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, 1996.
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
PAGE
<PAGE>
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-
PAGE
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Financial Statements
December 31, 1996 and 1995
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
INDEPENDENT AUDITORS' REPORT
The Plan Administrator
Home Federal Savings Bank
Employee's Savings and 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, 1996 and 1995, and the related
statements of changes in net assets available for benefits for each of the
years in the three-year period ended December 31, 1996. 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, 1996 and 1995, and the changes in net assets available for
benefits for each of the years in the three-year period ended December 31, 1996,
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 and reportable transactions are presented for
the purpose of additional analysis and are not a required part of the basic
financial statements, but are supplementary information required by the
Department of Labor Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in
the statements of net assets available for benefits and the statements of
changes in net assets available for benefits of each fund. The supplemental
schedules and fund information have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 13, 1997
Member Firm of KPMG International
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statement of Net Assets Available for Benefits
December 31, 1996
<TABLE>
<CAPTION>
Participant Directed Funds
-------------------------------------------------------
S&P Midcap S&P 500
Stock Stock Stable Money Bond
Index Index Value Market Market
Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments:
Total investments at
fair market value
(total cost of $810,844) $156,747 214,731 77,542 27,069 45,003
Contributions receivable:
Employer -0- -0- -0- -0- -0-
Employee -0- -0- -0- -0- -0-
- -----------------------------------------------------------------------------
Net assets
available for
benefits $156,747 214,731 77,542 27,069 45,003
- -----------------------------------------------------------------------------
<CAPTION>
Participant Directed Funds
----------------------------------------------------
HMN
Financial,
Inc. Participant
Stock Loans Unallocated Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments:
Total investments at
fair market value
(total cost of $810,844) 371,719 4,931 -0- 897,742
Contributions receivable:
Employer -0- -0- 35,288 35,288
Employee -0- -0- 13,062 13,062
- -----------------------------------------------------------------------------
Net assets
available for
benefits $371,719 4,931 48,350 946,092
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statement of Net Assets Available for Benefits
December 31, 1995
<TABLE>
<CAPTION>
Participant Directed Funds
----------------------------------------------------
Nationwide Federated Federated Fidelity
Pooled Capital Short Term Fidelity Equity
GIC Preservation Income Asset Income II
Fund Fund Fund Manager Fund
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments:
Total investments at
fair market value
(total cost of $586,953)$112,595 22,519 14,169 122,233 106,477
Contributions receivable:
Employer -0- -0- -0- -0- -0-
- -----------------------------------------------------------------------------
Net assets
available for
benefits $112,595 22,519 14,169 122,233 106,477
- -----------------------------------------------------------------------------
<CAPTION>
Participant Directed Funds
------------------------------------------------------
Fidelity HMN
Retirement Financial,
Growth Inc. Participant
Fund Stock Loans Unallocated Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments:
Total investments at
fair market value
(total cost of
$586,953) $ 53,098 223,265 1,519 7,671 663,546
Contributions receivable:
Employer -0- -0- -0- 30,962 30,962
- -----------------------------------------------------------------------------
Net assets
available for
benefits $ 53,098 223,265 1,519 38,633 694,508
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 1996
<TABLE>
<CAPTION>
Participant Directed Funds
-------------------------------------------------------
Nationwide Fidelity Federated
Pooled GIC Asset Capital Preservation
Fund Manager Fund
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Contributions:
Employer $ -0- -0- -0-
Employee -0- 13,547 5,862
Rollover -0- -0- -0-
- -----------------------------------------------------------------------------
Total contributions -0- 13,547 5,862
- -----------------------------------------------------------------------------
Withdrawals (105) (19,237) (294)
- -----------------------------------------------------------------------------
Investment income:
Unrealized appreciation
on fair market value
of investments -0- -0- -0-
Interest -0- 19 16
Dividends -0- 1,782 702
Realized gains (losses) (829) 2,020 930
Less asset management fees -0- -0- -0-
- -----------------------------------------------------------------------------
Net investment
income (829) 3,821 1,648
- -----------------------------------------------------------------------------
