##### 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, 2005
 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
    
    NoneRegistrants telephone number, including area code
    
    Former name, former address and former fiscal year, if changed
since last report
   o þ
 o þ
 þ o
 Form 10-K þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 Form 10-K.




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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
    
    
    16Sources 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
    
    
    32Item 6. Selected Financial Data
    
    
    32Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    33Item 7A. Quantitative and Qualitative Disclosure About Market Risk
    
    
    33Item 8. Financial Statements and Supplementary Data
    
    
    33Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
    
    
    33Item 9A. Controls and Procedures
    
    
    33Item 9B. Other Information
    
    
    35PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    35Item 11. Executive Compensation
    
    
    36Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    36Item 13. Certain Relationships and Related Transactions
    
    
    36Item 14. Principal Accountant Fees and Services
    
    
    36PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    37Signatures
    
    
    40Index to Exhibits
    
    
    41Portions of Annual Report to Security HoldersSubsidiaries of RegistrantConsent of KPMG LLPCertification of Chief Executive OfficerCertification of Chief Financial OfficerSection 1350 Certifications
  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
  www.hmnf.com
 
 Market Area
     4




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##### Table of Contents



Lending Activities
 General.
 5




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##### Table of Contents



2005
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    2002
    
    
    
    
    
    
    2001(Dollars in thousands)
    
    Amount
    
    
    Percent
    
    
    
    
    
    
    Amount
    
    
    Percent
    
    
    
    
    
    
    Amount
    
    
    Percent
    
    
    
    
    
    
    Amount
    
    
    Percent
    
    
    
    
    
    
    Amount
    
    
    PercentFixed rate LoansReal Estate:One-to-four familyGEM
    
    $
    14,812
    
    
    
    6.94
    %
    
    
    
    
    
    $
    16,133
    
    
    
    2.01
    %
    
    
    
    
    
    $
    13,387
    
    
    
    1.89
    %
    
    
    
    
    
    $
    17,394
    
    
    
    3.18
    %
    
    
    
    
    
    $
    30,727
    
    
    
    6.38
    %Other
    
    
    55,700
    
    
    
    1.84
    
    
    
    
    
    
    
    59,937
    
    
    
    7.48
    
    
    
    
    
    
    
    65,004
    
    
    
    9.17
    
    
    
    
    
    
    
    74,510
    
    
    
    13.63
    
    
    
    
    
    
    
    110,619
    
    
    
    22.97Total one-to-four family
    
    
    70,512
    
    
    
    8.78
    
    
    
    
    
    
    
    76,070
    
    
    
    9.49
    
    
    
    
    
    
    
    78,391
    
    
    
    11.06
    
    
    
    
    
    
    
    91,904
    
    
    
    16.81
    
    
    
    
    
    
    
    141,346
    
    
    
    29.35Multi-family
    
    
    5,956
    
    
    
    0.74
    
    
    
    
    
    
    
    6,387
    
    
    
    0.79
    
    
    
    
    
    
    
    6,471
    
    
    
    0.91
    
    
    
    
    
    
    
    6,588
    
    
    
    1.20
    
    
    
    
    
    
    
    7,644
    
    
    
    1.59GEM  multi-family
    
    
    51
    
    
    
    0.01
    
    
    
    
    
    
    
    57
    
    
    
    0.01
    
    
    
    
    
    
    
    61
    
    
    
    0.01
    
    
    
    
    
    
    
    64
    
    
    
    0.01
    
    
    
    
    
    
    
    68
    
    
    
    0.01Commercial
    
    
    89,905
    
    
    
    11.19
    
    
    
    
    
    
    
    51,390
    
    
    
    6.41
    
    
    
    
    
    
    
    52,563
    
    
    
    7.42
    
    
    
    
    
    
    
    37,878
    
    
    
    6.93
    
    
    
    
    
    
    
    29,756
    
    
    
    6.18Construction or development
    
    
    12,919
    
    
    
    1.61
    
    
    
    
    
    
    
    27,557
    
    
    
    3.44
    
    
    
    
    
    
    
    17,215
    
    
    
    2.43
    
    
    
    
    
    
    
    17,234
    
    
    
    3.15
    
    
    
    
    
    
    
    15,542
    
    
    
    3.22Total fixed rate real estate loans
    
    
    179,343
    
    
    
    22.33
    
    
    
    
    
    
    
    161,461
    
    
    
    20.14
    
    
    
    
    
    
    
    154,701
    
    
    
    21.83
    
    
    
    
    
    
    
    153,668
    
    
    
    28.10
    
    
    
    
    
    
    
    194,356
    
    
    
    40.35Consumer loans:Savings
    
    
    605
    
    
    
    0.07
    
    
    
    
    
    
    
    454
    
    
    
    0.06
    
    
    
    
    
    
    
    494
    
    
    
    0.07
    
    
    
    
    
    
    
    534
    
    
    
    0.10
    
    
    
    
    
    
    
    594
    
    
    
    0.12Automobile
    
    
    5,462
    
    
    
    0.68
    
    
    
    
    
    
    
    9,496
    
    
    
    1.18
    
    
    
    
    
    
    
    14,754
    
    
    
    2.08
    
    
    
    
    
    
    
    11,062
    
    
    
    2.02
    
    
    
    
    
    
    
    6,624
    
    
    
    1.38Home equity
    
    
    19,289
    
    
    
    2.40
    
    
    
    
    
    
    
    20,019
    
    
    
    2.50
    
    
    
    
    
    
    
    18,742
    
    
    
    2.65
    
    
    
