Analysts weigh in on when HomeTown Bank should start moving into the black.

HomeTown Bank of Roanoke, midway through its second year in business, has accumulated $100 million at a good clip. But getting investors to fork over start-up cash, and account holders to deposit funds, is just the first step in starting a community bank.

Managers are now endeavoring to earn a timely profit as well. To do that, HomeTown lends money at interest rates higher than the rates paid to account holders for their deposits.

The bank lost $3 million last year.

But it is almost a given that a new bank will run in the red for several years.

When can HomeTown's owners, its private shareholders, expect the first profit?

"You've got to give them till the end of '07," said David Danielson, president of Danielson Capital, a bank consulting firm in Vienna, Va. "I'd like to see a profit in the first quarter of '08."

Danielson, who is not an investor in HomeTown, gave his assessment at the request of The Roanoke Times.

Analyst John McCune directs the financial institutions group at SNL Financial LC in Charlottesville. McCune said profit between now and December would meet his expectations, but that some banks need another year.

Lending takes time, McCune explained. As of the end of the first quarter, HomeTown had lent 77 percent of its total asset value, a good sign given the newness of the bank.

"They're doing a good job of getting the loans out there," McCune said.

The man whose forecast is probably the likeliest to be correct is William Clark, president and chief executive officer of HomeTown Bank. Clark said the wait shouldn't be long, but his forecast is confidential.

"Most de novo [new] banks are profitable within their first three years, and we feel like we're well on target to meet that," Clark said.

So, if Clark is right, the bank, which opened in the fourth quarter of 2005, will make a profit by the end of 2008 at the latest. Analysts think profitability could -- and perhaps should -- happen sooner.

Certainly, the groundwork has been laid. Investors funded the bank with more than $20 million. Deposits have brought in four times that. Board members are pleased.

"We've got a good team of folks working for HomeTown Bank, and our financial results have been good and our customers have been pleased," said board member Danielle Yarber, vice president and general manager of Xpedx.

Added builder Jay Turner of J.M. Turner & Co. Inc.: "HomeTown Bank is a good local story, and I think it's going to get better."

But what's to indicate that HomeTown has built its asset base at a strong rate? How does its success in luring deposits compare to that of other new banks that opened their doors in late 2005?

SNL Financial identified 57 banks spread across the country that, like HomeTown, opened in the fourth quarter of 2005. SNL said in terms of assets, the average was $88.6 million per bank at the end of the first quarter of 2007.

HomeTown beat the average with $92.8 million. Its assets have since passed $100 million.

By comparison, Valley Bank, which opened in the Roanoke Valley during the second quarter of 1995, took more than three years to hit the $100 million mark.

But, Valley Bank became profitable in less than two years.

Clark cautioned that branch development is a strategic expense with the potential to delay HomeTown's profitability somewhat, but that it has the potential to make profits larger when they come.

"Every time you open up a branch, a branch is not profitable on Day One and ... that will in essence delay profitability" of the whole organization, Clark said; however, when profit occurs, "your profits are better than that one-branch or one-office bank."

HomeTown has approval for four branches.

Will there be a fifth?

"Of course," Clark said, "and a sixth and a seventh and an eighth. We just don't know when or where yet."