Transfers among funds (111,661) (120,364) (29,735)
- -----------------------------------------------------------------------------
Increase (decrease) in net
assets available for
plan benefits (112,595) (122,233) (22,519)
Beginning of year 112,595 122,233 22,519
- -----------------------------------------------------------------------------
End of year $ -0- -0- -0-
- -----------------------------------------------------------------------------
<CAPTION>
Participant Directed Funds
----------------------------------------------------
Fidelity Equity Fidelity S&P Midcap
Income II Retirement Growth Stock Index
Fund Fund Fund
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Contributions:
Employer $ -0- -0- -0-
Employee 16,362 11,353 16,535
Rollover -0- -0- 2,412
- -----------------------------------------------------------------------------
Total contributions 16,362 11,353 18,947
- -----------------------------------------------------------------------------
Withdrawals (3,470) (4,143) (2,474)
- -----------------------------------------------------------------------------
Investment income:
Unrealized appreciation
on fair market value
of investments -0- -0- 14,264
Interest 14 14 49
Dividends 1,308 -0- -0-
Realized gains (losses) 6,396 416 368
Less asset management fees -0- -0- (181)
- -----------------------------------------------------------------------------
Net investment
income 7,718 430 14,500
- -----------------------------------------------------------------------------
Transfers among funds (127,087) (60,738) 125,774
- -----------------------------------------------------------------------------
Increase (decrease) in net
assets available for
plan benefits (106,477) (53,098) 156,747
Beginning of year 106,477 53,098 -0-
- -----------------------------------------------------------------------------
End of year $ -0- -0- 156,747
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
PAGE
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Benefits (con't.)
Year ended December 31, 1996
<TABLE>
<CAPTION>
Participant Directed Funds
- ------------------------------------------------------------------------
S&P 500 Stable Money Bond
Stock Index Value Market Market
Fund Fund Fund Fund
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contributions:
Employer -0- -0- -0- -0-
Employee 19,214 5,366 7,051 4,300
Rollover 3,673 -0- -0- 308
- ------------------------------------------------------------------------
Total contributions 22,887 5,366 7,051 4,608
- ------------------------------------------------------------------------
Withdrawals (1,078) (1,146) -0- -0-
- ------------------------------------------------------------------------
Investment income:
Unrealized appreciation
on fair market value
of investments 17,899 1,840 -0- 759
Interest 1,136 75 494 662
Dividends 2,147 -0- -0- 436
Realized gains (losses) 202 18 57 (154)
Less asset management fees (314) (198) (25) (60)
- ------------------------------------------------------------------------
Net investment
income 21,070 1,735 526 1,643
- ------------------------------------------------------------------------
Transfers among funds 171,852 71,587 19,492 24,583
- ------------------------------------------------------------------------
Increase (decrease) in net
assets available for
plan benefits 214,731 77,542 27,069 30,834
Beginning of year -0- -0- -0- 14,169
- ------------------------------------------------------------------------
End of year 214,731 77,542 27,069 45,003
- ------------------------------------------------------------------------
<CAPTION>
Participant Directed Funds
- --------------------------------------------------------------------
HMN
Financial, Inc. Participant
Stock Loans Unallocated Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contributions:
Employer -0- -0- 35,288 35,288
Employee 15,477 -0- 34,190 149,257
Rollover 2,124 -0- -0- 8,517
- -----------------------------------------------------------------------------
Total contributions 17,601 -0- 69,478 193,062
- -----------------------------------------------------------------------------
Withdrawals (4,091) -0- (30) (36,068)
- -----------------------------------------------------------------------------
Investment income:
Unrealized appreciation
on fair market value
of investments 48,503 -0- -0- 83,265
Interest 7 -0- -0- 2,486
Dividends -0- -0- 26 6,401
Realized gains (losses) (6,219) -0- 11 3,216
Less asset management fees -0- -0- -0- (778)
- -----------------------------------------------------------------------------
Net investment
income 42,291 -0- 37 94,590
- -----------------------------------------------------------------------------
Transfers among funds 92,653 3,412 (59,768) -0-
- -----------------------------------------------------------------------------
Increase (decrease) in net
assets available for
plan benefits 148,454 3,412 9,717 251,584
Beginning of year 223,265 1,519 38,633 694,508
- -----------------------------------------------------------------------------
End of year 371,719 4,931 48,350 946,092
- -----------------------------------------------------------------------------
</TABLE>
PAGE
