Ames National (ATLO) 8-K Announces Third Quarter 2007 Financial Results

EXHIBIT 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE	CONTACTS:	THOMAS H. POHLMAN
		CEO
		JOHN P. NELSON
		CFO
		(515) 232-6251

OCTOBER 12, 2007

AMES NATIONAL CORPORATION

ANNOUNCES THIRD QUARTER 2007 FINANCIAL RESULTS

Net income for the third quarter of 2007 was $2,939,000, or $0.31 per share, a 15% increase above the $2,546,000 or $0.27 per share earned during the same period in 2006.  The improvement in earnings can be attributed to higher net interest income which increased $325,000, as well as increases in trust revenues ($102,000) and securities gains ($207,000).  Partially offsetting some of the income gains was higher non-interest expense primarily related to First National Bank’s new office in Ankeny, Iowa.

For the three month periods ending September 30, 2007 and 2006, the Company’s annualized return on average assets was 1.39% and 1.25%, respectively.  For the same periods, the annualized return on average equity was 10.69% and 9.36%, respectively.  The net interest margin for the most recent quarter was 3.39% compared to 3.25% for the same quarter in 2006.  The efficiency ratios for the quarter ending September 30, 2007 and 2006 were 54.02% and 52.80%, respectively.

For the nine month period ending September 30, 2007, the Company earned net income of $8,287,000, or $0.88 per share, a 1% increase from net income of $8,223,000, or $0.87 per share, earned a year ago.  Current year earnings were aided by an improving net interest margin which was 3.32% compared to 3.29% for the nine month period ending September 30, 2007 and 2006, respectively.  This margin improvement increased net interest income for the current nine month period by $334,000 compared to the same period 2006.  Favorable conditions in the equity markets allowed the Company to realize net security gains that were $597,000 over the previous year.  Trust department income was also up over 2006 by $454,000 to $1,543,000.

The Company’s annualized return on average assets was 1.31% and 1.34% with an annualized return on average equity of 9.92% and 10.08%, for the nine month periods ending September 30, 2007 and 2006, respectively.  The efficiency ratio for the nine months ending September 30, 2007 and 2006 was 53.65% and 52.26%, respectively.

Assets were $851 million as of September 30, 2007, a 4% increase over the $822 million posted a year ago.  The increase in assets relates primarily to increased loan volume.

Net loans were a record $458 million, an 8% increase over the $425 million posted one year ago.  The commercial and commercial real estate loans accounted for most of the growth.  The allowance for loan losses totaled $6,181,000 as of September 30, 2007 with net charged off loans of $245,000 recorded for the quarter ending September 30, 2007.  This compares to an allowance for loan losses of $6,503,000 as of September 30, 2006 with net charged-off loans of $11,000 recorded for the quarter ending September 30, 2006.  In addition to the allowance for loan losses, an additional reserve for off-balance sheet activities, primarily unfunded loan commitments, was funded during the third quarter with a provision of $233,000.  This provision is included in non-interest expense.

Deposits increased $1 million or 0.2% to $651 million as of September 30, 2007 compared to one year earlier as the result of an increase in time deposit balances of $100,000 or more. Long-term borrowings increased to $23,000,000 as of September 30, 2007 compared to $2,000,000 as of September 30, 2006. Long-term borrowings for 2007 were comprised primarily of repurchase agreements with maturities ranging from two to five years.

Total stockholders’ equity totaled $112 million as of September 30, 2007 and was relatively unchanged from one year ago.  The ratio of stockholders’ equity to total assets equaled 13% for September 30, 2007 and 14% for September 30, 2006.

Company stock, under the symbol ATLO, is traded on the NASDAQ Capital Market and ranged in price from $19.06 to $21.70 during the third quarter of 2007 and closed at $20.37 on September 28, 2007.