    
    
    
    
    21,049
    
    
    
    3.85
    
    
    
    
    
    
    
    26,300
    
    
    
    5.46Mobile home
    
    
    2,299
    
    
    
    0.29
    
    
    
    
    
    
    
    2,896
    
    
    
    0.36
    
    
    
    
    
    
    
    3,665
    
    
    
    0.52
    
    
    
    
    
    
    
    4,534
    
    
    
    0.83
    
    
    
    
    
    
    
    5,456
    
    
    
    1.13Land/Lot Loans
    
    
    1,234
    
    
    
    0.15
    
    
    
    
    
    
    
    818
    
    
    
    0.10
    
    
    
    
    
    
    
    754
    
    
    
    0.11
    
    
    
    
    
    
    
    781
    
    
    
    0.15
    
    
    
    
    
    
    
    767
    
    
    
    0.16Other
    
    
    2,569
    
    
    
    0.32
    
    
    
    
    
    
    
    3,134
    
    
    
    0.39
    
    
    
    
    
    
    
    3,105
    
    
    
    0.43
    
    
    
    
    
    
    
    3,299
    
    
    
    0.60
    
    
    
    
    
    
    
    3,326
    
    
    
    0.69Total consumer loans
    
    
    31,458
    
    
    
    3.91
    
    
    
    
    
    
    
    36,817
    
    
    
    4.59
    
    
    
    
    
    
    
    41,514
    
    
    
    5.86
    
    
    
    
    
    
    
    41,259
    
    
    
    7.55
    
    
    
    
    
    
    
    43,067
    
    
    
    8.94Commercial business loans
    
    
    49,297
    
    
    
    6.14
    
    
    
    
    
    
    
    69,671
    
    
    
    8.69
    
    
    
    
    
    
    
    51,609
    
    
    
    7.28
    
    
    
    
    
    
    
    42,272
    
    
    
    7.73
    
    
    
    
    
    
    
    37,123
    
    
    
    7.71Total other loans
    
    
    80,755
    
    
    
    10.05
    
    
    
    
    
    
    
    106,488
    
    
    
    13.28
    
    
    
    
    
    
    
    93,123
    
    
    
    13.14
    
    
    
    
    
    
    
    83,531
    
    
    
    15.28
    
    
    
    
    
    
    
    80,190
    
    
    
    16.65Total fixed rate loans
    
    
    260,098
    
    
    
    32.38
    
    
    
    
    
    
    
    267,949
    
    
    
    33.42
    
    
    
    
    
    
    
    247,824
    
    
    
    34.97
    
    
    
    
    
    
    
    237,199
    
    
    
    43.38
    
    
    
    
    
    
    
    274,546
    
    
    
    57.00Adjustable rate LoansReal estate:One-to-four family
    
    
    56,563
    
    
    
    7.04
    
    
    
    
    
    
    
    62,938
    
    
    
    7.85
    
    
    
    
    
    
    
    65,924
    
    
    
    9.30
    
    
    
    
    
    
    
    59,662
    
    
    
    10.91
    
    
    
    
    
    
    
    74,102
    
    
    
    15.38Multi-family
    
    
    34,745
    
    
    
    4.33
    
    
    
    
    
    
    
    35,478
    
    
    
    4.43
    
    
    
    
    
    
    
    25,008
    
    
    
    3.53
    
    
    
    
    
    
    
    9,113
    
    
    
    1.67
    
    
    
    
    
    
    
    6,657
    
    
    
    1.38Commercial
    
    
    170,363
    
    
    
    21.21
    
    
    
    
    
    
    
    173,554
    
    
    
    21.65
    
    
    
    
    
    
    
    146,603
    
    
    
    20.69
    
    
    
    
    
    
    
    92,539
    
    
    
    16.92
    
    
    
    
    
    
    
    41,012
    
    
    
    8.52Construction or development
    
    
    67,424
    
    
    
    8.39
    
    
    
    
    
    
    
    70,841
    
    
    
    8.84
    
    
    
    
    
    
    
    78,131
    
    
    
    11.02
    
    
    
    
    
    
    
    44,102
    
    
    
    8.07
    
    
    
    
    
    
    
    31,435
    
    
    
    6.53Total adjustable rate real estate loans
    
    
    329,095
    
    
    
    40.97
    
    
    
    
    
    
    
    342,811
    
    
    
    42.77
    
    
    
    
    
    
    
    315,666
    
    
    
    44.54
    
    
    
    
    
    
    
    205,416
    
    
    
    37.57
    
    
    
    
    
    
    
    153,206
    
    
    
    31.81Consumer (home equity and other)
    
    
    60,853
    
    
    
    7.57
    
    
    
    
    
    
    
    67,154
    
    
    
    8.38
    
    
    
    
    
    
    
    54,425
    
    
    
    7.68
    
    
    
    
    
    
    
    52,131
    
    
    
    9.53
    
    
    
    
    
    
    
    35,770
    
    
    
    7.43Land/Lot loans
    
    
    8,197
    
    
    
    1.02
    
    
    
    
    
    
    
    10,754
    
    
    
    1.34
    
    
    
    
    
    
    
    9,732
    
    
    
    1.38
    
    
    
    
    
    
    
    2,809
    
    
    
    0.52
    
    
    
    
    
    
    
    83
    
    
    
    0.02Other
    
    
    390
    
    
    
    0.05
    
    
    
    
    
    
    
    248
    
    
    
    0.03
    
    
    
    
    
    
    
    234
    
    
    
    0.03
    
    
    
