
    
    
    $
    324,352
    
    
    
    
    
    
    $
    60,178
    
    
    
    
    
    
    $
    89,848
    
    
    
    
    
    
    $
    176,770
    
    
    
    
    
    
    $
    785,418
 
 (1)
    
    Includes demand loans, loans having no stated maturity, overdraft loans and education
loans.  7




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##### Table of Contents



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




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##### Table of Contents



Commercial Real Estate and Multi-Family Lending.
  9




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##### Table of Contents



Construction Lending.
    10




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##### Table of Contents



Consumer Lending.
    Commercial Business Lending.
 11




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##### Table of Contents



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




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##### Table of Contents



LOANS HELD FOR INVESTMENT
 Year Ended December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2004Originations by type:Adjustable rate:Real estate -- one-to-four family
    
    $
    13,493
    
    
    
    13,064
    
    
    
    16,840- multi-family
    
    
    0
    
    
    
    258
    
    
    
    2,391- commercial
    
    
    76,797
    
    
    
    70,742
    
    
    
    44,046- construction or development
    
    
    159,278
    
    
    
    45,551
    
    
    
    84,328Non-real estate -- consumer
    
    
    11,607
    
    
    
    12,964
    
    
    
    13,822- commercial business
    
    
    94,603
    
    
    
    91,697
    
    
    
    50,467Total adjustable rate
    
    
    355,778
    
    
    
    234,276
    
    
    
    211,894Fixed rate:Real estate -- one-to-four family
    
    
    14,671
    
    
    
    1,587
    
    
    
    5,738- multi-family
    
    
    0
    
    
    
    35
    
    
    
    1,418- commercial
    
    
    31,635
    
    
    
    41,534
    
    
    
    17,544- construction or development
    
    
    5,691
    
    
    
    10,144
    
    
    
    38,731Non-real estate -- consumer
    
    
    23,127
    
    
    
    27,421
    
    
    
    28,347- commercial business
    
    
    54,261
    
    
    
    41,535
    
    
    
    46,414Total fixed rate
    
    
    129,385
    
    
    
    122,256
    
    
    
    138,192Total loans originated
    
    
    485,163
    
    
    
    356,532
    
    
    
    350,086Purchases:Real estate -- one-to-four family
    
    
    0
    
    
    
    130
    
    
    
    0- commercial
    
    
    8,874
    
    
    
    16,823
    
    
    
    4,125- construction or development
    
    
    9,700
    
    
    
    11,900
    
    
    
    56,798Non-real estate -- commercial business
    
    
    8,885
    
    
    
    3,412
    
    
    
    30,862Total loans purchased
    
    
    27,459
    
    
    
    32,265
    
    
    
    91,785Sales, Participations and repayments:Real estate -- commercial
    
    
    21,588
    
    
    
    23,974
    
    
    
    2,400- construction or development
    
    
    107,649
    
    
    
    21,646
    
    
    
    34,800Non-real estate -- consumer
    
    
    2,416
    
    
    
    1,248
    
    
    
    0- commercial business
    
    
    15,912
    
    
    
    8,813
    
    
    
    9,000Total sales
    
    
    147,565
    
    
    
    55,681
    
    
    
    46,200Transfers to (from) loans held for sale
    
    
    5,994
    
    
    
    7,373
    
    
    
    (2,437
    )Principal repayments
    
    
    373,953
    
    
    
    320,869
    
    
    
    300,407Total reductions
    
    
    527,512
    
    
    
    383,923
    
    
    
    344,170Decrease in other items, net
    
    
    (2,990
    )
    
    
    (3,190
    )
    
    
    (4,776
    )Net (decrease) increase
    
    $
    (17,880
    )
    
    
    1,684
    
    
    
    92,925
 13




---



##### Table of Contents



LOANS HELD FOR SALE
 Year Ended December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2004Originations by type:Adjustable rate:Real estate -- one-to-four family
    
    $
    1,400
    
    
    
    1,389
    
    
    
