<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HMN FINANCIAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
HMN Financial, Inc.
101 North Broadway, P.O. Box 231, Spring Valley, Minnesota 55975-0231
Phone (507) 346-1100 - FAX (507) 346-1111
March 23, 1999
Dear Stockholder:
On behalf of the Board of Directors and management of HMN Financial,
Inc., I cordially invite you to attend the Annual Meeting of Stockholders. The
meeting is scheduled to be held at 10:00 a.m. on April 27, 1999, at the Best
Western Apache Hotel, located at 1517 S.W. 16th Street, Rochester, Minnesota.
At the Annual Meeting, the stockholders will be asked (i) to elect five
directors and (ii) to ratify KPMG Peat Marwick LLP as HMN's auditors.
Your vote is most important regardless of the number of shares you own.
I urge you to participate in the business of the Annual Meeting by casting your
vote. Please COMPLETE, SIGN and DATE the enclosed proxy card as soon as possible
and return it in the postage prepaid envelope provided. You may, of course,
attend the meeting and vote in person even if you have returned a proxy.
On behalf of HMN Financial, Inc., I thank you for your attention and
continued support. Your Board remains committed to acting in your best
interests.
Sincerely,
/s/ Roger P. Weise
ROGER P. WEISE
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
HMN FINANCIAL, INC.
101 North Broadway
Spring Valley, Minnesota 55975-0231
(507) 346-1100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on April 27, 1999
Notice is hereby given that the Annual Meeting of Stockholders of HMN
Financial, Inc. (the "Company") will be held at the Best Western Apache Hotel,
located at 1517 S.W. 16th Street, Rochester, Minnesota, at 10:00 a.m., local
time, on April 27, 1999.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. the election of five directors of the Company;
2. the ratification of the appointment of KPMG Peat Marwick LLP as the
auditors of the Company for the fiscal year ending December 31, 1999;
and
such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof. As of the date of this Notice, the
Board of Directors is not aware of any other business to come before the
Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned or postponed. Stockholders of record at the close of business on
March 2, 1999 are the stockholders entitled to receive notice of and to vote at
the Meeting and any adjournments or postponements thereof.
A complete list of stockholders entitled to vote at the Meeting is
available for examination by any stockholder, for any purpose germane to the
Meeting, between 9:00 a.m. and 5:00 p.m., at Home Federal Savings Bank, 1110 6th
Street NW, Rochester, Minnesota 55901 for a period of ten days prior to the
Meeting.
You are requested to complete and sign the enclosed Proxy Card, which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. If you attend the Meeting, you may vote either in person or
by your Proxy Card.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Roger P. Weise
Roger P. Weise
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Spring Valley, Minnesota
March 23, 1999
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES.
A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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<PAGE>
HMN FINANCIAL, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 27, 1999
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of HMN Financial, Inc. (the "Company") of
proxies to be used at the Annual Meeting of Stockholders (the "Meeting"), which
will be held at the Best Western Apache Hotel, located at 1517 S.W. 16th Street,
Rochester, Minnesota, on April 27, 1999 at 10:00 a.m., local time, and any
adjournments or postponements of the Meeting. The accompanying Notice of Annual
Meeting and this Proxy Statement are first being mailed to stockholders on or
about March 23, 1999.
At the Meeting, stockholders of the Company are being asked to consider and
vote upon the following:
1. the election of five directors of the Company;
2. the ratification of the appointment of KPMG Peat Marwick LLP as
auditors for the Company for the fiscal year ending December 31, 1999;
and
such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof. As of the date of this Notice, the
Board of Directors is not aware of any other business to come before the
Meeting.
Certain information provided herein relates to Home Federal Savings Bank
("Home Federal" or the "Bank"), a wholly-owned subsidiary of the Company.
VOTE REQUIRED AND PROXY INFORMATION
All shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), represented at the Meeting by properly executed proxies, duly
returned to the Secretary of the Company prior to or at the Meeting, and not
revoked, will be voted at the Meeting in accordance with the instructions
specified on the proxies. If no instructions are indicated, properly executed
proxies will be voted for the proposals set forth in this Proxy Statement. As
of the date of this Proxy Statement, the Board of Directors of the Company does
not know of any matters, other than those described in the Notice of Annual
Meeting and this Proxy Statement, that are to come before the Meeting. If any
other matters are properly presented at the Meeting for action, the persons
named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with their best judgment.
Provided a quorum is present at the Meeting, (i) directors shall be elected
by a plurality of the votes cast at the Meeting and (ii) a majority of the votes
cast shall be the act of the stockholders with respect to all other matters
considered at the Meeting. Broker non-votes are not considered as votes for or
against a proposal.
A majority of the shares of the Common Stock outstanding and entitled to
vote shall constitute a quorum for purposes of the Meeting. Abstentions and
broker non-votes are counted for purposes of determining a quorum at the
Meeting. If a quorum is not present at the Meeting, the chairman of the
Meeting, or the stockholders present, by vote of a majority of the votes cast by
stockholders present in person or represented by proxy and entitled to vote, may
adjourn the Meeting, and at any such adjourned meeting at which a quorum is
present any business may be transacted which might have been transacted at the
Meeting as originally called.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with Carol J.
Thouin, the Secretary of the Company, at or before the Meeting a written notice
of revocation bearing a later date than the proxy or (ii) duly executing a proxy
dated a later date than the earlier proxy and relating to the same shares and
delivering it to the Secretary of the Company at or before the Meeting.
