North Texas Bancshares, Inc., Files for Bankruptcy in Delaware

On October 16, 2013, North Texas Bancshares of Delaware, Inc. and North Texas Bancshares, Inc. (collectively, the “Debtors”) filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  Debtors are bank holding companies based in Dallas, Texas.  See Declaration in Support of Chapter 11 Petitions and First Day Pleadings at *2.  Debtors’ primary assets are their shares in Park Cities Bank (“Park Cities Bank” or the “Bank”), which is a Texas bank headquartered in Dallas.  Decl. at *3. 

Chartered in 2000, Park Cities Bank provides banking services to customers in University Park, Highland Park and the Dallas, Texas areas.  The Bank got its start by acquiring a branch of Eagle National Bank, located in Dallas, on November 6, 2000.  At the time of filing for bankruptcy, the Bank operated four branch locations.  As of the petition date, the Bank employs 71 employees and holds deposits totaling $396 million.  The Bank focuses on “hometown banking,” offering both consumer and commercial lending.  Decl. at *3.

As bank holding companies, the Debtors’ primary activities consist of owning and operating the Bank.  The Debtors are the sole shareholder and parent corporations for the Bank.  This requires the Debtors to manage and provide financial resources for the Bank and to oversee operations.  Major decisions by the Bank require the Debtors’ approval.  Decl. at *4.  Going in to bankruptcy, Debtors have secured debt totaling approximately $5 million and unsecured debt in the form of junior subordinated debentures totaling $34 million.  Decl. at *6.

Debtors attribute their bankruptcy filings to the 2008 volatility in the financial markets.  The recession that followed cause the Bank to be undercapitalized.  At the same time, the Bank also saw a drop in real estate values, which in turn affected the Bank’s borrowers abilities to repay loans.  Eventually the Bank was forced to write down portions of its real estate loan portfolios.  Aside from real estate, the Bank was also negatively affected by the drop in natural gas prices and its effect on the Bank’s energy loan portfolios.  Decl. at *10-11.

The poor performance of the Bank’s loan portfolios led to the FDIC examining the Bank’s assets starting in November of 2009.  In response, the Bank started looking to sell distressed assets.  The Bank received inquiries from potential third party purchasers but was unable to close a sale of assets.  Decl. at *12-13. In 2013, following months of marketing, a party came forward and signed a letter of intent which led to the entry of an asset purchase agreement on October 14, 2013.  Decl. at *15. The parties to the deal enter bankruptcy hoping to receive court approval of a sale of assets pursuant to 11 U.S.C.§ 363 of the Bankruptcy Code.  Decl. at *16. 

The Debtors’ bankruptcy proceeding is before the Honorable Kevin Gross under case no. 13-12699(KG).  Debtors are represented by the law firm Ballard Spahr LLP.

————————————————————–

Jason Cornell is an equity partner with the law firm Fox Rothschild LLP. Jason is a creditors’ rights attorney who is admitted and practices before the United States Bankruptcy Court for the District of Delaware and the United States Bankruptcy Court for the Southern District of Florida. You can reach Jason at 302 427 5512 or [email protected].

Below are some additional posts Jason has written concerning Delaware bankruptcy litigation:

Ten Things Every Commercial Landlord Should Know About a Tenant in Bankruptcy.

Seeking Relief from the Automatic Stay in Delaware.

A Tale of Two Bankruptcy Auctions.

What Information is Required in a Chapter 11 Disclosure Statement?