    851- construction or development
    
    
    0
    
    
    
    0
    
    
    
    225Total adjustable rate
    
    
    1,400
    
    
    
    1,389
    
    
    
    1,076Fixed rate:Real estate -- one-to-four family
    
    
    57,277
    
    
    
    77,924
    
    
    
    83,469- construction or development
    
    
    1,340
    
    
    
    1,093
    
    
    
    2,896Total fixed rate
    
    
    58,617
    
    
    
    79,017
    
    
    
    86,365Total loans originated
    
    
    60,017
    
    
    
    80,406
    
    
    
    87,441Sales and repayments:Real estate -- one-to-four family
    
    
    65,951
    
    
    
    89,089
    
    
    
    88,808Total sales
    
    
    65,951
    
    
    
    89,089
    
    
    
    88,808Transfers to (from) loans held for investment
    
    
    (5,994
    )
    
    
    (7,373
    )
    
    
    2,437Total reductions
    
    
    59,957
    
    
    
    81,716
    
    
    
    91,245Net (increase) decrease
    
    $
    60
    
    
    
    (1,310
    )
    
    
    (3,804
    )
 MORTGAGE-BACKED AND RELATED SECURITIES
 Year Ended December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2004Purchases:Mortgage-backed securities:CMOs and REMICs (1)
    
    $
    0
    
    
    
    0
    
    
    
    0Total purchases
    
    
    0
    
    
    
    0
    
    
    
    0Sales:Mortgage-backed securities:CMOs and REMICs
    
    
    0
    
    
    
    0
    
    
    
    0Total sales
    
    
    0
    
    
    
    0
    
    
    
    0Principal repayments
    
    
    (702
    )
    
    
    (2,271
    )
    
    
    (3,898
    )Net decrease
    
    $
    (702
    )
    
    
    (2,271
    )
    
    
    (3,898
    )
 
 (1)
    
    Collateralized Mortgage Obligations and Real Estate Mortgage Investment Conduits 
 Classified Assets and Delinquencies
 Classification of Assets .
 14




---



##### Table of Contents



One-to-Four
    
    
    Commercialand
    
    
    
    
    
    
    Commercial
    
    
    Other(Dollars in thousands)
    
    Family
    
    
    Multi-family
    
    
    Consumer
    
    
    Business
    
    
    Assets
    
    
    TotalSubstandard
    
    $
    946
    
    
    
    11,387
    
    
    
    142
    
    
    
    551
    
    
    
    1,422
    
    
    
    14,448Doubtful
    
    
    0
    
    
    
    0
    
    
    
    1,112
    
    
    
    0
    
    
    
    44
    
    
    
    1,156Loss
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    946
    
    
    
    11,387
    
    
    
    1,254
    
    
    
    551
    
    
    
    1,466
    
    
    
    15,604
  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
    
    
    3
    
    
    $
    327
    
    
    
    0.24
    %
    
    
    4
    
    
    $
    946
    
    
    
    0.71
    %
    
    
    7
    
    
    $
    1,273
    
    
    
    0.95
    %Nonresidential
    
    
    3
    
    
    
    1,413
    
    
    
    0.48
    
    
    
    1
    
    
    
    162
    
    
    
    0.05
    
    
    
    4
    
    
    
    1,575
    
    
    
    0.53Consumer
    
    
    8
    
    
    
    178
    
    
    
    0.20
    
    
    
    6
    
    
    
    1,254
    
    
    
    1.40
    
    
    
    14
    
    
    
    1,432
    
    
    
    1.60Total
    
    
    14
    
    
    $
    1,918
    
    
    
    0.24
    %
    
    
    11
    
    
    $
    2,362
    
    
    
    0.30
    %
    
    
    25
    
    
    $
    4,280
    
    
    
