Ames National (ATLO) 8-K Announces Second Quarter and First Six Months

	Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE	CONTACT:	DANIEL L. KRIEGER,
	______________	CHAIRMAN & PRESIDENT
		(515) 232-6251
JULY 14, 2006

AMES NATIONAL CORPORATION

ANNOUNCES SECOND QUARTER AND FIRST SIX MONTHS

2006 EARNINGS

Net income for second quarter 2006 was $2,765,000, or $0.29 per share, a 7% decrease from the $2,968,000 or $0.32 per share earned during the same period in 2005. The decline in earnings is primarily the result of net interest income being lower by $613,000, attributed to a 35% increase in interest expense compared the second quarter of 2005 as the result of higher short term market interest rates. A reduction in the specific reserve for a problem credit and declining loan demand allowed for the lowering of the allowance for loan losses by $303,000 which offset nearly half of the decline in the net interest income. The Company’s annualized return on average assets was 1.35% and 1.42% with an annualized return on average equity of 10.22% and 10.89%, for the three month periods ending June 30, 2006 and 2005, respectively. The efficiency ratio for the quarter ending June 30, 2006 and 2005 was 53.84% and 48.61%, respectively. The net interest margin for the most recent quarter was 3.29% compared to 3.61% for the same period in 2005.

For the six month period ending June 30, 2006, the Company earned net income of $5,677,000, or $0.60 per share, a 5% decrease from the net income of $5,982,000, or $0.64 per share, earned a year ago. As with the quarterly earnings results, the net interest income for the first half of 2006 decreased by $1,357,000, a decline of 10% compared to the first half of 2005. Reducing the level of the allowance for loan losses by $273,000 and a gain on the foreclosure of a real estate property of $471,000 partially offset the lower net interest income. The Company’s annualized return on average assets was 1.39% and 1.42% with an annualized return on average equity of 10.44% and 10.89%, for the six month periods ending June 30, 2006 and 2005, respectively. The efficiency ratio for the six months ending June 30, 2006 and 2005 was 52.02% and 48.61%, respectively. The net interest margin for the most recent quarter was 3.31% compared to 3.53% for the same period in 2005.

Assets totaled $822 million as of June 30, 2006 and were 1% lower than the $834 million posted a year ago. This decrease in assets primarily relates to maturing securities available for sale being used to payoff federal funds borrowings.

Net loans totaled $430 million and were relatively unchanged from the $431 million posted one year ago. The allowance for loan losses totaled $6,468,000 as of June 30, 2006 with net charged-off loans of $11,000 recorded for the quarter ending June 30, 2006. This compares to an allowance for loan losses of $6,629,000 as of June 30, 2005 with net recoveries of $38,000 recorded for the quarter ending June 30, 2005.

Deposits increased 3% to $672 million as of June 30, 2006 compared to one year earlier with demand, NOW, and other time certificates accounting for the growth.

Total stockholders’ equity of $107 million was 4% lower than the $112 million recorded on June 30, 2005. This decrease in capital relates primarily to the market value of the Company’s bond portfolios declining as market interest rates continue to rise. As of June 30, 2006 there was $0.4 million in unrealized gains in securities, net of deferred tax liability, compared to $6.8 million in unrealized gains on June 30, 2005. The ratio of stockholders’ equity to total assets remained at 13% for June 30, 2006 and 2005.

Company stock, under the symbol ATLO, is traded on the NASDAQ Capital Market and ranged in price from $19.75 to $26.00 during the second quarter of 2006 and closed at $21.88 on June 30, 2006. 

Ames National Corporation affiliate Iowa banks are First National Bank, Ames; Boone Bank & Trust Co., Boone; State Bank & Trust Co., Nevada; Randall-Story State Bank, Story City; and United Bank & Trust, Marshalltown.

