SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [Mark One] [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 0-32637 AMES NATIONAL CORPORATION ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) IOWA 42-1039071 - -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I. R. S. Employer Incorporation or Organization) Identification Number) 405 FIFTH STREET AMES, IOWA 50010 ---------------------------------------- (Address of Principal Executive Offices) Registrant's Telephone Number, Including Area Code: (515) 232-6251 Not Applicable ---------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ x ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK, $5.00 PAR VALUE 3,128,982 - -------------------------------------------------------------------------------- (Class) (Shares Outstanding at April 30, 2003) 1
AMES NATIONAL CORPORATION INDEX Page Part I. Financial Information Item 1. Consolidated Financial Statements (Unaudited) Consolidated Balance Sheets at March 31, 2003 and December 31, 2002 3 Consolidated Statements of Income for the three months ended March 31, 2003 and 2002 4 Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 Item 4 Controls and Procedures 10 Part II. Other Information Items 1 through 6 11 Signatures 12 Certifications 13 2
PAGE> PART 1. FINANCIAL INFORMATION Item 1. Consolidated Balance Sheets (Unaudited) AMES NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (unaudited) <TABLE> March 31, December 31, 2003 2002 ------------------------------ <S> <C> <C> Assets Cash and due from banks ........................................................ $ 26,870,928 $ 51,688,784 Federal funds sold ............................................................. 100,320,000 32,500,000 Interest bearing deposits in financial institutions ............................ 1,000,000 1,000,000 Securities available-for-sale .................................................. 254,003,860 244,575,026 Loans receivable, net .......................................................... 340,383,399 332,306,497 Bank premises and equipment, net ............................................... 8,623,103 8,726,397 Accrued income receivable ...................................................... 5,701,244 5,849,017 Other assets ................................................................... 357,811 582,849 ------------------------------ Total assets ....................................................... $ 737,260,345 $ 677,228,570 ============================== Liabilities and Stockholders' Equity Deposits: Demand ..................................................................... $ 61,686,441 $ 62,557,937 NOW accounts ............................................................... 144,079,506 121,325,104 Savings and money market ................................................... 174,326,939 153,296,259 Time, $100,000 and over .................................................... 63,441,854 54,564,283 Other time ................................................................. 170,359,656 158,878,796 ------------------------------ Total deposits ..................................................... 613,894,396 550,622,379 Federal funds purchased and securities sold under agreements to repurchase ........................................ 13,362,019 18,325,574 Dividends payable .............................................................. 1,376,752 1,376,752 Deferred taxes ................................................................. 2,539,121 2,879,057 Accrued interest and other liabilities ......................................... 3,454,538 2,501,952 ------------------------------ Total liabilities .................................................. 634,626,826 575,705,714 ------------------------------ Stockholders' Equity: Common stock, $5 par value; authorized 6,000,000 shares; issued 3,153,230 shares at March 31, 2003 and December 31, 2002; outstanding 3,128,982 at March 31, 2003 and December 31, 2002 .................................. 15,766,150 15,766,150 Surplus .................................................................... 25,354,014 25,354,014 Retained earnings .......................................................... 55,411,117 53,917,544 Treasury stock, at cost; 24,248 shares at March 31, 2003 and December 31, 2002 .................................... (1,333,640) (1,333,640) Accumulated other comprehensive income - net unrealized gain on securities available-for-sale ......................................... 7,435,878 7,818,788 ------------------------------ Total stockholders' equity ......................................... 102,633,519 101,522,856 ------------------------------ $ 737,260,345 $ 677,228,570 ============================== </TABLE> 3
