Exhibit 99

HMN Financial, Inc. Announces Fourth Quarter Results and Annual Meeting

ROCHESTER , Minn.--(BUSINESS WIRE)--January 22, 2013--HMN Financial, Inc. (NASDAQ:HMNF):

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 fourth quarter of 2011
• Non-performing assets of $40.6 million, down $6.6 million from third quarter of 2012

Annual Highlights

• Net income of $5.3 million compared to net loss of $11.6 million for 2011
• Diluted earnings per common share of $0.86 compared to diluted loss per common share of $3.47 for 2011
• Provision for loan losses of $2.5 million, down $14.8 million from 2011
• Losses on real estate owned of $0.2 million, down $2.5 million from 2011
• Net interest income of $23.7 million, down $4.7 million from 2011
• Non-performing assets of $40.6 million, down $10.0 million from December 31, 2011
• Total assets decreased $137 million in 2012

HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $653 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $1.5 million for the fourth quarter of 2012, an improvement of $9.1 million compared to a net loss of $7.6 million for the fourth quarter of 2011. Net income available to common shareholders was $1.0 million for the fourth quarter of 2012, an improvement of $9.1 million from the net loss available to common shareholders of $8.1 million for the fourth quarter of 2011. Diluted earnings per common share for the fourth quarter of 2012 was $0.25, an improvement of $2.33 from the diluted loss per common share of $2.08 for the fourth quarter of 2011. The improvement in net income in the fourth quarter of 2012 is due primarily to a $7.6 million decrease in the provision for loan losses, a $0.4 million increase in the gain on sale of loans, and a $2.6 million decrease in noninterest expenses due primarily to the decrease in expenses and losses recognized on real estate owned between the periods. These changes to net income were partially offset by a $1.4 million decrease in net interest income due primarily to a decrease in interest earning assets between the periods.

President’s Statement
“The reported financial results reflect the increased volume of our mortgage banking activities and the positive impact that the stabilization of commercial real estate values has had on our provision for loan losses,” said Brad Krehbiel, President of HMN. “We are encouraged by the results of our ongoing efforts to improve credit quality in our commercial loan portfolio as evidenced by the positive trend of declining non-performing assets. We intend to continue to focus our efforts on further reducing these non-performing assets while, at the same time, improving the financial performance of our core banking operations.”

Fourth Quarter Results

Net Interest Income
Net interest income was $5.5 million for the fourth quarter of 2012, a decrease of $1.4 million, or 19.7%, compared to $6.9 million for the fourth quarter of 2011. Interest income was $7.0 million for the fourth quarter of 2012, a decrease of $2.2 million, or 23.6%, from $9.2 million for the same period in 2011. Interest income decreased between the periods primarily because of a $163 million decrease in the average interest-earning assets and also because of a decrease in the average yields between the periods. Average interest-earning assets decreased between the periods primarily because of a decrease in the commercial loan portfolio, which occurred because of low loan demand and the Company’s focus on improving credit quality, managing net interest margin and improving capital ratios. The average yield earned on interest-earning assets was 4.62% for the fourth quarter of 2012, a decrease of 13 basis points from the 4.75% average yield for the fourth quarter of 2011. The decrease in the average yield is due to the continued low interest rate environment that existed during the fourth quarter of 2012.

Interest expense was $1.5 million for the fourth quarter of 2012, a decrease of $0.8 million, or 35.1%, compared to $2.3 million for the fourth quarter of 2011. Interest expense decreased primarily because of a $170 million decrease in the average interest-bearing liabilities between the periods. The decrease in the average interest-bearing liabilities is primarily the result of a decrease in the average outstanding retail and brokered certificates of deposits between the periods and a decrease in other deposits as a result of the Bank’s Toledo, Iowa branch sale that was completed in the first quarter of 2012. The decrease in retail and brokered certificates of deposits between the periods was the result of using the proceeds from loan principal payments to fund the maturing certificates of deposits. Interest expense also decreased because of the lower interest rates paid on money market accounts and certificates of deposits. The decreased rates were the result of the low interest rate environment that continued to exist during the fourth quarter of 2012. The average interest rate paid on interest-bearing liabilities was 1.06% for the fourth quarter of 2012, a decrease of 20 basis points from the 1.26% average interest rate paid in the fourth quarter of 2011. Net interest margin (net interest income divided by average interest-earning assets) for the fourth quarter of 2012 was 3.63%, an increase of 8 basis points, compared to 3.55% for the fourth quarter of 2011.

