-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GS/2t2AbpfW9L2b61n7AyC24HVoBqLVDS81RB+I/NvfOWqV04F79BdZUdLULaEPw 5VXrC2mJicJMQa1C8kPnFQ== /in/edgar/work/20000626/0000921183-00-000006/0000921183-00-000006.txt : 20000920 0000921183-00-000006.hdr.sgml : 20000920 ACCESSION NUMBER: 0000921183-00-000006 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000626 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HMN FINANCIAL INC CENTRAL INDEX KEY: 0000921183 STANDARD INDUSTRIAL CLASSIFICATION: [6035 ] IRS NUMBER: 411777397 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 000-24100 FILM NUMBER: 660892 BUSINESS ADDRESS: STREET 1: 101 N BROADWAY CITY: SPRING VALLEY STATE: MN ZIP: 55975-1223 BUSINESS PHONE: 5073461100 11-K 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 1999. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________________________ to _____________________________ Commission file number 0-24100 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: HOME FEDERAL SAVINGS BANK EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: HMN FINANCIAL, INC. 101 NORTH BROADWAY SPRING VALLEY, MN 55975-0231 REQUIRED INFORMATION The financial statements filed as a part of the annual report of the plan include: 1. Audited statements of net assets available for benefits as filed under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); 2. Audited statements of changes in net assets available for benefits as filed under ERISA. -2- [logo] KPMG 4200 Norwest Center 90 South Seventh Street Minneapolis, MN 55402 INDEPENDENT AUDITORS' REPORT The Plan Administrator Home Federal Savings Bank Employees' Savings & Profit Sharing Plan: We have audited the accompanying statements of net assets available for benefits of the Home Federal Savings Bank Employees' Savings and Profit Sharing Plan (the Plan) as of December 31, 1999 and 1998, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1999 and 1998, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ KPMG LLP Minneapolis, Minnesota May 26, 2000 [logo] HOME FEDERAL SAVINGS BANK EMPLOYEES' SAVINGS & PROFIT SHARING PLAN Financial Statements and Supplemental Schedules December 31, 1999 and 1998 HOME FEDERAL SAVINGS BANK EMPLOYEES' SAVINGS & PROFIT SHARING PLAN Statement of Net Assets Available for Benefits December 31, 1999 and 1998
December 31, ------------------------------ 1999 1998 - --------------------------- ------------------------------ Investments: Total investments at fair market value $1,871,517 1,608,961 Contributions receivable: Employer 0 2,771 Employee 0 11,837 - --------------------------- ------------------------------ Net assets available for benefits $1,871,517 1,623,569 - --------------------------- ------------------------------
See accompanying notes to financial statements. 1 HOME FEDERAL SAVINGS BANK EMPLOYEES' SAVINGS & PROFIT SHARING PLAN Statement of Changes in Net Assets Available for Benefits Year ended December 31, 1999 and 1998
1999 1998 - ---------------------------------------------------------- Contributions Employer $ 63,355 65,707 Employee 276,702 280,885 Rollover 45,690 52,492 - ---------------------------------------------------------- Total contributions 385,747 399,084 - ---------------------------------------------------------- Withdrawals (290,166) (175,827) - ---------------------------------------------------------- Investment income: Net appreciation (depreciation) on fair market value of investments 140,883 (260,226) Interest 1,751 2,572 Dividends 18,621 9,831 Less asset management fees (8,888) (8,127) - ---------------------------------------------------------- Net investment income (loss) 152,367 (255,950) - ---------------------------------------------------------- Increase (decrease) in net assets available for plan benefits 247,948 (32,693) Beginning of year 1,623,569 1,656,262 - ---------------------------------------------------------- End of year $ 1,871,517 1,623,569 - ----------------------------------------------------------