    0.54
    %
 
 Investment Activities
  Securities.
 15




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##### Table of Contents



16




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##### Table of Contents



2006
    
    
    2005
    
    
    2004Amort
    
    
    Adjusted
    
    
    Market
    
    
    % of
    
    
    Amort
    
    
    Adjusted
    
    
    Market
    
    
    % of
    
    
    Amort
    
    
    Adjusted
    
    
    Market
    
    
    % ofCost
    
    
    To
    
    
    Value
    
    
    Total
    
    
    Cost
    
    
    To
    
    
    Value
    
    
    Total
    
    
    Cost
    
    
    To
    
    
    Value
    
    
    TotalSecurities available for sale:U.S. Government agency obligations
    
    $
    119,240
    
    
    
    22
    
    
    
    119,262
    
    
    
    74.68
    %
    
    $
    110,110
    
    
    
    (971
    )
    
    
    109,139
    
    
    
    71.61
    %
    
    $
    91,371
    
    
    
    (575
    )
    
    
    90,796
    
    
    
    77.42
    %Municipal obligations
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    65
    
    
    
    0
    
    
    
    65
    
    
    
    0.06Corporate equity (1)
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.44
    
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.46
    
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.60Preferred
stock of federal agencies
(1)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    2,940
    
    
    
    0
    
    
    
    2,940
    
    
    
    1.93
    
    
    
    2,961
    
    
    
    0
    
    
    
    2,961
    
    
    
    2.52Subtotal
    
    
    119,940
    
    
    
    
    
    
    
    119,962
    
    
    
    75.12
    
    
    
    113,750
    
    
    
    
    
    
    
    112,779
    
    
    
    74.00
    
    
    
    95,097
    
    
    
    
    
    
    
    94,522
    
    
    
    80.60Federal Home Loan Bank stock
    
    
    7,956
    
    
    
    
    
    
    
    7,956
    
    
    
    4.98
    
    
    
    8,365
    
    
    
    
    
    
    
    8,365
    
    
    
    5.49
    
    
    
    9,293
    
    
    
    
    
    
    
    9,293
    
    
    
    7.92Total investment securities
and Federal Home Loan Bank stock
    
    
    127,896
    
    
    
    
    
    
    
    127,918
    
    
    
    80.10
    
    
    
    122,115
    
    
    
    
    
    
    
    121,144
    
    
    
    79.49
    
    
    
    104,390
    
    
    
    
    
    
    
    103,815
    
    
    
    88.52Average remaining life of
investment securities excluding Federal Home Loan Bank stock
    
    1.1 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5 yearsOther interest earning assets:Cash equivalents
    
    
    31,776
    
    
    
    
    
    
    
    31,776
    
    
    
    19.90
    
    
    
    31,269
    
    
    
    
    
    
    
    31,269
    
    
    
    20.51
    
    
    
    13,467
    
    
    
    
    
    
    
    13,467
    
    
    
    11.48Total
    
    $
    159,672
    
    
    
    
    
    
    
    159,694
    
    
    
    100.00
    %
    
    $
    153,384
    
    
    
    
    
    
    
    152,413
    
    
    
    100.00
    %
    
    $
    117,857
    
    
    
    
    
    
    
    117,282
    
    
    
    100.00
    %Average remaining life or term to
repricing of investment securities and
other interest earning assets, excluding Federal Home Loan Bank stock
    
    0.8 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3 years
 
 (1)
    
    Average life assigned to corporate equity holdings and preferred stock
of federal agencies is five years. 17




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##### Table of Contents



December 31, 2006After 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
    
    $
    64,478
    
    
    
    54,762
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    119,240
    
    
    
    (22
    )
    
    
    119,262Corporate equity
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    700
    
    
    
    700
    
    
    
    0
    
    
    
    700Total stock
    
    $
    64,478
    
    
    
    54,762
    
    
    
    0
    
    
    
    0
    
    
    
    700
    
    
    
    119,940
    
    
    
    (22
    )
    
    
    119,962Weighted average yield (1)
    
    
    4.87
    %
    
    
    5.09
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    7.80
    %
    
    
    4.99
    %
 
 (1)
 Mortgage-Backed and Related Securities .
  Dec. 31,20065 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
    
