##### 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, 2010
 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
(State or Other Jurisdiction of Incorporation or Organization)
    
    41-1777397
(I.R.S. Employer Identification No.)1016 Civic Center Drive Northwest, PO Box 6057
Rochester, Minnesota
(Address of Principal Executive Offices)
    
    55901
(Zip Code)(507) 535-1200
Registrants Telephone Number, Including Area Code
 
 o þ
 o þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



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
    
    
    15Investment Activities
    
    
    17Sources of Funds
    
    
    20Other InformationService Corporations of the Bank
    
    
    23Competition
    
    
    24Other Corporations Owned by HMN
    
    
    24Employees
    
    
    24Regulation and Supervision
    
    
    24Executive Officers
    
    
    32Item 1A. Risk Factors
    
    
    32Item 1B. Unresolved Staff Comments
    
    
    42Item 2. Properties
    
    
    42Item 3. Legal Proceedings
    
    
    42Item 4. Reserved
    
    
    42PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    42Item 6. Selected Financial Data
    
    
    43Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    43Item 7A. Quantitative and Qualitative Disclosure About Market Risk
    
    
    44Item 8. Financial Statements and Supplementary Data
    
    
    44Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    44Item 9A. Controls and Procedures
    
    
    44Item 9B. Other Information
    
    
    46PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    46Item 11. Executive Compensation
    
    
    46Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    46Item 13. Certain Relationships and Related Transactions
    
    
    46Item 14. Principal Accountant Fees and Services
    
    
    47PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    48Signatures
    
    
    49Index to Exhibits
    
    
    50EX-10.18EX-10.19EX-10.20EX-13EX-21EX-23EX-31.1EX-31.2EX-32EX-99.1EX-99.2
  2




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##### Table of Contents



Forward-Looking Statements
  3




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##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 
 General
   
 Market Area
      4




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##### Table of Contents



Lending Activities
 General.
 5




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##### Table of Contents



2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Dollars in thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentFixed rate LoansReal estate:One-to-four family:GEM
    
    $
    4,221
    
    
    
    0.60
    %
    
    $
    7,590
    
    
    
    0.92
    %
    
    $
    8,962
    
    
    
    0.97
    %
    
    $
    11,854
    
    
    
    1.34
    %
    
    $
    13,335
    
    
    
    1.70
    %Other
    
    
    65,203
    
    
    
    9.20
    
    
    
    70,104
    
    
    
    8.50
    
    
    
    79,728
    
    
    
    8.62
    
    
    
    80,663
    
    
    
    9.14
    
    
    
    62,184
    
    
    
    7.92Total one-to-four family
    
    
    69,424
    
    
    
    9.80
    
    
    
    77,694
    
    
    
    9.42
    
    
    
    88,690
    
    
    
    9.59
    
    
    
    92,517
    
    
    
    10.48
    
    
    
    75,519
    
    
    
    9.62Multi-family
    
    
    23,079
    
    
    
    3.26
    
    
    
    11,455
    
    
    
    1.39
    
    
    
    4,703
    
    
    
    0.50
    
    
    
    5,952
    
    
    
    0.68
    
    
    
    6,238
    
    
    
    0.80Commercial
    
    
    110,267
    
    
    
    15.56
    
    
    
    103,036
    
    
    
    12.49
    
    
    
    91,835
    
    
    
    9.93
    
    
    
    69,276
    
    
    
    7.84
    
    
    
    100,562
    
    
    
    12.80Construction or development
    
    
    5,743
    
    
    
    0.81
    
    
    
    11,148
    
    
    
    1.35
    
    
    
    29,344
    
    
    
    3.17
    
    
    
    16,519
    
    
    
    1.87
    
    
    
    6,640
    
    
    
    0.84Total real estate loans
    
    
    208,513
    
    
    
    29.43
    
    
    
    203,333
    
    
    
    24.65
    
    
    
    214,572
    
    
    
    23.19
    
    
    
    184,264
    
    
    
    20.87
    
    
    
    188,959
    
    
    
    24.06Consumer loans:Savings
    
    
    534
    
    
    
    0.07
    
    
    
    324
    
    
    
    0.04
    
    
    
    277
    
    
    
    0.03
    
    
    
    358
    
    
    
    0.04
    
    
    
    814
    
    
    
    0.10Automobile
    
    
    604
    
    
    
    0.09
    
    
    
    902
    
    
    
    0.11
    
    
    
    1,333
    
    
    
    0.15
    
    
    
    1,730
    
    
    
    0.20
    
    
    
    3,093
    
    
    
    0.39Home equity
    
    
    18,127
    
    
    
    2.56
    
    
    
    21,396
    
    
    
    2.59
    
    
    
    22,961
    
    
    
    2.48
    
    
    
    20,249
    
    
    
    2.29
    
    
    
    21,181
    
    
    
    2.70Mobile home
    
    
    764
    
    
    
    0.11
    
    
    
    977
    
    
    
    0.12
    
    
    
    1,316
    
    
    
    0.14
    
    
    
    1,699
    
    
    
    0.19
    
    
    
    2,052
    
    
    
    0.26Land/Lot loans
    
    
    2,139
    
    
    
    0.30
    
    
    
    2,554
    
    
    
    0.31
    
    
    
    1,956
    
    
    
    0.21
    
    
    
    2,616
    
    
    
    0.30
    
    
    
    1,426
    
    
    
    0.18Other
    
    
    2,790
    
    
    
    0.39
    
    
    
    4,777
    
    
    
    0.58
    
    
    
    3,087
    
    
    
    0.33
    
    
    
    2,007
    
    
    
    0.23
    
    
    
    2,192
    
    
    
    0.28Total consumer loans
    
    
    24,958
    
    
    
    3.52
    
    
    
    30,930
    
    
    
    3.75
    
    
    
    30,930
    
    
    
    3.34
    
    
    
    28,659
    
    
    
    3.25
    
    
    
    30,758
    
    
    
