Ames National (ATLO) 8-K 2006 and Fourth Quarter Earnings

EXHIBIT 99.1

NEWS RELEASE

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

JANUARY 19, 2007

AMES NATIONAL CORPORATION

ANNOUNCES

2006 AND FOURTH QUARTER EARNINGS

FOURTH QUARTER 2006 RESULTS

For the quarter ended December 31, 2006, net income for Ames National Corporation (Company) totaled $2,721,000, or $0.29 per share, which was slightly higher than the $2,709,000, or $0.29 per share earned in the fourth quarter of 2005. An increase in security gains and higher net Merchant and ATM fees offset the lower net interest income for the quarter compared to the same quarter one year ago. Net interest income declined 5% to $5,731,000 for quarter ended December 31, 2006 compared to $6,053,000 for the same quarter in 2005. Fourth quarter 2006 interest expense increased 25% while interest income rose 8% compared to fourth quarter 2005. The Company’s annual net interest margin for the quarter declined to 3.29% in 2006 compared to the 3.45% posted in 2005.

Fourth quarter 2006 return on average assets was 1.32% and was unchanged when compared to the same period in 2005. Return on average equity was 9.74% for the three months ended December 31, 2006 compared to the 9.94% posted a year ago. Average equity for the quarter was higher than in 2005 due to an increase in net unrealized gains in the Company and banks’ investment portfolios. The improvement in unrealized gains resulted in a lower return on average equity for the quarter compared to one year ago. The efficiency ratio for the fourth quarter was 52.23%, compared to 50.67% last year. Non-interest expense increased 2% for the quarter compared to the same quarter in 2005.

ANNUAL RESULTS FOR 2006

Net income for the year ended December 31, 2006 decreased 6% to $10,944,000 or $1.16 per share compared to 2005 results of $11,609,000 or $1.23 per share. Rising market interest rates through the first half of 2006 resulted in annual net interest income declining 9% as deposits repriced more quickly than loans and investments. The flat yield curve in 2006 has also contributed to lower net interest income. Net interest income was $22,990,000 for the year ending December 31, 2006 compared to $25,373,000 recorded in 2005. The Company’s annual net interest margin declined to 3.29% in 2006 compared to the 3.56% posted in 2005.

Annual interest expense on interest bearing liabilities rose to $21,306,000 for 2006 compared to $15,933,000 posted for 2005, a 34% increase. The higher interest expense was offset by a 10% increase in annual interest income to $44,296,000 for 2006 compared to the $41,306,000 recorded for 2005. Partially offsetting the lower net interest income were higher gains on security transactions of $339,000, gains on the foreclosure or sale of real estate properties of $482,000 and 2006 credit provision for loan losses of $183,000.

Return on average assets for 2006 and 2005 was 1.34% and 1.40%, respectively. Return on equity for the same periods was 9.99% and 10.57%, respectively. The efficiency ratio for the year ending December 31, 2006 was 52.26% compared to 49.09% for the previous year. The decline in the efficiency ratio in 2006 was primarily the result of lower net interest income as annual non-interest expense increased less than 2% compared to the same period in 2005.

Deposits increased to $680,356,000 on December 31, 2006, a 2% increase over the $668,342,000 recorded at year-end 2005. Demand and interest bearing checking accounts (NOW) showed the highest percentage growth.

Net loans as of December 31, 2006 declined 3% to $429,123,000 compared to the $440,318,000 recorded a year ago as the result of softening loan demand in the local markets. The allowance for loan losses on December 31, 2006 totaled $6,533,000 compared to $6,765,000 on December 31, 2005. Net charge-offs for the year ended December 31, 2006 were $50,000 compared to $41,000 for the previous year.

Year end equity capital grew 3% to $112,923,000 compared to $109,227,000 on December 31, 2005 as the result of higher unrealized gains on securities available for sale and the retention of earnings. Capital represented over 13% of total assets at the end of 2006 and 2005.

Company stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $21.00 on December 31, 2006. During the fourth quarter, the price ranged from $19.82 to $22.69. The 2006 dividends paid of $1.03 per share were 13% higher than the $0.91 per share paid in 2005.