Provision for Loan Losses
The provision for loan losses was $0 for the fourth quarter of 2012, a decrease of $7.6 million, or 100.0%, from $7.6 million for the fourth quarter of 2011. The provision decreased in the fourth quarter of 2012 primarily because there were fewer decreases in the estimated value of the underlying collateral supporting commercial real estate loans that required additional allowances or charge offs in the fourth quarter of 2012 when compared to the fourth quarter of 2011. The provision also decreased because of the $106 million decrease in the loan portfolio between the periods. Total non-performing assets were $40.6 million at December 31, 2012, a decrease of $6.6 million, or 14.0%, from $47.2 million at September 30, 2012. Non-performing loans decreased $4.6 million and foreclosed and repossessed assets decreased $2.0 million during the fourth quarter of 2012. The non-performing loan and foreclosed and repossessed asset activity for the fourth quarter of 2012 was as follows:

The decrease in non-performing loans relates primarily to the principal payments received on non-performing loans during the fourth quarter of 2012. Of the $3.7 million in principal payments received on non-performing loans in the fourth quarter of 2012, $1.4 million related to the payoff of two loans in the utility industry and $0.8 million related to the payoff of a loan secured by land.

A reconciliation of the allowance for loan losses for the fourth quarters of 2012 and 2011 is summarized as follows:

The following table summarizes the amounts and categories of non-performing assets in the Bank’s portfolio and loan delinquency information as of the end of the two most recently completed quarters and December 31, 2011.

The following table summarizes the number and types of commercial real estate loans (the largest category of non-performing loans) that were non-performing as of the end of the two most recently completed quarters and December 31, 2011.

The decrease in the non-performing commercial real estate loans from September 30, 2012 is due primarily to a $1.1 million development loan that was reclassified as accruing during the fourth quarter of 2012 and because additional principal payments were received on various other non-performing commercial real estate loans during the quarter.

The following table summarizes the number of lending relationships and industry of commercial business loans that were non-performing for the two most recent quarters and December 31, 2011.

Non-Interest Income and Expense
Non-interest income was $2.4 million for the fourth quarter of 2012, an increase of $0.4 million, or 20.2%, from $2.0 million for the same period in 2011. Gain on sales of loans increased $0.4 million between the periods primarily because of an increase in single family loan originations and sales. Other income increased $26,000 between the periods primarily due to an increase in rental income on other real estate. Fees and service charges decreased $0.1 million primarily because of a decrease in overdraft fees between the periods.

Non-interest expense was $6.3 million for the fourth quarter of 2012, a decrease of $2.6 million, or 29.2%, from $8.9 million for the same period of 2011. Losses on real estate owned decreased $2.1 million from the fourth quarter of 2011 primarily because there were fewer losses realized on the sale of real estate and there were fewer write downs in the value of the real estate owned in the fourth quarter of 2012 when compared to the same period in 2011. Compensation and benefits expense decreased $0.3 million between the periods primarily as a result of having fewer employees and also because of a decrease in pension benefit costs. Occupancy expense decreased $0.1 million primarily because of a decrease in depreciation and other expenses as a result of having fewer branch facilities. Deposit insurance expense increased $0.1 million because of an increase in the insurance rates between the periods. Other non-interest expenses decreased $0.1 million between the periods primarily because of a decrease in advertising expenses.

Income tax expense was $0.1 million in the fourth quarter of 2012, an increase of $0.1 million from the fourth quarter of 2011 when no income tax expense was recorded. In the second quarter of 2010, the Company recorded a deferred tax asset valuation reserve against its entire deferred tax asset balance and the Company continued to maintain a valuation reserve against the entire deferred tax asset balance at December 31, 2012. Since the valuation reserve is established against the entire deferred tax asset balance, no regular income tax expense was recorded for the fourth quarter of 2012. The income tax expense that was recorded in the fourth quarter of 2012 relates to alternative minimum tax amounts that are due since only a portion of the outstanding net operating loss carry forwards can be used to offset current income under the current alternative minimum tax rules.