    3.91Commercial business loans
    
    
    68,962
    
    
    
    9.73
    
    
    
    76,936
    
    
    
    9.33
    
    
    
    90,458
    
    
    
    9.78
    
    
    
    90,688
    
    
    
    10.27
    
    
    
    65,347
    
    
    
    8.32Total non-real estate loans
    
    
    93,920
    
    
    
    13.25
    
    
    
    107,866
    
    
    
    13.08
    
    
    
    121,388
    
    
    
    13.12
    
    
    
    119,347
    
    
    
    13.52
    
    
    
    96,105
    
    
    
    12.23Total fixed rate loans
    
    
    302,433
    
    
    
    42.68
    
    
    
    311,199
    
    
    
    37.73
    
    
    
    335,960
    
    
    
    36.31
    
    
    
    303,611
    
    
    
    34.39
    
    
    
    285,064
    
    
    
    36.29Adjustable rate LoansReal estate:One-to-four family
    
    
    59,111
    
    
    
    8.34
    
    
    
    66,937
    
    
    
    8.12
    
    
    
    73,299
    
    
    
    7.92
    
    
    
    60,456
    
    
    
    6.85
    
    
    
    58,751
    
    
    
    7.48Multi-family
    
    
    25,187
    
    
    
    3.56
    
    
    
    47,811
    
    
    
    5.80
    
    
    
    24,589
    
    
    
    2.66
    
    
    
    23,120
    
    
    
    2.62
    
    
    
    23,624
    
    
    
    3.01Commercial
    
    
    182,607
    
    
    
    25.77
    
    
    
    209,678
    
    
    
    25.42
    
    
    
    233,469
    
    
    
    25.23
    
    
    
    212,547
    
    
    
    24.08
    
    
    
    193,928
    
    
    
    24.69Construction or development
    
    
    9,508
    
    
    
    1.34
    
    
    
    29,264
    
    
    
    3.54
    
    
    
    78,939
    
    
    
    8.53
    
    
    
    94,516
    
    
    
    10.70
    
    
    
    53,538
    
    
    
    6.82Total real estate loans
    
    
    276,413
    
    
    
    39.01
    
    
    
    353,690
    
    
    
    42.88
    
    
    
    410,296
    
    
    
    44.34
    
    
    
    390,639
    
    
    
    44.25
    
    
    
    329,841
    
    
    
    42.00Consumer:Home equity
    
    
    44,647
    
    
    
    6.30
    
    
    
    50,061
    
    
    
    6.07
    
    
    
    52,194
    
    
    
    5.64
    
    
    
    51,322
    
    
    
    5.81
    
    
    
    54,328
    
    
    
    6.91Land/Lot loans
    
    
    371
    
    
    
    0.05
    
    
    
    636
    
    
    
    0.08
    
    
    
    1,013
    
    
    
    0.11
    
    
    
    1,535
    
    
    
    0.17
    
    
    
    4,076
    
    
    
    0.52Other
    
    
    627
    
    
    
    0.09
    
    
    
    588
    
    
    
    0.07
    
    
    
    2,464
    
    
    
    0.27
    
    
    
    3,393
    
    
    
    0.39
    
    
    
    686
    
    
    
    0.09Total consumer loans
    
    
    45,645
    
    
    
    6.44
    
    
    
    51,285
    
    
    
    6.22
    
    
    
    55,671
    
    
    
    6.02
    
    
    
    56,250
    
    
    
    6.37
    
    
    
    59,090
    
    
    
    7.52Commercial business loans
    
    
    84,077
    
    
    
    11.87
    
    
    
    108,589
    
    
    
    13.17
    
    
    
    123,317
    
    
    
    13.33
    
    
    
    132,271
    
    
    
    14.99
    
    
    
    111,423
    
    
    
    14.19Total non-real estate loans
    
    
    129,722
    
    
    
    18.31
    
    
    
    159,874
    
    
    
    19.39
    
    
    
    178,988
    
    
    
    19.35
    
    
    
    188,521
    
    
    
    21.36
    
    
    
    170,513
    
    
    
    21.71Total adjustable rate loans
    
    
    406,135
    
    
    
    57.32
    
    
    
    513,564
    
    
    
    62.27
    
    
    
    589,284
    
    
    
    63.69
    
    
    
    579,160
    
    
    
    65.61
    
    
    
    500,354
    
    
    
    63.71Total loans
    
    
    708,568
    
    
    
    100.00
    %
    
    
    824,763
    
    
    
    100.00
    %
    
    
    925,244
    
    
    
    100.00
    %
    
    
    882,771
    
    
    
    100.00
    %
    
    
    785,418
    
    
    
    100.00
    %LessLoans in process *
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    

    
    
    
    3,011
    
    
    
    

    
    
    
    5,252Unamortized (premiums) discounts
    
    
    413
    
    
    
    
    
    
    
    177
    
    
    
    
    
    
    
    569
    
    
    
    

    
    
    
    (11
    )
    
    
    
    

    
    
    40Net deferred loan fees
    
    
    1,086
    
    
    
    
    
    
    
    1,518
    
    
    
    
    
    
    
    2,529
    
    
    
    

    
    
    
    2,245
    
    
    
    

    
    
    
    2,021Allowance for losses on loans
    
    
    42,828
    
    
    
    
    
    
    
    23,812
    
    
    
    
    
    
    
    21,257
    
    
    
    

    
    
    
    12,438
    
    
    
    

    
    
    
    9,873Total loans receivable, net
    
    $
    664,241
    
    
    
    
    
    
    $
    799,256
    
    
    
    
    
    
    $
    900,889
    
    
    
    

    
    
    $
    865,088
    
    
    
    

    
    
    $
    768,232
 
 *
    
    - Core data processing systems converted in 2008, loans in process amounts are reflected in loan
amounts in table. 6




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##### Table of Contents



Real EstateMulti-family and
    
    
    Construction orOne-to-four family
    
    
    Commercial
    
    
    Development
    
    
    Consumer
    
    
    Commercial Business
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedDue During Years Ending
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageDecember 31,
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate2011 (1)
    