<PAGE>
The Common Stock of the Company is the only authorized and outstanding
voting security of the Company. Stockholders of record as of the close of
business on March 2, 1999 will be entitled to one vote for each share of Common
Stock then held. As of March 2, 1999, the Company had 5,247,104 shares of
Common Stock issued and outstanding. The number of issued and outstanding
shares excludes 3,881,558 shares held in the treasury of the Company.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information, based on filings with the
Securities and Exchange Commission as of March 5, 1999 or known to the Company,
regarding share ownership of: (i) those persons or entities known by management
to beneficially own more than five percent of the Common Stock, (ii) the
Company's Chief Executive Officer and each executive officer who made in excess
of $100,000 during 1998 (the "Named Officers"), and (iii) all directors,
director nominees and executive officers of the Company as a group. Unless
otherwise indicated in the footnotes to this table, the listed beneficial owner
has sole voting power and investment power with respect to the shares of Common
Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK
BENEFICIALLY
OWNED AT PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER MARCH 5, 1999 OF CLASS
- ------------------------------------------------------------------- ---------------- -----------
<S> <C> <C>
PRINCIPAL OWNERS
HMN Financial, Inc. Employee Stock Ownership Plan 966,330 18.4%
101 North Broadway
Spring Valley, Minnesota 55975-0231(1)
Pohlad Group 300,000 5.7%
60 South Sixth Street, #3800
Minneapolis, Minnesota 55402(2)
Heartland Advisors, Inc. 295,500 5.6%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202(3)
NAMED OFFICERS, DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
Duane D. Benson(4) 9,450 *
Allan R. DeBoer 200 *
James B. Gardner(5) 103,956 2.0%
Timothy R. Geisler(6) 300 *
Michael McNeil(7) 614 *
Irma R. Rathbun(8) 16,998 *
M.F. Schumann(9) 38,420 *
Roger P. Weise(10) 159,182 3.0%
Richard J. Ziebell 50 *
Directors, director nominees and executive officers of the Company 416,611 7.6%
and the Bank as a group (11 persons)(11)
</TABLE>
- --------------------
* Less than 1% Owned
(1) The amount reported represents shares of Common Stock held by the HMN
Financial, Inc. Employee Stock Ownership Plan (the "ESOP"), 246,721 of
which have been allocated to accounts of participants. First Bankers Trust
Company, Quincy, Illinois, the trustee of the ESOP, may be deemed to
beneficially own the shares of Common Stock held by the ESOP. First
Bankers Trust expressly disclaims beneficial ownership of such shares.
Participants in the ESOP are entitled to instruct the trustee as to the
voting of shares of Common Stock allocated to their accounts under the
ESOP. Unallocated shares or allocated shares for which no voting
-2-
<PAGE>
instructions are received are voted by the trustee in the same proportion
as allocated shares for which instructions have been received from
participants. The trustee also has authority under the HMN Financial, Inc.
1995 Recognition and Retention Plan to vote, in its sole discretion, 39,425
restricted shares of Common Stock; the trustee has no dispositive power
with respect to such shares.
(2) As reported on a Schedule 13D dated and filed on April 24, 1998 by a group
consisting of James O. Pohlad, Robert C Pohlad, William M. Pohlad and Texas
Financial Bancorporation, Inc.
(3) As reported on a Schedule 13G/A dated January 22, 1999 and filed on January
26, 1999. Heartland Advisors, Inc. ("Heartland") is an investment adviser.
The amount reported represents shares of Common Stock held in various
advisory accounts. No such account has an interest relating to more than
5% of the outstanding shares of Common Stock. Heartland exercises sole
voting and dispositive power with respect to all the shares.
(4) Includes 7,200 shares of Common Stock covered by options which are
currently exercisable or exercisable within 60 days of March 5, 1999.
(5) Includes 30,950 shares of Common Stock held directly, 3,750 shares of
Common Stock held by Mr. Gardner's spouse's IRA, 12,560 shares of Common
Stock allocated to Mr. Gardner's ESOP account, 4,555 shares of Common Stock
held under the Bank's 401(k) Plan and 52,141 shares of Common Stock covered
by options which are currently exercisable or exercisable within 60 days of
March 5, 1999.
(6) Shares are held by Mr. Geisler's IRA account.
(7) Shares are held by the Bank's 401(k) Plan.
(8) Includes 2,794 shares of Common Stock held directly, 511 shares of Common
Stock held by Mrs. Rathbun's spouse's IRA and 13,693 shares of Common Stock
covered by options which are currently exercisable or exercisable within 60
days of March 5, 1999.
(9) Includes 16,477 shares of Common Stock held directly and 13,693 shares of
Common Stock covered by options which are currently exercisable or
exercisable within 60 days of March 5, 1999. Also includes 5,400 shares of
Common Stock owned by Mr. Schumann's spouse and 2,850 shares held by her
IRA, of which 8,250 shares Mr. Schumann disclaims beneficial ownership.
(10) Includes 12,600 shares of Common Stock held by Mr. Weise's IRA, 22,227
shares of Common Stock held in a fiduciary capacity, 2,100 shares of Common
Stock held by Mr. Weise's spouse's IRA, 13,500 shares held in a fiduciary
capacity by Mr. Weise's spouse, 16,546 shares of Common Stock allocated to
Mr. Weise's account under the ESOP, 6,232 shares of Common Stock held under
the Bank's 401(k) Plan and 85,977 shares of Common Stock covered by options
which are currently exercisable or exercisable within 60 days of March 5,
1999.
(11) Includes shares of Common Stock held directly, as well as shares of Common
Stock held jointly with family members, shares of Common Stock held in
retirement accounts, shares of Common Stock held by such individuals in
their accounts under the Bank's 401(k) Plan, shares of Common Stock
allocated to the ESOP accounts of the group members, shares of Common Stock
held in a fiduciary capacity or by certain family members and shares
covered by options which are currently exercisable or exercisable within 60
days of March 5, 1999, with respect to which shares the group members may
be deemed to have sole or shared voting and/or investment power.
