Employee Benefits

3 Months Ended

Mar. 31, 2022

Retirement Benefits [Abstract]

Employee Benefits

Employee BenefitsPension Plans

The Company provides pension benefits for its employees through membership in the Savings Banks Employees’ Retirement Association. The plan through which benefits are provided is a noncontributory, qualified defined benefit plan and is referred to as the Defined Benefit Plan. The Company’s annual contribution to the Defined Benefit Plan is based upon standards established by the Pension Protection Act. The contribution is based on an actuarial method intended to provide not only for benefits attributable to service to date, but also for those expected to be earned in the future. The Defined Benefit Plan has a plan year end of October 31.

The Company has an unfunded Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) that provides certain retired officers with defined pension benefits in excess of qualified plan limits imposed by U.S. federal tax law. The DB SERP has a plan year end of December 31.

In addition, the Company has an unfunded Benefit Equalization Plan (“BEP”), to provide retirement benefits to certain employees whose retirement benefits under the qualified pension plan are limited per the Internal Revenue Code. The BEP has a plan year end of October 31.

The Company also has an unfunded Outside Directors’ Retainer Continuance Plan (“ODRCP”) that provides pension benefits to outside directors who retire from service. The ODRCP has a plan year end of December 31. Effective December 31, 2020, the Company closed the ODRCP to new participants and froze benefit accruals for active participants.

Components of Net Periodic Benefit Cost

The components of net pension expense for the plans for the periods indicated are as follows:

	Three Months Ended March 31,
	2022		2021
	(In thousands)
Components of net periodic benefit cost:
Service cost	$	8,092	$	7,896
Interest cost	2,430		1,269
Expected return on plan assets	(9,281)		(8,141)
Past service credit	(2,970)		(2,946)
Recognized net actuarial loss	2,798		3,538
Net periodic benefit cost	$	1,069	$	1,616

Service costs for the Defined Benefit Plan, the BEP, and the DB SERP are recognized within salaries and employee benefits in the consolidated statement of income. Service costs for the ODRCP are recognized within professional services in the consolidated statements of income. The remaining components of net periodic benefit cost are recognized in other noninterest expense in the consolidated statements of income.

In accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the plan year beginning November 1, 2021. The Company chose to make contributions to the Defined Benefit Plan of $7.2 million during the three months ended March 31, 2022. In accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the plan year beginning November 1, 2020. Accordingly, during the three months ended March 31, 2021, there were no contributions made to the Defined Benefit Plan.

Rabbi Trust Variable Interest Entity

The Company established a rabbi trust to meet its obligations under certain executive non-qualified retirement benefits and deferred compensation plans and to mitigate the expense volatility of the aforementioned retirement plans. The rabbi trust is considered a variable interest entity (“VIE”) as the equity investment at risk is insufficient to permit the trust to finance its activities without additional subordinated financial support from the Company. The Company is considered the primary beneficiary of the rabbi trust as it has the power to direct the activities of the rabbi trust that significantly affect the rabbi trust’s economic performance and it has the obligation to absorb losses of the rabbi trust that could potentially be significant to the rabbi trust by virtue of its contingent call options on the rabbi trust’s assets in the event of the Company’s bankruptcy. As the primary beneficiary of this VIE, the Company consolidates the rabbi trust investments. In general, the rabbi trust investments and any earnings received thereon are accumulated, reinvested and used exclusively for trust purposes. These rabbi trust investments consist primarily of cash and cash equivalents, U.S. government agency obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at fair value in other assets in the Company's consolidated

balance sheet. Changes in fair value are recorded in noninterest income. At March 31, 2022 and December 31, 2021 the amount of rabbi trust investments at fair value were $87.3 million and $104.4 million, respectively.