    $
    22,446
    
    
    
    5.54
    %
    
    $
    86,887
    
    
    
    4.53
    %
    
    $
    8,308
    
    
    
    3.12
    %
    
    $
    4,046
    
    
    
    9.03
    %
    
    $
    61,539
    
    
    
    4.29
    %
    
    $
    183,226
    
    
    
    4.61
    %2012
    
    
    6,840
    
    
    
    6.11
    
    
    
    39,971
    
    
    
    5.22
    
    
    
    1,665
    
    
    
    4.93
    
    
    
    2,784
    
    
    
    7.56
    
    
    
    48,829
    
    
    
    5.84
    
    
    
    100,089
    
    
    
    5.642013
    
    
    7,169
    
    
    
    5.35
    
    
    
    69,533
    
    
    
    5.28
    
    
    
    2,333
    
    
    
    0.00
    
    
    
    5,000
    
    
    
    6.32
    
    
    
    17,665
    
    
    
    4.24
    
    
    
    101,700
    
    
    
    5.032014 through 2015
    
    
    2,578
    
    
    
    6.63
    
    
    
    31,894
    
    
    
    5.86
    
    
    
    566
    
    
    
    4.26
    
    
    
    9,981
    
    
    
    6.51
    
    
    
    8,472
    
    
    
    6.76
    
    
    
    53,491
    
    
    
    6.142016 through 2020
    
    
    13,942
    
    
    
    5.74
    
    
    
    68,829
    
    
    
    6.37
    
    
    
    0
    
    
    
    0.00
    
    
    
    4,208
    
    
    
    7.58
    
    
    
    15,517
    
    
    
    6.77
    
    
    
    102,496
    
    
    
    6.392021 through 2035
    
    
    24,434
    
    
    
    4.49
    
    
    
    43,723
    
    
    
    6.26
    
    
    
    650
    
    
    
    6.00
    
    
    
    44,576
    
    
    
    5.67
    
    
    
    1,017
    
    
    
    6.17
    
    
    
    114,400
    
    
    
    5.652036 and thereafter
    
    
    51,126
    
    
    
    5.54
    
    
    
    303
    
    
    
    5.25
    
    
    
    1,729
    
    
    
    4.88
    
    
    
    8
    
    
    
    0.00
    
    
    
    0
    
    
    
    0.00
    
    
    
    53,166
    
    
    
    5.52$
    128,535
    
    
    
    
    
    
    $
    341,140
    
    
    
    
    
    
    $
    15,251
    
    
    
    
    
    
    $
    70,603
    
    
    
    
    
    
    $
    153,039
    
    
    
    
    
    
    $
    708,568
 
 (1)
    
    Includes demand loans, loans having no stated maturity and overdraft 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



9




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##### Table of Contents



Commercial Real Estate and Multi-Family Lending.
    Construction Lending.
   10




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##### Table of Contents



Consumer Lending.
    11




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##### Table of Contents



Commercial Business Lending.
  
 Originations, Purchases and Sales of Loans and Mortgage-Backed and Related Securities
     12




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##### Table of Contents



13




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##### Table of Contents



LOANS HELD FOR INVESTMENT
 Year Ended December 31,(Dollars in thousands)
    
    2010
    
    
    2009
    
    
    2008Originations by type:Adjustable rate:Real estate -- one-to-four family
    
    $
    5,539
    
    
    
    11,300
    
    
    
    24,986- multi-family
    
    
    0
    
    
    
    1,357
    
    
    
    4,418- commercial
    
    
    12,504
    
    
    
    3,966
    
    
    
    38,700- construction or development
    
    
    3,042
    
    
    
    4,596
    
    
    
    49,093Non-real estate -- consumer
    
    
    9,413
    
    
    
    20,295
    
    
    
    19,560- commercial business
    
    
    11,539
    
    
    
    18,881
    
    
    
    44,968Total adjustable rate
    
    
    42,037
    
    
    
    60,395
    
    
    
    181,725Fixed rate:Real estate -- one-to-four family
    
    
    7,606
    
    
    
    11,141
    
    
    
    21,023- multi-family
    
    
    450
    
    
    
    803
    
    
    
    206- commercial
    
    
    15,165
    
    
    
    8,142
    
    
    
    14,936- construction or development
    
    
    6,492
    
    
    
    1,917
    
    
    
    26,650Non-real estate -- consumer
    
    
    14,745
    
    
    
    15,184
    
    
    
    18,251- commercial business
    
    
    8,732
    
    
    
    24,403
    
    
    
    38,926Total fixed rate
    
    
    53,190
    
    
    
    61,590
    
    
    
    119,992Total loans originated
    
    
    95,227
    
    
    
    121,985
    
    
    
    301,717Purchases:Real estate -- commercial
    
    
    5,683
    
    
    
    904
    
    
    
    4,505- construction or development
    
    
    625
    
    
    
    388
    
    
    
    1,596Non-real estate -- commercial business
    
    
    3,930
    
    
    
    5,264
    
    
    
    4,275Total loans purchased
    
    
    10,238
    
    
    
    6,556
    
    
    
    10,376Sales, participations and repayments:Real estate -- one-to-four family
    
    
    390
    
    
    
    0
    
    
    
    4,248- multi-family
    
    
    0
    
    
    
    649
    
    
    
    0- commercial
    
    
    3,921
    
    
    
    3,579
    
    
    
    21,827- construction or development
    
    
    0
    
    
    
    0
    
    
    
    7,712Non-real estate -- consumer
    
    
    1,813
    
    
    
    423
    
    
    
    440- commercial business
    
    
    6,230
    
    
    
    975
    
    
    
    38,559Total sales
    
    
    12,354
    
    
    
    5,626
    
    
    
    72,786Transfers to loans held for sale
    
    
    4,478
    
    
    
    5,228
    
    
    