    $
    27
    
    
    
    139
    
    
    
    0
    
    
    
    0
    
    
    
    166Government National Mortgage Association
    
    
    0
    
    
    
    10
    
    
    
    0
    
    
    
    0
    
    
    
    10Collateralized Mortgage Obligations
    
    
    139
    
    
    
    0
    
    
    
    3,209
    
    
    
    2,654
    
    
    
    6,002Total
    
    $
    166
    
    
    
    149
    
    
    
    3,209
    
    
    
    2,654
    
    
    
    6,178Weighted average yield
    
    
    6.58
    %
    
    
    7.12
    %
    
    
    3.69
    %
    
    
    4.00
    %
    
    
    3.96
    %
    18




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##### Table of Contents



Sources of Funds
 General.
 Deposits.
   Year Ended December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2004Opening balance
    
    $
    731,537
    
    
    
    698,902
    
    
    
    551,688Deposits
    
    
    4,861,548
    
    
    
    4,202,022
    
    
    
    3,750,395Withdrawals
    
    
    (4,889,449
    )
    
    
    (4,185,251
    )
    
    
    (3,613,887
    )Interest credited
    
    
    22,323
    
    
    
    15,864
    
    
    
    10,706Ending balance
    
    
    725,959
    
    
    
    731,537
    
    
    
    698,902Net increase (decrease)
    
    $
    (5,578
    )
    
    
    32,635
    
    
    
    147,214Percent increase (decrease)
    
    
    (0.76)
    %
    
    
    4.67
    %
    
    
    26.68
    %
 19




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent(Dollars in thousands)
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of TotalTransaction and Savings Deposits(1):Non-interest checking
    
    $
    68,990
    
    
    
    9.50
    %
    
    $
    58,430
    
    
    
    7.99
    %
    
    $
    42,777
    
    
    
    6.12
    %NOW Accounts  2.54%(2)
    
    
    87,074
    
    
    
    12.00
    
    
    
    101,942
    
    
    
    13.94
    
    
    
    95,294
    
    
    
    13.63Passbook Accounts  1.37%(3)
    
    
    40,445
    
    
    
    5.57
    
    
    
    84,858
    
    
    
    11.60
    
    
    
    47,416
    
    
    
    6.78Money Market Accounts  3.31%(4)
    
    
    178,694
    
    
    
    24.61
    
    
    
    96,947
    
    
    
    13.25
    
    
    
    129,098
    
    
    
    18.47Total Non-Certificates
    
    $
    375,203
    
    
    
    51.68
    %
    
    $
    342,177
    
    
    
    46.78
    %
    
    $
    314,585
    
    
    
    45.00
    %Certificates:0.00 - 0.99%
    
    $
    532
    
    
    
    0.08
    %
    
    $
    651
    
    
    
    0.09
    %
    
    $
    883
    
    
    
    0.13
    %1.00 - 1.99%
    
    
    157
    
    
    
    0.02
    
    
    
    5,846
    
    
    
    0.80
    
    
    
    62,833
    
    
    
    8.992.00 - 2.99%
    
    
    25,700
    
    
    
    3.54
    
    
    
    118,723
    
    
    
    16.23
    
    
    
    160,829
    
    
    
    23.013.00 - 3.99%
    
    
    126,409
    
    
    
    17.41
    
    
    
    211,019
    
    
    
    28.84
    
    
    
    108,938
    
    
    
    15.594.00 - 4.99%
    
    
    119,376
    
    
    
    16.45
    
    
    
    52,319
    
    
    
    7.15
    
    
    
    49,449
    
    
    
    7.085.00 - 5.99%
    
    
    78,582
    
    
    
    10.82
    
    
    
    797
    
    
    
    0.11
    
    
    
    1,266
    
    
    
    0.206.00 - 6.99%
    
    
    0
    
    
    
    0.00
    
    
    
    5
    
    
    
    0.00
    
    
    