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 1995
<TABLE>
<CAPTION>
Participant Directed Funds
-------------------------------------------------------
Nationwide 20th Century Fidelity
Pooled GIC U.S. Government Asset
Fund Bond Fund Manager
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Contributions:
Employer $ -0- -0- -0-
Employee -0- -0- 17,769
- --------------------------------------------------------------------------
Total contributions -0- -0- 17,769
- --------------------------------------------------------------------------
Withdrawals (12,526) -0- (5,321)
- --------------------------------------------------------------------------
Investment income:
Unrealized appreciation
on fair market value
of investments -0- -0- 13,818
Interest 6,626 -0- -0-
Dividends -0- -0- 3,399
Realized gains -0- 216 428
Less asset management
fees (187) (354) (4,112)
- --------------------------------------------------------------------------
Net investment
income 6,439 (138) 13,533
- --------------------------------------------------------------------------
Transfers among funds (10,389) (20,135) (63,131)
- --------------------------------------------------------------------------
Increase (decrease) in
net assets available
for plan benefits (16,476) (20,273) (37,150)
Beginning of year 129,071 20,273 159,383
- --------------------------------------------------------------------------
End of year $ 112,595 -0- 122,233
- --------------------------------------------------------------------------
<CAPTION>
Participant Directed Funds
--------------------------------------------------------------
Nationwide 20th Century Federated
Stock Growth Stock Capital Preservation
Fund Fund Fund
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Contributions:
Employer $ -0- -0- -0-
Employee -0- -0- 17,997
- --------------------------------------------------------------------------
Total contributions -0- -0- 17,997
- --------------------------------------------------------------------------
Withdrawals -0- -0- (2,155)
- --------------------------------------------------------------------------
Investment income:
Unrealized appreciation
on fair market value
of investments -0- -0- 1
Interest -0- -0- 301
Dividends -0- -0- 512
Realized gains 1,056 246 -0-
Less asset management
fees (2,725) (983) (106)
- ---------------------------------------------------------------------------
Net investment
income (1,669) (737) 708
- ---------------------------------------------------------------------------
Transfers among funds (79,418) (22,760) 5,969
- ---------------------------------------------------------------------------
Increase (decrease) in
net assets available
for plan benefits (81,087) (23,497) 22,519
Beginning of year 81,087 23,497 -0-
- ---------------------------------------------------------------------------
End of year $ -0- -0- 22,519
- ---------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
PAGE
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Benefits (con't.)
Year ended December 31, 1995
<TABLE>
<CAPTION>
Participant Directed Funds
- -----------------------------------------------------------------------------
Federated Fidelity Equity Fidelity
Short Term Income Income II Retirement Growth
Fund Fund Fund
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Contributions:
Employer -0- -0- -0-
Employee 2,115 24,149 13,946
- -----------------------------------------------------------------------------
Total contributions 2,115 24,149 13,946
- -----------------------------------------------------------------------------
Withdrawals (60) (627) (1,271)
- -----------------------------------------------------------------------------
Investment income:
Unrealized appreciation
on fair market value
of investments 413 13,127 3,195
Interest -0- -0- -0-
Dividends 600 4,146 4,565
Realized gains 19 747 473
Less asset management
fees (80) (532) (258)
- -----------------------------------------------------------------------------
Net investment income 952 17,488 7,975
- -----------------------------------------------------------------------------
Transfers among funds 11,162 65,467 32,448
- -----------------------------------------------------------------------------
Increase (decrease) in
net assets available
for plan benefits 14,169 106,477 53,098
Beginning of year -0- -0- -0-
- -----------------------------------------------------------------------------
End of year 14,169 106,477 53,098
- -----------------------------------------------------------------------------
<CAPTION>
Participant Directed Funds
--------------------------------------------------------------
HMN
Financial, Inc. Participant
Stock Loans Unallocated Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contributions:
Employer -0- -0- 40,453 40,453
Employee -0- -0- 48,287 124,263
- -----------------------------------------------------------------------------
Total contributions -0- -0- 88,740 164,716
- -----------------------------------------------------------------------------
Withdrawals (77) -0- (1) (22,038)
- -----------------------------------------------------------------------------
Investment income:
Unrealized appreciation
on fair market value
of investments 46,040 -0- -0- 76,594