AMES NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Income (unaudited) <TABLE> Three Months Ended March 31, ----------------------- 2003 2002 ----------------------- <S> <C> <C> Interest and dividend income: Loans ................................................... $5,556,035 $5,865,172 Securities Taxable ............................................... 1,883,539 1,980,131 Tax-exempt ............................................ 770,300 718,954 Federal funds sold ...................................... 163,694 200,784 Dividends ............................................... 340,665 330,803 ----------------------- 8,714,233 9,095,844 ----------------------- Interest expense: Deposits ................................................ 2,625,990 2,987,959 Other borrowed funds .................................... 64,219 74,135 ----------------------- 2,690,209 3,062,094 ----------------------- Net interest income ............................... 6,024,024 6,033,750 Provision for loan losses ................................... 119,745 104,219 ----------------------- Net interest income after provision for loan losses 5,904,279 5,929,531 ----------------------- Non-interest income: Trust department income ................................. 327,329 250,730 Service fees ............................................ 358,924 357,675 Securities gains, net ................................... 365,825 188,733 Loan and secondary market fees .......................... 248,120 135,627 Other ................................................... 295,215 190,372 ----------------------- Total non-interest income ......................... 1,595,413 1,123,137 ----------------------- Non-interest expense: Salaries and employee benefits .......................... 2,169,684 1,782,335 Occupancy expenses ...................................... 268,608 203,362 Data processing ......................................... 467,800 404,411 Other operating expenses ................................ 591,510 542,148 ----------------------- Total non-interest expense ........................ 3,497,602 2,932,256 ----------------------- Income before income taxes ........................ 4,002,090 4,120,412 Income tax expense .......................................... 1,131,765 1,179,482 ----------------------- Net income ........................................ $2,870,325 $2,940,930 ======================= Basic and diluted earnings per share ........................ $ 0.92 $ 0.94 ======================= Declared dividends per share ................................ $ 0.44 $ 0.42 ======================= Comprehensive Income ........................................ $2,487,415 $3,003,074 ======================= </TABLE> 4
AMES NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited) <TABLE> Three Months Ended March 31, -------------------------- 2003 2002 -------------------------- <S> <C> <C> Cash flows from operating activities: Net income ...................................................................... $ 2,870,325 $ 2,940,930 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses ..................................................... 119,745 104,219 Amortization and accretion, net ............................................... 151,601 914 Depreciation .................................................................. 247,253 225,330 Provision for deferred taxes .................................................. (115,053) -- Securities gains, net ......................................................... (365,825) (188,733) Decrease in accrued income receivable ......................................... 147,773 141,300 Decrease (increase) in other assets ........................................... 225,038 (86,360) Increase in accrued interest and other liabilities ............................ 952,586 634,020 -------------------------- Net cash provided by operating activities ............................... 4,233,443 3,771,620 -------------------------- Cash flow from investing activities: Purchase of securities available-for-sale ....................................... (26,888,288) (25,974,500) Proceeds from sale of securities available-for-sale ............................. 1,290,340 6,853,042 Proceeds from maturities of securities available-for-sale ....................... 15,775,545 7,997,885 Net (increase) in interest bearing deposits in financial institutions ........... -- (350,000) Net (increase) in federal funds sold ............................................ (67,820,000) (31,610,000) Net decrease (increase) in loans ................................................ (8,196,647) 18,428,683 Purchase of bank premises and equipment ......................................... (143,959) (525,672) --------------------------- Net cash used in investing activities ................................... (85,983,009) (25,180,562) --------------------------- Cash flows from financing activities: Increase in deposits ............................................................ 63,272,017 18,892,826 Increase (decrease) in FHLB advances, federal funds purchased and securities sold under agreements to repurchase ............................ (4,963,555) 2,233,959 Dividends paid .................................................................. (1,376,752) (1,312,596) --------------------------- Net cash provided by financing activities ............................... 56,931,710 19,814,189 --------------------------- Net decrease in cash and cash equivalents ............................... (24,817,856) (1,594,753) --------------------------- Cash and cash equivalents at beginning of quarter .................................. 51,688,784 42,459,156 --------------------------- Cash and cash equivalents at end of quarter ........................................ $ 26,870,928 $ 40,864,403 =========================== Supplemental disclosures of cash flow information: Cash paid for interest .......................................................... $ 2,781,226 $ 2,428,074 Cash paid for taxes ............................................................. 273,633 35,940 </TABLE> 5
