Ames National Corporation
Annual Report 2013

Plain-text annual report

Ames National Corporation 405 5th Street, Box 846 | Ames, IA 50010 t (515) 232-6251 | f (515) 663-3033 info@amesnational.com Mission stAtemeNt Mission Ames National Corporation is a result-oriented financial services holding company providing leadership, counsel and support to its community affiliate banks and superior performance for its shareholders. Corporate Culture Provide an environment where our affiliates and employees can be successful and provide products and services that enhance the financial well-being of customers and shareholders. Core Values Excellence: Striving to exceed expectations Integrity: Demonstrating high moral and ethical conduct Leadership: Creating and developing opportunities that benefit our employees, customers, communities, and shareholders Stability: Maintaining financial strength and a dedicated staff to successfully serve the current and future needs of our employees, customers, communities, and shareholders Trust: Acting in the best interest of our employees, customers, and shareholders Community: Dedicated to serving our communities through local decision making, community involvement and active boards of directors table of Contents Ames National Corporation at a Glance . . . . . . . . . . . . . . 1 Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2013 Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Five-Year Performance Record . . . . . . . . . . . . . . . . . . . . . 7 Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Affiliate Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-11 Stock and Dividend Information . . . . . . . . . . . . . . . . . . . 12 Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . 13 shareholder iNformAtioN Company Contact Information Ames National Corporation P.O. Box 846 405 5th Street Ames, IA 50010 (515) 232-6251 | Fax (515) 663-3033 info@amesnational.com | www.amesnational.com Company Officers Thomas H. Pohlman President & CEO John P. Nelson Vice President & CFO John L. Pierschbacher Controller Kevin G. Deardorff Vice President & Technology Director Nicole J. Gebhart Vice President & Marketing Director Tracy W. Laws Vice President & Auditor Jennifer J. Hanson Asst. Vice President & Human Resources Director Timothy J. Lupardus Vice President & Information Systems Manager Joel P. Jacobsen Asst. Vice President & Compliance Officer Lori J. Hill Asst. Corporate Secretary Matthew R. Hackbart Vice President & Information Systems Asst. Manager Colin T. Richey Information Systems Officer Independent Auditors CliftonLarsonAllen LLP West Des Moines, Iowa Counsel Nyemaster Goode, P.C. Des Moines, Iowa Annual Meeting The Board of Directors of Ames National Corporation has established Wednesday, April 30, 2014, at 4:30 p.m. as the date of the Annual Meeting of Shareholders. Registration will begin at 4:00 p.m. We invite all shareholders to attend the meeting, which will be held at Reiman Gardens, 1407 University Boulevard, Ames, Iowa. Market Makers Ames National Corporation’s common stock is listed on the NASDAQ Capital Market under the symbol “ATLO.” Market makers and brokers in the stock include: First Point Wealth Management , First National Bank, Ames (515) 663-3074 Stifel Nicolaus | (515) 233-4064 Monroe Securities, Inc. | (800) 766-5560 Raymond James | (800) 800-4693 FTN Financial Group | (800) 456-5460 Stock Transfer Agent Illinois Stock Transfer Company 433 S. Carlton Avenue Wheaton, IL 60187 (800) 757-5755 | Fax: (630) 480-0641 www.istshareholderservices.com Form 10-K and Other Information A copy of the Company’s annual report to the Securities and Exchange Commission on form 10-K will be available on the Securities and Exchange Commission’s website at http://www.sec.gov and through a link on the Company’s website, www.amesnational.com, at Financial Information, SEC Filings. A copy of the annual report can also be obtained upon request to John Nelson, Vice President & CFO at 515-232-6251 or info@amesnational.com. 13 ames national corporation at a glance Ames National Corporation (the “Company) is an Iowa-based bank holding company. The Company was organized and incorporated on January 21, 1975, under the laws of the State of Iowa to serve as a holding company for its principal banking subsidiary, First National Bank, Ames, Iowa. In 1983, the Company acquired the stock of the State Bank & Trust Co. located in Nevada, Iowa; in 1991, the Company, through a newly-chartered state bank known as Boone Bank & Trust Co., acquired certain assets and assumed certain liabilities of the former Boone State Bank & Trust Company located in Boone, Iowa; in 1995, the Company acquired the stock of the Reliance State Bank located in Story City, Iowa; and in 2002, the Company chartered and commenced operations of United Bank & Trust NA, located in Marshalltown, Iowa. In 2012, Reliance State Bank acquired two offices in Garner and Klemme, Iowa. Today, each Affiliate Bank is operated as a wholly-owned