Please check the Advance location option under the Campaign setting.By default it is "People in, searching for, or viewing pages about your targeted location".But here You have to choose "People in my targeted location".
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In addition to what Shuva said above, please note that you can only exclude the location from within your target regions. So for example if you are targeting US and you do not want to show ads in Texas, you can exclude Texas from whole US.
My 2 cents!