Net Income (Loss) Available to Common Shareholders
The net income available to common shareholders was $1.0 million for the fourth quarter of 2012, an improvement of $9.1 million from the $8.1 million net loss available to common shareholders in the fourth quarter of 2011. The net income available to common shareholders increased primarily because of the change in the net income (loss) between the periods. The Company has deferred the last eight quarterly dividend payments, beginning with the February 15, 2011 dividend payment, on its Fixed Rate Cumulative Perpetual Preferred Stock, Series A issued to the United States Treasury Department as part of the TARP Capital Purchase Program. The deferred dividend payments have been accrued for payment in the future and are being reported for the deferral period as a preferred dividend requirement that is deducted from income for financial statement purposes to arrive at the net income (loss) available to common shareholders. Under the terms of the certificate of designations for the preferred stock, dividend payments may be deferred without default, but the dividend is cumulative and, since the Company failed to pay dividends for six quarters, the Treasury has the right to appoint two representatives to the Company’s board of directors, although the Treasury has not yet exercised this right. Under the terms of the Company’s and Bank’s Supervisory Agreements with their federal banking regulators, neither the Company nor the Bank may declare or pay any cash dividends, or purchase or redeem any capital stock, without prior notice to, and consent of these regulators.

Return (Loss) on Assets and Equity
The return on average assets for the fourth quarter of 2012 was 0.93%, compared to a 3.75% loss on average assets for the fourth quarter of 2011. Return on average equity was 9.77% for the fourth quarter of 2012, compared to a 45.87% loss on average equity for the same period of 2011. Book value per common share at December 31, 2012 was $8.02, compared to $7.36 at December 31, 2011.

Annual Results

Net Income (Loss)
Net income was $5.3 million for 2012, an improvement of $16.9 million, from the $11.6 million loss for 2011. Net income available to common shareholders was $3.5 million for the year ended December 31, 2012, an improvement of $16.9 million, from the net loss available to common shareholders of $13.4 million for 2011. Diluted earnings per common share for the year ended December 31, 2012 was $0.86, an improvement of $4.33 from the $3.47 diluted loss per common share for the year ended December 31, 2011. The improvement in net income in 2012 is due primarily to a $14.8 million decrease in the provision for loan losses between the periods, a $1.9 million increase in the gain on sale of loans, and a $4.9 million decrease in noninterest expenses due primarily to the decrease in expenses and losses recognized on real estate owned between the periods. These improvements to net income were partially offset by a $4.7 million decrease in interest income due primarily to a decrease in interest earning assets between the periods.

Net Interest Income
Net interest income was $23.7 million for 2012, a decrease of $4.7 million, or 16.6%, from $28.4 million for 2011. Interest income was $30.8 million for 2012, a decrease of $8.7 million, or 22.1%, from $39.5 million for 2011. Interest income decreased between the periods primarily because of a $146 million decrease in the average interest-earning assets and also because of a decrease in the average yields earned between the periods. Average interest-earning assets decreased between the periods primarily because of a decrease in the commercial loan portfolio, which occurred because of low loan demand and the Company’s focus on improving credit quality, managing net interest margin and improving capital ratios. The average yield earned on interest-earning assets was 4.78% for the year ended December 31, 2012, a decrease of 22 basis points from the 5.00% average yield for 2011. The decrease in the average yield is due to the continued low interest rate environment that existed during 2012.

Interest expense was $7.1 million for the year ended December 31, 2012, a decrease of $4.0 million, or 35.9%, from $11.1 million for 2011. Interest expense decreased primarily because of a $149 million decrease in the average interest-bearing liabilities between the periods. The decrease in average interest-bearing liabilities is primarily the result of a decrease in the average outstanding retail and brokered certificates of deposits between the periods and a decrease in other deposits as a result of the Bank’s Toledo, Iowa branch sale that was completed in the first quarter of 2012. The decrease in retail and brokered certificates of deposits between the periods was the result of using the proceeds from loan principal payments to fund maturing certificates of deposits. Interest expense also decreased because of the lower rates paid on retail money market accounts and certificates of deposit. The decreased rates were the result of the low interest rate environment that continued to exist during 2012. The average interest rate paid on interest-bearing liabilities was 1.17% for the year ended December 31, 2012, a decrease of 30 basis points from the 1.47% average rate paid for the same period of 2011. Net interest margin (net interest income divided by average interest-earning assets) was 3.67% for the year ended December 31, 2012, an increase of 8 basis points, from the 3.59% margin for 2011.

