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Provident Financial Services' Q2 after-tax bottom line to shrink by $9.3M

Provident Financial Services Inc., based on information obtained from a bankruptcy proceeding during the second quarter, believes that the extent and value of inventory securing repayment of an impaired loan, as well as the accounts receivable pledged to the company as collateral, were overstated by one of its commercial borrowers.

In its first-quarter earnings release, Provident Financial Services disclosed that it established a specific reserve of $2.5 million with respect to the $15.4 million credit to the commercial borrower that filed a Chapter 7 bankruptcy petition March 27 for a liquidation of assets.

The Iselin, N.J.-based company expects that an additional reserve for the remaining balance of this credit will be required, and the company's net income for the quarter ended June 30 will be reduced by up to $9.3 million, after tax, or up to 14 cents per share.

Provident Financial Services believes that this impaired loan is not indicative of a deterioration of credit in its overall loan portfolio. The company's credit quality metrics remain strong, according to a Form 8-K filed July 5.