Interest -0- -0- 502 7,429
Dividends -0- -0- -0- 13,222
Realized gains 243 -0- -0- 3,428
Less asset management
fees -0- -0- (3,600) (12,937)
- -----------------------------------------------------------------------------
Net investment
income 46,283 -0- (3,098) 87,736
- -----------------------------------------------------------------------------
Transfers among funds 177,059 1,519 (97,791) -0-
- -----------------------------------------------------------------------------
Increase (decrease) in
net assets available
for plan benefits 223,265 1,519 (12,150) 230,414
Beginning of year -0- -0- 50,783 464,094
- -----------------------------------------------------------------------------
End of year 223,265 1,519 38,633 694,508
- -----------------------------------------------------------------------------
</TABLE>
PAGE
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 1994
<TABLE>
<CAPTION>
Participant Directed Funds
-------------------------------------------------------
Nationwide 20th Century American Fidelity
Pooled GIC U.S. Government Balanced Asset
Fund Bond Fund Manager
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contributions:
Employer $ -0- -0- -0- -0-
Employee 32,655 4,389 30,269 15,804
Rollover 8,261 -0- 7,473 -0-
- ----------------------------------------------------------------------------
Total contributions 40,916 4,389 37,742 15,804
- ----------------------------------------------------------------------------
Withdrawals (3,403) (5,367) (5,995) -0-
- ----------------------------------------------------------------------------
Investment income:
Unrealized depreciation
on fair market value of
investments -0- (265) -0- (6,837)
Interest 5,165 -0- -0- -0-
Realized gains (losses) -0- 3 911 (2)
Less asset management fees -0- (51) (385) -0-
- ----------------------------------------------------------------------------
Net investment
income 5,165 (313) 526 (6,839)
- ----------------------------------------------------------------------------
Transfers among funds 7,810 (1,986) (150,619) 150,418
- ----------------------------------------------------------------------------
Increase (decrease) in net
assets available for
plan benefits 50,488 (3,277) (118,346) 159,383
- ----------------------------------------------------------------------------
Beginning of year 78,583 23,550 118,346 -0-
- ----------------------------------------------------------------------------
End of year $ 129,071 20,273 -0- 159,383
- ----------------------------------------------------------------------------
<CAPTION>
Participant Directed Funds
--------------------------------------------
Nationwide 20th Century
Stock Growth Stock
Fund Fund Unallocated Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contributions:
Employer $ -0- -0- 31,304 31,304
Employee 19,742 12,850 10,627 126,336
Rollover 6,515 3,112 8,852 34,213
- ----------------------------------------------------------------------------
Total contributions 26,257 15,962 50,783 191,853
- ----------------------------------------------------------------------------
Withdrawals -0- -0- -0- (14,765)
- ----------------------------------------------------------------------------
Investment income:
Unrealized depreciation
on fair market value of
investments (311) (470) -0- (7,883)
Interest -0- -0- -0- 5,165
Realized gains (losses) 5 82 -0- 999
Less asset management fees (173) (7) -0- (616)
- -----------------------------------------------------------------------------
Net investment
income (479) (395) -0- (2,335)
- -----------------------------------------------------------------------------
Transfers among funds 486 (6,109) -0- -0-
- -----------------------------------------------------------------------------
Increase (decrease) in net
assets available for
plan benefits 26,264 9,458 50,783 174,753
- -----------------------------------------------------------------------------
Beginning of year 54,823 14,039 -0- 289,341
- -----------------------------------------------------------------------------
End of year $ 81,087 23,497 50,783 464,094
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
PAGE
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 1996 and 1995
(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
Mellon Bank, N.A. 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 approximate fair market value.
Investments in mutual funds of comingled 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 on the basis of a first-in, first-
out flow assumption.
COSTS AND EXPENSES
Asset management fees are deducted from the individual funds as they are
incurred. Administrative expenses totaling $7,511 and $4,646 were paid
by the Company in 1996 and 1995 respectively.
RECLASSIFICATIONS
Certain amounts in the financial statements for prior years have been
reclassified to conform with 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).
Company employees are eligible to participate in the Plan after one year
of continuous service of 1,000 hours or more and upon reaching 21 years
of age.
<PAGE>
FUNDING POLICY
Since August 1, 1996, participants have had the ability to contribute
up to 12% of their monthly compensation on a pretax basis to the Plan.
