XML 33 R19.htm IDEA: XBRL DOCUMENT v3.22.2.2
Employee Benefits
 9 Months Ended
Sep. 30, 2022
Retirement Benefits [Abstract]  
Employee Benefits Employee Benefits
Pension 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 September 30,Nine Months Ended September 30,
2022202120222021
(In thousands)
Components of net periodic benefit cost:
Service cost$8,094 $7,896 $24,278 $23,690 
Interest cost2,429 1,269 7,289 3,805 
Expected return on plan assets(9,280)(8,141)(27,842)(24,424)
Prior service credit(2,971)(2,945)(8,911)(8,835)
Recognized net actuarial loss2,799 3,537 8,395 10,612 
Net periodic benefit cost$1,071 $1,616 $3,209 $4,848 
Service costs for the Defined Benefit Plan and the BEP are recognized within salaries and employee benefits in the consolidated statements of income. There were no service costs associated with the DB SERP or ODRCP during the three and nine months ended September 30, 2022 and September 30, 2021. 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. However, the Company made a discretionary contribution to the Defined Benefit Plan of $7.2 million during the nine months ended September 30, 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 and nine months ended September 30, 2021, there were no contributions made to the Defined Benefit Plan.
Rabbi Trust Variable Interest Entities
The Company established rabbi trusts 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 trusts are considered variable interest entities (“VIE”) as the equity investment at risk is insufficient to permit the trusts to finance their activities without additional subordinated financial support from the Company. The Company is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities of the rabbi trusts that significantly affect the rabbi trusts’ economic performance and it has the obligation to absorb losses of the rabbi trusts that could potentially be significant to the rabbi trusts by virtue of its contingent call options on the rabbi trusts’ assets in the event of the Company’s bankruptcy. As the primary beneficiary of these VIEs, 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 sheets. Changes in fair value are recorded in noninterest income in the Company's consolidated statements of income. At September 30, 2022 and December 31, 2021 the amount of rabbi trust investments at fair value were $71.7 million and $104.4 million, respectively.
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 September 30, 2022As of December 31, 2021
Book ValueMark-to-MarketFair ValueBook ValueMark-to-MarketFair Value
Asset Type(In thousands)
Cash and cash equivalents$5,427 $— $5,427 $4,494 $— $4,494 
Equities (1)59,424 (132)59,292 67,401 24,295 91,696 
Fixed income7,810 (879)6,931 8,126 56 8,182 
Total assets$72,661 $(1,011)$71,650 $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, including those issued as performance shares and performance share units (“PSUs”), 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 PSUs, for which vesting is contingent upon the Compensation Committee of the Board of Director’s certification, after the conclusion of a three-year period, that the Company has attained a threshold level of certain performance criteria over such period. On May 17, 2022, the Company granted a total of 31,559 shares of restricted stock to the Company’s non-employee directors which vest after approximately one year from the date of grant. As of September 30, 2022 and December 31, 2021, there were 5,243,671 shares and 6,787,270 shares that remained available for issuance as restricted stock or RSU awards, respectively, and 18,675,815 shares that remain available for issuance upon the exercise of stock options at both dates. As of both September 30, 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 nine months ended September 30, 2022:
Number of SharesWeighted-Average Grant Price Per Share
Non-vested restricted stock as of December 31, 2021
683,056$20.13 
Granted31,55919.17 
Non-vested restricted stock as of September 30, 2022
714,615$20.09 
The following table summarizes the Company’s restricted stock unit activity for the nine months ended September 30, 2022:
Number of SharesWeighted-Average Grant Price Per Share
Non-vested restricted stock units as of December 31, 2021
—$— 
Granted978,36421.08 
Forfeited(6,039)21.08 
Non-vested restricted stock units as of September 30, 2022
972,325$21.08 
The following table summarizes the Company’s performance stock unit activity for the nine months ended September 30, 2022:
Number of SharesWeighted-Average Grant Price Per Share
Non-vested performance stock units as of December 31, 2021
—$— 
Granted533,67621.12 
Non-vested performance stock units as of September 30, 2022
533,676$21.12 
As of both September 30, 2022 and December 31, 2021, no awards had vested.
For the three months ended September 30, 2022, share-based compensation expense under the 2021 Plan and the related tax benefit totaled $3.6 million and $1.0 million, respectively. For the nine months ended September 30, 2022, share-
based compensation expense under the 2021 Plan and the related tax benefit totaled $8.1 million and $2.3 million, respectively. No share-based compensation expense was incurred for the three and nine months ended September 30, 2021 as the Company began granting awards in November 2021.
As of September 30, 2022 and December 31, 2021, there was $40.8 million and $13.5 million, respectively, of total unrecognized compensation expense related to unvested restricted stock awards, restricted stock units and performance stock units granted and issued under the 2021 Plan, as applicable. As of September 30, 2022, this cost is expected to be recognized over a weighted average remaining period of approximately 3.6 years. As of December 31, 2021, this cost was expected to be recognized over a weighted average remaining period of approximately 4.9 years.