Live Oak Bancshares, Inc. (NYSE:LOB) Q4 2022 Earnings Conference Call January 26, 2023 9:00 AM ET
Company Participants
Greg Seward - Chief Risk Officer and General Counsel
James Mahan - Chairman and Chief Executive Officer
William Losch - Chief Financial Officer
Huntley Garriott - President
Steve Smits - Chief Credit Officer
Conference Call Participants
Steven Alexopoulos - JPMorgan
Crispin Love - Piper Sandler
Michael Perito - KBW
Operator
Good day and thank you for standing by. Welcome to the Q4 2022 Live Oak Bancshares Inc. Earnings Conference Call. [Operator Instructions]
And I would now like to hand the conference over your speaker today Mr. Greg Seward, Chief Risk Officer and General Counsel. Sir please go ahead.
Greg Seward
Thank you, and good morning, everyone. Welcome to Live Oak's fourth quarter 2022 earnings conference call. We are webcasting live over the internet and this call is being recorded. To access the call over the internet and review the presentation materials that we will reference on the call, please visit our website at investor.liveoakbank.com and go to today's call on our event calendar for supporting materials. Our fourth quarter earnings release is also available on our website.
Before we get started, I would like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from our expectations are detailed in the materials accompanying this call and in our SEC filings. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of today's call. Information about any non-GAAP financial measures referenced, including reconciliation of those measures to GAAP measures, can also be found in our SEC filings and in the presentation materials.
I will now turn the call over to James Mahan, our Chairman and Chief Executive Officer.
James Mahan
Thanks, Greg, and good morning to those dialing in today. If I had your job, bank analyst extraordinaire, my first question would be tell me about your loan loss provision.
Moving to the next slide, Michael, before we unpack the provision, in our last quarterly call, we talked about some very famous folks predicting a recession. So are the last two substantial increases in the provision a proxy for the future? Let's drill down.
Next slide. Let's go way back to pre CECL, the provision in 2018 and '19 was between $0 and $7 million, mainly in the $2 million to $5 million range. Then, in Q1 of 2020 we implemented CECL at the beginning of the pandemic. We were predictively conservative providing $10 million per quarter during the COVID peak. We were equally predictable as the government provided PPP funding and our provision came down in 2021 as you can see from the slide. The title of this slide is regression to the norm. We're about back to where we were three years ago as our allowance for credit losses are 2.2% of unguaranteed loans compared to 2.4% in 2019. We do not see the Q4 provision as a proxy for the future at this point in time.