CapitalSource Inc. in Chevy Chase, Md., said it plans to give up its status as a real estate investment trust and reorganize as a bank holding company.

The company, which received a California commercial bank charter in July when it acquired $5.2 billion of deposits, 22 branches and some assets from Fremont General Corp.'s Fremont Investment and Loan, said this week that it has submitted an application with the Federal Reserve Board to become a bank holding company, and that it hopes to begin operating as one in January.

CapitalSource also said it intends to sell its residential mortgage investment portfolio.

The conversion to a bank holding company would give CapitalSource more funding options and allow it to offer a wider range of deposit products John K. Delaney, its chairman and chief executive officer, said in a press release.

Mr. Delaney also said that his company has "abundant liquidity" and that it intends to use its strong cash position to beef up its lending to small- and medium-sized businesses. It is also considering acquisitions of banks or thrifts that might be looking for buyers, Mr. Delaney said.

CapitalSource's third-quarter net income declined nearly 72% from a year earlier, to $8.1 million.

Shares of CapitalSource closed at $6.57 Thursday, down 15.6% from Wednesday's closing price.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.