    7,292Principal repayments
    
    
    181,716
    
    
    
    191,870
    
    
    
    172,350Total reductions
    
    
    198,548
    
    
    
    202,724
    
    
    
    252,428Decrease in other items, net
    
    
    (23,112
    )
    
    
    (26,298
    )
    
    
    (17,192
    )Net increase (decrease)
    
    $
    (116,195
    )
    
    
    (100,481
    )
    
    
    42,473
 14




---



##### Table of Contents



LOANS HELD FOR SALE
 Year Ended December 31,(Dollars in thousands)
    
    2010
    
    
    2009
    
    
    2008Originations by type:Adjustable rate:Real estate -- one-to-four family
    
    $
    0
    
    
    
    399
    
    
    
    1,009Total adjustable rate
    
    
    0
    
    
    
    399
    
    
    
    1,009Fixed rate:Real estate -- one-to-four family
    
    
    81,659
    
    
    
    113,025
    
    
    
    48,308Total fixed rate
    
    
    81,659
    
    
    
    113,025
    
    
    
    48,308Total loans originated
    
    
    81,659
    
    
    
    113,424
    
    
    
    49,317Sales and repayments:Real estate -- one-to-four family
    
    
    86,367
    
    
    
    118,202
    
    
    
    57,359Total sales
    
    
    86,367
    
    
    
    118,202
    
    
    
    57,359Transfers from loans held for investment
    
    
    (4,478
    )
    
    
    (5,228
    )
    
    
    (7,292
    )Changes in deferred fees and market value
    
    
    7
    
    
    
    33
    
    
    
    (37
    )Total reductions
    
    
    81,896
    
    
    
    113,007
    
    
    
    50,030Net increase (decrease)
    
    $
    (237
    )
    
    
    417
    
    
    
    (713
    )
 MORTGAGE-BACKED AND RELATED SECURITIES
 Year Ended December 31,(Dollars in thousands)
    
    2010
    
    
    2009
    
    
    2008Purchases:Mortgage-backed securities:FNMA MBSs
    
    $
    0
    
    
    
    0
    
    
    
    59,556Total purchases
    
    
    0
    
    
    
    0
    
    
    
    59,556Sales:Mortgage-backed securities:Fixed rate MBSs
    
    
    0
    
    
    
    (98
    )
    
    
    0CMOs and REMICs
    
    
    0
    
    
    
    (2,039
    )
    
    
    0Total sales
    
    
    0
    
    
    
    (2,137
    )
    
    
    0Principal repayments
    
    
    (20,053
    )
    
    
    (25,905
    )
    
    
    (697
    )Net increase (decrease)
    
    $
    (20,053
    )
    
    
    (23,768
    )
    
    
    58,859
 
 Classified Assets and Delinquencies
 Classification of Assets .
 15




---



##### Table of Contents



Real EstateOne-to-Four
    
    
    Construction or
    
    
    Commercial and
    
    
    
    
    
    
    Commercial(Dollars in thousands)
    
    Family
    
    
    Development
    
    
    Multi-family
    
    
    Consumer
    
    
    Business
    
    
    Other Assets
    
    
    TotalSubstandard
    
    $
    14,209
    
    
    
    6,003
    
    
    
    38,883
    
    
    
    197
    
    
    
    17,439
    
    
    
    11,301
    
    
    
    88,032Doubtful
    
    
    1,081
    
    
    
    2,397
    
    
    
    9,089
    
    
    
    51
    
    
    
    6,675
    
    
    
    3,636
    
    
    
    22,929Loss
    
    
    333
    
    
    
    32
    
    
    
    10,435
    
    
    
    58
    
    
    
    11,260
    
    
    
    1,458
    
    
    
    23,576Total
    
    $
    15,623
    
    
    
    8,432
    
    
    
    58,407
    
    
    
    306
    
    
    
    35,374
    
    
    
    16,395
    
    
    
    134,537
  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
    
    
    10
    
    
    $
    695
    
    
    
    0.54
    %
    
    
    26
    
    
    $
    3,500
    
    
    
    2.72
    %
    
    
    36
    
    
    $
    4,195
    
    
    
    3.26
    %Commercial real estate
    
    
    2
    
    
    
    4,163
    
    
    
    1.42
    
    
    
    12
    
    
    
    19,298
    
    
    
    6.59
    
    
    
    14
    
    
    
    23,461
    
    
    
    8.01Real estate construction
or development
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    4
    
    
    
    5,133
    
    
    
    33.66
    
    
    
    4
    
    
    
    5,133
    
    
    
    33.66Consumer
    
    
    9
    
    
    
    163
    
    
    
    0.23
    
    
    
    11
    
    
    
    207
    
    
    
    0.29
    
    
    
    20
    
    
    
    370
    
    
    
    0.52Commercial business
    
    
    1
    
    
    
    45
    
    
    
    0.03
    
    
    
    19
    
    
    
    20,908
    
    
    
    13.66
    
    
    
    20
    
    
    
    20,953
    
    
    
    13.69Total
    
    
    22
    
    
    $
    5,066
    
    
    
    0.71
    %
    
    
    72
    
    
    $
    49,046
    
    
    
    6.92
    %
    
    
    94
    
    
    $
    54,112
    
    
    
    7.64
    %
  16




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##### Table of Contents



Investment Activities
  Securities.
   17




---



##### Table of Contents



December 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008Amort
    
    
    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
    
    $
    117,931
    
    
    
    (48
    )
    
    
    117,883
    
    
    
    82.70
    %
    
    $
    105,023
    
    
    
    845
    
    
    
    105,868
    
    
    
    85.00
    %
    
    $
    94,745
    
    
    
    2,723
    
    
    
    97,468
    
    
    
    84.40
    %Corporate preferred stock (1)
    
    
    700
    
    
    
    (525
    )
    
    
    175
    
    
    
    0.10
    
    
    
    700
    
    
    
    (525
    )
    
    
    175
    
    
    