AMES NATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) 1. Significant Accounting Policies The consolidated financial statements for the three month periods ended March 31, 2003 and 2002 are unaudited. In the opinion of the management of Ames National Corporation (the "Company"), these financial statements reflect all adjustments, consisting only of normal recurring accruals, necessary to present fairly these consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of results which may be expected for an entire year. Certain information and footnote disclosure normally included in complete financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with the requirements for interim financial statements. The interim financial statements and notes thereto should be read in conjunction with the year-end audited financial statements contained in the Company's 10-K. The consolidated condensed financial statements include the accounts of the Company and its wholly-owned banking subsidiaries (the "Banks"). All significant intercompany balances and transactions have been eliminated in consolidation. 2. Dividends On May 13, 2003, the Company declared a cash dividend on its common stock, payable on August 15, 2003 to stockholders of record as of August 1, 2003, equal to $0.46 per share. Also on May 13, 2003, the Company declared an additional special cash dividend on its common stock, payable October 1, 2003 to stockholders of record as of September 16, 2003, equal to $0.46 per share. 3. Earnings Per Share Earnings per share amounts were calculated using the weighted average shares outstanding during the periods presented. The weighted average outstanding shares for the three months ended March 31, 2003 and 2002 were 3,128,982 and 3,125,229, respectively. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements about the Company, its business and its prospects. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include use of the words "believe", "expect", "anticipate", "intend", "plan", "estimate" or words of similar meaning, or future or conditional verbs such as "will", "would", "should", "could" or "may". Forward-looking statements, by their nature, are subject to risks and uncertainties. A number of factors, many of which are beyond the Company's control, could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Such risks and uncertainties with respect to the Company include those related to the economic environment, particularly in the areas in which the Company and the Banks operate, competitive products and pricing, fiscal and monetary policies of the U.S. government, changes in governmental regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, credit risk management and asset/liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity. Results of Operations for the Three Months Ending March 31, 2003 and March 31, 2002. General The Company earned net income of $2,870,000, or $0.92 per share for the three months ended March 31, 2003, compared to net income of $2,941,000, or $0.94 per share, for the three months ended March 31, 2002, a decrease of 2.4%. The Company's return on average assets was 1.67% and 1.91%, respectively, for the three month periods ending March 31, 2003 and 2002. The Company's return on average equity was 11.26% and 12.26%, respectively for the three month periods ending March 31, 2003 and 2002. 6
While net interest income was relatively unchanged for the first quarter of 2003 versus the same period in 2002, non-interest expense was significantly higher in 2003 as the result of higher overhead expenses relating to the opening of United Bank & Trust NA (United Bank) in Marshalltown, Iowa. Overhead expenses for United Bank totaled $324,000 for the first quarter ended March 31, 2003. The higher non-interest expense was partially offset by higher securities gains in the Company's stock portfolio and an increase in loan and secondary market fees for the first quarter of 2003 versus the same period a year ago. The secondary mortgage market activity remains brisk but it is not anticipated to remain at current levels once interest rates stabilize or increase. AVERAGE BALANCE SHEETS AND INTEREST RATES The following table sets forth certain information relating to the Company's average balance sheets and reflects the average yield on assets and average cost of liabilities for the three month periods ended March 31, 2003 and March 31, 2002, respectively. <TABLE> AVERAGE BALANCE SHEETS AND INTEREST RATES Three Months Ended March 31, ------------------------------------------------------------ 2003 2002 ---------------------------- ----------------------------- ASSETS Average Revenue/ Yield/ Average Revenue/ Yield/ (dollars in thousands) Balance Expense Rate Balance Expense Rate ------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> Interest-bearing assets Loans Commercial ......................... $ 38,186 $ 565 5.92% $ 44,101 $ 802 7.27% Agricultural ....................... 