The analysts stressed that they based their assessments of the bank's financial health solely on its reported data, and each acknowledged that the bank's true condition, as revealed by an on-site audit or exam, might be better than it appears on paper. Nonetheless, each said the bank's condition dictated the sale of both its agent-issued card portfolio to Elan Financial Services in 2009 and its card transaction processing unit last week.

"About the only good thing in that Call Report is the money the bank has on deposit at the Federal Reserve," said David Bryan, chief financial officer for the $246 million New Hampshire Federal Credit Union, headquartered in Concord. Before coming to the credit union, Bryan served for 10 years as an examiner for the New Hampshire Banking Department.

Bryan expressed concern, as did the other analysts, about the bank's steadily falling capital ratio, loss of income and high levels of nonperforming loans and mortgage-backed securities not supported by Fannie Mae or Freddie Mac.

According to its Call Reports, the bank had a Tier 1 capital ratio of 4.05% as of March 31 this year, the most current period for which there is published data. Bryan said he agreed with the FDIC's definition of an undercapitalized bank: one with more than $500 million in assets and a Tier 1 capital ratio of below 4.00%, according to an FDIC spokesman.

"It's always a tricky thing to take the pulse on a bank from only looking at its Call Report because every bank is different and different things banks do might call for them to have more or less capital," Bryan said. "But for a number of different reasons, 4% has been a traditional trigger number."

Neither Town North Bank nor its chairman, Jesse Gutierrez, CEO of Texas Bay Area Credit Union, returned calls seeking comment on the bank's capital ratios or financial health.

According to the FDIC, Town North's capital ratio fell from 7.63% in December 2007 to 4.50% in December 2009, a drop of more than three hundred basis points, while its peers saw their capital drop by only 38 basis points, from 8.73% to 8.35%.

Kevin Handly, a credit union and bank regulatory lawyer with the Boston-based law firm of Pierce Atwood LLP, drew attention to the amount of the bank's loans that were no longer accruing interest. He pointed out that the bank has $344 million in loans but that almost $22 million in loans and securities are also no longer accruing interest, a category that Handly and other analysts said was often the last stop before loans were written off.

The $22 million is more than double the bank's allowance for loan losses, Handly said, suggesting that the allowance might need to be raised again, further cutting into the bank's already precarious income.

According to the FDIC, Town North has had net negative income every year since 2008 and has seen its income decrease by more than $115 million over that time, including more than $11 million last year. Town North posted a more than $9 million income drop in the first quarter of this year.

The bank's Call Report also shows more than $99 million in mortgage-backed securities, of which only roughly $31 million are backed or issued by one of the GSEs. For the most part, MBS backed by the GSEs, even in receivership, are still considered safe investments, but so-called private label MBS are difficult to evaluate without knowing more about them, Handly said.

Lee Kyriacou, a director with management consulting firm Novantas who specializes in bank analysis, took a more favorable view of Town North, noting that the bank's questionable securities are at fair market value already and have likely lost all they can for now. He also argued that the bank's allowance for loan losses versus the amount of nonaccruing loans is actually better than that of many other consumer banks.

"I think they are also OK on their income statement," Kyriacou said. "I would like to know whether their income is stabilized."

Thirty-six credit unions, organized as a CUSO, have owned the bank since 2007. The bank has not yet answered a request for the number of CU members the CUSO has now.

Thomas Pinkowish, CEO of Remoc and Associates, a credit union and bank consultancy in Essex, Conn., said that given the bank's condition, it would not be impossible for its credit union owners to be asked to invest more capital into it.

"There is precedent for FDIC asking financial institutions that own banks to put in more capital if they can rather than have the taxpayers take a loss on it," Pinkowish said. "At the very least, the bank is likely going to need something."

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