    0.10
    
    
    
    700
    
    
    
    (350
    )
    
    
    350
    
    
    
    0.30Subtotal
    
    
    118,631
    
    
    
    
    
    
    
    118,058
    
    
    
    82.80
    
    
    
    105,723
    
    
    
    
    
    
    
    106,043
    
    
    
    85.10
    
    
    
    95,445
    
    
    
    
    
    
    
    97,818
    
    
    
    84.70Federal Home Loan Bank stock
    
    
    6,743
    
    
    
    
    
    
    
    6,743
    
    
    
    4.70
    
    
    
    7,286
    
    
    
    
    
    
    
    7,286
    
    
    
    5.80
    
    
    
    7,286
    
    
    
    
    
    
    
    7,286
    
    
    
    6.30Total investment securities and Federal Home Loan Bank stock
    
    
    125,374
    
    
    
    
    
    
    
    124,801
    
    
    
    87.50
    
    
    
    113,009
    
    
    
    
    
    
    
    113,329
    
    
    
    90.90
    
    
    
    102,731
    
    
    
    
    
    
    
    105,104
    
    
    
    91.00Average remaining life of investment securities excluding Federal Home Loan Bank stock
    
    0.41 years
    
    
    
    
    
    
    
    
    
    0.53 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.86 yearsOther interest earning assets:Cash equivalents
    
    
    17,796
    
    
    
    
    
    
    
    17,796
    
    
    
    12.50
    
    
    
    11,316
    
    
    
    
    
    
    
    11,316
    
    
    
    9.10
    
    
    
    10,440
    
    
    
    
    
    
    
    10,440
    
    
    
    9.00Total
    
    $
    143,170
    
    
    
    
    
    
    
    142,597
    
    
    
    100.00
    %
    
    $
    124,325
    
    
    
    
    
    
    
    124,645
    
    
    
    100.00
    %
    
    $
    113,171
    
    
    
    
    
    
    
    115,544
    
    
    
    100.00
    %Average remaining life or term to repricing of investment securities and other interest earning assets, excluding Federal Home Loan Bank stock
    
    0.36 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.48 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.77 years
 
 (1)
    
    Average life assigned to corporate preferred stock holdings is five years. 18




---



##### Table of Contents



December 31, 2010After 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
    
    $
    117,931
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    117,931
    
    
    
    (48
    )
    
    
    117,883Corporate preferred stock
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    700
    
    
    
    700
    
    
    
    (525
    )
    
    
    175Total
    
    $
    117,931
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    700
    
    
    
    118,631
    
    
    
    (573
    )
    
    
    118,058Weighted average yield (1)
    
    
    1.42
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    4.91
    %
    
    
    1.44
    %
 
 (1)
    
    Yields are computed on a tax equivalent basis.(2)
    
    Callable U.S. government agency securities maturity date based on first available
call date if security is anticipated to be called. Mortgage-Backed and Related Securities .
  Dec. 31,20105 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
    
    $
    11,844
    
    
    
    6,430
    
    
    
    0
    
    
    
    0
    
    
    
    18,274Federal National Mortgage Association
    
    
    6,175
    
    
    
    7,317
    
    
    
    0
    
    
    
    0
    
    
    
    13,492Collateralized Mortgage Obligations
    
    
    0
    
    
    
    396
    
    
    
    1,269
    
    
    
    75
    
    
    
    1,740Total
    
    $
    18,019
    
    
    
    14,143
    
    
    
    1,269
    
    
    
    75
    
    
    
    33,506Weighted average yield
    
    
    6.36
    %
    
    
    3.08
    %
    
    
    5.50
    %
    
    
    4.00
    %
    
    
    4.34
    %
    19




---



##### Table of Contents



Sources of Funds
 General.
 Deposits.
   Year Ended December 31,(Dollars in thousands)
    
    2010
    
    
    2009
    
    
    2008Opening balance
    
    $
    796,011
    
    
    
    880,505
    
    
    
    888,118Deposits
    
    
    5,537,842
    
    
    
    5,879,026
    
    
    
    6,623,346Withdrawals
    
    
    (5,662,903
    )
    
    
    (5,984,653
    )
    
    
    (6,660,954
    )Interest credited
    
    
    12,280
    
    
    
    21,133
    
    
    
    29,995Ending balance
    
    
    683,230
    
    
    
    796,011
    
    
    
    880,505Net decrease
    
    $
    (112,781
    )
    
    
    (84,494
    )
    
    
    (7,613
    )Percent decrease
    
    
    (14.17)
    %
    
    
    (9.60)
    %
    
    
    (0.86
    )%
 20




---



##### Table of Contents



(Dollars in thousands)
    
    2010
    
    
    2009
    
    
    2008Percent
    
    
    
    
    
    Percent
    
    
    
    
    
    PercentAmount
    
    of Total
    
    Amount
    
    of Total
    
    Amount
    
    of TotalTransaction and Savings Deposits(1):Non-interest checking
    
    $
    96,581
    
    
    
    14.1
    %
    
    $
    80,330
    
    
    
    10.1
    %
    
    $
    66,905
    
    
    
    7.6
    %NOW Accounts  0.11%(2)
    
    
    94,205
    
    
    
    13.8
    
    
    
    103,998
    
    
    
    13.0
    
    
    
    126,547
    
    
    
    14.4Passbook Accounts 0.15%(3)
    
    
    33,973
    
    
    
    5.0
    
    
    
    31,068
    
    
    
    3.9
    
    
    
    28,023
    
    
    
    3.2Money Market Accounts  0.75%(4)
    
    
    114,357
    
    
    
    16.7
    
    
    
    125,008
    
    
    
    15.7
    
    
    
    97,416
    
    
    
    11.0Total Non-Certificates
    
    $
    339,116
    
    
    
    49.6
    %
    
    $
    340,404
    
    
    
    42.7
    %
    
    $
    318,891
    
    
    
    36.2
    %Certificates:0.00  0.99%
    
    $
    41,311
    
    
    