Investments in rabbi trust accounts are recorded at fair value within the Company's consolidated balance sheets with changes in fair value recorded through noninterest income. The following table presents the book value, mark-to-market, and fair value of assets held in rabbi trust accounts by asset type:

	As of March 31, 2022						As of December 31, 2021
	Book Value		Mark-to-Market		Fair Value		Book Value		Mark-to-Market		Fair Value
Asset Type	(In thousands)
Cash and cash equivalents	$	5,445	$	—	$	5,445	$	4,494	$	—	$	4,494
Equities (1)	59,487		14,257		73,744		67,401		24,295		91,696
Fixed income	8,466		(363)		8,103		8,126		56		8,182
Total assets	$	73,398	$	13,894	$	87,292	$	80,021	$	24,351	$	104,372

(1)     Equities include mutual funds and other exchange-traded funds.

Share-Based Compensation Plan

On November 29, 2021, the shareholders of the Company approved the Eastern Bankshares, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the issuance of up to 26,146,141 shares of common stock pursuant to grants of restricted stock, restricted stock units (“RSUs”), non-qualified stock options and incentive stock options, any or all of which can be granted with performance-based vesting conditions. Under the 2021 Plan, 7,470,326 shares may be issued as restricted stock or RSUs and 18,675,815 shares may be issued upon the exercise of stock options. These shares may be awarded from the Company’s authorized but unissued shares. However, the 2021 Plan permits the grant of additional awards of restricted stock or RSUs above the aforementioned limit, provided that, for each additional share of restricted stock or RSU awarded in excess of such limit, the pool of shares available to be issued upon the exercise of stock options will be reduced by three shares. Pursuant to the terms of the 2021 Plan, each of the Company’s non-employee directors were automatically granted awards of restricted stock on November 30, 2021. Such restricted stock awards vest pro-rata on an annual basis over a five-year period. The maximum term for stock options is ten years. On March 1, 2022, the Company granted to all of the Company’s executive officers and certain other employees a total of 978,364 RSUs, which vest pro-rata on an annual basis over a period of three or five years, and a total of 533,676 performance stock units (“PSUs”), for which vesting is contingent upon the Compensation Committee of the Board of Director’s certification that the Company has attained a threshold level of certain performance criteria over a three-year period. As of March 31, 2022 and December 31, 2021, there were 5,275,230 and 6,787,270 shares available for issuance as restricted stock or RSU awards and 18,675,815 shares that remain available for issuance upon the exercise of stock options, respectively. As of both March 31, 2022 and December 31, 2021, no stock options had been awarded under the 2021 Plan.

The following table summarizes the Company’s restricted stock award activity for the three months ended March 31, 2022:

	Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock as of December 31, 2021	683,056	$	20.13
Granted	—	—
Non-vested restricted stock as of March 31, 2022	683,056	$	20.13

The following table summarizes the Company’s restricted stock unit activity for the three months ended March 31, 2022:

	Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock units as of December 31, 2021	—	$	—
Granted	978,364	21.08
Non-vested restricted stock units as of March 31, 2022	978,364	$	21.08

The following table summarizes the Company’s performance stock unit activity for the three months ended March 31, 2022:

	Number of Shares	Weighted-Average Grant Price Per Share
Non-vested performance stock units as of December 31, 2021	—	$	—
Granted	533,676	21.12
Non-vested performance stock units as of March 31, 2022	533,676	$	21.12

As of both March 31, 2022 and December 31, 2021, no awards had vested.

For the three months ended March 31, 2022, share-based compensation expense under the 2021 Plan and the related tax benefit totaled $1.6 million and $0.4 million, respectively. No share-based compensation expense was incurred for the three months ended March 31, 2021 as the Company began issuing awards in November 2021.

As of March 31, 2022 and December 31, 2021, there was $44.0 million and $13.5 million, respectively, of total unrecognized compensation expense related to non-vested restricted stock awards, restricted stock units and performance stock units granted and issued under the 2021 Plan. This cost is expected to be recognized over a weighted average remaining period of approximately 4.1 years.