LoanDepot says cash, warehouse line with Signature Bank are safe

LoanDepot is assuring investors that its financial ties to the failed Signature Bank are safe after regulators seized the depository Sunday.

The lender and servicer transferred $225 million of corporate cash balances out of the former bank Monday to an unnamed large money center bank, it said in a Securities and Exchange Commission filing Wednesday. It moved the funds following the Federal Deposit Insurance Corp.'s establishment Sunday evening of a bridge bank, Signature Bridge Bank N.A., which protected depositors and will continue the bank's operations.

The bank's collapse won't impact loanDepot's $300 million warehouse facility, in which Signature is a 50% participant, and a $300 million servicing rights facility with Signature, which both expire this December. Neither facility has acceleration rights for a defaulting lender, the filing said, and loanDepot will retain full access to the funding under the same terms and conditions. 

"We expect to have full access to the deposits held at Signature and do not expect any material adverse effect on our financial condition or operations, as a result of these events," the filing read, dated Tuesday and signed by Patrick Flanagan, chief financial officer. 

The lender said it also maintains fully insured custodial deposit accounts at Signature. LoanDepot noted it has no cash deposits, securities or credit exposure to Silicon Valley Bank, which also failed last week and was propped by the FDIC, which established another bridge bank. 

A representative for Loandepot didn't immediately return a request for comment Wednesday morning. 

In a fourth quarter earnings release last week, the lender disclosed cash and cash equivalents of $864 million and warehouse and other lines of credit totalling $2.1 billion, after implementing reductions in the second half of last year.

LoanDepot is reeling from a $156.8 million loss in the fourth quarter, ending a difficult year for the Foothill Ranch, California-based company. More layoffs are expected as loanDepot cuts costs this year, and it's unlikely the firm will turn a profit in 2023, CEO Frank Martell said last week during the company's quarterly earnings call. 

The mortgage player is the first across the industry to address a direct relationship with either failed bank, as other companies have distanced themselves from the banking chaos and professed confidence in their liquidity. Firms making such announcements this week include publicly traded companies Blend Labs, Merchants Bancorp and Rocket Cos.