1. Tyler, Dave, Brandon, Jack
HMN Financial
Tyler, Dave, Brandon, Jack

2. Agenda Company Profile Financial Highlights SWOT Analysis
Ratio – Comps Analysis
Valuation Recommendation
Profile – Financial Highlights – SWOT – Ratio - Valuation

3. Company Overview
Stock savings bank holding company that owns 100% of Home Federal Savings Bank.
Operates retail banking and loan production facilities in MN and IA.
Business involves attracting deposits from the general public and businesses.
Purchase one to four family residential, commercial real estate, and multi-family mortgage loans as well as consumer, construction, and commercial business loans.
Also invests in mortgage-backed and related securities.
Earnings Per Share:
Fourth Quarter Highlights
-Net income of $1.5 million compared to net loss of $7.6 million for fourth quarter of 2011.
-Diluted earnings per common share of $0.25 compared to diluted loss per common share of $2.08 in the fourth quarter of 2011.
-Provision for loan losses of $0, down $7.6 million from fourth quarter of 2011.
-Losses on real-estate owned of $0.3 million, down $2.1 million from fourth quarter of 2011.
-Net interest income of $5.5 million, down $1.4 million from 4th qrt of 2011.
- Non-performing assets of $40.6 million, down $6.6 million from 3rd qrt of 2012.
Profile – Financial Highlights – SWOT – Ratio - Valuation *

4. Financial Highlights
Positive Operating Margins after 5 years of negative growth
Shrinking balance sheet size and streamlining loan structure
Profile – Financial Highlights – SWOT – Ratio - Valuation

5. Profile – Financial Highlights – SWOT – Ratio - Valuation

6. SWOT Analysis
Profile – Financial Highlights – SWOT – Ratio - Valuation

7. Strengths
Reported financial results reflect the increased volume of mortgage banking activities
Diversified real estate holdings in Minnesota
Real estate market looking positive
2012 Net income of $5.3 million compared to net loss of $11.6 million for 2011
Undergoing management reconstruction *

8. Weaknesses Exposure to Savings and Loans industry
Relatively small firm
Negative net income from ’08-’11

9. Opportunities Low stock price with room for growth
Market niches in Minnesota and Iowa

10. Threats Potential of clients defaulting Delinquencies
Interest rate risk

11. Comparable Analysis P/E P/B D/E Leverage Ratio HMNF 8.5x 0.77 10.7
10.7
Porter Bancorp
-0.3x
0.23
0.73
24.6
Home Federal
97.7x
0.97
5.8
Bank of the Carolinas
N/A
6.29
51.6
Community Capital Corp.
-0.45x
0.07
2.34
9.4
Profile – Financial Highlights – SWOT – Ratio - Valuation

12. Valuation Current P/E: 8.5 FY2012 EPS: .86
2013 P/E: (Industry Average Range)
Assumptions: $ EPS
Recession: 8.5x Base Case P/E: Optimistic: 20.5
Profile – Financial Highlights – SWOT – Ratio - Valuation

13. Recommendation
Buy Half Position at $6.22