-3-
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the Company's
Board of Directors shall fix the number of directors from time to time. On
January 26, 1999, the Board of Directors adopted a resolution fixing the current
number of members of the Board of Directors at nine members, an increase of
three members, and has nominated the five persons named below for election as
members of the Board of Directors to serve for the terms indicated. The Board
of Directors is divided into three classes. Generally directors are elected
each year to a term of three years or until their respective successors shall
have been elected and shall qualify. Due to the increase in the number of
directors, however, each of the three nominees to become a new member of the
Board of Directors has been nominated to become a member of a different class.
Each director of the Company is also currently a director of the Bank.
It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one or more
nominees) will be voted at the Meeting for the election of the nominees
identified in the table. If any nominee is unable to serve, the shares of
Common Stock represented by all such proxies will be voted for the election of
such substitute as the Board of Directors may recommend. At this time, the
Board of Directors knows of no reason why any of the nominees, if elected, might
be unable to serve. Except as described herein, there are no arrangements or
understandings between any director or nominee and any other person pursuant to
which such director or nominee was selected.
The business experience of each director and director nominee is set forth
below.
DIRECTOR NOMINEES:
TERM EXPIRING IN 2000
MICHAEL MCNEIL, AGE 51
Mr. McNeil has been nominated as a new member to the Board of Directors.
Mr. McNeil has been the President and Chief Executive Officer of the Bank since
January 1999 and a director of the Bank since April 1998. From April 1998
through December 1998, Mr. McNeil was the Senior Vice President Business
Development of the Bank. Prior to joining the Bank, Mr. McNeil was the
President and a director of Stearns Bank, N.A. in St. Cloud, Minnesota from
August 1991 until March 1998.
TERM EXPIRING IN 2001
RICHARD J. ZIEBELL, AGE 59
Mr. Ziebell has been nominated as a new member to the Board of Directors.
Mr. Ziebell has been the President of Badger Foundry, Inc., an iron foundry,
since 1992.
TERM EXPIRING IN 2002
JAMES B. GARDNER, AGE 58
Mr. Gardner has been a director of the Company since 1993. Mr. Gardner was
appointed to his position as Executive Vice President of the Company and the
Bank in 1994 and 1993, respectively. Mr. Gardner is also the Chief Financial
Officer of the Company and the Bank. From 1989 to 1993, Mr. Gardner served as
Secretary and Treasurer of the Bank. Mr. Gardner joined the Bank in 1981 and
served as the Bank's Treasurer and Controller from 1985 to 1989.
TIMOTHY R. GEISLER, AGE 47
Mr. Geisler has been a director of the Company since 1996. Mr. Geisler has
been the tax manager for the Mayo Foundation since 1986. Mr. Geisler has been a
certified public accountant since 1976. The Mayo Foundation
-4-
<PAGE>
provides medical care and education in clinical medicine and medical sciences
and conducts medical research through hospitals and clinics in Rochester,
Minnesota; Jacksonville, Florida; Scottsdale, Arizona and other cities in the
United States.
ALLAN R. DEBOER, AGE 56.
Mr. DeBoer has been nominated as a new member to the Board of Directors.
Since March 1988 Mr. DeBoer has been the chief executive officer of RCS of
Rochester, Inc. which is doing business as Rochester Cheese/Valley Cheese, a
cheese processing company.
DIRECTORS CONTINUING IN OFFICE AFTER ANNUAL MEETING:
TERM EXPIRING IN 2000
DUANE D. BENSON, AGE 53.
Mr. Benson has been a director of the Company since 1997. Mr. Benson has
been the executive director of the Minnesota Business Partnership, a non-profit
public policy foundation comprised of 105 member companies, since September
1994. Mr. Benson's primary responsibilities include the management of
governmental and public affairs for that organization. Mr. Benson served as a
member of the Minnesota Legislature for 14 years prior to assuming his duties at
the Minnesota Business Partnership.
IRMA R. RATHBUN, AGE 67.
Mrs. Rathbun has been a director of the Company since 1988. Mrs. Rathbun
served as the Bank's Vice President until her retirement in 1988. Mrs. Rathbun
began her career with the Bank in 1948.
TERM EXPIRING IN 2001
ROGER P. WEISE, AGE 64.
Mr. Weise has been a director of the Company since 1977. Mr. Weise is
Chairman, President and Chief Executive Officer of the Company. Mr. Weise has
been Chairman of the Bank since 1996 and served as President and Chief Executive
Officer of the Bank from 1989 through 1998. Mr. Weise began his employment with
the Bank in 1958.
M. F. SCHUMANN, AGE 72.
Mr. Schumann has been a director of the Company since 1979. Mr. Schumann
has been a licensed public accountant since 1945 and currently works at the
accounting firm of Schumann, Granahan, Hesse & Wilson, Ltd., in Rochester,
Minnesota, where prior to his semi-retirement in 1991, he was a partner. During
his career in public accounting, he has served as a consultant to many
corporations, including banks located in Minnesota and Iowa.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES
LISTED ABOVE.
DIRECTORS EMERITUS
In 1996, the Board of Directors of the Company established a Directors
Emeritus program. Any retiring director who has served as a director of the
Company or the Bank for 12 or more years may be invited by the Board of
Directors to be a director emeritus. Directors emeritus are appointed annually,
and may not serve for more than five years. A director emeritus attends and
participates in regular meetings of the Board of Directors of the Company, but
may not vote. In consideration for serving as a director emeritus, such
individual is paid a fee equal to the fee received as a director during such
individual's last year of service to the Company or the Bank (excluding
-5-
<PAGE>
any fees paid for serving on any committee of the Board of Directors of the
Company or the Bank). Since 1996, Charles R. Reps has served as a director
emeritus and since 1997, Keith A. Hagen has served as a director emeritus.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
BOARD AND COMMITTEE MEETINGS OF THE COMPANY. Meetings of the Company's
Board of Directors are generally held on a monthly basis. The Board of
Directors of the Company held 12 meetings during the year ended December 31,
1998. No incumbent director attended fewer than 92% of the total number of
meetings held by the Board of Directors and by all committees of the Board of
Directors on which such director served during the year.