The maximum monthly contribution prior to this date was 8% of their
compensation. Participant contributions are subject to the Internal
Revenue Service maximum annual limits of $9,500 during 1996 and $9,240
during 1995 and 1994. The Company matches 25% of each participant's
contributions up to a maximum of 8% of compensation.
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 1996, 1995, or 1994.
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
Company's contributions, plus actual earnings thereon.
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
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 commensurate with local prevailing rates as
determined by the Plan administrator. Principal and interest payments
must be made monthly.
DISTRIBUTIONS
Upon termination of employment for any reason 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 during 1995. The
contributions to the Plan for each employer participating in the Plan
during 1996 were as follows:
Employer Employee Rollover
---------- ---------- ----------
Home Federal Savings Bank $ 34,348 145,497 8,517
Osterud Insurance Agency, Inc. 940 3,760 -0-
-------- ------- -------
$ 35,288 149,257 8,517
======== ======= =======
(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 accounts 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 10%.
<PAGE>
NATIONWIDE POOLED GIC FUND - Funds are invested in a guaranteed
investment contract with an insurance company. This investment option
was not available at December 31, 1996.
FEDERATED CAPITAL PRESERVATION FUND - Funds are invested in guaranteed
investment contracts and other stable value products to preserve
principal while earning a competitive rate-of-return. This investment
option was not available at December 31, 1996.
FEDERATED SHORT TERM INCOME FUND - Funds are invested in a blend of
mortgage-backed securities, treasuries, and agency securities to provide
income. The activity in this fund has been aggregated with the Bond
Market Fund in the Statement of Changes in Net Assets Available for
Benefits. This investment option was not available at December 31,
1996.
FIDELITY ASSET MANAGER - Funds are invested in stocks, bonds, and short
term instruments to achieve maximum total return. This investment
option was not available at December 31, 1996.
FIDELITY EQUITY INCOME II FUND - Funds are invested primarily in equity
security with above-average yields to provide current income. This
investment option was not available at December 31, 1996.
FIDELITY RETIREMENT GROWTH - Funds are invested primarily in equity
securities of companies with earnings that are expected to grow at an
above-average rate. This investment option was not available at
December 31, 1996.
S&P MIDCAP STOCK INDEX FUND - Funds are invested 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.
S&P 500 STOCK INDEX FUND - Funds are invested 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.
STABLE VALUE FUND - Funds are invested 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.
MONEY MARKET FUND - Funds are invested 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.
BOND MARKET FUND - Funds are invested in a portfolio of high quality
bonds including U.S. Treasury, agency, corporate, mortgage and asset
backed securities.
HMN FINANCIAL, INC. STOCK - Funds are invested in the common stock of
HMN Financial, Inc., the Holding Company of Home Federal Savings Bank.
<PAGE>
(5) NUMBER OF PARTICIPANTS
The number of participants in each investment option as of December 31,
1996 and 1995 were as follows:
1996 1995
------ ------
Nationwide Pooled GIC Fund -0- 47
Fidelity Asset Manager -0- 54
Federated Capital Preservation Fund -0- 47
Federated Short Term Income Fund -0- 18
Fidelity Equity Income II Fund -0- 58
Fidelity Retirement Growth Fund -0- 43
HMN Financial, Inc. Stock 55 45
Participant Loans 3 1
S&P MidCap Stock Index Fund 70 -0-
S&P 500 Stock Index Fund 74 -0-
Stable Value Fund 27 -0-
Money Market Fund 10 -0-
Bond Market Fund 29 -0-
The total number of participants in the Plan were 88 and 78 at December
31, 1996 and 1995 respectively.
