Ames National Corporation – Ticker: ATLO (NASDAQ)

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1. Executive Summary

  • Company: Ames National Corporation
  • Ticker: ATLO (NASDAQ)
  • Sector: Regional Banking
  • Recommendation: Hold / Modest Buy for Income Investors – Stable dividend, strong profitability, conservative balance sheet, though with modest growth potential.

2. Company Overview

  • Business Model: Operates as a bank holding company for six community banks in Iowa, offering loans (commercial, agri, consumer, real estate), deposits, wealth management, and related financial services  .
  • Market Position: Sixth-largest Iowa-based commercial bank holding company with total assets of ~$2.1 B as of December 31, 2024  .

3. Financial Analysis

  • Revenue & Profit:
    • 2024 revenue ≈ $55 M; net income ≈ $11.36 M, yielding ~20.6% net margin  .
  • Profitability:
    • Return on Assets (ROA) ≈ 0.52%, Return on Equity (ROE) ≈ 6.5%  .
  • Cash Flow & Efficiency:
    • Operating cash flow ~$20 M; free cash flow ~$19.6 M (~35.7% of revenues)  .
  • Balance Sheet:
    • Strong net cash position: ~$169 M cash vs ~$82 M debt → net cash $87.5 M ($9.81/share)  .
    • Capital position solid, equity ~$183 M .

4. Stock Performance

  • Current Price Range: $17.52–$17.89; 52‑week low/high: ~$15.69–$22.03  .
  • Volatility: Low beta (~0.47), less volatile than market; weekly volatility ~4%  .
  • Near-Term Trends: Roughly –13.7% YTD and –12.3% over last year .

5. Valuation Analysis

  • Valuation Multiples:
    • P/E ≈ 13.7×; P/B ≈ 0.91×; P/FCF ≈ 10.8×  .
  • Dividend Yield: Payable US$0.80 yearly (~4.47%), payout ratio ~63%  .
  • Comparisons: Valued at reasonable discounts relative to peers and supports income-focused investment strategies.

6. Industry & Market

  • Community Banking Context: Benefits from localized decision-making and diversified services (commercial, agricultural, consumer lending)  .
  • Interest Rate Sensitivity: Earnings tied to net interest margins; stability expected with current rate environment.

7. Risk Analysis

  • Interest Rate Risk: Margin compression possible if rates decline.
  • Growth Risk: Revenue seasonality and modest top-line growth; 3‑year revenue declined ~5.8% .
  • Capital Utilization: If capital is unused, could pressure ROE.
  • Economic Exposure: Local downturns in Iowa’s agri/commercial sectors could impact loan performance.

8. Growth Drivers

  • Loan & Deposit Growth: Five-year CAGR ~4.3–4.9% .
  • High-Quality Earnings: Stable margins (~20%), efficient operations  .
  • Cash Surplus: Potential for share buybacks, reinvestment, or dividend increases.

9. Analyst Sentiment

  • Coverage & Targets: Lacks formal analyst coverage—no consensus or targets available  .
  • Technical Indicators:
    • 50‑day MA ≈ $17.35, 200‑day ≈ $17.64; RSI ~55 — indicating a neutral to mildly bullish technical outlook  .

10. Conclusion

Ames National is a well-capitalized, profitable community bank with stable earnings and a dependable dividend (~4–5%). With a healthy balance sheet—net cash, low debt, solid cash flow—it appeals to conservative and income-focused investors.

Recommendation:

  • Hold for dividend income and balance-sheet resilience.
  • Selective Buy if seeking steady income at ~4.5% yield, with limited downside given strong fundamentals.

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