subsidiary of the Company. Each Affiliate Bank operates with a local board of directors and a local bank president. All decisions are made locally which means customers receive quick responses to questions, and services are customized to meet customer needs in each community. The principal sources of Company revenue are: interest and fees earned on loans made and held by the Company and Affiliate Banks, interest on fixed income investments, fees on trust services provided by those Affiliate Banks exercising trust powers, service charges on deposit accounts maintained by Affiliate Banks, gain on sale of loans, securities gains and merchant and card fees. The Affiliate Banks’ lending activities consist primarily of short-term and medium-term commercial, agricultural and residential real estate loans, agricultural and business operating loans and lines of credit, equipment loans, vehicle loans, personal loans and lines of credit, home improvement loans and origination of mortgage loans for sale into the secondary market. Affiliate Banks also offer a variety of demand, savings and time deposits, cash management services, merchant credit card processing and safe deposit box services. Convenient access to funds and account information is also available through online banking, mobile banking, online bill pay, online statements and debit cards. The Company provides various services to the Affiliate Banks which include: management assistance, internal auditing services, human resources services and administration, compliance management, marketing assistance and coordination, loan review and technology support. Company staff handles the backroom operations that make the Company more efficient so the Affiliate Bank staff can focus on what they do best: banking and taking care of customers’ financial needs. The principal executive office of Ames National Corporation is located at 405 5th Street, Ames, Iowa 50010. The Company’s phone number is (515) 232-6251. More information about the Company can also be found at www.amesnational.com. recent recognitions • Ranked 25th on Bank Director’s Nifty 50 for NYSE, NYSE MKT and NASDAQ-listed companies based on profitability and capital levels (1st Quarter 2014) • Ranked among the top 100 best-performing community banks in the country by SNL Financial (3/13) • Ranked among the top 100 top banks with assets less than $2 billion in assets based on a 3-year average ROE by the American Banker Magazine (4/13) • Ranked in the top 13 among banks between $1 billion and $5 billion in assets based on the 2013 Bank Performance Scorecard for profitability, capital strength and asset quality by Bank Director Magazine (8/13) • Ranked as the 6th largest Iowa commercial bank holding company based on total deposits 1 letter to shareholders Strategic Thinking. Strategic Goals. Strategic Focus. 2013 presented many challenges such as the interest rate environment and regulatory changes. These challenges provided opportunities for our staff to think strategically which resulted in positive outcomes transpiring during the year. Total assets, loans and deposits reached record levels. Loans grew over 10% and finished the year at a new all-time high. Asset quality improved and our low ratio of problem loans to total assets ranked up in the upper quartile (best performance) in comparison to our peers. Our exceptional people provided quality products and services that fueled the expansion of our client base. Our banks provide financial leadership in the communities we serve, and we are fortunate to have the right people in the proper positions who find extraordinary ways to serve our clients. Our bankers are focused on making our client experiences valuable and rewarding, as we build long-term, mutually beneficial relationships. We are pleased to present our 2013 financial report, highlighting earnings performance, growth strategies, new products and services, and our people. Let’s begin with earnings. Earnings. Ames National Corporation ended 2013 with net income of 14.0 million, or $1.50 per share, compared to $14.2 million, or $1.52 per share earned in 2012. We were pleased with higher net interest income in 2013 over 2012 considering the low market interest rates for the first half of the year, but earnings were lower primarily as the result of funding the loan loss reserve. Net interest margins improved in the second half of the year as intermediate and long term interest rates have increased compared to those of one year ago. Loan growth, good asset quality, and better intermediate interest rates should provide momentum for earnings as we enter 2014. Rapid growth in assets over the past several years and lower market interest rates for much of that time have made it difficult to deliver our historical norms for average Return on Average Assets (ROAA) during 2013. ROAA was 1.14% for the year compared to 1.24% in 2012. Return on Average Equity (ROAE) was 9.76% for the year compared to 10.08% in 2012. The Company’s ROAA and