    6.1
    %
    
    $
    16,615
    
    
    
    2.1
    %
    
    $
    1,068
    
    
    
    0.1
    %1.00  1.99%
    
    
    142,742
    
    
    
    20.9
    
    
    
    113,916
    
    
    
    14.3
    
    
    
    8,193
    
    
    
    1.02.00  2.99%
    
    
    105,126
    
    
    
    15.4
    
    
    
    135,311
    
    
    
    17.0
    
    
    
    81,483
    
    
    
    9.33.00  3.99%
    
    
    50,529
    
    
    
    7.4
    
    
    
    138,152
    
    
    
    17.4
    
    
    
    344,735
    
    
    
    39.04.00  4.99%
    
    
    4,113
    
    
    
    0.6
    
    
    
    47,692
    
    
    
    6.0
    
    
    
    114,155
    
    
    
    13.05.00  5.99%
    
    
    293
    
    
    
    0.0
    
    
    
    3,921
    
    
    
    0.5
    
    
    
    11,980
    
    
    
    1.4Total Certificates
    
    
    344,114
    
    
    
    50.4
    
    
    
    455,607
    
    
    
    57.3
    
    
    
    561,614
    
    
    
    63.8Total Deposits
    
    $
    683,230
    
    
    
    100.0
    %
    
    $
    796,011
    
    
    
    100.0
    %
    
    $
    880,505
    
    
    
    100.0
    %
 
 (1)
    
    Reflects weighted average rates paid on transaction and savings deposits at
December 31, 2010.(2)
    
    The weighted average rate on NOW Accounts for 2009 was 0.08% and 2008 was
0.19%.(3)
    
    The weighted average rate on Passbook Accounts for 2009 was 0.13% and 2008 was
0.11%.(4)
    
    The weighted average rate on Money Market Accounts for 2009 was 1.25% and
2008 was 1.59%. 21




---



##### 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, 2011
    
    $
    11,163
    
    
    
    26,563
    
    
    
    6,047
    
    
    
    14,833
    
    
    
    91
    
    
    
    122
    
    
    
    58,819
    
    
    
    17.10
    %June 30, 2011
    
    
    8,185
    
    
    
    7,824
    
    
    
    20,229
    
    
    
    7,976
    
    
    
    534
    
    
    
    0
    
    
    
    44,748
    
    
    
    13.00September 30, 2011
    
    
    7,457
    
    
    
    23,420
    
    
    
    4,608
    
    
    
    1,714
    
    
    
    1,380
    
    
    
    171
    
    
    
    38,750
    
    
    
    11.26December 31, 2011
    
    
    8,990
    
    
    
    15,187
    
    
    
    6,759
    
    
    
    3,299
    
    
    
    485
    
    
    
    0
    
    
    
    34,720
    
    
    
    10.09March 31, 2012
    
    
    114
    
    
    
    20,029
    
    
    
    14,804
    
    
    
    4,747
    
    
    
    984
    
    
    
    0
    
    
    
    40,678
    
    
    
    11.82June 30, 2012
    
    
    2,789
    
    
    
    9,238
    
    
    
    7,482
    
    
    
    15,002
    
    
    
    49
    
    
    
    0
    
    
    
    34,560
    
    
    
    10.04September 30, 2012
    
    
    671
    
    
    
    11,843
    
    
    
    25,083
    
    
    
    355
    
    
    
    201
    
    
    
    0
    
    
    
    38,153
    
    
    
    11.09December 31, 2012
    
    
    1,807
    
    
    
    11,712
    
    
    
    4,089
    
    
    
    142
    
    
    
    331
    
    
    
    0
    
    
    
    18,081
    
    
    
    5.25March 31, 2013
    
    
    41
    
    
    
    3,106
    
    
    
    3,637
    
    
    
    603
    
    
    
    48
    
    
    
    0
    
    
    
    7,435
    
    
    
    2.16June 30, 2013
    
    
    7
    
    
    
    5,378
    
    
    
    6,527
    
    
    
    418
    
    
    
    0
    
    
    
    0
    
    
    
    12,330
    
    
    
    3.58September 30, 2013
    
    
    10
    
    
    
    5,723
    
    
    
    634
    
    
    
    311
    
    
    
    0
    
    
    
    0
    
    
    
    6,678
    
    
    
    1.94December 31, 2013
    
    
    12
    
    
    
    1,329
    
    
    
    138
    
    
    
    492
    
    
    
    10
    
    
    
    0
    
    
    
    1,981
    
    
    
    0.58Thereafter
    
    
    65
    
    
    
    1,390
    
    
    
    5,089
    
    
    
    637
    
    
    
    0
    
    
    
    0
    
    
    
    7,181
    
    
    
    2.09Total
    
    $
    41,311
    
    
    
    142,742
    
    
    
    105,126
    
    
    
    50,529
    
    
    
    4,113
    
    
    
    293
    
    
    
    344,114
    
    
    
    100.00
    %Percent of total
    
    
    12.00
    %
    
    
    41.48
    %
    
    
    30.55
    %
    
    
    14.68
    %
    
    
    1.20
    %
    
    
    0.09
    %
    
    
    100.00
    %
 22




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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
    
    $
    48,860
    
    
    
    37,819
    
    
    
    57,675
    
    
    
    126,912
    
    
    
    271,266Certificates of deposit of $100,000 or more
    
    
    9,908
    
    
    
    6,772
    
    
    
    15,570
    
    
    
    39,533
    
    
    
    71,783Public funds less than $100,000(1)
    
    
    51
    
    
    
    14
    
    
    
    56
    
    
    
    81
    
    
    
    202Public funds of $100,000 or more (1)
    
    
    0
    
    
    
    143
    
    
    
    169
    
    
    
    551
    
    
    
    863Total certificates of deposit
    
    $
    58,819
    
    
    
    44,748
    
    
    
    73,470
    
    
    
    167,077
    
    
    
    344,114Passbook of $100,000 or more
    
    $
    183,654
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    183,654Accounts of $100,000 or more
    
    $
    193,562
    
    
    
    6,915
    
    
    
    15,739
    
    
    
    40,084
    
    
    
    256,300
 
 (1)
    
    Deposits from governmental and other public entities.  Borrowings.
 
