Franklin Bank of Houston aims to be a major player in Texas by avoiding the hot urban markets being targeted by out-of-state giants.
But some observers speculated that Franklin, which the legendary dealmaker Lewis S. Ranieri bought in April 2002, may be preparing for a sale to one of those rivals.
Since it was acquired by an investor group led by Mr. Ranieri, Franklin has grown to more than $3 billion of assets, from $203 million.
“Our target is to be a $5 billion bank by the end of 2006,” said Anthony J. Nocella, Franklin’s president and chief executive officer.
The bank focuses on growing in the outer suburbs and satellite towns rather than trying to slug it out in major markets.
“The market share in big cities is being fought for by large commercial banks every day of the week,” Mr. Nocella said. “Our growth is outside of Houston, Austin, and Dallas.”
Last week Franklin made a $22.6 million deal for the $104.5 million-asset Cedar Creek Bancshares Inc. of Seven Points, which is in Henderson County, southeast of Dallas. The deal is Franklin’s fourth since early last year, according to Highline Data LLC. With the purchase, Franklin would have added $700 million of assets in the past 21 months.
The rest of Franklin’s growth has come from buying loans and from lending to builders and homebuyers nationwide, Mr. Nocella said. Many of its business borrowers outside Texas were customers of Bank United Corp. in Houston, where he was the chief financial officer until it sold itself to Washington Mutual Inc. for $1.5 billion in February 2001.
Mr. Ranieri, now Franklin’s chairman, was the head of Bank United until Wamu bought it.
Noting the ties between Franklin and Bank United, Scott Alaniz, an analyst with Sandler O’Neill & Partners LP, said he suspects Franklin is building up for a sale.
Large companies like Wachovia Corp. and Citigroup Inc. that are looking to grow in Texas are not interested in buying small banks, Mr. Alaniz said. Once Franklin’s assets reach $5 billion to $10 billion, large buyers will come calling — and it executives will probably answer, he said.
“With this management team, they have shown a willingness to accept an offer,” Mr. Alaniz said. “The story is still: Make acquisitions and grow the franchise in markets outside of metro areas everyone has drawn a bull’s-eye on.”
John Heasly, the executive vice president of the Texas Bankers Association, said banks from around the country are “falling all over themselves” to get into the state.
Homegrown banks will feel pressure to sell as outsiders try to take advantage of the potential growth there, especially east of the I-35 corridor that runs north from Laredo, he said.
Stephen Y. Scurlock, the executive vice president of the Independent Bankers Association of Texas, agreed that competition throughout the state was getting fiercer as large banks buy and build their way into the market.
“It seems to be a gold-rush mentality,” he said.
Mr. Nocella insisted that Franklin is not interested in selling.
“We are using all of our experience and talent to build a franchise,” he said.
Paul J. Miller, an analyst with Friedman, Billings, Ramsey & Co. Inc., said Franklin is a likely acquisition target, but he does not expect a sale until 2009 or later.
He pointed out that Mr. Ranieri ran Bank United for over 10 years before selling it.
“Are they going to sell at some point? I think down the road, yes,” but not for another five years, he said.