ROAE generally compared favorably to the averages as shown below: Ames National Corporation vs. U.S. and Iowa FDIC Insured Banks (ROAA and ROAE) Industry Iowa-Based Banks ROAA ROAE 1.14% 9.76% 1.07% 9.56% 0.93% 10.19% The Company’s efficiency ratio is a measurement of our ability to convert resources into revenue, the lower the number, the more efficient the organization. Ames National Corporation's efficiency ratio for 2013 was 52.78%, consistent with the 52.33% reported in 2012. The Company compares favorably to the industry which reported 61.46% for FDIC Insured Iowa Banks during 2013. The regulatory environment has been a challenge as we work to maximize earnings. With the expansion of regulatory mandates stemming from the Dodd-Frank Act, more dollars have been shifted to complying with new processes, which unfortunately can be discouraging for consumers when obtaining financing and looking for access to products and services. The most significant new mandate, the Ability-to-Repay Rule, significantly increases the underwriting processes when making certain consumer mortgage loans. Clients will be asked to provide more documentation and verification information than previously required. Some mortgage loan features and terms will no longer be offered due to the Ability-to-Repay Rule. Other new mortgage rules require changes to disclosure documents, loan servicing processes, appraisal usage, and lender compensation and qualification requirements. Our compliance staff has been diligently reviewing current procedures and changing processes to meet the 2014 mandates. Loan Growth. An important part of Ames National Corporation’s success is driven by loan growth. A quality, well-managed loan portfolio provides our organization with the best opportunities to enhance earnings, and building our loan business has been a strategic focus for our bankers. Loans grew to $564.5 million, or a $54 million increase over 2012 levels. The majority of this growth was in real estate, primary in the 1-4 family, commercial and agricultural loan portfolios. As the economic environment has improved, affiliate bank’s opportunities to assist clients with new projects and business expansions have increased. Loan growth will drive earnings as long as asset quality remains favorable. We are pleased to report that the Company had net recoveries for 2013 of $13,000; compared to net charge-offs of $154,000 for 2012. In addition, net impaired loans as of December 31, 2013, were $2.2 million, or 0.39% of gross loans, compared to $5.9 million, or 1.1% of gross loans as of the end of 2012. Ames National Corporation’s low level of problem loans places us in the top 15% of peer bank-holding companies in the country and is an indication of the importance we have placed on effectively monitoring and managing credit quality. 2 On the Balance Sheet. Driven by loan growth, assets reached record levels at $1.2 billion as of December 31, 2013, a $15.4 million increase compared to year-end 2012. Deposits exceeded $1 billion at the end of 2013, a 0.7% increase over last year. The deposit growth was primary due to increases in core deposits, such as: interest-bearing checking, savings and money market accounts. Long-term certificates of deposit decreased as we believe clients are anticipating an interest rate increase and are keeping their funds more liquid. The Company’s stockholders’ equity represented 11.5% of total assets as of December 31, 2013, with all of the Company’s five affiliate banks continuing to maintain strong capital levels. Total equity was $142 million as of December 31, 2013, compared to $145 million reported at year-end 2012. Lower capital levels were directly attributed to a change in the unrealized gains in our investment portfolio, one of the elements included in our capital. Capital is impacted by earnings, dividends and the fair value of the investment portfolio. When interest rates increase, the fair value of the investment portfolio is reduced and that change is reflected in capital. Growth through Acquisition. As we reflect on our strategic initiatives, acquisition considerations have been a growth opportunity for Ames National Corporation. We are also pleased to report that the acquisition of the Garner and Klemme, Iowa offices by Reliance State Bank in April of 2012 continues to generate positive returns. Reliance State Bank’s net income for 2013 was $2,172,000, as compared to $1,833,000 for the year ended December 31, 2012, an 18.5% increase. The acquisition contributed to increases in net interest income, noninterest income and noninterest expense, and has proven to be a profitable model as we look for future growth strategies. Company Stock. Company stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $22.39 on December 31, 2013. During the year the price ranged from $18.50 to $23.94 with 2,925,300 shares traded. Dividends declared to shareholders in 2013 totaled $0.64 per share. Our People. During 2013, a director and long-term employee retired