(6) INVESTMENTS
The following investments equal or exceed 5% of net assets available for
plan benefits at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
December 31, 1996
-------------------------------
Fair
market Unrealized
Description Cost value appreciation
- ------------------------------------------------------------------------
<S> <C> <C> <C>
S&P MidCap Stock Index Fund 142,595 156,747 14,152
S&P 500 Stock Index Fund 193,896 214,731 20,835
Stable Value Fund 75,898 77,542 1,644
HMN Financial, Inc. Stock 323,198 371,719 48,521
Nationwide Pooled GIC Fund -0- -0- -0-
Fidelity Asset Manager -0- -0- -0-
Fidelity Equity Income II Fund -0- -0- -0-
Fidelity Retirement Growth Fund -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
------------------------------
Fair
market Unrealized
Description Cost value appreciation
- ------------------------------------------------------------------------
<S> <C> <C> <C>
S&P MidCap Stock Index Fund -0- -0- -0-
S&P 500 Stock Index Fund -0- -0- -0-
Stable Value Fund -0- -0- -0-
HMN Financial, Inc. Stock 177,225 223,265 46,040
Nationwide Pooled GIC Fund 112,595 112,595 -0-
Fidelity Asset Manager 108,415 122,233 13,818
Fidelity Equity Income II Fund 93,350 106,477 13,127
Fidelity Retirement Growth Fund 49,903 53,098 3,195
</TABLE>
(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 the determination letter. However, the Plan
administrator and the third party administrator believe that the Plan is
designed and is being operated in compliance with the applicable
requirements of the IRC. Therefore, no provision for income taxes has
been included in the Plan's financial statements.
<PAGE>
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. These transactions are covered by an exemption from the
"prohibited transactions" provisions of ERISA and the IRC.
(9) SUBSEQUENT EVENTS
Effective January 1, 1997, the Plan was amended to allow company
employees to participate in the Plan after one month of employment and
the attainment of age 21. Participant vesting in the Company's
contribution was also changed to a five year cliff vesting schedule for
all employees hired after January 1, 1997.
Effective June 17, 1997, The Bank of New York was designated by the Plan
Administrator to serve as the Trustee of the Plan.
PAGE
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
Net
Asset Fair
Value market
Description Units Per Unit Cost value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P MidCap Stock Index Fund 10,568 $14.8325 142,595 $156,747
S&P 500 Stock Index Fund 12,583 17.0651 193,896 214,731
Stable Value Fund 6,507 11.9161 75,897 77,542
Money Market Fund 2,331 11.6118 26,622 27,069
Bond Market Fund 3,862 11.6528 43,705 45,003
*HMN Financial, Inc.
Common Stock 32,171 11.5543 323,198 371,719
Participant Loans
(9.25% to 10.5%) 4,931 1.0000 4,931 4,931
- ---------------------------------------------------------------------------
Total investment $ 810,844 $ 897,742
- ---------------------------------------------------------------------------
*Party-in-interest
</TABLE>
See accompanying independent auditors' report.
<PAGE>
HOME FEDERAL SAVINGS BANK
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN
Item 27-d - Schedule of Reportable Transactions
Series of Transactions (Involving One Security)
Which Exceed 5% of Net Assets Available for Benefits
Year ended December 31, 1996
<TABLE>
<CAPTION>
Total dollar Total Total
Description Number of value of dollar value cost of Net
----------------
of asset Purchases Sales purchases of sales sales gain
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fidelity Asset Manager 20 9 $ 24,167 147,660 145,640 2,020
Federated Capital
Preservation Fund 25 11 133,369 146,147 145,217 930
Fidelity Equity
Income II Fund 22 9 29,795 140,809 134,413 6,396
Fidelity Retirement
Growth Fund 18 8 18,097 70,259 69,843 416
S&P MidCap Stock
Index Fund 16 6 146,462 4,166 3,798 368
S&P 500 Stock
Index Fund 17 5 197,614 3,882 3,680 202
Stable Value Fund 11 6 79,408 3,527 3,509 18
Money Market Fund 9 6 51,992 25,425 25,368 57
Bond Market Fund 13 1 43,709 4 158 (154)
*HMN Financial, Inc.
Common Stock 13 6 83,386 8,014 14,233 (6,219)
*Party-in-interest
</TABLE>
See accompanying independent auditors' report.
<PAGE>
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 25, 1997 By: /s/ Roger P. Weise
-----------------------------
Roger P. Weise
Title: Chief Executive Officer,
Home Federal Savings Bank
<PAGE>
EXHIBIT INDEX
Exhibit
Number
23 Consent of KPMG Peat Marwick LLP,
certified public accountants
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
HMN Financial, Inc. and
The Plan Administrator
Home Federal Savings Bank
Employees' Savings and Profit Sharing Plan
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
June 13, 1997 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, 1996 and 1995, the related statements
of changes in net assets available for benefits for each of the years in the
three-year period ended December 31, 1996 and the related schedules as of and
for the year ended December 31, 1996.
/s/ KPMG Peat Marwick LLP
June 25, 1997
Member firm of
KPMG International
