Since 1999, when Texas Capital Bancshares opened its first branch, in Dallas, the company's assets have grown more than tenfold, to $908 million.

Now it plans to enter its fifth Texas city - Houston, the state's biggest market - by starting a loan production office in the second quarter and a full-service branch in late 2001 or early 2002.

So far, Texas Capital's phenomenal growth has been generated internally. But its president, Raleigh Hortenstine, said an initial public offering is in the works that will provide the fuel to make acquisitions.

Mr. Hortenstine predicted that eventually, Texas Capital would expand outside the state and become a regional bank.

"We're not trying to build a $2 billion or $3 billion bank just to sell it," he said. "We're trying to build the bank so we can turn it into a $15 billion bank."

Mr. Hortenstine said the IPO could occur as early as next year, and probably no later than 2003. "We think 2002 and 2003 are going to be critically important years for us," he said.

Texas Capital, which is privately held by about 800 investors, raised $26.5 million last summer for its Internet unit, BankDirect, and decided to take it public. But last month chief executive officer Joseph M. Grant postponed that offering indefinitely, citing the collapse of the market for new high-tech firms, including Internet banks.

Carol Towne, Texas Capital's vice president of marketing, said it is still committed to BankDirect, which has pulled in more than 30,000 customers and $375 million of deposits, or 47% of Texas Capital's total. The company has no plans to scale back BankDirect's operations, she said.

The canceled BankDirect IPO was not Texas Capital's only setback. Dallas-based Legend Airlines, which used the bank to process its credit card payments and for its main deposit account, suspended operations and filed for bankruptcy protection in December. But neither the demise of BankDirect's IPO nor that of Legend Airlines has stopped Texas Capital's drive toward profitability, Mr. Hortenstine said.

He said the company expects to be in the black in its four current markets - Dallas, Fort Worth, Austin, and San Antonio - by the end of the second quarter. "We're only a few months away from breaking even."

Mr. Hortenstine added that an economic slowdown would not change those projections significantly, arguing that Texas' diverse economy and counter-cyclical industries, such as energy, would help the state in a downturn.

Texas Capital, the corporate parent of Texas Capital Bank, reported losses of $8.1 million for 1999, and $8.7 million through the first nine months of 2000, according to the Federal Deposit Insurance Corp. The company plans to release its yearend results at the end of March, Ms. Towne said.

But despite the losses, the bank says its $629 million loan portfolio is solid, and it has charged off only $12,000 to date. "We don't have any problem loans," Mr. Hortenstine said. "We're only two years old, so we shouldn't have any," he added.

Olivia Solis, a spokeswoman for the Texas Bankers Association, said Texas Capital's performance has been remarkable, and "not at all indicative of the trends we have seen here of late."

"In general," she said, we're seeing nothing out of the ordinary - just slow, steady growth."

John Heasley, the association's executive vice president, said Texas banking people have never before seen a new bank operate on Texas Capital's scale, noting that the bank's start-up capital in 1999 was a whopping $80 million.

Texas Capital's enormous capitalization, he said, helped it tap into a vein of "regional chauvinism" in a state that, despite its size, is home to no major national or regional bank. "They're selling Texas pride," Mr. Heasley said.


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