Loan-Loss Provision
The expense a bank records each quarter to build (or reduce) its reserve for expected future loan losses. Provisions are managements forward-looking judgment about credit deterioration: when provisions rise, management is signaling more losses coming; when provisions fall (sometimes called "releasing reserves"), management is signaling improvement. Because provisions are estimates, they can flatter or depress reported earnings relative to underlying business reality -- which is why disciplined bank analysts focus on pre-provision net revenue and net charge-offs alongside the reported earnings.
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