Citigroup Inc. has joined its peers by making its first foray into the hot Texas banking market through the acquisition of privately held First American Bank SSB.

While Citigroup has had a presence in the Lone Star state through call centers and a consumer-finance business, Citigroup lacked a retail banking presence. Analysts said Citigroup’s decision to buy the bank is a positive step for the company and shareholders given that the Texas market is one of the fastest growing in terms of demographics.

“It’s a small deal relative to the size of Citigroup overall,” said a senior research analyst at Lehman Brothers Inc., Jason Goldberg. “But it does take them into a good market, albeit through a small player.”

First American, of Bryan, Texas, is one of the largest independent financial institutions in the state. In the deal, announced Tuesday, Citigroup will acquire First American’s $3.5 billion in assets in Texas, including 100 branches and about 120,000 customers’ accounts.

While terms of the deal weren’t disclosed, Citigroup said that the acquisition should add to earnings immediately.

Given the presence of competitors such as Bank of America Corp. and Wachovia Corp. in the South, industry observers had speculated for some time that Citigroup would need to expand its presence in hot domestic markets such as Texas.