Business Combinations

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Business Combinations

Business Combinations

SB One Bancorp Acquisition

Effective as of the close of business on July 31, 2020, the Company completed its previously announced acquisition of SB One Bancorp ("SB One"), which was merged with and into the Company. In connection with the acquisition, SB One Bank, a wholly owned subsidiary of SB One, was merged with and into Provident Bank, a wholly owned subsidiary of the Company. At July 31, 2020, SB One had, on a consolidated basis, approximately $2.22 billion in total assets, which included $1.78 billion in total loans and $1.75 billion in total deposits, and operated 18 full-service banking offices in New Jersey and New York. Under the merger agreement, each share of SB One common stock will be exchanged for 1.357 shares, or approximately 12.8 million shares, of the Company's common stock plus cash in lieu of fractional shares. Consideration paid in the acquisition of SB One was approximately $180.8 million.

Merger-related expenses, which are recorded in other operating expenses on the Consolidated Statements of Income, totaled $683,000 and $1.1 million for the three and six months ended June 30, 2020, respectively, and primarily consist of professional and legal expenses.

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 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. Total cost of the 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 in the transaction were nominal. No liabilities were assumed in the 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 for both the three and six months ended June 30, 2020 due to worsening economic conditions and declining asset valuations attributable to the COVID-19 pandemic, asset valuations improved in the second quarter of 2020 and management has not identified a reduction in assets under management due to a declining customer base. As a result, the $9.4 million fair value of the contingent liability was unchanged at June 30, 2020, from December 31, 2019, with maximum potential future payments totaling $11.0 million.