from service at Ames National Corporation. Frederick Samuelson, president of James Michael & Associates, Inc. and member of the Ames National Corporation and State Bank & Trust Co. Boards of Directors and Michael Bloom, Senior Vice President and Trust Officer and board member at United Bank & Trust, retired from their respective positions during the year. We appreciate their advice and council over the years. They will truly be missed. We were pleased to welcome Richard Parker, Attorney, and the Company’s Chief Financial Officer, John Nelson, to the Ames National Corporation Board of Directors. Jim Kurtenbach, Sr. Manager at Web Filings, joined the board at State Bank & Trust Co. With the acquisition of Garner and Klemme, we added two new board positions at Reliance State Bank. Mike Hrubes, farmer and business owner in Garner, and Neil Fell, Market President for Reliance State Bank in Garner, joined the board in May. We are fortunate to have these community leaders serving our organization. We were saddened by the passing of Edward C. Jacobson, former senior vice president at First National Bank, Treasurer of Ames National Corporation and board member at Reliance State Bank, on December 30, 2013. He joined First National Bank in 1964 and was part of the original group of incorporators of Ames National Corporation in 1975. Ed retired from First National Bank in 2003 where he served his entire banking career. We would like to express our condolences to Ed’s family. In Conclusion. As we reflect on 2013, we would like to thank our shareholders, employees and boards of directors for their commitment and support to Ames National Corporation. We hope you find this report valuable and informative as we review the financial results, growth in services and Company accomplishments. 2014 will bring many new opportunities, and we are looking forward to our continued focus on strategic direction and profitable growth. Please mark your calendars and plan to join us for the Ames National Corporation 39th Annual Meeting of Shareholders at Reiman Gardens on April 30th. We encourage you to contact us if you have any questions prior to the meeting. Thomas H. Pohlman President Douglas C. Gustafson Chairman 3 Board of directors BACk ROw, LEFT TO RIGHT: Warren R. Madden Vice President for Business & Finance, Iowa State University John P. Nelson Vice President and Chief Financial Officer of the Company Douglas C. Gustafson Retired Veterinarian, Boone Veterinary Hospital and Chairman of the Company Richard O. Parker Attorney, Parker Law Firm Thomas H. Pohlman President of the Company Steven D. Forth Farmer Charles D. Jons Retired Physician, McFarland Clinic 4 FRONT ROw, LEFT TO RIGHT: David W. Benson Partner, Nyemaster Goode Attorneys at Law Larry A. Raymon Chief Executive Officer, Raymon Enterprises, Inc. Betty A. Baudler Horras President, Baudler Enterprises, Inc. (marketing) James R. Larson, II President, Larson Development Corporation (real estate development) Robert L. Cramer Retired President and Chief Operating Officer Fareway Stores, Inc. (grocery stores) 2013 highlights Innovative Financial Solutions. Client-Focused. An important aspect of our plan for growth is providing unique and valuable products and services that enhance the banking experience for our clients. Providing innovative solutions that are focused on our clients’ needs is a key component to maintaining our client base and driving new business. When considering our product and services mix, we have been diligently working on a variety of strategic initiatives to engage our clients and generate new opportunities. We would like to provide you with a snapshot of some of these initiatives that our clients are finding important in helping them at every life stage with their financial needs. “ Banking should be easy, convenient and stress free – and that’s what I get from First National Bank.” Carrie and Andrew Ricklefs Mobile Deposit Clients online solutions: Simplifying Banking Technology has given clients easy access to a myriad of information. Through a few swipes on their smart phones or tablets, they have powerful tools to help them make decisions. Clients have high expectations for convenience, and these expectations are no different with banking. Clients want their financial information easily accessible so they can make manage their cash flow, wherever and whenever they want. We are very much in-tune with the wants and needs of our clients and are focused on providing solutions that simplify banking. Over the past five years, we have been building our suite of mobile and online banking services, and our clients are responding. Our most recent launch of Mobile Deposit has given clients the ability to deposit checks using their smart phones. Clients are enjoying the added convenience, and the Company is benefiting from the powerful new retention tool. id theftsmart: Offering Peace of Mind Identify theft continues to grow each year. According to Javelin and Associates, 12.6 