Current standards require banks to reserve for expected losses over the life of a loan at the moment it is written, which front-loads charges when lending grows and produces releases when the outlook improves.
Provisions are estimates, so they are the main lever in bank earnings-quality. A bank releasing reserves into earnings while credit conditions deteriorate is borrowing profit from the future.
Example: Meridian Savings Bank charges $46M of provisions against $256M of net interest income, against $34M the prior year, after raising its assumed unemployment path in the model.
Related: net-interest-margin, tier-1-capital, earnings-quality, allowance-for-doubtful-accounts, one-time-charge