Provision for Loan Losses
The provision for loan losses was $2.5 million for the year ended December 31, 2012, a decrease of $14.8 million, from $17.3 million for the year ended December 31, 2011. The provision decreased between the periods primarily because there were fewer decreases in the estimated value of the underlying collateral supporting commercial real estate loans that required additional allowances or charge offs in 2012 when compared to 2011. The provision also decreased because of the $106 million decrease in the loan portfolio between the periods. Total non-performing assets were $40.6 million at December 31, 2012, a decrease of $10.0 million, or 19.8%, from $50.6 million at December 31, 2011. Non-performing loans decreased $4.0 million and foreclosed and repossessed assets decreased $6.0 million during 2012. The non-performing loan and foreclosed and repossessed asset activity for 2012 was as follows:

A reconciliation of the allowance for loan losses for 2012 and 2011 is summarized as follows:

Non-Interest Income and Expense
Non-interest income was $9.0 million for the year ended December 31, 2012, an increase of $2.1 million, or 30.9%, from $6.9 million for the year ended December 31, 2011. Gains on sales of loans increased $1.9 million, or 115.8%, between the periods primarily because of an increase in single family loan originations and sales. Gain on sale of branch office increased $0.6 million as a result of the sale of the Toledo, Iowa branch in the first quarter of 2012. Fees and service charges decreased $0.4 million primarily because of a decrease in overdraft charges between the periods.

Non-interest expense was $24.7 million for the year ended December 31, 2012, a decrease of $4.9 million, or 16.5%, from $29.6 million for the same period in 2011. Losses on real estate owned decreased $2.5 million between the periods primarily because there were fewer losses realized on the sale of real estate and there were fewer write downs in the value of the real estate owned in 2012 when compared to 2011. Compensation and benefits expense decreased $1.1 million between the periods primarily as a result of having fewer employees and also because of a decrease in pension benefit costs. Other non-interest expenses decreased $1.0 million between the periods primarily because of a decrease in real estate taxes and legal fees related to other real estate owned. Occupancy expense decreased $0.4 million primarily because of a decrease in depreciation and other expenses as a result of having fewer branch facilities.

Income tax expense was $0.1 million in 2012, an increase of $0.1 million from 2011 when no income tax expense was recorded. In the second quarter of 2010, the Company recorded a deferred tax asset valuation reserve against its entire deferred tax asset balance and the Company continued to maintain a valuation reserve against the entire deferred tax asset balance at December 31, 2012. Since the valuation reserve is established against the entire deferred tax asset balance, no regular income tax expense was recorded in 2012. The income tax expense that was recorded in 2012 relates to alternative minimum tax amounts that are due since only a portion of the outstanding net operating loss carry forwards can be used to offset current income under the current alternative minimum tax rules.

Net Income (Loss) Available to Common Shareholders
Net income available to common shareholders was $3.5 million for the year ended December 31, 2012, an improvement of $16.9 million, from the net loss available to common shareholders of $13.4 million for 2011. Net income available to common shareholders increased primarily because of the change in net income (loss) between the periods. The Company has deferred the last eight quarterly dividend payments, beginning with the February 15, 2011 dividend payment, on its Fixed Rate Cumulative Perpetual Preferred Stock, Series A issued to the United States Treasury Department as part of the TARP Capital Purchase Program. The deferred dividend payments have been accrued for payment in the future and are being reported for the deferral period as a preferred dividend requirement that is deducted from income for financial statement purposes to arrive at the net income (loss) available to common shareholders. Under the terms of the certificate of designations for the preferred stock, dividend payments may be deferred without default, but the dividend is cumulative and, since the Company failed to pay dividends for six quarters, the Treasury has the right to appoint two representatives to the Company’s board of directors, although the Treasury has not yet exercised this right. Under the terms of the Company’s and Bank’s Supervisory Agreements with their federal banking regulators, neither the Company nor the Bank may declare or pay any cash dividends, or purchase or redeem any capital stock, without prior notice to, and consent of these regulators.

Return (Loss) on Assets and Equity
The return on average assets was 0.79% for 2012, compared to a 1.39% loss on average assets for 2011. Return on average common equity was 8.94% for 2012, compared to a 16.94% loss on average common equity for 2011.

Annual Meeting Announcement
HMN announced that its annual meeting will be held at the Rochester Golf and Country Club, located at 3100 West Country Club Road, Rochester, Minnesota on Tuesday, April 23, 2013, at 10:00 a.m. local time.

