Eagan Minnesota Real Estate

							               Presenters
• Michael McNeil
  – President and Chief Executive Officer
• Jon Eberle
  – Sr. Vice President/Chief Financial Officer/
    Treasurer
    Safe Harbor Statement
This presentation may contain certain forward-looking
     statements within the meaning of the Private
    Securities Reform Act of 1995. Forward-looking
  statements include expressions such as “expects,”
      “intends,” “believes” and “should” which are
    necessarily statements of belief as to expected
    outcomes of future events. Actual results could
materially differ from those contained in, or implied by
 such statements. HMN Financial, Inc. undertakes no
    obligation to release revisions to these forward-
looking statements or reflect events or circumstances
           after the date of this presentation.
                      Background
1934 -   Home Federal established in Spring Valley, Minnesota

1994 -   Initial public offering of HMN stock (ticker HMNF)

1997 -   Acquired Marshalltown Financial Corporation

1998 -   Current CEO joined Company and focus shifted to commercial

2001 -   Corporate office moved to Rochester, Minnesota

2002 -   First private banking location opened in Edina, Minnesota

2004 -   Loan production office opened in St. Cloud, Minnesota

2004 -   Private banking location opened in Rochester, Minnesota

2007 -   Full service commercial branch opened in Eagan, Minnesota

2008 -   Rochester branch opened August 1, 2008 (insurance alliance)
Locations


 Eagan
       Financial Highlights
2007
• Record earnings of $11.3 million
• EPS of $2.89, up 38% over 2006
• ROA 1.03% and ROE 11.53%
• Net interest margin of 3.67%, down 46 basis
  points from 2006
• Efficiency ratio of 48.75% for 2007
• Total assets $1.1 billion at December 31, 2007
        Financial Highlights
First six months of 2008
• Net loss of $537,000
• Diluted loss per share of ($0.15)
• Goodwill impairment charge of $3.8 million ($1.02 per
   diluted share)
• Net interest margin of 3.21%, down 67 basis points
   from first six months of 2007
• Provision for loan losses of $2.7 million, up $1.2
   million
• Tier I core capital 8.52%, Tier I risk-based capital
   10.76%, risk-based capital 11.56%
    HMN Stock Information
• Ticker - HMNF (NASDAQ)
• 300,000 shares approved for repurchase,
  but no shares purchased in 2nd quarter of 2008
• Stock price of $15.11 at August 13, 2008
  represents a 11.48 multiple of TTM earnings
  and 66% of book value
• Quarterly dividend of $0.25 per share, dividend
  yield of 6.60%
• 4.4 million shares outstanding
• Book value per share of $22.81
               Summary Performance
       Total Assets                               Net Interest Margin                    Net Income
          (in millions)                                                                     (in millions)

                                                                                   $11.1          $11.3
                   $1,117
                                                                                $9.3
                                                          4.13%                            $8.4
                             $1,076
                                                   3.80%
                                                                 3.67%
                                           3.50%
                                                                      3.21%
       $991
              $978
$961                                                                                                        $3.3*



                                                                                                       $(0.5)




2004          2006               6/30/08   2004           2006        6/30/08   2004        2006         6/30/08
       2005               2007                     2005           2007                 2005       2007
                                                                                           * Without goodwill impairment
  Provision for Loan Losses
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
    $0
         2004   2005   2006   2007   6/30/2008
         Profitability Analysis
14.00%   1.01%   1.12%   0.86%      1.03%    -0.10%      0.60%       1.20%
12.00%                                                               1.00%

                   2%
10.00%




                                      3%
                   .4
           3%



                                                                     0.80%
                 12




                                      .5
           .0




                                    11
8.00%
         11




                            %
                                                                     0.60%

                         85
6.00%
                         8.




                                                              %
                                                                     0.40%




                                                           65
4.00%




                                                         6.
                                                 0%
                                                                     0.20%




                                               .1
2.00%




                                              -1
0.00%                                                                0.00%

-2.00%                                                               -0.20%
          2004    2005   2006        2007    6/30/08 6/30/2008*

                              ROE      ROA

                                                   * Without goodwill impairment
                      Asset Mix
       2003                       2007                            6-30-08
  15%     18%                17%      15%                         13%   17%
                                                                8%
13%                        8%

                                                                22%
                            21%           39%                            40%
 16%          38%




                    Single Family               Commercial RE
                    Commercial Business         Consumer
                    Cash & Investments
             Commercial Real Estate
               Loan Composition
2006   1%
                                                                  2007
             7%                               1%   8%
                         15%                                   15%
      5%                                      3%
                                              2%
  3%
  2%                                     8%

 1%
 6%
                                  20%   2%                                20%
                                         6%



                             5%                                      3%
       35%
                                                   32%

                  Lodging                 Ethanol plants
                  Retail/Office           Warehouse
                  Nursing home            Manufacturing
                  Land developments       Churches/community service
                  Golf courses            Other
                  Restaurant/bar/cafe
                Liability Mix
                       (in millions)


$1,000
  $900
  $800
  $700
  $600
  $500
  $400
  $300
  $200
  $100
    $0
         2004       2005     2006       2007    6/30/2008


Wholesale Funding   CD's   Savings & Money Market   Checking
Performance Measurements
               Interest Rate Margin
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%




                                                              08
       01


               02


                       03


                               04


                                       05


                                               06


                                                       07

                                                            20
    20


            20


                    20


                            20


                                    20


                                            20


                                                    20


                                                              /
                                                           30
                                                        6/
             HMN Financial, Inc.       SNL Bank NASDAQ Index
              Cost of Funds
5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
           2004      2005      2006      2007    6/30/2008