 Service Corporations of the Bank
   23




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##### Table of Contents



Competition
   
 Other Corporations Owned by the Company
  
 Employees
  
 Regulation and Supervision
  The Dodd-Frank Wall Street Reform and Consumer Protection Act
  24




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##### Table of Contents



Holding Company Regulation
    Acquisitions by Savings and Loan Holding Companies.
 Examination and Reporting.
 25




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##### Table of Contents



Affiliate Transactions.
 Capital Adequacy.
 Bank Regulation
    26




---



##### Table of Contents



Qualified Thrift Lender Test.
 OTS Assessments.
 Transactions with Affiliates and Insiders.
 Dividend Restrictions.
  27




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##### Table of Contents



Deposit Insurance
     Other Deposit Insurance-Related Issues
    28




---



##### 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
    
    
    7.60
    %
    
    
    7.60
    %
    
    
    9.72
    %
    
    
    10.97
    %
 
 (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
  29




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##### Table of Contents



Federal Home Loan Bank (FHLB) System
   Federal Reserve Regulation
   Community Reinvestment Act
  30




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##### Table of Contents



Bank Secrecy Act
  Troubled Asset Relief Program  Capital Purchase Program
  31




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##### Table of Contents



EXECUTIVE OFFICERS
  Bradley C. Krehbiel , age 52.
 Jon J. Eberle , age 45.
 Lawrence D. McGraw age 47
 Dwain C. Jorgensen , age 62.
 Susan K. Kolling , age 59.
 Available Information
  
 ITEM 1A. RISK FACTORS
  32




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##### Table of Contents



Our allowance for loan losses may prove to be insufficient to absorb losses or adequately reflect
at any given time the inherent risk of loss in our loan portfolio.
    The Company has concentrations in commercial business and commercial real estate loans, increasing
the risk in its loan portfolio.
  33




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##### Table of Contents



.
 Declines in home values have decreased our loan originations and increased delinquencies and
defaults, including in our commercial business and commercial real estate loans.
  Regional economic changes in the Companys markets have adversely impacted, and may continue to
adversely impact, results from operations.
  Because of the limited size of the Company, losses on a few large loans or lending relationships
can cause significant volatility in earnings.
  34




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##### Table of Contents



The Company may not be able to meet its cash flow needs on a timely basis at a reasonable cost, and
its cost of funds for banking operations may significantly increase as a result of general economic
conditions, interest rates and competitive pressures.
      35




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##### Table of Contents



We may be required to raise additional capital in the future, but that capital may not be available
when it is needed.
    The Company and the Bank are subject to the restrictions and conditions of the Supervisory
Agreements with the Office of Thrift Supervision (OTS). Failure to comply with the Supervisory
Agreements could result in enforcement actions against us, including the imposition of monetary
penalties
   36




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##### Table of Contents



Federal banking supervision and new or revised tax, accounting and other laws, regulations, rules
and standards could significantly impact strategic initiatives, results of operations and financial
condition.
     37




---



##### Table of Contents



Our participation in the Capital Purchase Program (CPP) under the Troubled Asset Relief Program
(TARP) imposes restrictions on us affecting our capital stock and our compensation practices that
may be adverse, and greater restriction is possible in the future.
    38




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##### Table of Contents



Changes in interest rates could negatively impact the Companys results of operations.
    39




---



##### Table of Contents



Changes in interest rates or prepayment speeds could negatively impact the value of capitalized
mortgage servicing rights.
  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.
  We are subject to the Community Reinvestment Act and fair lending laws, and failure to comply with
these laws could lead to material penalties.
 40




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##### Table of Contents



The USA Patriot Act and Bank Secrecy Act may subject us to large fines for non-compliance.
  We operate in a highly regulated environment and may be adversely affected by changes in federal
and state laws and regulations, including changes that may restrict our ability to foreclose on
single-family home loans and offer overdraft protection.
     41




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##### Table of Contents



ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 th st th
 
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. RESERVED
 
 PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  42




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##### Table of Contents



STOCKHOLDER RETURN PERFORMANCE PRESENTATION
  
 Period EndingIndex
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08
    
    
    12/31/09
    
    
    12/31/10HMN Financial, Inc.
    
    
    100.00
    
    
    
    120.44
    
    
    
    88.55
    
    
    
    15.70
    
    
    
    15.78
    
    
    
    10.55NASDAQ Composite
    
    
    100.00
    
    
    
    110.39
    
    
    
    122.15
    
    
    
    73.32
    
    
    
    106.57
    
    
    
    125.91SNL Bank NASDAQ Index
    
    
    100.00
    
    
    
    112.27
    
    
    
    88.14
    
    
    
    64.01
    
    
    
    51.93
    
    
    
    61.27
 
 ITEM 6. SELECTED FINANCIAL DATA
  
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  43




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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.
    44




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework
    Internal
Control  Integrated Framework
  
 45




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##### Table of Contents



Changes in internal controls.
 