25,998 461 7.09% 24,604 469 7.62% Real estate ........................ 257,491 4,215 6.55% 227,645 4,246 7.46% Installment and other .............. 19,401 315 6.49% 20,058 348 6.94% ----------------------------------------------------------- Total loans (including fees) ....... $341,076 $ 5,556 6.52% $316,408 $ 5,865 7.41% Investment securities Taxable ............................ $156,000 $ 2,003 5.14% $136,209 $ 2,083 6.12% Tax-exempt ......................... 81,167 1,494 7.36% 75,104 1,432 7.63% ----------------------------------------------------------- Total investment securities ........ $237,167 $ 3,497 5.90% $211,313 $ 3,515 6.65% Interest bearing deposits with banks $ 1,000 $ 5 2.00% $ 402 $ 2 1.99% Federal funds sold ................. 58,914 164 1.11% 49,442 201 1.63% ----------------------------------------------------------- Total interest-earning assets ...... $638,157 $ 9,222 5.78% $577,565 $ 9,583 6.64% Non-interest-earning assets ........ $ 49,973 $ 39,954 -------- -------- TOTAL ASSETS ....................... $688,130 $617,519 ======== ======== <FN> 1 Average loan balance include nonaccrual loans, if any. Interest income on nonaccrual loans has been included. 2 Tax-exempt income has been adjusted to a tax-equivalent basis using an incremental tax rate of 34%. </FN> 7
</TABLE> <TABLE> AVERAGE BALANCE SHEETS AND INTEREST RATES Three Months Ended March 31, -------------------------------------------------------------- 2003 2002 -------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Average Revenue/ Yield/ Average Revenue/ Yield/ (dollars in thousands) Balance Expense Rate Balance Expense Rate -------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Interest-bearing liabilities Deposits Savings, NOW accounts, and money markets ... $278,748 $ 752 1.08% $249,852 $ 831 1.33% Time deposits < $100,000 ................... 165,333 1,407 3.40% 153,197 1,682 4.39% Time deposits > $100,000 ................... 61,415 467 3.04% 46,394 475 4.10% ------------------------------------------------------------- Total deposits ............................. $505,496 $ 2,626 2.08% $449,443 $ 2,988 2.66% Other borrowed funds ....................... 15,116 64 1.69% 14,580 74 2.03% ------------------------------------------------------------- Total Interest-bearing ..................... $520,612 $ 2,690 2.07% $464,023 $ 3,062 2.64% liabilities ................................ -------- -------- Non-interest-bearing liabilities Demand deposits ............................ $ 57,934 $ 52,687 Other liabilities .......................... 7,604 4,829 -------- -------- Stockholders' equity ....................... $101,980 $ 95,980 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $688,130 $617,519 ======== ======== Net interest income ........................ $ 6,532 4.09% $ 6,521 4.52% ======== ======== Spread Analysis Interest income/average assets ............. 9,222 5.36% 9,583 6.21% Interest expense/average assets ............ 2,690 1.56% 3,062 1.98% Net interest income/average assets ......... 6,532 3.80% 6,521 4.23% <FN> 1 Tax-exempt income has been adjusted to a tax-equivalent basis using an incremental tax rate of 34%. </FN> </TABLE> Net Interest Income For the three months ended March 31, 2003, the Company's net interest margin adjusted for tax exempt income was 4.09% compared to 4.52% for the three months ended March 31, 2002. Net interest income, prior to the adjustment for tax-exempt income, for the quarter ended March 31, 2003 and March 31, 2002 totaled $6,024,000 and $6,034,000, respectively. Net interest income remained relatively unchanged despite the decline in the net interest margin as the higher volume of earning assets and the lower cost of interest bearing liabilities nearly offset the decline in yield on earning assets. For the three months ended March 31, 2003, interest income decreased $382,000 or 4.2% when compared to the same period in 2002. This decrease was attributable to lower average loan rates of 6.5% for the quarter ended March 31, 2003 versus 7.4% for the quarter ended March 31, 2002. A higher volume of loans and investments offset some of the decline in yield for interest income. Interest expense decreased $372,000 or 12.1% for the quarter ended March 31, 2003 when compared to the same period in 2002. The lower interest expense for the quarter is attributable to declining interest rates paid on deposits and other borrowed funds partially offset by a higher volume of deposits. Provision for Loan Losses The Company's provision for loan losses for the three months ended March 31, 2003 was $120,000 compared to $104,000 during the same period last year. Provision expense for quarter ended March 31, 2003 related to loan growth at United Bank while provisions for the quarter ended March 31, 2002 were primarily related to specific reserves for problem credits. 8