    5
    
    
    
    0.007.00 - 7.99%
    
    
    0
    
    
    
    0.00
    
    
    
    0
    
    
    
    0.00
    
    
    
    114
    
    
    
    0.00Total Certificates
    
    
    350,756
    
    
    
    48.32
    
    
    
    389,360
    
    
    
    53.22
    
    
    
    384,317
    
    
    
    55.00Total Deposits
    
    $
    725,959
    
    
    
    100.00
    %
    
    $
    731,537
    
    
    
    100.00
    %
    
    $
    698,902
    
    
    
    100.00
    %
 
 (1)
    
    Reflects rates paid on transaction and savings deposits at December 31, 2006.(2)
    
    The rate on NOW Accounts for 2005 was 2.08% and 2004 was 1.09%.(3)
    
    The rate on Passbook Accounts for 2005 was 2.04% and 2004 was 0.19%.(4)
    
    The rate on Money Market Accounts for 2005 was 2.59% and 2004 was 1.72%. 20




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##### Table of Contents



0.00-
    
    
    1.00-
    
    
    2.00-
    
    
    3.00-
    
    
    4.00-
    
    
    5.00-
    
    
    
    
    
    
    Percent(Dollars in thousands)
    
    0.99%
    
    
    1.99%
    
    
    2.99%
    
    
    3.99%
    
    
    4.99%
    
    
    5.99%
    
    
    Total
    
    
    of TotalCertificate accounts
maturing in quarter
ending:March 31, 2007
    
    $
    56
    
    
    
    141
    
    
    
    5,678
    
    
    
    38,353
    
    
    
    20,822
    
    
    
    1,283
    
    
    
    66,333
    
    
    
    18.91
    %June 30, 2007
    
    
    45
    
    
    
    11
    
    
    
    4,816
    
    
    
    29,699
    
    
    
    28,546
    
    
    
    2,781
    
    
    
    65,898
    
    
    
    18.79September 30, 2007
    
    
    75
    
    
    
    3
    
    
    
    6,125
    
    
    
    23,117
    
    
    
    21,642
    
    
    
    13,465
    
    
    
    64,427
    
    
    
    18.36December 31, 2007
    
    
    42
    
    
    
    0
    
    
    
    1,974
    
    
    
    11,771
    
    
    
    25,483
    
    
    
    48,266
    
    
    
    87,536
    
    
    
    24.96March 31, 2008
    
    
    34
    
    
    
    0
    
    
    
    884
    
    
    
    3,584
    
    
    
    4,170
    
    
    
    5,756
    
    
    
    14,428
    
    
    
    4.11June 30, 2008
    
    
    20
    
    
    
    0
    
    
    
    620
    
    
    
    3,221
    
    
    
    2,910
    
    
    
    2,053
    
    
    
    8,824
    
    
    
    2.52September 30, 2008
    
    
    9
    
    
    
    0
    
    
    
    1,070
    
    
    
    3,634
    
    
    
    2,589
    
    
    
    3,706
    
    
    
    11,008
    
    
    
    3.14December 31, 2008
    
    
    17
    
    
    
    0
    
    
    
    1,444
    
    
    
    8,238
    
    
    
    1,516
    
    
    
    258
    
    
    
    11,473
    
    
    
    3.27March 31, 2009
    
    
    1
    
    
    
    0
    
    
    
    1,301
    
    
    
    427
    
    
    
    1,447
    
    
    
    39
    
    
    
    3,215
    
    
    
    0.92June 30, 2009
    
    
    5
    
    
    
    0
    
    
    
    933
    
    
    
    500
    
    
    
    1,267
    
    
    
    254
    
    
    
    2,959
    
    
    
    0.84September 30, 2009
    
    
    5
    
    
    
    0
    
    
    
    104
    
    
    
    1,137
    
    
    
    1,407
    
    
    
    271
    
    
    
    2,924
    
    
    
    0.83December 31, 2009
    
    
    11
    
    
    
    2
    
    
    