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)
	September 30,		September 30,
ASSETS	2007		2006
Cash and due from banks	$	25,654,272	$	18,014,733
Federal funds sold		-		50,000
Interest bearing deposits in financial institutions		661,885		3,331,089
Securities available-for-sale		341,089,875		351,928,869
Loans receivable, net		457,864,361		424,848,430
Loans held for sale		754,433		591,185
Bank premises and equipment, net		13,719,670		11,913,843
Accrued income receivable		8,408,901		8,328,348
Other assets		3,139,478		2,895,230
Total assets	$	851,292,875	$	821,901,727
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand, noninterest bearing	$	71,653,364	$	73,742,114
NOW accounts		145,788,086		150,119,248
Savings and money market		144,800,475		149,674,765
Time, $100,000 and over		108,556,497		92,706,421
Other time		180,181,480		183,418,287
Total deposits		650,979,902		649,660,835
Federal funds purchased and securities sold under agreements to repurchase		55,232,215		49,069,784
Other short-term borrowings		3,361,535		2,272,894
Long-term borrowings		23,000,000		2,000,000
Dividends payable		2,545,987		2,450,503
Deferred income taxes		-		717,188
Accrued expenses and other liabilities		4,555,396		3,954,891
Total liabilities		739,675,035		710,126,095
STOCKHOLDERS' EQUITY
Common stock, $2 par value, authorized 18,000,000 shares;9,429,580 and 9,425,013 shares issued and outstanding at September 30, 2007 and September 30, 2006, respectively		18,859,160		18,850,026
Additional paid-in capital		22,588,691		22,498,904
Retained earnings		66,506,883		65,586,270
Accumulated other comprehensive income, net unrealized gain on securities available-for-sale		3,663,106		4,840,432
Total stockholders' equity		111,617,840		111,775,632
Total liabilities and stockholders' equity	$	851,292,875	$	821,901,727

AMES NATIONAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

(unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2007			2006		2007			2006
Interest and dividend income:
Loans	$	8,062,624		$	7,504,606	$	23,500,424		$	22,064,447
Securities
Taxable		2,322,438			2,320,638		6,981,845			6,488,712
Tax-exempt		1,218,921			1,045,124		3,603,235			3,121,681
Federal funds sold		2,132			40,918		181,523			144,911
Dividends		397,137			353,659		1,171,687			1,052,437
Total interest income		12,003,252			11,264,945		35,438,714			32,872,188
Interest expense:
Deposits		5,232,913			5,111,121		16,041,795			14,515,383
Other borrowed funds		789,136			497,354		1,804,055			1,097,577
Total interest expense		6,022,049			5,608,475		17,845,850			15,612,960
Net interest income		5,981,203			5,656,470		17,592,864			17,259,228
Provision (credit) for loan losses		(264,131	)		45,859		(110,527	)		(227,371	)
Net interest income after provision (credit) for loan losses		6,245,334			5,610,611		17,703,391			17,486,599
Non-interest income:
Trust department income		438,383			336,207		1,543,048			1,089,285
Service fees		479,930			474,633		1,383,137			1,379,684
Securities gains, net		537,969			330,827		1,444,047			846,135
Gain on sale of loans held for sale		241,548			173,163		539,652			457,150
Merchant and ATM fees		143,859			127,108		426,144			403,328
Gain on foreclosure of real estate		—			10,734		—			482,203
Other		146,284			118,701		430,943			404,894
Total non-interest income		1,987,973			1,571,373		5,766,971			5,062,679
Non-interest expense:
Salaries and employee benefits		2,480,547			2,341,368		7,543,814			7,128,646
Data processing		535,527			541,865		1,643,884			1,624,142
Occupancy expenses		344,227			294,113		965,715			891,991
Off-balance sheet provision		233,000			—		233,000			—
Other operating expenses		711,887			639,067		2,146,260			2,024,029
Total non-interest expense		4,305,188			3,816,413		12,532,673			11,668,808
Income before income taxes		3,928,119			3,365,571		10,937,689			10,880,470
Income tax expense		989,580			819,999		2,650,706			2,657,713
Net income	$	2,938,539		$	2,545,572	$	8,286,983		$	8,222,757
Basic and diluted earnings per share	$	0.31		$	0.27	$	0.88		$	0.87
Declared dividends per share	$	0.27		$	0.26	$	0.81		$	0.78