Ames National (ATLO) 8-K Announces Third Quarter 2006 Financial Results

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE	CONTACT:	DANIEL L. KRIEGER,
		CHAIRMAN & PRESIDENT
		OR
		JOHN P. NELSON
		VICE PRESIDENT
		(515) 232-6251

OCTOBER 13, 2006

AMES NATIONAL CORPORATION

ANNOUNCES THIRD QUARTER 2006 FINANCIAL RESULTS

The Company had net income of $2,546,000, or $0.27 per share for the three months ending September 30, 2006, compared to net income of $2,917,000, or $0.31 per share, for the three months ending September 30, 2005, a 13% decrease. The decline in net income can be attributed primarily to a $704,000, or 11% decrease in net interest income as the result of significantly higher deposit interest expense this quarter compared to the same period a year ago. Partially offsetting the higher cost of deposits was an increase in interest income of $730,000, or 7%, and the non-interest income categories of trust department fees of $65,000, or 24%, and gains from security transactions of $65,000, or 25%.

The return on average assets was 1.25% and 1.41% respectively, for the three months ending September 30, 2006 and 2005. Return on average equity was 9.36% for the three months ending September 30, 2006 compared to 10.54% for the same period a year ago. Total assets ended the quarter at $822 million nearly identical to the $823 million on September 30, 2005. The net interest margin for the most recent quarter was 3.25% compared to 3.58% for the same period in 2005.

Net income was $8,223,000, or $0.87 per share for the nine months ending September 30, 2006, compared to $8,900,000, or $0.95 per share, for the nine months ending September 30, 2005, a decrease of 8%. Net interest income for the first nine months of 2006 decreased by $2,061,000, or 11% compared to the first nine months of 2005. Partially offsetting the lower net interest income was the 2006 year-to-date credit provision for loan losses of $227,000, higher gains on security transactions of $213,000, and gains on the foreclosure of real estate properties of $482,000.

The Company’s return on average assets was 1.34% and 1.43% with a return on average equity of 10.08% and 10.78%, for the nine month periods ending September 30, 2006 and 2005, respectively. The net interest margin for the most recent nine month period was 3.29% compared to 3.60% for the same period in 2005.

Deposits decreased 1% to $650 million compared to September 30, 2005 primarily as the result of lower level of public funds deposit balances.

Net loans decreased 2% to $425 million as of September 30, 2006 compared to the $436 million as of September 30, 2005. The allowance for loan losses on September 30, 2006 and 2005 was $6,503,000 and $6,729,000, respectively, with net charged-off loans of $11,000 recorded for the quarter ending September 30, 2006.

Capital levels increased to $112 million for September 30, 2006 compared to $110 million one year ago as the result of higher retained earnings and net unrealized gains on securities available for sale. Capital at the end of September 2006 represented 13.6% of total assets.

Company stock, under the symbol ATLO, traded in the $19.95 to $22.75 range in the third quarter of 2006 and closed at $21.41 on September 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. Additional information about the Company can be found at www.amesnational.com.

AMES NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(unaudited)

ASSETS	September 30, 2006		September 30, 2005
Cash and due from banks	$	18,014,733	$	18,749,571
Federal funds sold		50,000		100,000
Interest bearing deposits in financial institutions		3,331,089		6,973,569
Securities available-for-sale		351,928,869		343,497,810
Loans receivable, net		424,848,430		435,708,073
Loans held for sale		591,185		756,219
Bank premises and equipment, net		11,913,843		9,221,385
Accrued income receivable		8,328,348		7,471,349
Other assets		2,895,230		420,048
Total assets	$	821,901,727	$	822,898,024
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand, noninterest bearing	$	73,742,114	$	71,040,005
NOW accounts		150,119,248		163,803,373
Savings and money market		149,674,765		153,653,610
Time, $100,000 and over		92,706,421		90,796,789
Other time		183,418,287		176,630,452
Total deposits		649,660,835		655,924,229
Federal funds purchased and securities sold under agreements to repurchase		49,069,784		50,678,317
Other short-term borrowings		2,272,894
FHLB term advances		2,000,000
Dividend payable		2,450,503		2,354,818
Deferred income taxes		717,188		423,282
Accrued expenses and other liabilities		3,954,891		3,623,182
Total liabilities		710,126,095		713,003,828
STOCKHOLDERS' EQUITY
Common stock, $2 par value, authorized 18,000,000 shares; 9,425,013 shares issued and outstanding September 30, 2006 and 9,419,271 shares issued and outstanding September 31, 2005		18,850,026		18,838,542
Additional paid-in capital		22,498,904		22,383,375
Retained earnings		65,586,270		64,359,425
Accumulated other comprehensive income, net unrealized gain on securities available-for-sale		4,840,432		4,312,854
Total stockholders' equity		111,775,632		109,894,196
Total liabilities and stockholders' equity	$	821,901,727	$	822,898,024

AMES NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2006		2005		2006			2005
Interest and dividend income:
Loans	$	7,504,606	$	7,036,222	$	22,064,447		$	19,888,720
Securities
Taxable		2,320,638		2,121,380		6,488,712			6,469,383
Tax-exempt		1,045,124		1,040,237		3,121,681			3,162,676
Federal funds sold		40,918		3,277		144,911			131,557
Dividends		353,659		333,722		1,052,437			1,053,311
Total interest income		11,264,945		10,534,838		32,872,188			30,705,647
Interest expense:
Deposits		5,111,121		3,691,821		14,515,383			10,237,119
Other borrowed funds		497,354		482,849		1,097,577			1,148,575
Total interest expense		5,608,475		4,174,670		15,612,960			11,385,694
Net interest income		5,656,470		6,360,168		17,259,228			19,319,953
Provision (credit) for loan losses		45,859		118,431		(227,371	)		247,038
Net interest income after provision (credit) for loan losses		5,610,611		6,241,737		17,486,599			19,072,915
Non-interest income:
Trust department income		336,207		271,730		1,089,285			1,015,260
Service fees		474,633		465,027		1,379,684			1,335,672
Securities gains, net		330,827		265,771		846,135			633,554
Gain on sale of loans held for sale		173,163		186,812		457,150			468,833
Merchant and ATM fees		127,108		145,006		403,328			429,209
Gain on foreclosure of real estate		10,734		—		482,203			—
Other		118,701		110,473		404,894			351,314
Total non-interest income		1,571,373		1,444,819		5,062,679			4,233,842
Non-interest expense:
Salaries and employee benefits		2,341,368		2,354,097		7,128,646			7,065,595
Data processing		541,865		469,622		1,624,142			1,515,026
Occupancy expenses		294,113		285,962		891,991			864,370
Other operating expenses		639,067		697,397		2,024,029			1,999,283
Total non-interest expense		3,816,413		3,807,078		11,668,808			11,444,274
Income before income taxes		3,365,571		3,879,478		10,880,470			11,862,483
Income tax expense		819,999		962,102		2,657,713			2,962,871
Net income	$	2,545,572	$	2,917,376	$	8,222,757		$	8,899,612
Basic and diluted earnings per share	$	0.27	$	0.31	$	0.87		$	0.95
Declared dividends per share	$	0.26	$	0.25	$	0.78		$	0.75
Comprehensive Income	$	6,971,732	$	473,204	$	9,771,334		$	5,744,755