UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 22, 2014

HMN Financial, Inc.
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code (507) 535-1200

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e- 4(c)) 

(e)           Senior Management Incentive Plan

On July 22, 2014, HMN Financial, Inc. (the “Company”) adopted the HMN Financial, Inc. Senior Management Incentive Plan (the “Plan”) for the employees or employee groups determined by the Compensation Committee of the Company’s Board of Directors (the “Committee”). The Plan design incorporates incentive award payout levels that are linked to the achievement of pre-defined performance objectives, and payment of earned amounts in a mixture of cash and restricted stock. The payout levels for each Plan participant are designed to provide market competitive payouts for the achievement of performance objectives.

The Committee will review and approve for each performance period the Plan participants, award opportunity levels, and specific performance objectives and weightings. The performance objectives will be based on performance criteria approved by the Committee, such as net income, credit quality, return on equity, return on assets, and performance against strategic objectives. The Committee will apply both “Level 1” and “Level 2” performance objectives, as follows:

The Committee will establish threshold, target, and maximum award opportunities under the Plan for each participant as a percentage of the participant’s actual salary earned during the performance period. An individual participant may earn less or more than the targeted incentive payout level based on performance during the applicable performance period. In order to be eligible for any payout, a Plan participant must also receive a minimum individual performance rating of “meets expectations” or better for the relevant performance period. The participant must be an active employee of the Company on the award payout date in order to receive an award, unless the participant terminates employment due to death, disability or retirement during the performance period (in which case, the participant may, at the Committee’s discretion, receive a pro rata payout of the Plan award otherwise earned during the performance period) or after the performance period is completed but prior to the payment date (in which case, the participant will be entitled to the full earned amount of the Plan award).

The payout amount will be paid in a combination of cash and shares of restricted stock, the ratio of which will be determined annually by the Committee. The cash portion will be paid no later than March 15 of the year following the performance period. The restricted stock will be awarded pursuant to the Company’s 2009 Equity Incentive Plan with the grant date of the award being the same date as the payment date of the cash potion of the incentive payout. The number of restricted shares awarded will be determined by dividing the dollar value of the participant’s restricted share payout amount by the closing sale price of a share of the Company’s common stock on the date of grant. The restricted shares will vest 1/3 each year over a three-year period. If a participant terminates employment during such three-year period, the participant will forfeit any unvested restricted shares unless termination occurs due to death, disability or retirement, in which case, all restricted shares awarded under the Plan will immediately vest. All restricted shares awarded under the Plan will also immediately vest upon a change in control of the Company. A “change in control” generally occurs under for purposes of the Plan if

The Committee will administer the Plan and has the power, subject to the terms of the Plan, to determine when and to whom Plan awards will be granted, and the form, amount and other terms and conditions of each such award. Each award under the Plan and the compensation associated therewith is subject to potential forfeiture to or recovery by the Company in accordance with any compensation recovery policy currently in plan or subsequently adopted by the Company’s Board of Directors.

The foregoing summary of the terms of the Plan does not purport to be complete and is qualified in its entirety by reference to the Plan, a copy of which is attached hereto as Exhibit 10.1 and is incorporated by reference into this Item 5.02.

Item 9.01     Financial Statements and Exhibits.

(d)     Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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