        HMN Financial, Inc.
        Average Semi-Annual National Cost of Funds Index
 Non-Performing Assets
        (as a percent of total assets)

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
         2004       2005       2006    2007    6/30/2008

        HMN Financial, Inc.   SNL Bank NASDAQ Index
                       Non-Performing Assets
                                                               June 30,                     December 31,             December 31,        December 31,
(Dollars in thousands)                                           2008                          2007                     2006                2005
Non-Accruing Loans:
 One-to-four family real estate                        $             1,046              $         1,196          $         1,364     $          626
                                                                               (1)(2)                      (3)
 Commercial real estate                                             39,221                       15,641                    5,296                948
 Consumer                                                            1,439                        1,094                    1,254                496
 Commercial business                                                 2,500                        1,723                      394                259
 Total                                                              44,206                       19,654                    8,308              2,329

Other assets                                                              25                        34                       44                 178
Foreclosed and Repossessed Assets:
 One-to-four family real estate                                      2,731                          901                    1,422                565
 Consumer                                                               19                           33                        0                 61
 Commercial real estate                                              1,541                        1,313                      650                750
Total non-performing assets                            $            48,522              $        21,935          $        10,424     $        3,883
Total as a percentage of total assets                                 4.50 %                       1.96 %                   1.07 %             0.39 %
Total non-performing loans                             $            44,206              $        19,654          $         8,308     $        2,329
Total as a percentage of total loans receivable, net                  4.94 %                       2.27 %                   1.08 %             0.30 %
Allowance for loan loss to non-performing loans                      33.76 %                      63.28 %                 118.84 %           376.88 %

(1) Includes $24.8 million in residential development loans.
(2) Increase since December 31, 2007 is primarily related to the following:
         3 residential development loans totaling $13.7 million
         1 manufacturing facility loan totaling      $5.0 million
         1 hotel property loan totaling              $5.0 million
         5                                          $23.7 million
(3) Increase in 2007 is primarily related to 2 residential development relationships totaling $8.9 million.
                                   Delinquency Data

                                               June 30,          December 31,         December 31,         December 31,
(Dollars in thousands)                           2008               2007                 2006                 2005
Delinquency Data:
Delinquencies (1)
  30+ days                                 $       2,491     $          6,416     $          1,895     $          3,245
  90+ days                                             0                    0                    0                    0
Delinquencies as a percentage of
 loan and lease portfolio (1)
  30+ days                                          0.27 %               0.73 %               0.25 %               0.41 %
  90+ days                                          0.00 %               0.00 %               0.00 %               0.00 %

         (1) Excludes non-accrual loans.
           Return on Equity
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00%
         2004      2005        2006   2007   6/30/2008 6/30/2008*

         HMN Financial, Inc.     SNL Bank NASDAQ Index

                                                    * Without goodwill impairment
                                       Total Return Performance

              250        HMN Financial, Inc.
                         NASDAQ Composite
                         SNL Bank NASDAQ Index
              225



              200
Index Value




              175



              150


              125


              100


              75
              12/31/03      12/31/04           12/31/05   12/31/06   12/31/07   06/30/08
             Areas of Focus
• Non-Performing Loans
• In-house Data Processing
• Deposits
  – Use of Technology
     •   Remote Deposit
     •   Online Banking
     •   Commercial Cash Management Products
     •   In-house data processing
  – Private Banking
  – Industry Niches
          Areas of Focus
• Loans
  – Commercial Lending
  – Residential Mortgage/Home Equity
  – Private Banking
Opportunities
Rochester, MN
What makes Rochester unique?

• Home of the Mayo Clinic
• Averages 1.5 million visitors a year,
  largely for patient care at Mayo Clinic
• Bio-technology and medical genomics
  research partnership between Mayo Clinic
  and University of Minnesota
• Newest campus of University of Minnesota
  system – established in Rochester in 2006
 Mayo Complex & Rochester Downtown




Staff physicians and scientists                        2,000
Residents, fellows and temporary professionals         2,000
Allied health staff (clinic and hospital)             24,000
                                          Total Staff 28,000
       Largest Employers in the
         Rochester Area (2007)
Mayo Clinic                          33,430   Medical/Hospital
IBM                                   4,400   Electronics/Computer
Rochester Public Schools              2,285   Education Services
Olmsted County                        1,205   Government
HyVee (north, south, Barlow)            860   Grocery-Retail
Olmsted Medical Center                1,019    Medical/Hospital Services
Wal-Mart & Sam’s Club                   962   Retail
City of Rochester                       847   Local Government
Crenlo                                  725   Fabricated Metal
Sunstone Hotel Properties               650   Hotel/Restaurant Services
Seneca Food                             690   (240 regular) (450 seasonal)
                                               Food Processing
Rochester Community & Tech College     550    Post Secondary Education
Federal Medical Center                 445    Corrections/Medical
Target                                 500    Retail
Charter                                635    Cable TV, high speed internet
Rochester Metropolitan Statistical Area

2006   Population - 180,280
2007   Median age - 36.19
2007   Total Employment - 109,085
2007   Unemployment Rate - 3.9%
2007   Per Capita Income - $38,973
2007   Mean HH Income - $93,045
2007   Total Commercial & Residential Permits -
       10,559
      Rochester MSA Demographic Analysis
             All Current Dollars ($)

             1980     1990         2000         2003         2004        2005          2010      2015      2020

Income per   10,347   20,120      31,044       33,829       35,845      36,941        43,716    52,952    65,117
  Capita


  Mean
Household    28,822   53,185      76,689       86,311       90,683      93,045        108,087   129,231   157,944
 Income



                          Source: Woods & Poole Economics, Inc., 2005 State Profile