Non-interest Income and Expense Non-interest income increased $472,000, or 42.0% during the quarter ended March 31, 2003 compared to the same period in 2002. The increase can be attributed to securities gains in the Company's equity portfolio of $366,000 in 2003 compared gains on the sale of securities in the Company's equity portfolio of $366,000 in 2003 compared to $189,000 in first quarter 2002. Higher loan and secondary market fees also contributed to the increase in non-interest income. Non-interest expense increased $565,000 or 19.3% for the first quarter of 2003 compared to the same period in 2002. The increase in non-interest expense is primarily attributable to United Bank non-interest expenses for the first quarter of 2003 of $324,000 while the bank was not yet opened in the first quarter of 2002. The Company's efficiency ratio, non-interest expense divided by net interest income plus non-interest income, was 45.9% and 41.0% for the three months ended March 31, 2003 and 2002, respectively. Income Taxes The provision for income taxes for March 31, 2003 and March 31, 2002 was $1,132,000 and $1,179,000, respectively. This amount represents an effective tax rate of 28.3% for the three months ended March 31, 2003 versus 28.6% for the same quarter in 2002. The Company's marginal federal tax rate is currently 35%. The difference between the Company's effective and marginal tax rate is primarily related to investments made in tax exempt securities. Financial Condition Assets For the quarter ended March 31, 2003, total assets were $737,260,000, a $60,032,000 increase compared to December 31, 2002. This higher level of assets is attributable to the growth in assets at United Bank of $22,110,000 and to a higher volume of federal funds sold resulting from temporary large public fund deposit balances associated with the collection of property taxes. Average assets for the first quarter ended March 31, 2003 totaled $688,130,000 versus $617,519,000 for the first quarter ended March 31, 2002. Investment Portfolio The increase in the volume of investment securities to $254,004,000 on March 31, 2003 from $244,575,000 on December 31, 2002 resulted from the purchase of municipal and U.S. government treasuries and agencies bonds. Loan Portfolio Net loans totaled $340,383,000 as of March 31, 2003 compared to 332,306,000 as of December 31, 2002. The increased level of loans relates primarily to new loan originations at United Bank. Impaired loans totaled $2,288,000 as of March 31, 2003 compared to $2,409,000 as of December 31, 2002. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impaired loans include loans accounted for on a non-accrual basis, accruing loans which are contractually past due 90 days or more as to principal or interest payments, and any restructured loans. As of March 31, 2003, non-accrual loans totaled $2,091,000, loans past due 90 days still accruing totaled $197,000 and there were no restructured loans outstanding. Other real estate owned as of March 31, 2003 and December 31, 2002 totaled $251,000 and $295,000, respectively. Net recoveries totaled $49,000 for the three months ended March 31, 2003 compared to net charge-offs of $63,000 for the three months ended March 31, 2002. The first quarter's net recoveries were related to a commercial lease recovery and net charge-offs in the first quarter of 2002 related primarily to consumer loans. The resulting allowance for loan losses as a percentage of outstanding loans as of March 31, 2003 and December 31, 2002 was 1.71% and 1.70%, respectively. The allowance for loan losses is management's best estimate of probable losses inherent in the loan portfolio as of the balance sheet date. Factors considered in establishing an appropriate allowance include: an assessment of the financial condition of the borrower, a realistic determination of value and adequacy of underlying collateral, the condition of the local economy and the condition of the specific industry of the borrower, an analysis of the levels and trends of loan categories and a review of delinquent and classified loans. 9
Liabilities Deposits increased by $63,272,000 from December 31, 2002 and are $83,492,000 higher than March 31, 2002 balances. The increase in deposits is attributable to growth in deposit volume particularly at United Bank and a large influx of public funds invested on a short-term basis until the funds are withdrawn over the following 60 day period. The Company's deposits typically increase significantly at the end of the first and third quarters as local municipalities receive local property tax payments. Other borrowed funds as of March 31, 2003 totaled $13,362,000 and consisted primarily of securities sold under agreements to repurchase. Other borrowing as of December 31, 2002 totaled $18,326,000. Liquidity and Capital Resources The objective of liquidity management is to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for profitable business expansion. The