    
    
    
    
    222
    
    
    
    0.04
    
    
    
    
    
    
    
    211
    
    
    
    0.04Total consumer loans
    
    
    69,440
    
    
    
    8.64
    
    
    
    
    
    
    
    78,156
    
    
    
    9.75
    
    
    
    
    
    
    
    64,391
    
    
    
    9.09
    
    
    
    
    
    
    
    55,162
    
    
    
    10.09
    
    
    
    
    
    
    
    36,064
    
    
    
    7.49Commercial business loans
    
    
    144,665
    
    
    
    18.01
    
    
    
    
    
    
    
    112,698
    
    
    
    14.06
    
    
    
    
    
    
    
    80,808
    
    
    
    11.40
    
    
    
    
    
    
    
    48,989
    
    
    
    8.96
    
    
    
    
    
    
    
    17,817
    
    
    
    3.70Total other loans
    
    
    214,105
    
    
    
    26.65
    
    
    
    
    
    
    
    190,854
    
    
    
    23.81
    
    
    
    
    
    
    
    145,199
    
    
    
    20.49
    
    
    
    
    
    
    
    104,151
    
    
    
    19.05
    
    
    
    
    
    
    
    53,881
    
    
    
    11.19Total adjustable rate loans
    
    
    543,200
    
    
    
    67.62
    
    
    
    
    
    
    
    533,665
    
    
    
    66.58
    
    
    
    
    
    
    
    460,865
    
    
    
    65.03
    
    
    
    
    
    
    
    309,567
    
    
    
    56.62
    
    
    
    
    
    
    
    207,087
    
    
    
    43.00Total loans
    
    
    803,298
    
    
    
    100.00
    %
    
    
    
    
    
    
    801,614
    
    
    
    100.00
    %
    
    
    
    
    
    
    708,689
    
    
    
    100.00
    %
    
    
    
    
    
    
    546,766
    
    
    
    100.00
    %
    
    
    
    
    
    
    481,633
    
    
    
    100.00
    %LessLoans in process
    
    
    7,008
    
    
    
    
    
    
    
    
    
    
    
    7,561
    
    
    
    
    
    
    
    
    
    
    
    11,298
    
    
    
    
    
    
    
    
    
    
    
    6,826
    
    
    
    
    
    
    
    
    
    
    
    4,692Unamortized discounts
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    278Net deferred loan fees
    
    
    1,644
    
    
    
    
    
    
    
    
    
    
    
    1,781
    
    
    
    
    
    
    
    
    
    
    
    1,334
    
    
    
    
    
    
    
    
    
    
    
    1,068
    
    
    
    
    
    
    
    
    
    
    
    1,212Allowance for losses on loans
    
    
    8,778
    
    
    
    
    
    
    
    
    
    
    
    8,996
    
    
    
    
    
    
    
    
    
    
    
    6,940
    
    
    
    
    
    
    
    
    
    
    
    4,824
    
    
    
    
    
    
    
    
    
    
    
    3,783Total loans receivable, net
    
    $
    785,678
    
    
    
    
    
    
    
    
    
    
    $
    783,213
    
    
    
    
    
    
    
    
    
    
    $
    688,951
    
    
    
    
    
    
    
    
    
    
    $
    533,906
    
    
    
    
    
    
    
    
    
    
    $
    471,668
 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
    
    
    Rate2006 (1)
    
    $
    7,671
    
    
    
    6.15
    %
    
    $
    85,431
    
    
    
    7.45
    %
    
    
    
    
    
    $
    27,297
    
    
    
    7.51
    %
    
    $
    16,852
    
    
    
    8.58
    %
    
    $
    108,108
    
    
    
    7.65
    %
    
    $
    245,359
    
    
    
    7.58
    %2007
    
    
    6,493
    
    
    
    5.90
    
    
    
    48,745
    
    
    
    7.60
    
    
    
    
    
    
    
    14,348
    
    
    
    8.32
    
    
    
    10,183
    
    
    
    8.02
    
    
    
    25,916
    
    
    
    7.29
    
    
    
    105,685
    
    
    
    7.562008
    
    
    6,966
    
    
    
    5.76
    
    
    
    30,984
    
    
    
    7.26
    
    
    
    
    
    
    
    1,094
    
    
    
    7.49
    
    
    
    10,373
    
    
    
    8.07
    
    
    
    18,697
    
    
    
    7.28
    
    
    
    68,114
    
    
    
    7.242009 through 2010
    
    
    13,164
    
    
    
    5.64
    
    
    
    27,391
    
    
    
    6.81
    
    
    
    
    
    
    
    2,285
    
    
    
    7.66
    
    
    
    18,770
    
    
    
    8.45
    
    
    
    20,316
    
    
    
    7.22
    
    
    
    81,926
    
    
    
    7.122011 through 2015
    
    
    29,696
    
    
    
    5.62
    
    
    
    64,865
    
    
    
    6.43
    
    
    
    
    
    
    
    13,830
    
    
    
    7.50
    
    
    
    30,493
    
    
    
    8.60
    
    
    
    16,427
    
    
    
    7.32
    
    
    
    155,311
    
    
    
    6.892016 through 2030
    
    
    52,445
    
    
    
    5.62
    
    
    
    43,604
    
    
    
    6.11
    
    
    
    
    
    
    
    20,017
    
    
    
    7.25
    
    
    
    14,210
    
    
    
    7.90
    
    
    
    4,498
    
    
    
    7.57
    
    
    
    134,774
    
    
    