See accompanying notes to financial statements. 2 HOME FEDERAL SAVINGS BANK EMPLOYEES' SAVINGS & PROFIT SHARING PLAN Notes to Financial Statements December 31, 1999 and 1998 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting. CUSTODIAN OF INVESTMENTS Bank of New York is the trustee and custodian of all Plan assets. PLAN ADMINISTRATION Home Federal Savings Bank (the Company) is the administrator of the Plan and Pentegra Services, Inc. performs the participant accounting. VALUATION OF INVESTMENTS Investments are stated at their fair market value. Investments in mutual funds or commingled trusts are valued using daily net asset value calculations performed by the funds and published by the National Association of Securities Dealers. Investments in common stock are valued at the quoted market price. Participant notes are valued at cost which approximates fair value. Purchases and sales of securities are recorded on a trade date basis. Net realized gains or losses are recognized by the Plan upon the sale of its investments or portions thereof based on average cost. COSTS AND EXPENSES Asset management fees ranging between 38 and 85 basis points are assessed annually on average net asset values and are deducted from the individual funds. In addition, the Company paid accounting fees totaling $5,700 and $5,427 in 1999 and 1998, respectively. RECLASSIFICATIONS Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. (2) DESCRIPTION OF THE PLAN The following description of the Plan provides only general information. Participants should refer to the Summary Plan Description for more complete information. GENERAL The Plan is a defined contribution plan, qualified under section 401(a) of the Internal Revenue Code. The Plan includes 401(k) provisions which allow participants to direct the Company to contribute a portion of their compensation to the Plan on a pretax basis through payroll deductions. The Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA). During 1998, Company employees who had attained the age of 21 were eligible to participate in the Plan if during the one month period following the date of employment (or any anniversary thereof) the employee completed 83 1/3 or more hours of service. During 1999, eligibility requirements were changed to eliminate the 3 hours of service requirement and allow part-time employees to participate in the Plan. As such, all Company employees who had attained the age of 21 were eligible to participate in the Plan in 1999. FUNDING POLICY Participants have had the ability to contribute up to 12% of their monthly compensation on a pretax basis to the Plan. Participant contributions are subject to the Internal Revenue Service maximum annual limit of $10,000 during 1999 and 1998. The Company matches 25% of each participant's contribution not in excess of 8% of the participant's annual salary. The Company may, in its sole discretion, contribute to the Plan an amount to be determined from year to year (the Non-Elective Contribution). Such contributions would be allocated to the accounts of participants in the ratio that each participant's compensation for the plan year bears to the total compensation of all participants for the plan year. There were no such contributions during 1999 or 1998. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contribution and allocations of the Company's contribution and Plan earnings. Allocations are based on participant contributions or account balances, as defined. VESTING Participants are immediately vested in their contributions and the actual earnings thereon. Participants must be employed on December 31 of the plan year to be entitled to the Company's match for the year. Employees hired prior to January 1, 1997 are immediately vested in the employer contributions at December 31 of the plan year. Employees hired January 1, 1997 and thereafter are subject to 5 year cliff vesting for the employer matching contribution. Forfeited amounts for 1999 totaled $7,905, and are used to reduce future employer match obligations. Employer match amounts not vested at December 31, 1999 totaled $36,755. PARTICIPANT LOANS Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balance. Loan terms range from 1-5 years, except loans used to purchase a primary residence may have a term up to 15 years. All loans are secured by the balance in the participant's account and bear interest at a rate equal to the prime rate plus 1%. Principal and interest payments must be made monthly. DISTRIBUTIONS Upon termination of employment for any reason the vested portion of the participant's account balance becomes fully payable. PARTICIPATING EMPLOYERS The Company is a member of a controlled group of corporations as defined in Section 414(b) of the Internal Revenue Code. No members of the group other than the Company participated in the Plan prior to 1996. Employees of HMN Mortgage Services, Inc. began participating in 1998. The contributions to the Plan for each employer participating in the Plan during 1999 and 1998 were as follows: 4