    103
    
    
    
    850
    
    
    
    1,012
    
    
    
    299
    
    
    
    2,277
    
    
    
    0.65Thereafter
    
    
    212
    
    
    
    0
    
    
    
    648
    
    
    
    1,878
    
    
    
    6,565
    
    
    
    151
    
    
    
    9,454
    
    
    
    2.70Total
    
    $
    532
    
    
    
    157
    
    
    
    25,700
    
    
    
    126,409
    
    
    
    119,376
    
    
    
    78,582
    
    
    
    350,756
    
    
    
    100.00
    %Percent of total
    
    
    0.15
    %
    
    
    0.04
    %
    
    
    7.34
    %
    
    
    36.04
    %
    
    
    34.03
    %
    
    
    22.40
    %
    
    
    100.00
    %
 21




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##### 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
    
    $
    34,000
    
    
    
    37,138
    
    
    
    65,340
    
    
    
    40,509
    
    
    
    176,987Certificates of deposit of $100,000 or more
    
    
    31,452
    
    
    
    27,965
    
    
    
    81,885
    
    
    
    26,050
    
    
    
    167,352Public funds less than $100,000(1)
    
    
    238
    
    
    
    74
    
    
    
    291
    
    
    
    3
    
    
    
    606Public funds of $100,000 or more(1)
    
    
    643
    
    
    
    721
    
    
    
    4,447
    
    
    
    0
    
    
    
    5,811Total certificates of deposit
    
    $
    66,333
    
    
    
    65,898
    
    
    
    151,963
    
    
    
    66,562
    
    
    
    350,756Passbook of $100,000 or more
    
    $
    13,573
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    13,573Accounts of $100,000 or more
    
    $
    45,668
    
    
    
    28,686
    
    
    
    86,332
    
    
    
    26,050
    
    
    
    186,736
 
 (1)
    
    Deposits from governmental and other public entities.  Borrowings.
  
 Service Corporations of the Bank
   22




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##### Table of Contents



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




---



##### Table of Contents



Holding Company Regulation
   Acquisitions by Savings and Loan Holding Companies
 Examination and Reporting
 Affiliate Transactions
 Capital Adequacy
 Bank Regulation
   24




---



##### Table of Contents



Qualified Thrift Lender Test
 OTS Assessments
 Transactions with Affiliates and Insiders
 Dividend Restrictions
 Deposit Insurance
   25




---



##### Table of Contents



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
    
    
    8.34
    %
    
    
    8.34
    %
    
    
    10.19
    %
    
    
    11.33
    %
 
 (1)
    
    Savings associations are required to maintain a leverage ratio of 4.00% or more to be considered
adequately capitalized. Capital Categories and Prompt Corrective Action
  Other Regulations and Examination Authority
   26




---



##### Table of Contents



Federal Home Loan Bank (FHLB) System
   Federal Reserve Regulation
   Community Reinvestment Act
  27




---



##### Table of Contents



Bank Secrecy Act
  
 EXECUTIVE OFFICERS
  Michael McNeil , age 59.
 Jon J. Eberle , age 41.
 Dwain C. Jorgensen , age 58.
 Susan K. Kolling , age 55.
 Bradley C. Krehbiel , age 48.
 Available Information
 www.hmnf.com
  28




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##### Table of Contents



www.sec.gov
 
 ITEM 1A. RISK FACTORS
  Changes in interest rates could negatively impact the Companys results of operations.
    The Company has increased its commercial real estate loan originations, increasing the risk in its
loan portfolio.
  29




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##### Table of Contents



Changes in interest rates or prepayment speeds could negatively impact the value of capitalized
mortgage servicing rights.
  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.
  30




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##### Table of Contents



The extended disruption of vital infrastructure could negatively impact the Companys results of
operations and financial condition.
  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.
   31




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##### Table of Contents



Because of the limited size of the Company, losses on a few large loans or lending relationships
can cause significant volatility in earnings.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  32




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##### 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, 2006
    
