Bankrupt Lehman Brothers Holdings Inc is auctioning a thrift and an industrial bank it owns, and the process is in the early stages, a source familiar with the matter said on Monday.

The sale of Lehman Brothers Bank FSB, a Delaware-based thrift, and Woodlands Commercial Bank, a Utah industrial bank, is being handled by investment bank Lazard Ltd, the source said.

A transaction will have to go through the U.S. bankruptcy court process, said the source, who asked not to be named because the sale process is not public.

A Lehman spokeswoman said the company was selling all assets as part of Lehman's wind-down in bankruptcy.

We're looking to realize value whenever we can get it, Lehman spokeswoman Kimberly Macleod said.

We're going to hold it until someone comes with fair value and the creditors' committee approves it, she said, noting Lazard was running the sales process for this and other assets.

Lazard declined to comment.

Last month, a U.S. bankruptcy judge allowed Lehman to pump cash into the two banks to avoid a seizure by regulators.

FSB was a centerpiece of Lehman's mortgage loan origination, purchasing and servicing business. Lehman reported equity of about $467 million and total assets of about $6.5 billion in the bank at the end of 2008.

Woodlands issues commercial and real estate loans to major corporations, short-term secured warehouse loans to borrowers and interest rate products, such as swap or derivative contracts. It does not conduct retail deposit operations and has no consumer deposit or loan customers, according to a court filing.

Woodlands, which was earlier known as Lehman Brothers Commercial Bank, has been funded primarily by brokered certificates of deposit. As of December 31, it had total assets of about $5.4 billion and Lehman's equity of about $432 million, according to the filing.

Lehman, once the fourth-largest U.S. investment bank, filed for bankruptcy protection on September 15, in the largest U.S. bankruptcy filing in history.

The case is: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555

(Reporting by Paritosh Bansal and Emily Chasan; Editing by Andre Grenon)

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