The Board of Directors of the Company has standing Audit, Compensation,
Executive and Nominating Committees.
The Audit Committee of the Company reviews audit reports and related
matters to ensure effective compliance by the Company with internal policies and
procedures, including but not limited to (i) recommending to the Board of
Directors the independent public accountants to act as the Company's independent
auditors, (ii) discussing with representatives of management and the independent
auditors the scope and procedures used in auditing the records of the Company,
and (iii) reviewing the financial statements of the Company. Directors Benson,
Geisler, Rathbun and Schumann are members of this committee. The Audit
Committee met three times during 1998.
The Compensation Committee reviews and reports to the Board of Directors on
matters concerning compensation plans, the compensation of certain executives as
well as administration of the Company's 1995 Stock Option and Incentive Plan
(the "Stock Option Plan") and the 1995 Recognition and Retention Plan (the
"RRP"). The current members of the Compensation Committee are Directors
Geisler, Rathbun and Schumann. This committee met once during 1998.
The Executive Committee of the Company acts on issues arising between
regular Board of Directors' meetings. The Executive Committee possesses the
powers of the full Board of Directors of the Company between meetings of the
Company's Board of Directors. The Executive Committee is currently comprised of
Directors Gardner, Schumann and Weise. Directors Geisler, Rathbun and Benson
serve as alternates on this committee. The Executive Committee met twice during
1998.
The entire Board of Directors acts as the Nominating Committee of the
Company and meets annually to nominate eligible persons to serve on the
Company's Board of Directors and on the Bank's Board of Directors. The
Company's By-laws require that directors have their primary domicile in a county
in which the Bank has a full-service branch. While the Board of Directors will
consider nominees recommended by stockholders, this committee has not actively
solicited such nominations. In January 1999, the Board of Directors determined
to nominate Messrs. Gardner and Geisler for re-election, and Messrs. DeBoer,
McNeil and Ziebell for election, as directors of the Company. Pursuant to the
Company's By-laws, nominations by stockholders must generally be delivered in
writing to the Secretary of the Company at least 90 days before the date of the
meeting.
BOARD AND COMMITTEE MEETINGS OF THE BANK. Meetings of the Bank's Board of
Directors have generally coincided with those of the Company. During the year
ended December 31, 1998, the Board of Directors of the Bank held 12 meetings.
No director attended fewer than 92% of the total meetings of the Board of
Directors of the Bank and committees on which such Board member served during
this period. The Board of Directors of the Bank has standing Asset
Classification, Audit, Commercial Loan Executive, Investment/Asset-Liability,
Mortgage and Consumer Loan, Merger and Acquisition and Salary Administration
Committees.
The Asset Classification Committee meets at least quarterly to review the
classification of all assets held by the Bank. The committee establishes the
loan loss reserves and prepares the asset classification report which is given
to the Bank's Board of Directors on a quarterly basis. Members of the committee
are Director Gardner and Officers Dwain Jorgensen and Timothy Johnson. This
committee met four times in 1998.
-6-
<PAGE>
The Audit Committee reviews audit reports of the Bank and related matters
to ensure effective compliance with regulations and internal policies and
procedures. This committee also approves the accounting firm selected by
management of the Bank to perform the Bank's annual audit and acts as the
liaison between the auditors and the Board of Directors of the Bank. Directors
Benson, Geisler, Rathbun and Schumann currently comprise this committee. This
committee met three times in 1998.
The Commercial Loan Committee meets on an as-needed basis, but at least
quarterly, to approve in advance all commercial loans up to $3,000,000 in
accordance with the underwriting guidelines of the Bank. The Commercial Loan
Committee consists of Directors Gardner, Weise and McNeil and Officers Dwain
Jorgenson and Timothy Johnson. This committee met 17 times in 1998.
The Executive Committee meets on an as-needed basis to act on matters that
arise between regular meetings of the Board of Directors of the Bank. The
Executive Committee possesses the powers of the full Board of Directors of the
Bank between meetings of the Bank's Board of Directors. The current members of
the Executive Committee are Directors Gardner, Schumann and Weise. Directors
Geisler, Rathbun and Benson serve as alternates on this committee. This
committee met once in 1998.
The Investment/Asset-Liability Committee consists of Directors Gardner,
Weise and McNeil and Officers Timothy Johnson, Dwain Jorgensen and Jon Eberle.
The committee meets at least quarterly to discuss current and potential
investments, to ensure that all investment activities are consistent with the
Bank's Board of Directors' policies and to review short- and long-range asset
and liability objectives of the Bank. This committee met ten times in 1998.
The Mortgage and Consumer Loan Committee meets on an as-needed basis to
approve in advance all loans in excess of the FNMA and FHLMC conforming loan
amounts in accordance with the underwriting guidelines of the Bank, perform all
second reviews, and approve, deny or ratify exceptions to lending policies,
recommend changes in loan policies, and approve changes in loan products. The
Mortgage and Consumer Loan Committee consists of Directors Gardner, Weise and
McNeil and Officers Danae Ostern and Dwain Jorgenson. This committee met twice
in 1998.
The Merger and Acquisition Committee meets on an as-needed basis to
research, review, and evaluate possible mergers and acquisitions. This
committee coordinates a merger and acquisition team when needed and makes all
presentations and recommendations to the Board of Directors. The members of
this committee are Directors Gardner and Weise and Officers Dwain Jorgensen and
Timothy Johnson. This committee did not meet in 1998.
