Countrywide Credit Industries Inc., which is trying to raise deposits to fund its branching out from home lending to other banking services, is one step closer to launching the Internet banking operation at the core of its diversification push.

On Tuesday, the company took another step in its evolution. Countrywide received conditional approval from the Office of the Comptroller of the Currency to acquire Treasury Bank, a $100 million-asset Washington, D.C., institution that would bring the bank charter and lay the groundwork for the Internet strategy.

Armed with a bank charter, the Calabasas, Calif., mortgage lender plans to use the Internet to expand into checking, savings, and other consumer banking services.

Countrywide sees the future banking company as an Internet bank, Clarence G. Simmons 3d, president and chief operating officer of Countrywide Financial Holding Co., which would become a first-tier financial holding company upon Federal Reserve Board approval.

Countrywide has been moving for years to increase its portfolio of products and services beyond its origins in straight mortgage banking. Thanks to a mixture of acquisitions and internal growth, roughly one-third of its earnings now come from outside mortgage banking.

Buying a bank charter and building a bank also will give Countrywide a capability that its commercial bank competitors have long enjoyed. With its own bank, it will be able to move the $4 billion to $5 billion in escrow deposits Countrywide has kept in accounts at other depository institutions to its own institution. This instant deposit base will provide an immediate cost advantage to the Internet operation, Mr. Simmons said.

“Countrywide is a huge customer of banks,” Mr. Simmons said. With a bank charter and a place to put those deposits, the company will have a cheap source of funding for its bank operations. “This allows us to use existing relationships to lower our cost of funding,” he said.

When Countrywide filed to acquire Treasury Bank, the market’s initial reaction sent Countrywide’s stock down 5%, as many investors viewed the news as a sign that a long-rumored sale of Countrywide was not in the making.

(Countrywide officials have not said specifically that their company was for sale but co-founder and chairman Angelo R. Mozilo — who for years had explicitly ruled out a sale — softened that stance in an interview last May, when he said he no longer ruled out the option. The company, according to published reports, last summer hired Goldman Sachs to explore the possibility of a sale. The company declined to comment on the matter on Wednesday.)

Michael McMahon, an analyst at Sandler O’Neill, said that a move into banking does not necessarily mean management has rejected the idea of a sale. “I think Countrywide has to manage its affairs as if it’s going to be independent forever,” he said.

Through Effinity Financial Corp., a Countrywide subsidiary based in Alexandria, Va., Countrywide plans to create an Internet-based bank platform from which it can cross-sell a variety of banking products to its existing 3 million customers.

Countrywide’s efforts come as Internet banking, always in flux, has seen some participants bow out of the business. For example, Usabancshares.com in Philadelphia said in April it would return to its community banking roots, while Houston-based Compubank in March announced a sale of all of its assets to NetBank.

Mr. Simmons said Countrywide’s Internet effort should have some advantages over other Internet-based banks because of its ties to the asset-producing machine of the parent organization. “Other Internet banks haven’t been as successful attracting assets as deposits,” he said in an interview Tuesday. “With the loan origination capabilities of Countrywide and the affiliation of the bank, we have the opportunity to gain access to tremendous asset origination capabilities.”

“This is a way for Countrywide to gain a platform that will enable it to expand its banking services down the road,” said Mr. McMahon.

Countrywide and Effinity applied to the OCC to acquire Treasury Bank in mid-August. Mr. Simmons said the company’s primary interest was its charter. The company decided to apply for an approval to buy a bank, rather seek approval for a de novo bank charter for a variety of reasons - and expediency was one, he said.

The Internet-banking capabilities are being developed by Effinity Financial, which Countrywide acquired a majority interest in last May. Pending regulatory approvals, Treasury Bank’s name will be changed to Effinity Bank and its current business activities aligned with Effinity Financial’s, Mr. Simmons said. Pending other approvals related to Internet banking, Countrywide expects a rollout of the Internet bank sometime this year, he said.


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