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, 2000.
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-
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KPMG
4200 Wells Fargo 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 & Profit Sharing
Plan (the Plan) as of December 31, 2000 and 1999, 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 auditing standards generally
accepted in the United States of America. 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
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, 2000 and 1999, and the changes in net assets available for
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule 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. The 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
June 15, 2001
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Financial Statements and Supplemental Schedule
December 31, 2000 and 1999
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statements of Net Assets Available for Benefits
December 31, 2000 and 1999
December 31,
------------------------------
2000 1999
----------------------- ------------------------------
Investments:
Total investments at
fair market value $ 1,999,075 1,871,517
Contributions receivable:
Employer 2,584 0
Employee 11,183 0
---------------------- -------------------------------
Net assets
available for
benefits $ 2,012,842 1,871,517
---------------------- -------------------------------
See accompanying notes to financial statements.
1
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statements of Changes in Net Assets Available for Benefits
Year ended December 31, 2000 and 1999
2000 1999
-----------------------------------------------------------------
Contributions
Employer $ 66,484 63,355
Employee 296,689 276,702
Rollover 14,580 45,690
-----------------------------------------------------------------
Total contributions 377,753 385,747
-----------------------------------------------------------------
Withdrawals (345,618) (290,166)
-----------------------------------------------------------------
Investment income:
Net appreciation
on fair market
value of investments 90,798 140,883
Interest 2,270 1,751
Dividends 26,182 18,621
Less asset management fees (10,060) (8,888)
-----------------------------------------------------------------
Net investment
income 109,190 152,367
-----------------------------------------------------------------
Increase in net
assets available for
plan benefits 141,325 247,948
Beginning of year 1,871,517 1,623,569
-----------------------------------------------------------------
End of year $ 2,012,842 1,871,517
-----------------------------------------------------------------
See accompanying notes to financial statements.
2
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(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 $5,780 and
$5,700 in 2000 and 1999, respectively.
(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).
All Company employees who have attained the age of 21 are
eligible to participate in the Plan.
3
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 limits of
$10,500 and $10,000 during 2000 and 1999, respectively. 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 2000 or 1999.
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 2000 totaled $14,664, and are
used to reduce future employer match obligations. Employer match amounts
not vested at December 31, 2000 totaled $59,375.
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.
The contributions to the Plan for each employer participating
in the Plan during 2000 and 1999 were as follows:
2000 1999
------------------------------ -----------------------------
Employer Employee Rollover Employer Employee Rollover
------------------------------------------------------------
Home Federal
Savings Bank $ 56,029 245,637 14,580 49,312 210,266 45,690
HMN Mortgage
Services, Inc. 8,432 38,567 0 10,777 51,935 0
Osterud Insurance
Agency, Inc. 2,023 12,485 0 3,266 14,501 0
--------- -------- ------- ------- -------- -------
$ 66,484 296,689 14,580 63,355 276,702 45,690
======== ======== ======= ======= ======== =======
4
(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 2000 and 1999.
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 2000 and 1999.
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 2000 and 1999.
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 2000 and 1999.
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 2000 and 1999.
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 2000 and 1999.
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 2000 and 1999.
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 2000 and 1999.
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
2000 and 1999.
PSI Growth Fund - The fund invests in a broad range of domestic and
international stock. This fund was available in 2000 and 1999.
5
PSI S&P 500 GROWTH STOCK INDEX FUND -
This fund is a subset of the S&P 500 Stock Index fund, investing primarily
in the S&P 500 stocks that exhibit faster earnings and dividend growth.
This fund was available in 2000.
PSI S&P 500 VALUE STOCK INDEX FUND -
This fund is a subset of the S&P 500 Stock Index fund, investing primarily
in the S&P 500 stocks that exhibit higher dividend yields. This fund was
available in 2000.
PSI RUSSELL 2000 STOCK INDEX FUND -
This fund invests in stocks that make up the Russell 2000 Index, which
consists of U.S. small company stocks. The fund's goal is to match the
performance of the Russell 2000 Index. This fund was available in 2000.
(5) NUMBER OF PARTICIPANTS
The number of participants in each investment option as of December 31,
2000 and 1999 were as follows:
2000 1999
------ ------
HMN Financial, Inc. Stock 91 85
Participant Loans 5 5
PSI S&P MidCap Stock Index Fund 104 89
PSI S&P 500 Stock Index Fund 117 103
PSI Stable Value Fund 32 26
PSI Money Market Fund 58 15
PSI Bond Market Fund 37 26
PSI International Stock Fund 47 22
PSI Income Plus Fund 8 3
PSI Growth & Income Fund 25 17
PSI Growth Fund 31 16
PSI S&P 500 Growth Stock Index Fund 28 0
PSI S&P Value Stock Index Fund 15 0
PSI Russell 2000 Stock Index Fund 13 0
The total number of eligible participants in the Plan were 222 and 169 at
December 31, 2000 and 1999, respectively.
(6) INVESTMENTS
The following investments equal or exceed 5% of net assets available for
plan benefits at December 31, 2000 or 1999:
December 31,
2000 1999
-------------------------
Fair Fair
market market
Description value value
---------------------------------------------------------
PSI S&P MidCap Stock Index Fund 472,555 379,043
PSI S&P 500 Stock Index Fund 496,396 581,528
HMN Financial, Inc. Stock 564,478 600,112
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
Schedule of Assets Held for Investment Purposes
December 31, 2000
Fair
market
Description value
-----------------------------------------------------------
*PSI S&P MidCap Stock Index Fund $ 472,555
*PSI S&P 500 Stock Index Fund 496,396
*PSI Stable Value Fund 62,616
*PSI Money Market Fund 29,380
*PSI Bond Market Fund 55,861
*PSI International Stock Fund 45,051
*PSI Income Plus Fund 24,942
*PSI Growth & Income Fund 64,808
*PSI Growth Fund 77,261
*PSI S&P 500 Growth Stock Index Fund 27,860
*PSI S&P 500 Value Stock Index Fund 49,786
*PSI Russell 2000 Stock Index Fund 14,073
*HMN Financial, Inc. Stock 564,478
Participant Loans (8.75% to 10.00%) 14,008
-----------------------------------------------------------
Total investments $ 1,999,075
-----------------------------------------------------------
*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: June 28, 2001 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