The Salary Administration Committee meets to review salaries and the
performance of officers and employees, and recommends compensation adjustments
and promotions. This committee is currently comprised of Directors Geisler,
Schumann and Weise. The Salary Administration Committee met once during 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the Bank's Salary Administration Committee (which functions as
the Bank's compensation committee) was comprised of Directors Geisler, Schumann
and Weise. Mr. Weise is the President and Chief Executive Officer of the
Company and during 1998 served as President and Chief Executive Officer of the
Bank. No other interlocking relationship exists between the Company's Board of
Directors or Salary Administration Committee and the board of directors or
compensation committee of any other company.
DIRECTOR COMPENSATION
CASH COMPENSATION. Each non-employee member of the Board of Directors of
the Company is paid $300 per month. Non-employee directors of the Bank are paid
a fee of $600 per month and receive $100 for each regular or special meeting
attended. In addition, non-employee directors who are members of the Audit
Committee of the Company receive $100 per month. No fees are paid for being a
member of or attending any meetings of any other committee of the Company or the
Bank. The Company allows each member of the Board of Directors to elect to
-7-
<PAGE>
defer receipt of his or her fees until January 30 of the calendar year
immediately following the date in which such member ceases to serve as a member
of the Board of Directors. The deferred fees earn interest at an interest rate
equal to the Bank's cost of funds on November 30 of each year. A director who
is an officer or employee of the Company or the Bank receives no separate
compensation for service as a director of the Company or the Bank.
EXECUTIVE COMPENSATION
The Company has not paid any compensation to its executive officers since
its formation. The Company does not presently anticipate paying any
compensation to such persons until it becomes actively involved in the operation
or acquisition of businesses other than the Bank.
The following table sets forth the compensation paid or accrued by the Bank
during the fiscal years indicated for services rendered by the Named Officers.
No executive officers of the Bank other than Messrs. Weise, McNeil and Gardner
received cash compensation in excess of $100,000 during 1998.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
------------------------
ALL OTHER
SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Roger P. Weise, Chairman, President, 1998 168,000 550 29,776
Chief Executive Officer and Director 1997 165,300 150 79,075
1996 158,100 150 47,015
James B. Gardner, Executive Vice 1998 129,000 150 24,484
President, Chief Financial Officer and 1997 120,600 150 60,258
Director 1996 114,600 300 36,334
Michael McNeil, President of the Bank 1998 105,750 50 1,880
</TABLE>
- --------------------
(1) During 1998, 1997 and 1996, none of Mr. Weise, Mr. Gardner or Mr. McNeil
received from the Company any benefits or perquisites that, in the
aggregate, exceeded 10% of his salary and bonus or $50,000.
(2) The amounts for 1996 represent contributions by the Bank in the amount of
$2,312 and $2,092 to the accounts of Messrs. Weise and Gardner,
respectively, under the Bank's 401(k) Plan and $44,703 and $34,242, the
value of shares of Common Stock allocated to the ESOP accounts of Messrs.
Weise and Gardner, respectively, based upon a market value of $18.125 per
share of Common Stock on December 31, 1996. The amounts for 1997 represent
contributions by the Bank in the amount of $2,375 to the accounts of both
Messrs. Weise and Gardner under the Bank's 401(k) Plan and $76,700 and
$57,883, the value of shares of Common Stock allocated to the ESOP accounts
of Messrs. Weise and Gardner, respectively, based upon a market value of
$32.50 per share of Common Stock on December 31, 1997. The amounts for
1998 represent the Bank's contribution of $2,500 to the accounts of each of
Messrs. Weise and Gardner and $1,880 to the account of Mr. McNeil under the
Bank's 401(k) Plan and $27,278 and $21,984, the value of shares allocated
to the ESOP accounts of Messrs. Weise and Gardner, respectively, based upon
a market value of $11.75 per share of Common Stock on December 31, 1998.
STOCK OPTIONS
No individual grants of stock options were made to the Named Officers
during 1998.
-8-
<PAGE>
The following table shows, as to the Named Officers, information concerning
stock options exercised and the value of options held by such persons at the end
of 1998.
AGGREGATED OPTION/SAR EXERCISES IN 1998
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS
SHARES ACQUIRED VALUE REALIZED YEAR-END (#)(2) AT FISCAL YEAR-END ($)(3)
NAME ON EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------- ----------------- ---------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Roger P. Weise -- -- 85,977 59,336 $218,382 $150,713
James B. Gardner 4,000 $23,160 52,141 37,428 $132,438 $95,067
Michael McNeil -- -- -- -- -- --
</TABLE>
- --------------------
(1) Represents market value of underlying securities on date of exercise less
the exercise price.
(2) Includes options exercisable within 60 days of fiscal year end.
Approximately 20% of the options vest on each anniversary of the date of
grant. All options were granted at fair market value and have a term of
ten years. Generally, all of the options will become fully exercisable
upon approval by the Company's stockholders of a merger, plan of exchange,
sale of substantially all of the Company's assets or plan of liquidation.
(3) Represents market value of underlying securities at year end of $11.75 per
share less the exercise price.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Bank has entered into employment agreements with Messrs. Weise and
Gardner. These agreements are designed to assist the Bank in maintaining a
stable and competent management team. Each agreement has a three year term
which automatically extends on a daily basis unless either the Bank or the
applicable employee gives contrary written notice to the other party. The Bank
may terminate either agreement at any time. Each agreement also will terminate
upon death or disability of the employee or upon the occurrence of certain
events specified in the Office of Thrift Supervision regulations. In addition,
either employee may terminate his agreement upon 90 days' notice to the Bank.
In the event that either agreement is terminated by the Bank, other than for
cause or by reason of death or disability of the employee, the employee will
continue to receive his salary and the same insurance benefits as he was
receiving before the date of termination through the remaining term of the
agreement.