million people were affected by identity theft in 2012. As a victim, it can be a very time-consuming and overwhelming process to repair the damage done. During 2013, we expanded our ID TheftSmart restoration services to include a credit monitoring feature. Clients are looking for solutions to help them restore confidence and their reputations should they ever have problems, and this service brings peace of mind. Wealth Management: Delivering Financial Expertise Expanding our Wealth Management Services has been an important strategic initiative over the past three years. The need for services like financial management, trust services, financial planning and estate planning continues to grow, and we have found a niche in delivering financial expertise to assist clients with their short and long-term financial goals. Within the Company, we have two CERTIFIED FINANCIAL PLANNERS™ and a Chartered Financial Analyst on staff in additional to many trust officers with extensive years of experience. When combining financial expertise and a custom-designed experience for each client, the response has been remarkable. These are just a few of the services we offer to make our clients financial lives better. By asking important questions and listening to customers’ needs, we are continually enhancing our services and building stronger client relationships. Our account numbers are growing, and clients are finding value in our banking model. Clients appreciate the fact that what our employees do, the decisions we make and the services offered are truly in their best interest. We are focused on doing the right things daily to take care of clients. This philosophy produces long-term financial success for our clients, and, in turn, for our organization. 5 financial highlights FOR THe YeAR PERFORmANCE 2013 2012 2011 2010 2009 Net Income (in thousands) $13,954 $14,182 $13,921 $12,966 $9,006 Return on Average Assets Average Equity Efficiency Ratio PER COmmON SHARE DATA Basic and Diluted Earnings Cash Dividends Declared Dividend Payout Ratio Dividend Yield AT DeCeMBeR 31 BALANCE SHEET DATA (in thousands) Total Assets Net Loans Deposits 1.14% 9.76% 52.78% 1.24% 10.08% 52.33% 1.38% 10.82% 49.80% 1.40% 10.91% 50.12% 1.02% 8.31% 63.72% $1.50 $0.64 $1.52 $0.60 42.67% 39.47% 2.9% 2.7% $1.48 $0.52 35.14% 2.7% $1.37 $0.44 32.12% 2.0% $0.95 $0.40 42.11% 1.9% $1,233,084 $1,217,692 $1,035,564 $962,975 $915,570 $564,502 $510,126 $438,651 $418,094 $415,434 $1,011,803 $1,004,732 $818,705 $743,862 $722,164 Stockholders' Equity $ 142,106 $144,736 $134,557 $121,363 $112,340 LOAN QUALITy Allowance for loan losses to total loans Net charge-offs to average outstanding loans Non performing loans to total loans CAPITAL Tier 1 Risk-Based Capital Ratio Total Equity/Total Assets Market Price per Share Closing High Low 6 1.50% 0.00% 0.44% 11.0% 11.5% $22.39 $23.94 $18.50 1.50% 0.03% 1.07% 10.9% 11.9% $21.90 $24.00 $18.30 1.77% 0.03% 1.81% 12.2% 13.0% $19.50 $21.92 $14.15 1.77% 0.19% 1.48% 12.5% 12.6% $21.67 $22.84 $16.61 1.81% 0.16% 2.44% 12.0% 12.3% $21.11 $28.79 $14.87 five-year perforMance record FIve-YeAR FINANCIAL HIGHLIGHTS AveRAGe TOTAL ASSeTS MILLIONS OF DOLLARS AveRAGe DePOSITS MILLIONS OF DOLLARS AveRAGe LOANS MILLIONS OF DOLLARS $880 $929 $1,009 $1,143 $1226 $682 $717 $792 $923 $1004 $434 $418 $431 $483 $528 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 $300 $1.60 $1.40 $1.20 $1.00 $.80 $.60 $.40 $.20 $.00 $1,000 $900 $800 $700 $600 $500 $400 $300 2009 2010 2011 2012 2013 $600 $500 $400 $300 $200 $100 $0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 eARNINGS PeR SHARe DOLLARS BOOK vALUe PeR SHARe DeCLAReD DIvIDeNDS PeR SHARe DOLLARS DOLLARS $0.95 $1.37 $1.48 $1.52 $1.50 $11.91 $12.87 $14.45 $15.54 $15.26 $0.40 $0.44 $0.52 $0.60 $0.64 $16.00 $15.50 $15.00 $14.50 $14.00 $13.50 $13.00 $12.00 $11.50 $11.00 $10.50 $10.00 2009 2010 2011 2012 2013 $.80 $.60 $.40 $.20 $.00 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 report of independent registered public accounting firM The Board of Directors of Ames National Corporation: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ames National Corporation and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows (not presented herein) for each of the three years in the period ended December 31, 2013; and in our report dated March 12, 2014, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. CliftonLarsonAllen LLP West Des Moines, Iowa March 12, 2014 7 condensed consolidated balance sheets December 31, 2013 December 31, 2012 $ $ $ ASSETS Cash and due from banks Interest bearing deposits in financial institutions Securities available-for-sale Loans receivable, net Loans held for sale Bank premises and equipment, net Accrued income receivable Other real estate owned Deferred income taxes Core deposit intangible, net Goodwill Other assets Total assets LIABILITIES AND STOCkHOLDERS’ EQUITy LIABILITIES Deposits Demand, noninterest bearing NOW accounts Savings and money market Time, $100,000 and over Other time