    6.322031 and following
    
    
    10,640
    
    
    
    5.35
    
    
    
    0
    
    
    
    0.00
    
    
    
    
    
    
    
    1,472
    
    
    
    6.24
    
    
    
    17
    
    
    
    6.28
    
    
    
    0
    
    
    
    0.00
    
    
    
    12,129
    
    
    
    5.46$
    127,075
    
    
    
    
    
    
    $
    301,020
    
    
    
    
    
    
    
    
    
    
    $
    80,343
    
    
    
    
    
    
    $
    100,898
    
    
    
    
    
    
    $
    193,962
    
    
    
    
    
    
    $
    803,298
 
 (1)
    
    Includes demand loans, loans having no stated maturity, and overdraft loans.  7




---



##### Table of Contents



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




---



##### Table of Contents



Commercial Real Estate and Multi-Family Lending.
  9




---



##### Table of Contents



Construction Lending.
    10




---



##### Table of Contents



Consumer Lending.
    Commercial Business Lending.
 11




---



##### Table of Contents



Originations, Purchases and Sales of Loans and Mortgage-Backed and Related Securities
    Form 10-K).
  12




---



##### Table of Contents



LOANS HELD FOR INVESTMENT
 Year Ended December 31,(Dollars in thousands)
    
    2005
    
    
    2004
    
    
    2003Originations by type:Adjustable rate:Real estate -- one-to-four family
    
    $
    13,064
    
    
    
    16,840
    
    
    
    25,433- multi-family
    
    
    258
    
    
    
    2,391
    
    
    
    5,316- commercial
    
    
    70,742
    
    
    
    44,046
    
    
    
    47,647- construction or development
    
    
    45,551
    
    
    
    84,328
    
    
    
    50,552Non-real estate -- consumer
    
    
    12,964
    
    
    
    13,822
    
    
    
    30,561- commercial business
    
    
    91,697
    
    
    
    50,467
    
    
    
    84,406Total adjustable rate
    
    
    234,276
    
    
    
    211,894
    
    
    
    243,915Fixed rate:Real estate -- one-to-four family
    
    
    1,587
    
    
    
    5,738
    
    
    
    32,181- multi-family
    
    
    35
    
    
    
    1,418
    
    
    
    250- commercial
    
    
    41,534
    
    
    
    17,544
    
    
    
    42,370- construction or development
    
    
    10,144
    
    
    
    38,731
    
    
    
    25,040Non-real estate -- consumer
    
    
    27,421
    
    
    
    28,347
    
    
    
    38,640- commercial business
    
    
    41,535
    
    
    
    46,414
    
    
    
    47,841Total fixed rate
    
    
    122,256
    
    
    
    138,192
    
    
    
    186,322Total loans originated
    
    
    356,532
    
    
    
    350,086
    
    
    
    430,237Purchases:Real estate -- one-to-four family
    
    
    130
    
    
    
    0
    
    
    
    15,277- multi-family
    
    
    0
    
    
    
    0
    
    
    
    7,830- commercial
    
    
    16,823
    
    
    
    4,125
    
    
    
    43,542- construction or development
    
    
    11,900
    
    
    
    56,798
    
    
    
    25,365Non-real estate -- commercial business
    
    
    3,412
    
    
    
    30,862
    
    
    
    10,396Total loans purchased
    
    
    32,265
    
    
    
    91,785
    
    
    
    102,410Sales and repayments:Real estate -- commercial
    
    
    23,974
    
    
    
    2,400
    
    
    
    18,912- construction or development
    
    
    21,646
    
    
    
    34,800
    
    
    
    431Non-real estate -- consumer
    
    
    1,248
    
    
    
    0
    
    
    
    0- commercial business
    
    
    8,813
    
    
    
    9,000
    
    
    
    4,105Total sales
    
    
    55,681
    
    
    
    46,200
    
    
    
    23,448Transfers to loans held for sale
    
    
    7,373
    
    
    
    (2,437
    )
    
    
    3,555Principal repayments
    
    
    320,869
    
    
    
    300,407
    
    
    
    322,103Total reductions
    
    
    383,923
    
    
    
    344,170
    
    
    
    349,106Decrease in other items, net
    
    
    (3,190
    )
    
    
    (4,776
    )
    
    
    (21,618
    )Net increase
    
    $
    1,684
    
    
    
    92,925
    
    
    
    161,923
 13




---



##### Table of Contents



LOANS HELD FOR SALE
 Year Ended December 31,(Dollars in thousands)
    
    2005
    
    
    2004
    
    
    2003Originations by type:Adjustable rate:Real estate -- one-to-four family
    
    $
    1,389
    
    
    
    851
    
    
    
    5,302- construction or development
    
    
    0
    
    
    
    225
    
    
    
    0Total adjustable rate
    
    
    1,389
    
    
    
    1,076
    
    
    
    5,302Fixed rate:Real estate -- one-to-four family
    
    
    77,924
    
    
    
    83,469
    
    
    
    269,475- construction or development
    
    
    1,093
    
    
    
    2,896
    
    
    
    5,184Total fixed rate
    
    
    79,017
    
    
    
    86,365
    
    
    
    274,659Total loans originated
    
    
    80,406
    
    
    
    87,441
    
    
    
    279,961Sales and repayments:Real estate -- one-to-four family
    
    
    89,089
    
    
    
    88,808
    
    
    
    292,163Total sales
    
    
    89,089
    
    
    
    88,808
    
    
    
    292,163Transfers to (from) loans held for investment
    
    
    (7,373
    )
    