    
    30,000
    
    
    $
    33.55
    
    
    
    30,000
    
    
    
    82,000November 1 through November 30, 2006
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    82,000December 1 through December 31, 2006
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    82,000Total
    
    
    30,000
    
    
    $
    33.55
    
    
    
    30,000
  STOCKHOLDER RETURN PERFORMANCE PRESENTATION
  33




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##### Table of Contents



Total
Return Performance
 
 Period EndingIndex
    
    12/31/01
    
    12/31/02
    
    12/31/03
    
    12/31/04
    
    12/31/05
    
    12/31/06HMN Financial, Inc.
    
    
    100.00
    
    
    
    113.02
    
    
    
    169.52
    
    
    
    237.34
    
    
    
    218.57
    
    
    
    263.24NASDAQ Composite
    
    
    100.00
    
    
    
    68.76
    
    
    
    103.67
    
    
    
    113.16
    
    
    
    115.57
    
    
    
    127.58SNL Bank NASDAQ Index
    
    
    100.00
    
    
    
    102.85
    
    
    
    132.76
    
    
    
    152.16
    
    
    
    147.52
    
    
    
    165.62SNL Midwest Index
    
    
    100.00
    
    
    
    126.11
    
    
    
    171.38
    
    
    
    193.64
    
    
    
    193.66
    
    
    
    195.18
 
 ITEM 6. SELECTED FINANCIAL DATA
  
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  34




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##### 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




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##### Table of Contents



Attestation Report of the Registered Public Accounting Firm.
 Report of Independent Registered Public Accounting Firm
 
 Internal Control-Integrated Framework
    Internal Control-Integrated Framework Internal
 36




---



##### Table of Contents



Control-Integrated Framework .
 -
  
 Changes in internal controls.
 
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   
 ITEM 11. EXECUTIVE COMPENSATION
  37




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   (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 plans (excludingPlan Category
    
    warrants and rights
    
    warrants and rights
    
    securities reflected in column (a))(1)Equity compensation
plans approved by
stockholders
    
    
    356,181
    
    
    $
    16.55
    
    
    
    154,127Equity compensation
plans not approved
by stockholders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    356,181
    
    
    $
    16.55
    
    
    
    154,127
 
 (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:
154,127 shares under the Companys 2001 Omnibus Stock Plan. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  38




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 1.
    
    Financial Statements
  Pages inAnnual Report Section
    
    2006 Annual ReportConsolidated Balance Sheets December 31, 2006 and 2005
    
    
    24Consolidated Statements of Income Each of the Years in the Three-Year Period Ended December 31, 2006
    
    
    25Consolidated Statements of Stockholders Equity and Comprehensive Income Each of the Years in the Three-Year Period Ended December 31, 2006
    
    
    26Consolidated Statements of Cash Flows Each of the Years in the Three-Year Period Ended December 31, 2006
    
    
    27Notes to Consolidated Financial Statements
    
    
    28Report of Independent Registered Public Accounting Firm
    
    
    49
 2.
    
    Financial Statement Schedules
  39




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##### Table of Contents



3. Exhibits
 ExhibitNumber
    
    Exhibit3.1
    
    Amended and Restated Certificate of Incorporation (1)3.2
    
    Amended and Restated By-laws (2)4
    
    Form of Common Stock Certificate (3)10.1
    
    Change in Control Agreement with Michael McNeil dated as of March 1,
2004(4)10.2
    
    Employment Agreement with Michael McNeil dated as of January 1, 2002 (5)10.3
    
    Form of Change in Control Agreement with executive officers (6)10.4
    
    Directors Deferred Compensation Plan (7)10.5
    
    Amended and Restated HMN Financial, Inc. Stock Option and Incentive
Plan dated July 29, 1998 (8)10.6
    
    HMN Financial, Inc. 2001 Omnibus Stock Plan (9)10.7
    
    Form of Incentive Stock Option Agreement for HMN Financial, Inc. 2001
Omnibus Stock (10)10.8
    