General Information
HMN Financial, Inc. and Home Federal Savings Bank are headquartered in Rochester, Minnesota. Home Federal Savings Bank operates nine full service offices in Minnesota located in Albert Lea, Austin, Eagan, LaCrescent, Rochester (3), Spring Valley and Winona; one full service office in Iowa located in Marshalltown; one loan origination office in Sartell, Minnesota; and two Private Banking offices in Rochester, Minnesota.

Safe Harbor Statement
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are often identified by such forward-looking terminology as “expect,” “intend,” “look,” “believe,” “anticipate,” “estimate,” “project,” “seek,” “may,” “will,” “would,” “could,” “should,” “trend,” “target,” and “goal” or similar statements or variations of such terms and include, but are not limited to, those relating to increasing our core deposit relationships, reducing non-performing assets, reducing expense and generating improved financial results; the adequacy and amount of available liquidity and capital resources to the Bank; the Company’s liquidity and capital requirements; our expectations for core capital and our strategies and potential strategies for improvement thereof; changes in the size of the Bank’s loan portfolio; the recovery of the valuation allowance on deferred tax assets; the amount and mix of the Bank’s non-performing assets and the appropriateness of the allowance therefor; future losses on non-performing assets; the amount of interest-earning assets; the amount and mix of brokered and other deposits (including the Company’s ability to renew brokered deposits); the availability of alternate funding sources; the payment of dividends; the future outlook for the Company; the amount of deposits that will be withdrawn from checking and money market accounts and how the withdrawn deposits will be replaced; the projected changes in net interest income based on rate shocks; the range that interest rates may fluctuate over the next twelve months; the net market risk of interest rate shocks; the future outlook for the issuer trust preferred securities held by the Bank; and the Bank’s compliance with regulatory standards generally (including the Bank’s status as “well-capitalized”), and supervisory agreements, individual minimum capital requirements or other supervisory directives or requirements to which the Company or the Bank are or may become expressly subject, specifically, and possible responses of the OCC and FRB and the Bank and the Company to any failure to comply with any such regulatory standard, agreement or requirement. A number of factors could cause actual results to differ materially from the Company’s assumptions and expectations. These include but are not limited to the adequacy and marketability of real estate and other collateral securing loans to borrowers; federal and state regulation and enforcement, including restrictions set forth in the supervisory agreements between each of the Company and Bank and the OCC and FRB; possible legislative and regulatory changes, including changes in the degree and manner of regulatory supervision, the ability of the Company and the Bank to establish and adhere to plans and policies relating to, among other things, capital, business, non-performing assets, loan modifications, documentation of loan loss allowance and concentrations of credit that are satisfactory to the OCC and FRB, as applicable, in accordance with the terms of the Company and Bank supervisory agreements and to otherwise manage the operations of the Company and the Bank to ensure compliance with other requirements set forth in the supervisory agreements; the ability of the Company and the Bank to obtain required consents from the OCC and FRB, as applicable, under the supervisory agreements or other directives; the ability of the Bank to comply with its individual minimum capital requirement and other applicable regulatory capital requirements; enforcement activity of the OCC and FRB in the event of our non-compliance with any applicable regulatory standard, agreement or requirement; adverse economic, business and competitive developments such as shrinking interest margins, reduced collateral values, deposit outflows, changes in credit or other risks posed by the Company’s loan and investment portfolios, changes in costs associated with alternate funding sources, including changes in collateral advance rates and policies of the Federal Home Loan Bank, technological, computer-related or operational difficulties, results of litigation, and reduced demand for financial services and loan products; changes in accounting policies and guidelines, or monetary and fiscal policies of the federal government or tax laws; international economic developments; the Company’s access to and adverse changes in securities markets; the market for credit related assets; or other significant uncertainties. Additional factors that may cause actual results to differ from the Company’s assumptions and expectations include those set forth in the Company’s most recent filings on Forms 10-K and 10-Q with the Securities and Exchange Commission. All forward-looking statements are qualified by, and should be considered in conjunction with, such cautionary statements. For additional discussion of the risks and uncertainties applicable to the Company, see the “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and Part II, Item 1A of its Quarterly Reports on Forms 10-Q. We undertake no duty to update any of the forward-looking statements after the date of this press release.

CONTACT:
HMN Financial, Inc.
Bradley Krehbiel, 507-252-7169
President