Fremont General files for bankruptcy protection

The bankruptcy filing was necessary to allow CapitalSource, a commercial lender, to complete the purchase of Fremont General's retail banking operations. The filing will have no effect on operations at the bank or its branches.

Fremont General said both the California Department of Financial Institutions and Federal Deposit Insurance Corp. approved CapitalSource's acquisition of the retail banking operations.

Fremont General previously was one of the largest originators of subprime mortgages--loans given to customers with poor credit history.

Last year though, regulators forced it to cease originating mortgages, saying it did not have proper risk management oversight. Fremont later sold its mortgage assets, but still held retail banking assets.

In March, regulators gave Fremont General 60 days raise new capital or sell its banking subsidiary because the bank was considered "undercapitalized." It then agreed to sell the banking operations to CapitalSource.

CapitalSource will take over 22 branches and about $5.6 billion in deposits.

Fremont General shares closed at about 7 cents Wednesday, leaving the company with a market capitalization of just over $5 million. A year ago the stock traded north of $12 per share.