Business Combinations

3 Months Ended

Mar. 31, 2020

Business Combinations [Abstract]

Business Combinations

Business Combinations

SB One Bancorp Acquisition

On March 11, 2020, the Company entered into a definitive merger agreement pursuant to which SB One Bancorp ("SB One") will merge with and into the Company, and SB One Bank, a wholly owned subsidiary of SB One, will merge with and into Provident Bank, a wholly owned subsidiary of the Company. The merger agreement has been unanimously approved by the boards of directors of both companies. The actual value of the Company’s common stock to be recorded as consideration in the Merger will be based on the closing price of the Company’s common stock at the time of the Merger completion date. Under the Merger Agreement, each share of SB One common stock will be exchanged for 1.357 shares of the Company's common stock plus cash in lieu of fractional shares. The merger is expected to close in the third quarter of 2020, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by the shareholders of SB One. At December 31, 2019, SB One had $2.0 billion in assets and operated 18 full-service banking offices in New Jersey and New York.

Acquisition of Tirschwell & Loewy, Inc.

On April 1, 2019, Beacon Trust Company ("Beacon") completed its acquisition of certain assets of Tirschwell & Loewy, Inc. ("T&L"), a New York City-based independent registered investment adviser. Beacon is a wholly owned subsidiary of Provident Bank. This acquisition expanded the Company’s wealth management business by $822.4 million of assets under management at the time of acquisition.

The T&L acquisition was accounted for under the acquisition method of accounting. The Company recorded goodwill of $8.2 million, a customer relationship intangible of $12.6 million and $800,000 of other identifiable intangibles related to the acquisition. In addition, the Company recorded a contingent consideration liability at its fair value of $6.6 million. The contingent consideration arrangement requires the Company to pay additional cash consideration to T&L's former stakeholders over a three-year period after the closing date of the acquisition if certain financial and business retention targets are met. The acquisition agreement limits the total additional payment to a maximum of $11.0 million, to be determined based on actual future results. The total cost of the T&L acquisition was $21.6 million, which included cash consideration of $15.0 million and contingent consideration with a fair value of $6.6 million. Tangible assets acquired were nominal, and no liabilities were assumed in the T&L acquisition. The goodwill recorded in the transaction is deductible for tax purposes.

In the fourth quarter of 2019, the Company recognized a $2.8 million increase in the estimated fair value of the contingent consideration liability. While performance of the acquired business has been adversely impacted in the first quarter of 2020 due to worsening economic conditions and declining asset valuations attributable to the COVID-19 pandemic, management has not identified a reduction in assets under management due to a declining customer base. Therefore, the $9.4 million fair value of the contingent liability was unchanged at March 31, 2020, from December 31, 2019, with maximum potential future payments totaling $11.0 million.