    
    2,437
    
    
    
    (3,555
    )Total reductions
    
    
    81,716
    
    
    
    91,245
    
    
    
    288,608Net Decrease
    
    $
    (1,310
    )
    
    
    (3,804
    )
    
    
    (8,647
    )
 MORTGAGE-BACKED AND RELATED SECURITIES
 Year Ended December 31,(Dollars in thousands)
    
    2005
    
    
    2004
    
    
    2003Purchases:Mortgage-backed securities:CMOs and REMICs (1)
    
    $
    0
    
    
    
    0
    
    
    
    15,139Total purchases
    
    
    0
    
    
    
    0
    
    
    
    15,139Sales:Mortgage-backed securities:CMOs and REMICs
    
    
    0
    
    
    
    0
    
    
    
    22,268Total sales
    
    
    0
    
    
    
    0
    
    
    
    22,268Principal repayments
    
    
    (2,271
    )
    
    
    (3,898
    )
    
    
    (31,718
    )Net decrease
    
    $
    (2,271
    )
    
    
    (3,898
    )
    
    
    (38,847
    )
 
 (1)    Collateralized Mortgage Obligations and Real Estate Mortgage Investment Conduits 
 Classified Assets and Delinquencies
 Classification of Assets .
 14




---



##### Table of Contents



CommercialOne-to-Four
    
    
    and
    
    
    
    
    
    
    Commercial
    
    
    Other(Dollars in thousands)
    
    Family
    
    
    Multi-family
    
    
    Consumer
    
    
    Business
    
    
    Assets
    
    
    TotalSubstandard
    
    $
    626
    
    
    
    2,884
    
    
    
    326
    
    
    
    3,063
    
    
    
    1,376
    
    
    
    8,275Doubtful
    
    
    0
    
    
    
    0
    
    
    
    126
    
    
    
    0
    
    
    
    178
    
    
    
    304Loss
    
    
    0
    
    
    
    0
    
    
    
    44
    
    
    
    0
    
    
    
    0
    
    
    
    44Total
    
    $
    626
    
    
    
    2,884
    
    
    
    496
    
    
    
    3,063
    
    
    
    1,554
    
    
    
    8,623
  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
    
    
    $
    194
    
    
    
    0.15
    %
    
    
    5
    
    
    $
    626
    
    
    
    0.49
    %
    
    
    8
    
    
    $
    820
    
    
    
    0.65
    %Consumer
    
    
    26
    
    
    
    357
    
    
    
    0.35
    
    
    
    14
    
    
    
    496
    
    
    
    0.49
    
    
    
    40
    
    
    
    853
    
    
    
    0.85Commercial business
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    1
    
    
    
    5
    
    
    
    0.00
    
    
    
    1
    
    
    
    5
    
    
    
    0.00Total
    
    
    29
    
    
    $
    551
    
    
    
    0.07
    %
    
    
    20
    
    
    $
    1,127
    
    
    
    0.14
    %
    
    
    49
    
    
    $
    1,678
    
    
    
    0.21
    %
 15




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##### Table of Contents



Investment Activities
  Securities.
   16




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003Amort
    
    
    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
    
    $
    110,110
    
    
    
    (971
    )
    
    
    109,139
    
    
    
    71.61
    %
    
    $
    91,371
    
    
    
    (575
    )
    
    
    90,796
    
    
    
    77.42
    %
    
    $
    86,658
    
    
    
    930
    
    
    
    87,588
    
    
    
    67.32
    %Municipal obligations
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0.00
    
    
    
    65
    
    
    
    0
    
    
    
    65
    
    
    
    0.06
    
    
    
    177
    
    
    
    (7
    )
    
    
    170
    
    
    
    0.13Corporate equity (1)
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.46
    
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.60
    
    
    
    700
    
    
    
    0
    
    
    
    700
    
    
    
    0.54Preferred stock of federal agencies(1)
    
    
    2,940
    
    
    
    0
    
    
    
    2,940
    
    
    
    1.93
    
    
    
    2,961
    
    
    
    0
    
    
    
    2,961
    
    
    
    2.52
    
    
    
    3,500
    
    
    
    (343
    )
    
    
    3,157
    
    
    
    2.43Subtotal
    
    
    113,750
    
    
    
    
    
    
    
    112,779
    
    
    
    74.00
    
    
    
    95,097
    
    
    
    
    
    
    
    94,522
    
    
    
    80.60
    
    
    
    91,035
    
    
    
    
    
    
    
    91,615
    
    
    
    70.42Federal Home Loan Bank stock
    
    
    8,365
    
    
    
    
    
    
    
    8,365
    
    
    
    5.49
    
    
    
    9,293
    
    
    
    
    
    
    
    9,293
    
    
    
    7.92
    
    
    
    10,004
    
    
    
    
    
    
    
    10,004
    
    
    
    7.69Total investment securities
and Federal Home Loan Bank stock
    
    
    122,115
    
    
    
    
    
    
    
    121,444
    
    
    
    79.49
    
    
    
    104,390
    
    
    
    
    
    
    
    103,815
    
    
    
    88.52
    
    
    
    101,039
    
    
    
    
    
    
    
    101,619
    
    
    
    78.11Average remaining life of
investment securities excluding
Federal Home Loan Bank stock
    
    0.7 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.8 yearsOther interest earning assets:Cash equivalents
    
    
    31,269
    
    
    
    
    
    
    
    31,269
    
    
    
    20.51
    
    
    
    13,467
    
    
    
    
    
    
    
    13,467
    
    
    