Total deposits Federal funds purchased and securities sold under agreements to repurchase FHLB advances and other long-term borrowings Dividend payable Deferred income taxes Accrued expenses and other liabilities Total liabilities STOCKHOLDERS’ EQUITY Common stock, $2 par value, authorized 18,000,000 shares; issued 9,432,915 shares; outstanding 9,310,913 shares as of December 31, 2013 and 2012 Additional paid-in capital Retained earnings Accumulated other comprehensive income-net unrealized income on securities available-for-sale Treasury stock, at cost; 122,002 shares at December 31, 2013 and 2012 Total stockholders’ equity Total liabilities and stockholders’ equity $ 8 24,270,031 23,628,117 580,039,080 564,501,547 295,618 11,892,329 7,437,673 8,861,107 5,027,103 1,029,564 5,600,749 501,242 1,233,084,160 179,946,472 299,788,852 289,307,102 97,077,717 145,683,035 1,011,803,178 39,616,644 34,540,526 1,489,746 – 3,527,882 1,090,977,976 18,865,830 22,651,222 102,154,498 451,132 (2,016,498) 142,106,184 1,233,084,160 $ $ $ 34,805,371 44,639,033 588,417,037 510,125,880 1,030,180 12,233,464 7,173,703 9,910,825 – 1,303,264 5,600,749 2,452,593 1,217,692,099 182,033,279 287,294,015 279,774,197 99,925,619 155,705,340 1,004,732,450 27,088,660 34,611,035 1,396,627 1,632,560 3,495,032 1,072,956,364 18,865,830 22,651,222 94,159,839 11,075,342 (2,016,498) 144,735,735 1,217,692,099 $ condensed consolidated stateMents of incoMe years Ended December 31, 2013 2012 2011 $ 25,433,950 $ 24,761,633 $ 23,600,471 INTEREST INCOmE: Loans Securities Taxable Tax-exempt Interest bearing deposits and federal funds sold Total interest income INTEREST ExPENSE: Deposits Other borrowed funds Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses NONINTEREST INCOmE: Trust services income Service fees Securities gains, net Other-than-temporary impairment of investment securities Gain on sale of loans held for sale Merchant and card fees Other noninterest income Total noninterest income NONINTEREST ExPENSE: Salaries and employee benefits Data processing Occupancy expenses FDIC insurance assessments Professional fees Business development Other real estate owned, net Core deposit intangible amortization Other operating expenses, net Total noninterest expense Income before income taxes 5,744,321 6,864,948 390,594 38,433,813 3,861,713 1,213,050 5,074,763 33,359,050 786,390 32,572,660 1,970,938 1,580,811 1,002,920 – 1,200,402 1,142,027 820,680 7,717,778 13,131,556 2,414,564 1,471,978 661,127 1,127,666 957,702 651,401 273,700 989,178 21,678,872 18,611,566 6,058,556 6,767,545 484,004 38,071,738 4,472,337 1,279,604 5,751,941 32,319,797 22,277 32,297,520 2,060,308 1,578,672 646,755 (259,851) 1,589,122 1,055,613 764,765 7,435,384 12,465,403 2,239,003 1,462,898 664,285 1,224,093 941,090 482,904 196,736 1,126,541 20,802,953 18,929,951 4,747,643 14,182,308 1.52 6,993,213 6,555,546 466,475 37,615,705 5,313,476 1,416,589 6,730,065 30,885,640 532,961 30,352,679 2,046,914 1,465,055 1,025,714 – 1,048,583 739,951 644,163 6,970,380 11,631,032 1,985,329 1,377,333 738,893 989,856 816,639 434,041 – 878,849 18,851,972 18,471,087 4,550,280 13,920,807 1.48 9 $ $ PROvISION FOR INCOmE TAxES NET INCOmE Basic and diluted earnings per share 4,657,922 13,953,644 1.50 $ $ $ $ affiliate banks 10 Organized: The former Boone State Bank & Trust Co., was organized in 1883. In 1992, the Bank was organized by the Company under a new state charter in connection with a purchase and assumption transaction, whereby Boone Bank & Trust Co. purchased certain assets and assumed certain liabilities of the former Boone State Bank & Trust Co. in exchange for a cash payment. Financial Highlights: As of December 31, 2013, Boone Bank had capital of $12,495,000 and 25 full- time equivalent employees. Boone Bank had net income for the years ended December 31, 2013, 2012 and 2011 of approximately $1,533,000, $1,764,000 and $1,828,000, respectively. Total assets as of December 31, 2013, 2012 and 2011 were approximately $128,551,000, $123,829,000 and $118,345,000, respectively. Locations: Main Office: 716 8th Street, Boone Boone Branch Office: 1326 S. Story Street, Boone Contact Information: Phone: (515) 432-6200 Fax: Web: (515) 432-3312 www.boonebankiowa.com Email: service@boonebankiowa.com Board Of Directors: Back Row, Left to Right: Robert L. Cramer, Richard D. Blomgren, Front Row, Left to Right: William S. Zinnel, Thomas H. Pohlman, Jeffrey K. Putzier Douglas C. Gustafson, DVM, Patrick J. McMullan Organized: The Bank was organized in 1903 and became a wholly-owned subsidiary of the Company in 1975 through a bank holding company reorganization, whereby those shareholders of First National exchanged all of their First National stock for stock in the Company. Financial Highlights: As of December 31, 2013, First National had capital of $63,571,000 and 96 full- time equivalent employees. First National had net income for the years ended December 31, 2013, 2012 and 2011 of approximately $7,200,000, $7,193,000 and $7,517,000, respectively. Total assets as of December 31, 2013, 2012 and 2011 were approximately $629,414,000, $616,287,000 and $560,753,000, respectively. Locations: Main Office: 405 5th Street, Ames University Office: 2330 Lincoln Way, Ames North Grand Office: 2406 Grand Avenue, Ames Ankeny Office: 1205 North Ankeny Blvd., Ankeny Contact Information: (515) 232-5561 Phone: Fax: Web: (515) 232-5778 www.FNBames.com Email: info@FNBames.com Board Of Directors: Back Row, Left to Right: Warren R. Madden, Scott T. Bauer, David W. Benson Front Row, Left to Right: Charles D. Jons, Lisa M. Eslinger, Betty A. Baudler Horras, Thomas H. Pohlman,Terrill L. Wycoff, James R. Larson, II John R. Linch Organized: Reliance State Bank, formerly known as “Randall-Story State Bank,” Story City, Iowa, is an Iowa, state-chartered, FDIC insured commercial bank. Organized in 1928, Reliance Bank was acquired by the Company in 1995 through a stock transaction whereby the then shareholders of Reliance Bank exchanged all their Reliance Bank stock for stock in the Company. In 2012, Reliance Bank acquired the Garner, Iowa and Klemme, Iowa offices with a purchase and assumption transaction whereby Reliance Bank purchased certain assets and assumed certain liabilities in exchange for a cash payment. Financial Highlights: As of December 31, 2013, Reliance Bank had capital of $24,204,000 and 31 full- time equivalent employees. Reliance Bank had net income for the years ended December 31, 2013, 2012 and 2011 of approximately $2,172,000, $1,833,000 and $1,234,000, respectively. Total assets as of December 31, 2013, 2012 and 2011 were approximately $221,597,000, $221,799,000 and $91,279,000, respectively. Locations: 606 Broad Street, Story City 175 E. 3rd Street, Garner 100 E. Main Street, Klemme Contact Information: (515) 733-4396 Phone: Fax: Web: (515) 733-2068 www.RSBiowa.com Email: info@rsbiowa.com Board Of Directors: Back Row, Left to Right: Harold E. Thompson, Cory K. Milbrandt, Michael M. Hrubes, Elaine C. Tekippe, Steven D. Forth, Gary G. Vulgamott Front Row, Left to Right: Neil W. Fell, John P. Nelson, Richard J. Schreier Organized: The Bank was organized in 1939 and acquired by the Company in 1983 through a stock transaction, whereby those shareholders of State Bank exchanged all of their State Bank stock for stock in the Company. Financial Highlights: As of December 31, 2013, State Bank had capital of $16,738,000 and 23 full-time equivalent employees. State Bank had net income for the years ended December 31, 2013, 2012 and 2011 of approximately $2,122,000, $2,208,000 and $2,059,000, respectively. Total assets as of December 31, 2013, 2012 and 2011 were approximately $154,405,000, $151,859,000 and $148,839,000, respectively. Locations: Main Office: 1025 6th Street, Nevada Colo Office: 405 Main Street, Colo Contact Information: Phone: (515) 382-2191 Fax: Web: (515) 382-3826 www.banksbt.com Email: info@banksbt.com Board Of Directors: Back Row, Left to Right: Dan E. Johnson, Stephen C. McGill, Richard O. Parker, James M. Kurtenbach Front Row, Left to Right: Laurie L. Henry, Thomas H. Pohlman, Michelle R. Cassabaum Organized: The Bank was chartered as a national bank in June 2002. Financial Highlights: As of December 31, 2013, United Bank had capital of $13,160,000 and 23 full-time equivalent employees. United Bank had net income for the years ended December 31, 2013, 2012 and 2011 of approximately $1,103,000, $1,269,000 and $1,228,000, respectively. Total assets as of December 31, 2013, 2012 and 2011 were approximately $111,420,000, $107,627,000 and $107,555,000, respectively. Locations: Main Office: 2101 S. Center Street, Marshalltown Courthouse Branch: 29 S. Center Street, Marshalltown Contact Information: (641) 753-5900 Phone: Fax: Web: (641) 753-0800 www.ubtna.com Email: info@ubtna.com Board Of Directors: Back Row, Left to Right: Michael W. Bloom, John S. Wise, Thomas H. Pohlman Front Row, Left to Right: Keith R. Brown, Larry A. Raymon, Kathy L. Baker, Curtis A. Hoff, Kevin L. Swartz 11 stock & dividend inforMation market Price & Dividend Information On February 28, 2014, the Company had approximately 416 shareholders and 1,091 beneficial owners whose shares were held in nominee titles through brokerage or other accounts. The Company’s common stock is traded on the NASDAQ Capital Market under the symbol “ATLO.” Trading in the Company’s common stock is, however, relatively limited. The closing price of the Company’s common stock was $22.28 on February 28, 2014. Below is a summary of the Company’s high and low sales price for the common stock on a per share basis during the last two years, based on information provided to and gathered by the Company on an informal basis. The comparison also outlines the Company’s declared cash dividends during the past two years. The Company declared aggregate annual cash dividends in 2013 and 2012 of $5,959,000 and $5,587,000, respectively, or $0.64 per share in 2013 and $0.60 per share in 2012. In February 2014, the company declared