1999 1998 ---------------------------- ---------------------------- Employer Employee Rollover Employer Employee Rollover -------- -------- -------- -------- -------- -------- Home Federal Savings Bank $ 49,312 210,266 45,690 53,496 217,246 47,788 HMN Mortgage Services, Inc. 10,777 51,935 0 10,062 54,254 4,704 Osterud Insurance Agency, Inc. 3,266 14,501 0 2,149 9,385 0 ------- ------- ------- ------- -------- ------ $ 63,355 276,702 45,690 65,707 280,885 52,492 ======= ======= ======= ======= ======== ======
(3) PLAN TERMINATION The Company, by action of its board of directors, may terminate the Plan. All participants at the time of such termination shall be 100% vested in their account balances and shall be entitled to a benefit equal to the value of their accounts as determined as of the valuation date following termination. (4) DESCRIPTION OF INVESTMENT OPTIONS Participant contributions are invested by the Plan Trustee in accordance with participant elections, in one or more of the investment options the Plan offers in increments of 1%. PENTEGRA SERVICES, INC. (PSI) S&P MIDCAP STOCK INDEX FUND - The fund invests in the stocks that make up the Standard & Poor's MidCap 400 Index. The fund is designed to approximate the total return of the S&P MidCap 400 Index, including reinvestment of dividends. This fund was available in 1999 and 1998. PSI S&P 500 STOCK INDEX FUND - The fund invests in the stocks that make up the Standard & Poor's 500 Index. The fund is designed to approximate the total return of the S&P 500 Index, including reinvestment of dividends. This fund was available in 1999 and 1998. PSI STABLE VALUE FUND - The fund invests in a diversified portfolio of fixed income securities with high quality ratings by major rating services such as Moody's Investors Service and Standard & Poor's. This fund was available in 1999 and 1998. PSI MONEY MARKET FUND - The fund invests primarily in AAA short-term securities issued by corporations. The average range of weighted portfolio maturities varies from one to ninety days with most securities held to maturity. This fund was available in 1999 and 1998. PSI BOND MARKET FUND - The fund invests in a portfolio of high quality bonds including U.S. Treasury, agency, corporate, mortgage and asset backed securities. This fund was available in 1999 and 1998. HMN FINANCIAL, INC. STOCK - The fund invests in the common stock of HMN Financial, Inc., the Holding Company of Home Federal Savings Bank. Three to six percent of the fund is maintained in a Short Term Investment Fund for liquidity purposes. This fund was available in 1999 and 1998. PSI INTERNATIONAL STOCK FUND - The fund invests in foreign stocks in countries based in Europe, Australia and the Far East. The fund is designed to approximate the performance of the Morgan Stanley Capital International (MSCI) EAFE (Europe, Australia, Far East) Index. This fund was available in 1999 and 1998. 5 PSI ASSET ALLOCATION FUNDS - PSI Income Plus Fund - The fund invests in a broad range of stable value securities to reduce short term risk, and in a broad range of large U.S. and international companies to capture growth potential. This fund was available in 1999 and 1998. PSI Growth & Income Fund - The fund invests in U.S. and international stock, U.S. bonds, and stable value investments to pursue long term appreciation and short term stability. This fund was available in 1999 and 1998. PSI Growth Fund - The fund invests in a broad range of domestic and international stock. This fund was available in 1999 and 1998. (5) NUMBER OF PARTICIPANTS The number of participants in each investment option as of December 31, 1999 and 1998 were as follows:
1999 1998 ------ ------ HMN Financial, Inc. Stock 85 87 Participant Loans 5 6 PSI S&P MidCap Stock Index Fund 89 93 PSI S&P 500 Stock Index Fund 103 103 PSI Stable Value Fund 26 32 PSI Money Market Fund 15 17 PSI Bond Market Fund 26 27 PSI International Stock Fund 22 18 PSI Income Plus Fund 3 2 PSI Growth & Income Fund 17 12 PSI Growth Fund 16 11