    11.48
    
    
    
    28,497
    
    
    
    
    
    
    
    28,497
    
    
    
    21.89Total
    
    $
    153,384
    
    
    
    
    
    
    
    152,413
    
    
    
    100.00
    %
    
    $
    117,857
    
    
    
    
    
    
    
    117,282
    
    
    
    100.00
    %
    
    $
    129,536
    
    
    
    
    
    
    
    130,116
    
    
    
    100.00
    %Average remaining life or term to
repricing of investment securities and
other interest earning assets, excluding
Federal Home Loan Bank stock
    
    0.5 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4 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, 2005After 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
    
    $
    100,114
    
    
    
    9,996
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    110,110
    
    
    
    (971
    )
    
    
    109,139Corporate equity
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    700
    
    
    
    700
    
    
    
    0
    
    
    
    700Preferred stock of federal agencies
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    2,940
    
    
    
    2,940
    
    
    
    0
    
    
    
    2,940Total stock
    
    $
    100,114
    
    
    
    9,996
    
    
    
    0
    
    
    
    0
    
    
    
    3,640
    
    
    
    113,750
    
    
    
    (971
    )
    
    
    112,779Weighted average yield (1)
    
    
    3.22
    %
    
    
    3.08
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    4.69
    %
    
    
    3.25
    %
 
 (1)
 Mortgage-Backed and Related Securities .
  Dec. 31,20055 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
    
    $
    44
    
    
    
    157
    
    
    
    0
    
    
    
    0
    
    
    
    201Government National Mortgage Association
    
    
    0
    
    
    
    0
    
    
    
    15
    
    
    
    0
    
    
    
    15Collateralized Mortgage Obligations
    
    
    140
    
    
    
    0
    
    
    
    3,730
    
    
    
    2,794
    
    
    
    6,664Total
    
    $
    184
    
    
    
    157
    
    
    
    3,745
    
    
    
    2,794
    
    
    
    6,880Weighted average yield
    
    
    6.67
    %
    
    
    6.50
    %
    
    
    3.70
    %
    
    
    4.00
    %
    
    
    3.96
    %
    18




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##### Table of Contents



Sources of Funds
 General.
 Deposits.
   Year Ended December 31,(Dollars in thousands)
    
    2005
    
    
    2004
    
    
    2003Opening balance
    
    $
    698,902
    
    
    
    551,688
    
    
    
    432,951Deposits
    
    
    4,202,022
    
    
    
    3,750,395
    
    
    
    2,498,532Withdrawals
    
    
    (4,185,251
    )
    
    
    (3,613,887
    )
    
    
    (2,388,783
    )Interest credited
    
    
    15,864
    
    
    
    10,706
    
    
    
    8,988Ending balance
    
    
    731,537
    
    
    
    698,902
    
    
    
    551,688Net increase
    
    $
    32,635
    
    
    
    147,214
    
    
    
    118,737Percent increase
    
    
    4.67
    %
    
    
    26.68
    %
    
    
    27.43
    %
 19




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent(Dollars in thousands)
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of TotalTransaction and Savings Deposits(1):Non-interest checking
    
    $
    58,430
    
    
    
    7.99
    %
    
    $
    42,777
    
    
    
    6.12
    %
    
    $
    37,629
    
    
    
    6.82
    %NOW Accounts - 2.08%(2)
    
    
    101,942
    
    
    
    13.94
    
    
    
    95,294
    
    
    
    13.63
    
    
    
    61,271
    
    
    
    11.11Passbook Accounts - 2.04%(3)
    
    
    84,858
    
    
    
    11.60
    
    
    
    47,416
    
    
    
    6.78
    
    
    
    35,883
    
    
    
    6.50Money Market Accounts - 2.59%(4)
    
    
    96,947
    
    
    
    13.25
    
    
    
    129,098
    
    
    
    18.47
    
    
    
    91,315
    
    
    
    16.57Total Non-Certificates
    
    $
    342,177
    
    
    
    46.78
    %
    
    $
    314,585
    
    
    
    45.00
    %
    
    $
    226,098
    
    
    
    41.00
    %Certificates:0.00 - 0.99%
    
    $
    651
    
    
    
    0.09
    %
    
    $
    883
    
    
    
    0.13
    %
    
    $
    1,525
    
    
    
    0.28
    %1.00 - 1.99%
    
    
    5,846
    
    
    
    0.80
    
    
    
    62,833
    
    
    
    8.99
    
    
    
    55,629
    
    
    
    10.082.00 - 2.99%
    
    
    118,723
    
    
    
    16.23
    
    
    
    160,829
    
    
    
    23.01
    
    
    
    103,450
    
    
    
    18.753.00 - 3.99%
    
    
    211,019
    
    
    
    28.84
    
    
    
    108,938
    
    
    
    15.59
    
    
    
    71,691
    
    
    
    12.994.00 - 4.99%
    
    
    52,319
    
    
    
    7.15
    
    
    
    49,449
    
    
    
    7.08
    
    
    
    76,315
    
    
    
    13.835.00 - 5.99%
    
    
    797
    
    
    
    0.11
    
    
    
    1,266
    
    
    
    0.20
    
    
    
    16,621
    
    
    
    3.016.00 - 6.99%
    
    
    5
    
    
    
    0.00
    
    
    
    5
    
    
    
    0.00
    
    
    
    246
    
    
    
    0.047.00 - 7.99%
    
    
    0
    
    
    
    0.00
    
    
    
    114
    
    
    
    0.00
    
    
    
    113
    
    
    
