Fremont General selling retail banking business for $58M

CapitalSource Inc. will acquire the retail banking business of Fremont General Corp. for $58 million.

The retail banking acquisition includes $5.6 billion in deposits.

Chevy Chase, Md.-based CapitalSource will also loan Fremont as much as $200 million.

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Fremont, a mortgage lender based in Brea, was ordered by the Federal Deposit Insurance Corp.to stop making subprime loans a year ago.

The sale includes 22 Fremont bank branches in Southern California. Fremont will keep its loan servicing operations and its residential mortgage assets.

The acquisition will put CapitalSource, a big commercial lender, in the retail banking business for the first time.

"We have long sought deposit funding as a way to further diversify and strengthen our funding platform, said Thomas Fink, the company's chief financial officer. "This transaction will accomplish that objective in an optimal and expeditious way."

CapitalSource has not announced a name for its new banking operation. It expects the acquisition, which is subject to regulatory approval, to close in the third quarter.

CapitalSource (NYSE: CSE) canceled plans to acquire Lincoln, Neb.-based TierOne Bank in March, nearly a year after the deal was announced.

Fremont General (NYSE: FMT)was ordered last month to find new capital or seek a buyerafter the FDIC determined it was undercapitalized.