In the event the employee is terminated in connection with, or within 12
months after, a change of control or the employee voluntarily terminates his
employment in connection with, or within 12 months after, a change in control
that was opposed by the Bank's Board of Directors at any time within one year of
the change in control, the employment agreements provide for payment to the
employee of his salary for the remainder of the term of the agreement and an
additional payment of up to 299% of the employee's "base amount" of
compensation, as defined in Section 280G of the Internal Revenue Code of 1986,
as amended ("Section 280G"); provided, however, that the total amount payable in
the event of a change in control may not exceed three times the employee's
annual compensation or be non-deductible by the Bank for federal income tax
purposes pursuant to Section 280G. For the purposes of the employment
agreements, a "change in control" is defined as any event which would require
the filing of an application for acquisition of control or notice of change in
control pursuant to 12 C.F.R. Section 574.3. Such events may be triggered by,
among other things, an acquisition of more than 10% of the Company's Common
Stock under certain circumstances or the acquisition of proxies representing
more than 25% of the Company's Common Stock that would enable the acquiror to
elect one-third or more of the directors. Based on their current salaries, if
the employment of Messrs. Weise and Gardner had been terminated as of
December 31, 1998 under circumstances giving rise to severance pay as described
above, such individuals would have been entitled to receive maximum lump-sum
cash payments of approximately $527,000 and $360,000 respectively.
-9-
<PAGE>
These employment agreements also provide, among other things, for
participation in an equitable manner in employee benefits applicable to
executive personnel. The agreements further provide that, for a period of one
year after termination of employment for any reason, the employee will not
manage, operate, or control any financial institution having an office within
ten miles of any office of the Bank.
The Bank has entered into a Severance Agreement with Mr. McNeil for
the purpose of assisting the Bank in maintaining a stable and competent
management team. The agreement has a thirty month term which automatically
extends on the anniversary date of the agreement for an additional twelve month
period if the Board of Directors of the Company explicitly approves the
extension after its review of a formal evaluation of Mr. McNeil's performance.
Either the Bank or Mr. McNeil may give written notice to the other, ninety days
in advance of the anniversary date, that such party does not wish to extend the
term of the agreement. In addition, the Bank may terminate the agreement at any
time. The agreement also will terminate upon Mr. McNeil's death or disability
or upon the occurrence of certain events specified in the Office of Thrift
Supervision regulations. Upon the occurrence of a change of control followed by
an "involuntary termination" of Mr. McNeil (other than for cause), the agreement
provides for payment of up to 299% of Mr. McNeil's base amount of compensation,
as defined in Section 280G; provided that the total amount payable in the event
of a change in control may not exceed three times the employee's annual
compensation or be non-deductible by the Bank for federal income tax purposes
pursuant to Section 280G. The agreement also provides, among other things, for
Mr. McNeil to receive life and health insurance coverage, substantially similar
to the coverage maintained for Mr. McNeil immediately prior to his termination,
for a period equal to the greater of twelve months or the remaining term of the
agreement. The phrase "involuntary termination" means (i) the termination of
Mr. McNeil without his written consent; (ii) a change in Mr. McNeil's workplace
to a location more than 20 miles from the Company's current headquarters; (iii)
a material demotion; (iv) a material adverse change in his total compensation;
or (v) a material permanent increase in his required hours of work or workload.
Mr. McNeil will not receive any benefits in the event that he is terminated for
cause. Based on his current salary, if the employment of Mr. McNeil had been
terminated as of December 31, 1998 under circumstances giving rise to severance
pay as described above, he would have been entitled to receive a maximum
lump-sum cash payment of approximately $408,250.
PENSION PLAN
The Bank's employees are included in the Financial Institutions Retirement
Fund, a multi-employer comprehensive pension plan (the "Pension Plan"). This
non-contributory defined benefit retirement plan covers all employees who have
met minimum service requirements. Employees become 100% vested in the Pension
Plan after five years of eligible service (as defined in the Pension Plan). The
Bank's policy is to fund the maximum amount that can be deducted for federal
income tax purposes. No contribution was made to the Pension Plan during 1998
because the Pension Plan was fully funded.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL ----------------------------------------------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35 40
------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 40,000 $ 4,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 $ 14,000 $ 16,000
60,000 6,000 9,000 12,000 15,000 18,000 21,000 24,000
80,000 8,000 12,000 16,000 20,000 24,000 28,000 32,000
100,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
120,000 12,000 18,000 24,000 30,000 36,000 42,000 48,000
140,000 14,000 21,000 28,000 35,000 42,000 49,000 56,000
160,000 16,000 24,000 32,000 40,000 48,000 56,000 64,000
180,000 18,000 27,000 36,000 45,000 54,000 63,000 72,000
</TABLE>
The above table illustrates annual pension benefits payable upon
retirement, which are not subject to offset for Social Security payments or
other payments, based on various levels of compensation and years of service and
assuming payment in the form of a straight-line annuity. Benefits payable under
the Pension Plan are based upon 1% of the average cash remuneration for the
highest five consecutive calendar years multiplied by the number of
-10-
<PAGE>
years of service of the employee. At December 31, 1998, Messrs. Weise and
Gardner had 39.5 and 16.5 years of credited service under the Pension Plan,
respectively.
COMPENSATION COMMITTEE AND SALARY ADMINISTRATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
COMPENSATION POLICY. The Compensation Committee of the Company works with
the Salary Administration Committee of the Bank to recommend to the full Board
of Directors of each entity the compensation of all employees, including
executive officers and directors.