    0.02Total Certificates
    
    
    389,360
    
    
    
    53.22
    
    
    
    384,317
    
    
    
    55.00
    
    
    
    325,590
    
    
    
    59.00Total Deposits
    
    $
    731,537
    
    
    
    100.00
    %
    
    $
    698,902
    
    
    
    100.00
    %
    
    $
    551,688
    
    
    
    100.00
    %
 
 (1)
    
    Reflects rates paid on transaction and savings deposits at December 31, 2005.(2)
    
    The rate on NOW Accounts for 2004 was 1.09% and 2003 was 0.39%.(3)
    
    The rate on Passbook Accounts for 2004 was 0.19% and 2003 was 0.20%.(4)
    
    The rate on Money Market Accounts for 2004 was 1.72% and 2003 was 1.23%. 20




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##### Table of Contents



0.00-
    
    
    1.00-
    
    
    2.00-
    
    
    3.00-
    
    
    4.00-
    
    
    5.00-
    
    
    6.00-
    
    
    
    
    
    
    Percent(Dollars in thousands)
    
    0.99%
    
    
    1.99%
    
    
    2.99%
    
    
    3.99%
    
    
    4.99%
    
    
    5.99%
    
    
    6.99%
    
    
    Total
    
    
    of TotalCertificate accounts maturing in quarter ending:March 31, 2006
    
    $
    109
    
    
    
    3,217
    
    
    
    31,573
    
    
    
    10,882
    
    
    
    1,592
    
    
    
    126
    
    
    
    0
    
    
    
    47,499
    
    
    
    12.20June 30, 2006
    
    
    51
    
    
    
    1,696
    
    
    
    16,423
    
    
    
    35,015
    
    
    
    1,289
    
    
    
    353
    
    
    
    0
    
    
    
    54,827
    
    
    
    14.08September 30, 2006
    
    
    39
    
    
    
    582
    
    
    
    6,857
    
    
    
    26,797
    
    
    
    2,010
    
    
    
    8
    
    
    
    5
    
    
    
    36,298
    
    
    
    9.32December 31, 2006
    
    
    71
    
    
    
    189
    
    
    
    35,439
    
    
    
    16,110
    
    
    
    8,812
    
    
    
    0
    
    
    
    0
    
    
    
    60,621
    
    
    
    15.57March 31, 2007
    
    
    27
    
    
    
    124
    
    
    
    5,225
    
    
    
    33,473
    
    
    
    11,933
    
    
    
    94
    
    
    
    0
    
    
    
    50,876
    
    
    
    13.07June 30, 2007
    
    
    25
    
    
    
    11
    
    
    
    5,384
    
    
    
    26,573
    
    
    
    5,123
    
    
    
    17
    
    
    
    0
    
    
    
    37,133
    
    
    
    9.54September 30, 2007
    
    
    37
    
    
    
    25
    
    
    
    6,591
    
    
    
    21,781
    
    
    
    7,612
    
    
    
    0
    
    
    
    0
    
    
    
    36,046
    
    
    
    9.26December 31, 2007
    
    
    53
    
    
    
    0
    
    
    
    2,133
    
    
    
    10,648
    
    
    
    1,526
    
    
    
    135
    
    
    
    0
    
    
    
    14,495
    
    
    
    3.72March 31, 2008
    
    
    15
    
    
    
    0
    
    
    
    898
    
    
    
    3,642
    
    
    
    427
    
    
    
    0
    
    
    
    0
    
    
    
    4,982
    
    
    
    1.28June 30, 2008
    
    
    13
    
    
    
    0
    
    
    
    736
    
    
    
    5,384
    
    
    
    1,248
    
    
    
    0
    
    
    
    0
    
    
    
    7,381
    
    
    
    1.90September 30, 2008
    
    
    7
    
    
    
    0
    
    
    
    1,589
    
    
    
    7,136
    
    
    
    1,255
    
    
    
    0
    
    
    
    0
    
    
    
    9,987
    
    
    
    2.56December 31, 2008
    
    
    11
    
    
    
    0
    
    
    
    1,600
    
    
    
    8,217
    
    
    
    1,574
    
    
    
    60
    
    
    
    0
    
    
    
    11,462
    
    
    
    2.94Thereafter
    
    
    193
    
    
    
    2
    
    
    
    4,275
    
    
    
    5,361
    
    
    
    7,918
    
    
    
    4
    
    
    
    0
    
    
    
    17,753
    
    
    
    4.56Total
    
    $
    651
    
    
    
    5,846
    
    
    
    118,723
    
    
    
    211,019
    
    
    
    52,319
    
    
    
    797
    
    
    
    5
    
    
    
    389,360
    
    
    
    100.00
    %Percent of total
    
    
    0.17
    %
    
    
    1.50
    %
    
    
    30.49
    %
    
    
    54.20
    %
    
    
    13.44
    %
    
    
    0.20
    %
    
    
    0.00
    %
    
    
    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
    
    $
    17,741
    
    
    
    25,960
    
    
    
    45,299
    
    
    
    89,465
    
    
    
    178,465Certificates of deposit of $100,000 or more
    
    
    27,603
    
    
    
    28,279
    
    
    
    49,369
    
    
    
    97,258
    
    
    
    202,509Public funds less than $100,000(1)
    
    
    73
    
    
    
    88
    
    
    
    151
    
    
    
    46
    
    
    
    358Public funds of $100,000 or more(1)
    
    
    2,082
    
    
    
    500
    
    
    
    2,100
    
    
    
    3,346
    
    
    