The total number of participants in the Plan were 169 and 144 at December 31, 1999 and 1998, respectively. (6) INVESTMENTS The following investments equal or exceed 5% of net assets available for plan benefits at December 31, 1999 or 1998:
December 31, 1999 1998 ------------------------- Fair Fair market market Description value value - ------------------------------------------------------------- PSI S&P MidCap Stock Index Fund 379,043 320,473 PSI S&P 500 Stock Index Fund 581,528 444,589 PSI Stable Value Fund ** 86,449 HMN Financial, Inc. Stock 600,112 563,711
** Not applicable in 1999. Fund is less than 5% of net assets. 6 (7) INCOME TAX STATUS The Internal Revenue Service determined and informed the Company by a letter dated May 11, 1994, that the Plan and related trust, as then designed, were in compliance with the provisions of 401(a) of the Internal Revenue Code (IRC) and were thereby exempt from federal income taxes under Section 501(a) of the code. The Plan has been amended in its entirety since receiving this determination letter. During 1999 the Plan, as amended, was again submitted to the IRS for determination of its tax exempt status. A favorable determination was received on March 15, 2000, therefore no provision for income taxes has been included in the Plan's financial statements. An employee's pretax contributions under the Plan will reduce the participant's taxable income for federal and state income tax purposes. Each participant's portion of earnings from investments made with contributions under the Plan, generally, are not taxable until distributed or withdrawn. (8) PARTY-IN-INTEREST TRANSACTIONS The Plan engages in investment transactions involving the acquisition or disposition of HMN Financial, Inc. common stock. HMN Financial, Inc. is the holding company of Home Federal Savings Bank and is a party-in-interest. Also, certain Plan investments are shares of mutual funds managed by Pentegra Services, Inc. Pentegra is the third party administrator of the Plan as defined by the Basic Plan Document and is a party in interest. These transactions are covered by an exemption from the "prohibited transactions" provisions of ERISA and the IRC. 7 HOME FEDERAL SAVINGS BANK EMPLOYEES' SAVINGS & PROFIT SHARING PLAN Item 27a - Schedule of Assets Held for Investment Purposes December 31, 1999
Fair market Description Cost value - ------------------------------------------------------------------- *PSI S&P MidCap Stock Index Fund $ 247,669 $ 379,043 *PSI S&P 500 Stock Index Fund 337,613 581,528 *PSI Stable Value Fund 52,759 60,326 *PSI Money Market Fund 65,120 65,048 *PSI Bond Market Fund 43,442 46,943 *PSI International Stock Fund 21,932 30,123 *PSI Income Plus Fund 19,323 21,987 *PSI Growth & Income Fund 32,074 38,841 *PSI Growth Fund 24,351 30,258 *HMN Financial, Inc. Stock 702,709 600,112 Participant Loans (8.75% to 9.50%) 17,308 17,308 - ------------------------------------------------------------------ Total investments $1,564,300 $1,871,517 - ------------------------------------------------------------------
*Party-in-interest See accompanying independent auditors' report. 8 SIGNATURES THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. HOME FEDERAL SAVINGS BANK EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN Date: By: /s/ Michael McNeil -------------------------- Michael McNeil Title: President Home Federal Savings Bank 9 EXHIBIT INDEX Exhibit Number 23 Consent of KPMG LLP, certified public accountants EX-23 2 0002.txt [logo] KPMG 4200 Norwest Center 90 South Seventh Street Minneapolis, MN 55402 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors HMN Financial, Inc.: We consent to incorporation by reference in the registration statement (No. 33-88228) on Form S-8 of HMN Financial, Inc. of our report dated May 26, 2000 and the use of such report in the annual report on Form 11-K of HMN Financial, Inc. Such report relates to the statements of net assets available for benefits of the Home Federal Savings Bank Employees' Savings and Profit Sharing Plan as of December 31, 1999 and 1998, the related statements of changes in net assets available for benefits for the years then ended, and the related schedule as of December 31, 1999. /s/ KPMG LLP June 26, 2000 -----END PRIVACY-ENHANCED MESSAGE-----