AMES NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
	June 30,		June 30,
ASSETS	2006		2005
Cash and due from banks	$	18,632,106	$	26,971,695
Federal funds sold		11,150,000		30,000
Interest bearing deposits in financial institutions		4,373,148		6,936,900
Securities available-for-sale		333,959,950		352,469,540
Loans receivable, net		429,548,140		430,925,591
Loans held for sale		1,380,669		903,235
Bank premises and equipment, net		11,557,644		8,736,698
Accrued income receivable		6,567,073		6,147,784
Deferred income taxes		1,882,303		-
Other assets		2,893,674		1,035,802
Total assets	$	821,944,707	$	834,157,245
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand, noninterest bearing	$	72,020,426	$	67,091,578
NOW accounts		151,090,394		144,682,035
Savings and money market		166,285,257		167,771,051
Time, $100,000 and over		100,511,727		101,384,877
Other time		182,543,829		172,577,468
Total deposits		672,451,633		653,507,009
Federal funds purchased and securities sold under agreements to repurchase		36,017,887		61,334,723
Dividend payable		2,450,503		2,354,818
Deferred income taxes		-		1,925,302
Accrued expenses and other liabilities		3,770,281		3,259,583
Total liabilities		714,690,304		722,381,435
STOCKHOLDERS' EQUITY
Common stock $2 par value, authorized 18,000,000 shares; 9,425,013 shares issued and outstanding June 30, 2006 and 9,419,271 shares issued and outstanding June 30, 2005		18,850,026		18,838,542
Additional paid-in capital		22,498,904		22,383,375
Retained earnings		65,491,202		63,796,866
Accumulated other comprehensive income, net unrealized gain on securities available-for-sale		414,271		6,757,027
Total stockholders' equity		107,254,403		111,775,810
Total liabilities and stockholders' equity	$	821,944,707	$	834,157,245

AMES NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2006			2005		2006			2005
Interest and dividend income:
Loans	$	7,357,897		$	6,599,747	$	14,559,841		$	12,852,498
Securities
Taxable		2,127,842			2,117,885		4,168,073			4,348,004
Tax-exempt		1,040,194			1,061,590		2,076,557			2,122,439
Federal funds sold		92,691			75,714		103,994			128,281
Dividends		359,005			372,138		698,779			719,589
Total interest income		10,977,629			10,227,074		21,607,244			20,170,811
Interest expense:
Deposits		4,968,077			3,562,992		9,404,262			6,545,298
Other borrowed funds		257,605			299,135		600,224			665,728
Total interest expense		5,225,682			3,862,127		10,004,486			7,211,026
Net interest income		5,751,947			6,364,947		11,602,758			12,959,785
Provision (credit) for loan losses		(302,854	)		74,882		(273,230	)		128,607
Net interest income after provision (credit) for loan losses		6,054,801			6,290,065		11,875,988			12,831,178
Non-interest income:
Trust department income		389,676			411,021		753,078			743,530
Service fees		497,729			450,489		905,051			870,645
Securities gains, net		270,830			232,844		515,308			367,783
Gain on sale of loans held for sale		172,521			168,196		283,987			282,021
Merchant and ATM fees		133,160			138,273		276,220			284,202
Gain on foreclosure of real estate		—			—		471,469			—
Other		134,651			112,605		286,193			240,841
Total non-interest income		1,598,567			1,513,428		3,491,306			2,789,022
Non-interest expense:
Salaries and employee benefits		2,372,072			2,335,550		4,787,278			4,711,498
Data processing		582,175			568,690		1,082,277			1,045,404
Occupancy expenses		287,920			268,233		597,879			578,408
Other operating expenses		715,330			657,065		1,384,961			1,301,885
Total non-interest expense		3,957,497			3,829,538		7,852,395			7,637,195
Income before income taxes		3,695,871			3,973,955		7,514,899			7,983,005
Income tax expense		931,053			1,005,643		1,837,714			2,000,769
Net income	$	2,764,818		$	2,968,312	$	5,677,185		$	5,982,236
Basic and diluted earnings per share	$	0.29		$	0.32	$	0.60		$	0.64
Declared dividends per share	$	0.26		$	0.25	$	0.52		$	0.50