Company's principal source of funds is deposits including demand, money market, savings and certificates of deposits. Other sources include principal repayments on loans, proceeds from the maturity and sale of investment securities, federal fund purchased, repurchase agreements, advances from the Federal Home Loan Bank and funds provided by operations. Net cash from operating activities contributed $4,233,000 and $3,772,000 to liquidity for the three months ended March 31, 2003 and 2002, respectively. Liquid assets including cash on hand, balances due from other banks, federal funds sold and interest-bearing deposits in financial institutions increased to $128,191,000 as of March 31, 2003 compared to the December 31, 2002 balance of $85,189,000. The increased liquid assets are attributable to the growth in consumer and public funds deposits. Securities available for sale increased to $254,004,000 as of March 31, 2003 from $244,575,000 as of December 31, 2002 and provide additional liquidity for the Company. To provide additional external liquidity, the Banks have lines of credit with the Federal Home Loan Bank of Des Moines, Iowa of $30,732,000 and federal funds borrowing capacity at correspondent banks of $46,000,000. As of March 31, 2003, the Company had no outstanding borrowings of federal funds purchased or Federal Home Loan Bank advances. Management believes that the Company's liquidity sources will be sufficient to support existing operations for the foreseeable future. The Company's total stockholder's equity increased to $102,634,000 on March 31, 2003, from $101,523,000 on December 31, 2002. March 31, 2003 stockholders' equity was 13.9% of total assets, compared to 15.0% at December 31, 2002. Total equity increased due to the retention of earnings. No material capital expenditures or material changes in the capital resource mix are anticipated at this time. Management believes that, as of March 31, 2003, the Company and its Banks meet the capital requirements to which they are subject. As of that date, all the Company's Banks were "well capitalized" under regulatory prompt corrective action provisions. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's market risk is comprised primarily of interest rate risk arising from its core banking activities of lending and deposit taking. Interest rate risk results from the changes in market interest rates which may adversely affect the Company's net interest income. Management continually develops and applies strategies to mitigate this risk. Management does not believe that the Company's primary market risk exposure and how it has been managed to-date in 2003 changed significantly when compared to 2002. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Company 's Principal Executive Officer and Principal Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic filings under the Exchange Act. Changes in Internal Controls Since the Evaluation Date, there have not been any significant changes in Company's internal controls or in other factors that could significantly affect such controls. 10
PART II. OTHER INFORMATION Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 99.1 - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K On January 24, 2003, the Company filed a Form 8-K pursuant to Item 5, announcing net earnings for the year ending December 31, 2002. On February 14, 2003, the Company filed a Form 8-K pursuant to Item 5, announcing financial results for the three and twelve months ended December 31, 2002 and that on February 12, 2003, the Company's Board of Directors declared a cash dividend of $.44 per share payable on May 15, 2003 to the holders of record as of close of business May 1, 2003. 11
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMES NATIONAL CORPORATION DATE: May 14 2003 By: /s/ Daniel L. Krieger ---------------------------- Daniel L. Krieger, President Principal Executive Officer By: /s/ John P. Nelson ------------------------------ John P. Nelson, Vice President Principal Financial Officer 12
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Daniel L. Krieger, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ames National Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant , including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) have presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and to the audit committee of the registrant's board of directors (or persons fulfilling the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/ Daniel L. Krieger ----------------------------- Daniel L. Krieger, President (Principal Executive Officer) 13
I, John P. Nelson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ames National Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant , including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) have presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and to the audit committee of the registrant's board of directors (or persons fulfilling the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/ John P. Nelson ------------------------------ John P. Nelson, Vice President (Principal Financial Officer) 14