a cash dividend of $1,676,000 or $0.18 per share. market Price & Dividend Two-year Comparison 2013 2012 MARKeT PRICe High $22.91 $23.15 $23.94 $23.05 Quarter 1st 2nd 3rd 4th Low $19.92 $18.50 $19.87 $21.09 CASH DIvIDeNDS Declared $0.16 $0.16 $0.16 $0.16 MARKeT PRICe High $24.00 $24.00 $23.72 $21.99 Quarter 1st 2nd 3rd 4th Low $18.30 $19.51 $20.06 $18.39 CASH DIvIDeNDS Declared $0.15 $0.15 $0.15 $0.15 The decision to declare cash dividends in the future and the amount thereof rests within the discretion of the Board of Directors of the Company and will be subject to, among other things, the future earnings, capital requirements and financial condition of the Company and certain regulatory restrictions imposed on the payment of dividends by the Banks. Such restrictions are discussed in greater detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources and Regulatory Matters and in the Notes to the Company’s Financial Statements appearing in the Company's Annual Report on Form 10-K. 12 Mission stAtemeNt Mission Ames National Corporation is a result-oriented financial services holding company providing leadership, counsel and support to its community affiliate banks and superior performance for its shareholders. Corporate Culture Provide an environment where our affiliates and employees can be successful and provide products and services that enhance the financial well-being of customers and shareholders. Core Values Excellence: Striving to exceed expectations Integrity: Demonstrating high moral and ethical conduct Leadership: Creating and developing opportunities that benefit our employees, customers, communities, and shareholders Stability: Maintaining financial strength and a dedicated staff to successfully serve the current and future needs of our employees, customers, communities, and shareholders Trust: Acting in the best interest of our employees, customers, and shareholders Community: Dedicated to serving our communities through local decision making, community involvement and active boards of directors table of Contents Ames National Corporation at a Glance . . . . . . . . . . . . . . 1 Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2013 Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Five-Year Performance Record . . . . . . . . . . . . . . . . . . . . . 7 Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Affiliate Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-11 Stock and Dividend Information . . . . . . . . . . . . . . . . . . . 12 Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . 13 shareholder iNformAtioN Company Contact Information Ames National Corporation P.O. Box 846 405 5th Street Ames, IA 50010 (515) 232-6251 | Fax (515) 663-3033 info@amesnational.com | www.amesnational.com Company Officers Thomas H. Pohlman President & CEO John P. Nelson Vice President & CFO John L. Pierschbacher Controller Kevin G. Deardorff Vice President & Technology Director Nicole J. Gebhart Vice President & Marketing Director Tracy W. Laws Vice President & Auditor Jennifer J. Hanson Asst. Vice President & Human Resources Director Timothy J. Lupardus Vice President & Information Systems Manager Joel P. Jacobsen Asst. Vice President & Compliance Officer Lori J. Hill Asst. Corporate Secretary Matthew R. Hackbart Vice President & Information Systems Asst. Manager Colin T. Richey Information Systems Officer Independent Auditors CliftonLarsonAllen LLP West Des Moines, Iowa Counsel Nyemaster Goode, P.C. Des Moines, Iowa Annual Meeting The Board of Directors of Ames National Corporation has established Wednesday, April 30, 2014, at 4:30 p.m. as the date of the Annual Meeting of Shareholders. Registration will begin at 4:00 p.m. We invite all shareholders to attend the meeting, which will be held at Reiman Gardens, 1407 University Boulevard, Ames, Iowa. Market Makers Ames National Corporation’s common stock is listed on the NASDAQ Capital Market under the symbol “ATLO.” Market makers and brokers in the stock include: First Point Wealth Management , First National Bank, Ames (515) 663-3074 Stifel Nicolaus | (515) 233-4064 Monroe Securities, Inc. | (800) 766-5560 Raymond James | (800) 800-4693 FTN Financial Group | (800) 456-5460 Stock Transfer Agent Illinois Stock Transfer Company 433 S. Carlton Avenue Wheaton, IL 60187 (800) 757-5755 | Fax: (630) 480-0641 www.istshareholderservices.com Form 10-K and Other Information A copy of the Company’s annual report to the Securities and Exchange Commission on form 10-K will be available on the Securities and Exchange Commission’s website at http://www.sec.gov and through a link on the Company’s website, www.amesnational.com, at Financial Information, SEC Filings. A copy of the annual report can also be obtained upon request to John Nelson, Vice President & CFO at 515-232-6251 or info@amesnational.com. 13 Ames National Corporation 405 5th Street, Box 846 | Ames, IA 50010 t (515) 232-6251 | f (515) 663-3033 info@amesnational.com 

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