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
  46




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  47




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 1. Financial Statements
 The following financial statements appearing in the Companys Annual Report to Security
Holders for the year ended December 31, 2010, are incorporated herein by reference.
 Pages inAnnual Report Section
    
    2010 Annual ReportConsolidated Balance Sheets 
December 31, 2010 and 2009
    
    
    26Consolidated Statements of Loss 
Each of the Years in the Three-Year Period Ended December 31, 2010
    
    
    27Consolidated Statements of Stockholders Equity and Comprehensive Loss 
Each of the Years in the Three-Year Period Ended December 31, 2010
    
    
    28Consolidated Statements of Cash Flows 
Each of the Years in the Three-Year Period Ended December 31, 2010
    
    
    29Notes to Consolidated Financial Statements
    
    
    30Report of Independent Registered Public Accounting Firm
    
    
    56
 2. Financial Statement Schedules
  3. Exhibits
  48




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##### Table of Contents



SIGNATURES
  HMN FINANCIAL, INC.Date: March 4, 2011
    By:
    /s/Bradley C. KrehbielBradley C. Krehbiel,President  Name
    
    Title/s/ Bradley C. Krehbiel

Bradley C. Krehbiel
    
    President 
(Principal
Executive Officer)Senior Vice President,/s/ Jon J. Eberle

Jon J. Eberle
    
    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/ 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/s/Hugh C. Smith

Hugh C. Smith
    
    Director
 49




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit
    
    Filing Status3.1
    
    Certificate of Incorporation, as amended April 28, 1998
    
    Incorporated by Reference (1)3.2
    
    Amended and Restated By-laws
    
    Incorporated by Reference (2)4.1
    
    Form of Common Stock Certificate
    
    Incorporated by Reference (3)4.2
    
    Certificate of Designations of
Fixed Rate Cumulative Perpetual Preferred Stock, Series A
    
    Incorporated by Reference (4)4.3
    
    Warrant to Purchase Common Stock, dated December 23, 2008
    
    Incorporated by Reference (5)10.2
    
    Form of Change in Control Agreement with executive officers
    
    Incorporated by Reference (6)10.3
    
    Directors Deferred Compensation Plan
    
    Incorporated by Reference (7)10.4
    
    Amended and Restated HMN Financial,
Inc. Stock Option and Incentive Plan dated July 29, 1998
    
    Incorporated by Reference (8)10.5
    
    HMN Financial, Inc. 2001 Omnibus Stock Plan
    
    Incorporated by Reference (9)10.6
    
    Form of Incentive Stock Option
Agreement for HMN Financial, Inc. 2001 Omnibus Stock
    
    Incorporated by Reference (10)10.7
    
    Form of Non-Statutory Stock Option
Agreement for HMN Financial, Inc. 2001 Omnibus Stock Plan
    
    Incorporated by Reference (11)10.8
    
    Form of Restricted Stock Agreement
for HMN Financial, Inc. 2001 Omnibus Stock Plan
    
    Incorporated by Reference (12)10.9
    
    HMN Financial, Inc. Employee Stock
Ownership Plan (as amended through February 26, 2008)
    
    Incorporated by Reference (13)10.10
    
    Letter Agreement, dated December
23, 2008, including Securities Purchase AgreementStandard Terms
incorporated therein by reference, between HMN Financial, Inc. and
the United States Department of the Treasury
    
    Incorporated by Reference (14)10.11
    
    Form of Agreement with Senior
Executive Officer to Amend Certain Benefit Plans of the Company
    
    Incorporated by Reference (15)10.12
    
    Form of Waiver by Senior Executive Officers
    
    Incorporated by Reference (16)10.13
    
    HMN Financial, Inc. 2009 Equity Incentive Plan
    
    Incorporated by Reference (17)10.14
    
    Form of Restricted Stock Agreement
under HMN Financial, Inc. 2009 Equity Incentive Plan
    
    Incorporated by Reference (18)10.15
    
    Form of Incentive Stock Option
Agreement under HMN Financial, Inc. 2009 Equity Incentive Plan
    
    Incorporated by Reference (19)10.16
    
    Form of Non-Statutory Stock Option
Agreement under HMN Financial, Inc. 2009 Equity Incentive Plan
    
    Incorporated by Reference (20)10.17
    
    Description of Bradley Krehbiel 2010 Incentive Plan
    
    Incorporated by Reference (21)10.18
    
    Description of Retention Awards for Certain Executive Officers
    
    Filed Electronically10.19
    
    Supervisory Agreement between HMN
Financial, Inc. and the Office of Thrift Supervision
    
    Filed Electronically
 50




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##### Table of Contents



ExhibitNumber
    
    Exhibit
    
    Filing Status10.20
    
    Supervisory Agreement between Home
Federal Savings Bank and the Office of Thrift Supervision
    
    Filed Electronically13
    
    Portions of Annual Report to
Security Holders incorporated by reference
    
    Filed Electronically21
    
    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 Electronically99.1
    
    Section 111(b)(4) Certifications of Chief Executive Officer
    
    Filed Electronically99.2
    
    Section 111(b)(4) Certifications of Chief Financial Officer
    
    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 3.2 to the Companys Current Report on Form 10-Q, as
amended, for the period ended September 30, 2008 (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 3.1 to the Companys Current Report on Form 8-K dated
December 19, 2008, filed on December 23, 2008 (File No. 0-24100).5
    
    Incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated
December 19, 2008, filed on December 23, 2008 (File No. 0-24100).6
    
    Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K dated
May 27, 2008, filed on June 2, 2008 (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 10.2 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 10.11 to the Companys Annual Report on Form 10-K for
the period ended December 31, 2007 (File No. 0-24100).14
    
    Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated
December 19, 2008, filed on December 23, 2008 (File No. 0-24100).15
    
    Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K dated
December 19, 2008, filed on December 23, 2008 (File No. 0-24100).16
    
    Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K dated
December 19, 2008, filed on December 23, 2008 (File No. 0-24100).17
    
    Incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K dated
May 6, 2009, filed on May 12, 2009 (File No. 0-24100). 51




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##### Table of Contents



18
    
    Incorporated by reference to Exhibit 99.2 to the Companys Current Report on Form 8-K dated May 6, 2009, filed on May 12, 2009 (File No. 0-24100).19
    
    Incorporated by reference to Exhibit 99.3 to the Companys Current Report on Form 8-K dated May 6, 2009, filed on May 12, 2009 (File No. 0-24100).20
    
    Incorporated by reference to Exhibit 10 to the Companys Current Report on Form 8-K dated January 25, 2010, filed on January 28, 2010 (File No. 0-24100).21
    
    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). 52