    Form of Non-Statutory Stock Option Agreement for HMN Financial, Inc.
2001 Omnibus Stock (11)10.9
    
    Form of Restricted Stock Agreement for HMN Financial, Inc. 2001 Omnibus
Stock*10.10
    
    Description of Michael McNeil 2007 Bonus Plan (12)13
    
    Portions of Annual Report to Security Holders incorporated by reference*14
    
    Code of Business Conduct and Ethics(13)21
    
    Subsidiaries of Registrant*23
    
    Consent of KPMG LLP*24
    
    Powers of Attorney (included with signatures to this Annual Report on
Form 10-K)*31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer*31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer*32
    
    Section 1350 Certifications*
 
 
    
    Management contract or compensatory arrangement*
    
    Filed herewith1
    
    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).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). 40




---



##### Table of Contents



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 10.1 to the Companys Current Report on Form 8-K dated
January 22, 2007, filed on January 26, 2007 (File No. 0-24100).13
    
    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). 41




---



##### Table of Contents



SIGNATURES
  HMN FINANCIAL, INC.Date: March 1, 2007
    By:
    /s/ Michael McNeilMichael McNeil,President and Chief Executive Officer  Name
    
    Title/s/ Michael McNeil
    
    President, Chief Executive Officer andMichael McNeil
    
    Director
(Principal Executive Officer)Senior Vice President,/s/ Jon J. Eberle
    
    Chief Financial Officer and TreasurerJon J. Eberle
    
    (Principal
Financial and Accounting Officer)/s/ Timothy R. Geisler
    
    Chairman of the BoardTimothy R. Geisler/s/ Allan R. DeBoer
    
    DirectorAllan R. DeBoer/s/ Duane D. Benson
    
    DirectorDuane D. Benson/s/ Michael J. Fogarty
    
    DirectorMichael J. Fogarty/s/ Karen L. Himle
    
    DirectorKaren L. Himle/s/ Susan K. Kolling
    
    DirectorSusan K. Kolling/s/ Malcolm W. McDonald
    
    DirectorMalcolm W. McDonald/s/ Mahlon C. Schneider
    
    DirectorMahlon C. Schneider
 42




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit
    
    Filing Status3.1
    
    Amended and Restated Certificate of Incorporation
    
    Incorporated by
Reference3.2
    
    Amended and Restated By-laws
    
    Incorporated by
Reference4
    
    Form of Common Stock Certificate
    
    Incorporated by
Reference10.1
    
    Change in Control Agreement with Michael McNeil
dated as of March 1, 2004
    
    Incorporated by
Reference10.2
    
    Employment Agreement with Michael McNeil dated
as of January 1, 2002
    
    Incorporated by
Reference10.3
    
    Form of Change in Control Agreement with
executive officers
    
    Incorporated by
Reference10.4
    
    Directors Deferred Compensation Plan
    
    Incorporated by
Reference10.5
    
    Amended and Restated HMN Financial, Inc. Stock
Option and Incentive Plan dated July 29, 1998
    
    Incorporated by
Reference10.6
    
    HMN Financial, Inc. 2001 Omnibus Stock Plan
    
    Incorporated by
Reference10.7
    
    Form of Incentive Stock Option Agreement for HMN
Financial, Inc. 2001 Omnibus Stock
    
    Incorporated by
Reference10.8
    
    Form of Non-Statutory Stock Option Agreement for
HMN Financial, Inc. 2001 Omnibus Stock
    
    Incorporated by
Reference10.9
    
    Form of Restricted Stock Agreement for HMN
Financial, Inc. 2001 Omnibus Stock
    
    Filed Electronically10.10
    
    Description of Michael McNeil 2007 Bonus Plan
    
    Incorporated by
Reference13
    
    Portions of Annual Report to Security Holders
incorporated by reference
    
    Filed Electronically14
    
    Code of Business Conduct and Ethics
    
    Incorporated by
Reference21
    
    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
 43