    8,028Total certificates of deposit
    
    $
    47,499
    
    
    
    54,827
    
    
    
    96,919
    
    
    
    190,115
    
    
    
    389,360Passbook of $100,000 or more
    
    $
    54,260
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    54,260Accounts of $100,000 or more
    
    $
    83,945
    
    
    
    28,779
    
    
    
    51,469
    
    
    
    100,604
    
    
    
    264,797
 
 (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
    
    
    8.18%
    
    
    
    8.18
    %
    
    
    10.02
    %
    
    
    11.09
    %
 
 (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 58.
 Jon J. Eberle , age 40.
 Dwain C. Jorgensen , age 57.
 Susan K. Kolling , age 54.
 Bradley C. Krehbiel , age 47.
 28




---



##### Table of Contents



Available Information
 www.hmnf.com
 www.sec.gov
 
 ITEM 1A. RISK FACTORS
  Changes in interest rates could negatively impact the Companys results of operations.
    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.
  The extended disruption of vital infrastructure could negatively impact the Companys results of
operations and financial condition.
  30




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##### Table of Contents



Strong competition within the Companys market area may limit profitability.
  Loss of large checking and money market deposit customers could increase cost of funds and have a
negative effect on results of operations.
   31




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##### Table of Contents



ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
   (d) Maximum Number(or Approximate(c) Total Number of
    
    
    Dollar Value) ofShares (or Units)
    
    
    Shares (or Units)(a) Total Number of
    
    
    (b) Average Price
    
    
    Purchased as Part of
    
    
    that May Yet BeShares (or Units)
    
    
    Paid per Share (or
    
    
    Publicly Announced Plans
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    Unit)
    
    
    or Programs
    
    
    Plans or ProgramsOctober 1 through October 31, 2005
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    197,000November 1 through November 30, 2005
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    197,000December 1 through December 31, 2005
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    197,000Total
    
    
    0
    
    
    $
    0
    
    
    
    0
 
 ITEM 6. SELECTED FINANCIAL DATA
  32




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
 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.
  33




---



##### Table of Contents



Attestation Report of the Registered Public Accounting Firm.
 Report of Independent Registered Public Accounting Firm
 
 Internal Control-Integrated Framework
   34




---



##### Table of Contents



Internal Control-Integrated Framework Internal Control-Integrated
Framework .
 -
  
 Changes in internal controls.
 
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   35




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
  
 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
    
    
    359,395
    
    
    $
    16.47
    
    
    
    164,605Equity compensation
plans not approved
by stockholders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    359,395
    
    
    $
    16.47
    
    
    
    164,605
 
 (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:
164,605 shares under the Companys 2001 Omnibus Stock Plan. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  36




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 1. Financial Statements
  Pages in2005 Annual ReportAnnual Report SectionConsolidated Balance Sheets December 31, 2005 and 2004
    
    22Consolidated Statements of Income 
Each of the Years in the Three-Year Period Ended December 31, 2005
    
    23Consolidated Statements of Stockholders Equity and Comprehensive Income 
Each of the Years in the Three-Year Period Ended December 31, 2005
    
    24Consolidated Statements of Cash Flows 
Each of the Years in the Three-Year Period Ended December 31, 2005
    
    25Notes to Consolidated Financial Statements
    
    26Report of Independent Registered Public Accounting Firm
    
    45
 2. Financial Statement Schedules
  37




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##### Table of Contents



3. Exhibits
 Exhibit Number
    
    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 (12)10.10
    
    Description of Michael McNeil 2006 Bonus Plan (13)10.11
    
    2006 Officer Base Salaries(14)13
    
    Portions of Annual Report to Security Holders incorporated by reference*14
    
    Code of Business Conduct and Ethics(15)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). 38




---



##### Table of Contents



6
    
    Incorporated by reference to Exhibit 10 to the Companys Quarterly Report on Form 10-Q for
the period ended June 30, 2004 (File No. 0-24100).7
    
    Incorporated by reference to the same numbered exhibit to the Companys Annual Report on Form
10-K for the period ended December 31, 1994 (File No. 0-24100).8
    
    Incorporated by reference to Exhibit 10.1(b) to the Companys Quarterly Report on Form 10-Q
for the period ended September 30, 1998 (File No. 0-24100).9
    
    Incorporated by reference to Exhibit B to the Companys Proxy Statement for its Annual
Meeting of Stockholders held on April 24, 2001 (File no. 0-24100).10
    
    Incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for
the period ended September 30, 2004 (File No. 0-24100).11
    
    Incorporated by reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for
the period ended September 30, 2004 (File No. 0-24100).12
    
    Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K dated
January 24, 2005, filed on January 28, 2005 (File No. 0-24100).13
    
    Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated
January 23, 2006, filed on January 27, 2006 (File No. 0-24100).14
    
    Incorporated by reference to the Companys Current Report on Form 8-K dated January 23, 2006,
filed on January 27, 2006 (File No. 0-24100).15
    
    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). 39




---



##### Table of Contents



SIGNATURES
  HMN FINANCIAL, INC.Date:      March 1, 2006
    By:
    /s/ Michael McNeilMichael McNeil,President and Chief Executive Officer  Name
    
    Title/s/ Michael McNeil

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

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

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

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

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

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

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

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

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

     Mahlon C. Schneider
    
    Director
 40




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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
    
    Incorporated by Reference10.10
    
    Description of Michael McNeil 2006 Bonus Plan
    
    Incorporated by Reference10.11
    
    2006 Officer Base Salaries
    
    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
 41