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
December 31, 2006 and 2005
ASSETS	2006		2005
Cash and due from banks	$	16,510,082	$	18,092,139
Federal funds sold		13,100,000		300,000
Interest bearing deposits in financial institutions		1,544,306		5,983,542
Securities available-for-sale		354,571,864		333,510,152
Loans receivable, net		429,122,541		440,317,685
Loans held for sale		525,999		981,280
Bank premises and equipment, net		12,617,741		11,030,840
Accrued income receivable		7,871,365		6,633,795
Deferred income taxes		-		343,989
Other assets		2,989,090		2,190,652
Total assets	$	838,852,988	$	819,384,074
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand, noninterest bearing	$	77,638,264	$	74,155,477
NOW accounts		158,584,115		151,680,984
Savings and money market		159,401,753		160,998,014
Time, $100,000 and over		102,230,631		101,042,024
Other time		182,501,710		180,465,836
Total deposits		680,356,473		668,342,335
Federal funds purchased and securities sold under agreements to repurchase		34,727,897		34,659,983
Other short-term borrowings		1,470,116		2,861,130
FHLB term advances		2,000,000		-
Dividend payable		2,450,503		2,354,818
Deferred income taxes		1,187,948		-
Accrued expenses and other liabilities		3,736,739		1,938,507
Total liabilities		725,929,676		710,156,773
STOCKHOLDERS' EQUITY
Common stock, $2 par value, authorized 18,000,000 shares;
9,425,013 issued and outstanding at December 31, 2006
9,419,271 issued and outstanding at December 31, 2005		18,850,026		18,838,542
Additional paid-in capital		22,498,904		22,383,375
Retained earnings		65,856,627		64,713,530
Accumulated other comprehensive income, net unrealizedgain on securities available-for-sale		5,717,755		3,291,854
Total stockholders' equity		112,923,312		109,227,301
Total liabilities and stockholders' equity	$	838,852,988	$	819,384,074

AMES NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
	Three Months Ended				Twelve Months Ended
	December 31,				December 31,
	2006		2005		2006			2005
Interest and dividend income:
Loans, including fees	$	7,529,449	$	7,090,638	$	29,593,896		$	26,979,358
Securities:
Taxable		2,341,644		2,087,397		8,830,356			8,558,156
Tax-exempt		1,105,260		1,027,592		4,226,941			4,190,268
Federal funds sold		79,971		—		224,882			130,182
Dividends		367,180		394,352		1,419,617			1,447,663
Total interest income		11,423,504		10,599,979		44,295,692			41,305,627
Interest expense:
Deposits		5,226,996		4,143,093		19,742,379			14,380,214
Other borrowed funds		465,572		404,319		1,563,149			1,552,894
Total interest expense		5,692,568		4,547,412		21,305,528			15,933,108
Net interest income		5,730,936		6,052,567		22,990,164			25,372,519
Provision for loan losses		44,685		84,244		(182,686	)		331,282
Net interest income after provision for loan losses		5,686,251		5,968,323		23,172,850			25,041,237
Noninterest income:
Trust department income		373,449		360,048		1,462,734			1,375,308
Service fees		461,015		460,832		1,840,699			1,796,503
Securities gains, net		289,001		162,226		1,135,136			795,780
Loan and secondary market fees		107,669		137,444		564,819			606,277
Merchant and ATM fees		242,189		141,705		645,517			570,914
Gain on sale or foreclosure of real estate		—		—		482,203			—
Other		138,030		117,096		542,924			468,410
Total noninterest income		1,611,353		1,379,351		6,674,032			5,613,192
Noninterest expense:
Salaries and employee benefits		2,279,647		2,143,307		9,408,293			9,208,902
Data processing		561,336		611,014		2,185,478			2,126,040
Occupancy expenses		267,758		284,368		1,159,750			1,148,738
Other operating expenses		726,314		726,940		2,750,341			2,726,222
Total noninterest expense		3,835,055		3,765,629		15,503,862			15,209,902
Income before income taxes		3,462,549		3,582,045		14,343,020			15,444,527
Income tax expense		741,689		873,122		3,399,403			3,835,992
Net income	$	2,720,860	$	2,708,923	$	10,943,617		$	11,608,535
Basic and diluted earnings per share	$	0.29	$	0.29	$	1.16		$	1.23
Dividends declared per share	$	0.26	$	0.26	$	1.04		$	1.00
Comprehensive income (loss)	$	3,598,183	$	1,687,923	$	13,369,518		$	7,432,677