Fremont, once the home of sweet CD yields, sells its branches

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Fremont General Corp., once one of Southern California’s biggest sub-prime mortgage lenders, made a deal today to shed most of its deposit-taking bank -- a place where Southland savers have long earned some sweet interest rates.

Fremont, already a shadow of its old self, agreed to sell its 22 Fremont Investment & Loan branches, and their $5.6 billion in deposits, to CapitalSource Inc. of Chevy Chase, Md.

The buyer, a lender to small- and mid-size businesses, has been trying for some time to get into the general banking business. It had planned to buy a Nebraska-based bank but ended the agreement last month as the credit crunch worsened.

Brea-based Fremont last year was forced out of the sub-prime business by regulators who were trying to protect the bank from ruin. In March the Federal Deposit Insurance Corp. went a step further, telling Fremont either to raise capital or sell its banking unit.

At this point the loss-ridden company looks like it’s just winding down its affairs. With the stock trading for about 50 cents, the New York Stock Exchange today said the shares were ‘no longer suitable for listing on the NYSE.’

Fremont made a lot of loans its shareholders now regret, but its depositors made out. A year ago, for example, Fremont was paying 5.6% on a one-year CD -- far above the national average rate of 4.16% at the time, according to rate-tracker Informa Research Services.

With federal deposit insurance, savers never have to say they’re sorry for funding bad loans.

The bank still is paying better-than-average rates on shorter-term money. Its website today was advertising six-month CDs at 3.40% for $10,000 or more. That compares with a national average of 2.29%, Informa says. But Fremont’s one-year CD yield now is 2.05%, well below the national average of 2.4%.

As for CapitalSource, the market must think the company is getting a good deal in the complicated transaction: The company’s shares jumped $1.44, or nearly 14%, to $11.92.

Photo: An employee of Fremont Investment & Loan carries his belongings from the company’s Anaheim office in March 2007. Tim Rue/Bloomberg News