The Salary Administration Committee of the Bank has designed the
compensation and benefit plans for all employees, executive officers and
directors in order to attract and retain individuals who have the skills,
experience and work ethic to provide a coordinated work force that will
effectively and efficiently carry out the policies adopted by the Board of
Directors and to manage the Company and its subsidiaries to meet the Company's
mission, goals and objectives.
To determine the compensation and benefit plans for employees, executive
officers and directors, the Salary Administration Committee sets salary ranges
for every position and fees for the Board of Directors. It then reviews along
with the Compensation Committee of the Company (i) the financial performance of
the Bank over the most recently completed fiscal year (principally return on
assets, general and administrative expense, CAMELS rating, compliance rating and
quality of assets) compared to results at comparable companies within the
banking industry, and (ii) the responsibilities and performance of each
individual employee, executive officer and director and the compensation levels
of such personnel with the compensation of personnel with similar
responsibilities at other comparable companies within the banking industry. The
Compensation Committee and the Salary Administration Committee evaluate all
factors subjectively in the sense that they do not attempt to tie any factors to
a specific level of compensation. The Salary Administration Committee also
reviews salary ranges, health insurance plans and tax-qualified retirement
plans.
All employees and executive officers participate on an equal,
nondiscriminatory basis in the Bank's medical insurance plan, medical
reimbursement plan, child care plan, long-term disability plan and group life
insurance plan. The Bank also provides to all employees and executive officers
on a nondiscriminatory basis participation in the Pension Plan, a 401(k) Plan
and the ESOP. Nondiscretionary cash bonuses (up to a maximum of $150) are
awarded annually to all employees based upon years of service, with an
additional nondiscretionary cash bonus awarded to employees every five years of
service. To date, the Company has not paid any discretionary cash bonus awards
to its executive officers.
The Salary Administration Committee of the Bank recommends all compensation
and benefit plans to the full Board for the Board's approval. Although
President Weise was a member of the Salary Administration Committee of the Bank
during 1998, Mr. Weise did not participate in discussions related to his
compensation at either the committee or Board of Directors levels.
STOCK OPTION PLAN AND RESTRICTED STOCK AWARD PLAN. The Stock Option Plan
and the RRP were designed to reward Board members and executive officers for the
future long term performance of the Company, based on the responsibilities of
the Board and of the executive officers and other senior managers to manage the
Bank and the Company. The Salary Administration Committee has not recommended
and the Compensation Committee has not made any awards to executive officers
under either plan since 1995 because both committees believe that the 1995
awards provide adequate incentive to such employees.
REPORT ON EXECUTIVE OFFICER COMPENSATION. As discussed above, the Salary
Administration Committee of the Bank and the Compensation Committee of the
Company establish the salary ranges to be paid for every position. The Chief
Executive Officer's compensation is based on the same factors as those applied
to all employees and executive officers. There are no special programs designed
especially for the Chief Executive Officer. As shown in the table set forth
under "Security Ownership of Principal Stockholders and Management" above, the
Chief Executive Officer holds a significant interest in the Company's Common
Stock. It is the philosophy of the Compensation Committee that the financial
rewards and incentives for the Chief Executive Officer should come in large part
from increases in the value of the Company's Common Stock. Consistent with that
philosophy, the
-11-
<PAGE>
Compensation Committee set the salary of the Chief Executive Officer for 1998 at
approximately the same level as 1997. The bonus paid to the Chief Executive
Officer was paid under the Company's general employee bonus program. The other
compensation paid to the Chief Executive Officer was pursuant to the terms of
plans generally applicable to all other employees.
THE COMPENSATION COMMITTEE
TIMOTHY R. GEISLER IRMA R. RATHBUN M. F. SCHUMANN
AND
THE SALARY ADMINISTRATION COMMITTEE
TIMOTHY R. GEISLER M.F. SCHUMANN ROGER P. WEISE
-12-
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following graph compares the cumulative total stockholder return on the
Company's Common Stock to the Nasdaq U.S. Stock Index ("Nasdaq-U.S."), which
includes all Nasdaq traded stocks of U.S. companies, and the SNL Securities
Midwest Asset Size Index (the "HMN Peer Group"), which includes publicly traded
financial institutions located in selected Midwestern states with assets of $500
million to $1 billion, for the period of June 29, 1994 through December 31,
1998. The graph assumes that $100 was invested on June 29, 1994 and that all
dividends were reinvested.
[GRAPHIC OMITTED - information from the omitted line chart is presented in the
table below.]
<TABLE>
<CAPTION>
PERIOD ENDING
------------------------------------------------------------
INDEX 6/29/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HMN Financial, Inc. 100.00 87.38 124.28 140.78 252.44 138.36
Nasdaq - Total US 100.00 107.05 151.40 186.18 228.41 321.08
HMN Peer Group 100.00 100.12 139.95 163.96 273.15 252.11
</TABLE>
The HMN Peer Group consists of all publicly traded thrifts with total assets
between $500 million and $1 billion located in the states of Illinois, Indiana,
Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota,
Ohio, South Dakota and Wisconsin.
-13-
<PAGE>
CERTAIN TRANSACTIONS
The Bank follows a policy of granting loans to eligible directors,
officers, employees and members of their immediate families for the financing of
their personal residences and for consumer purposes. Historically, the Bank has
made residential mortgage and consumer loans to nonexecutive officers and other
employees utilizing an employee rate that was generally 1% below the then
current rate offered to the general public. Prior to 1997 Regulation O required
that all loans to directors, executive officers and members of their families be
made in the ordinary course of business and on the same terms, including
collateral and interest rates, as those prevailing at the time for comparable
transactions and that the loans not involve more than the normal risk of
collectibility at the time of origination. As a result of changes in
Regulation O, the Board of Directors changed its loan policy during 1997 to
allow directors and executive officers to obtain loans at the employee rate. At
December 31, 1998, the aggregate amount of the Bank's loans to directors,
executive officers and employees was approximately $3.9 million (of which
$814,600 represents loans to directors and executive officers) or 5.7% of the
Company's stockholders' equity. All of these loans were current at December 31,
1998. All of the loans to directors and executive officers (a) were made in the
ordinary course of business, (b) were made on substantially the same terms,
including collateral, as those prevailing at the time for comparable
transactions with other persons, except for the employee interest rate, and (c)
did not involve more than the normal risk of collectibility or other unfavorable
features.
II - RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed KPMG Peat Marwick LLP,
independent accountants, to be the Company's auditors for the fiscal year ending
December 31, 1999. KPMG Peat Marwick LLP has audited the financial statements
of the Company since 1966. Representatives of KPMG Peat Marwick LLP are
expected to attend the Meeting to respond to appropriate questions and to make a
statement if they so desire.
If the stockholders do not ratify the appointment of KPMG Peat Marwick LLP,
the Board of Directors will review the appointment.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
the next Annual Meeting of Stockholders, any stockholder proposal to take action
at such meeting must be received at the Company's main office located at 101
North Broadway, Spring Valley, Minnesota 55975-0231, no later than November 23,
1999. Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, as amended.
Under the Company's By-laws, certain procedures are provided which a
stockholder must follow to nominate persons for election as directors or to
introduce an item of business at an annual meeting of stockholders. These
procedures provide, generally, that stockholders desiring to make nominations
for directors, or to bring a proper subject of business before the meeting, must
do so by a written notice timely received (not later than 90 days in advance of
such meeting) by the Secretary of the Company containing the name and address of
the stockholder as they appear on the Company's books, the class and number of
shares owned by the stockholder, and a representation that the stockholder
intends to appear in person or by proxy at the meeting. If the notice relates
to a nomination for director, it must also set forth the name and address of any
nominee(s), all arrangements or understandings between the stockholder and each
nominee and any other person(s) (naming such person(s)) pursuant to which the
nomination(s) are to be made, such other information regarding each nominee as
would have been required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had each nominee been
nominated by the Board, and the consent of each nominee to be named in the proxy
statement and to serve. Notice of an item of business shall include a brief
description of the proposed
-14-
<PAGE>
business and a description of all arrangements or understandings between the
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by the stockholder and any
material interest of such stockholder in such business.
The chairman of the meeting may refuse to allow the transaction of any
business not presented, or to acknowledge the nomination of any person not made,
in compliance with the foregoing procedures. Copies of the Company's By-laws
are available from the Secretary of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission. Directors and executive officers are required by Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's directors and executive
officers, all Section 16(a) filing requirements were met for the year ended
December 31, 1998, with the exception that the HMN Financial, Inc. Employee
Stock Ownership Plan failed to file Form 4's to report shares of the Company's
Common Stock purchased by the plan during March, April and June of 1998. A Form
5 was filed in February 1999 reflecting the purchases.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
The Company anticipates furnishing its Annual Report, including financial
statements, for the year ended December 31, 1998 to each stockholder with this
Proxy Statement.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitation by mail,
directors, officers and regular employees of the Company and the Bank may
solicit proxies personally or by telephone without additional compensation.
By Order of the Board of Directors
/s/ Roger P. Weise
Roger P. Weise
CHAIRMAN
Dated: March 23, 1999
-15-
<PAGE>
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to HMN Financial, Inc, c/o
Shareowner Services, -SM- P.O. Box 64873, St. Paul, MN 55164-0873.
PLEASE DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. Election of directors
01 Michael McNeil 02 Richard J. Ziebell
03 James B. Gardner 04 Timothy R. Geisler
05 Allan R. DeBoer
/ / Vote FOR all nominees / / Vote WITHHELD from all nominees
(except as marked to the
contrary)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
- ------------------------------------------------------------------------
/ /
- ------------------------------------------------------------------------
2. The ratification of the appointment of KPMG Peat Marwick LLP
as the auditors of the Company for the fiscal year ending
December 31, 1999.
/ / For / / Against / / Abstain
3. In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting, or any adjournments
or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box / /
Indicate changes below:
Dated: , 1999
------------------------------------------
- ------------------------------------------------------------------------
/ /
/ /
- ------------------------------------------------------------------------
Signature(s) in Box
PLEASE SIGN EXACTLY AS THE NAME(S) APPEAR PRINTED TO THE LEFT.
IF A CORPORATION, PLEASE SIGN THE CORPORATION NAME IN FULL BY A DULY
AUTHORIZED OFFICER AND INDICATE THE OFFICE OF THE SIGNER. WHEN SIGNING AS
EXECUTOR, ADMINISTRATOR, FIDUCIARY, ATTORNEY, TRUSTEE OR GUARDIAN, OR AS
CUSTODIAN FOR A MINOR, PLEASE GIVE FULL TITLE AS SUCH. IF HELD IN JOINT
TENANCY, ALL PERSONS SHOULD SIGN.
<PAGE>
HMN FINANCIAL, INC
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, APRIL 27, 1999
10:00 A.M.
BEST WESTERN APACHE HOTEL
1517 S.W. 16TH STREET
ROCHESTER, MINNESOTA
HMN FINANCIAL, INC.
[LOGO] 101 NORTH BROADWAY PROXY
SPRING VALLEY, MINNESOTA 55975-0231
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL
MEETING ON TUESDAY, APRIL 27, 1999.
The shares of stock you hold in your account will be voted as you specify below.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2.
By signing the Proxy, you revoke all prior proxies and appoint Roger P. Weise,
and Irma R. Rathbun, and each of them, with full power of substitution, to vote
your shares on the matters shown on the reverse side and any other matters
which may come before the Annual Meeting and all adjournments.
SEE REVERSE FOR VOTING INSTRUCTIONS
