Employee Benefits

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [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.

In connection with the Company’s merger with Cambridge, the Company acquired Cambridge’s defined benefit plan. The plan was frozen to new participants in 2011 and the accrual of benefits for all participants in the plan was frozen effective in 2017. At the time of the merger, all participants in the plan were fully vested. The Company assumed a $35.3 million pension benefit obligation from Cambridge following the merger.

All Cambridge employees retained following the merger were credited with prior service, which counted for vesting and eligibility into the Company’s Defined Benefit Plan, but not for benefit accrual. Additionally, all Cambridge employees retained following the merger were eligible to join the Company’s Defined Benefit Plan to the extent that eligibility requirements were satisfied based upon such employees’ prior service with Cambridge.

The Company has an unfunded Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) that provides certain Company officers upon their retirement 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 connection with the Company’s merger with Cambridge, the Company acquired Cambridge's DB SERP. In 2016, Cambridge’s Board of Directors discontinued the use of DB SERPs for new entrants to Cambridge’s non-qualified retirement programs. Expense for the DB SERPs is recognized over the executive’s service life utilizing the projected unit credit actuarial cost method. All participants of Cambridge’s DB SERP were deemed to be fully vested upon the closing of the merger.

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.

In connection with the Company’s merger with Cambridge, the Company acquired Cambridge’s post-retirement health care plan. Benefits for the postretirement health care plan are based on years of service. Expenses for the postretirement health care plan are recognized over the employee's service life utilizing the projected unit credit actuarial cost method. Effective November 7, 2019, the postretirement health care plan was frozen for employees hired after that date. The frozen health care plan is not accruing and is only in payout status.

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,
	2024		2023		2024		2023
	(In thousands)
Components of net periodic benefit cost:
Service cost (1)	$	5,634	$	6,339	$	16,811	$	19,016
Interest cost	5,062		4,297		14,322		12,893
Expected return on plan assets	(9,076)		(7,532)		(25,980)		(22,596)
Prior service credit	(2,488)		(2,970)		(7,465)		(8,910)
Recognized net actuarial loss	1,775		2,468		5,325		7,404
Net periodic benefit cost	$	907	$	2,602	$	3,013	$	7,807

(1)Includes service costs related to employees of our insurance agency business with regard to the three and nine months ended September 30, 2023. Such service costs were included in net income from discontinued operations as such costs are no longer incurred by the Company following the sale of the insurance agency business in October 2023. All other costs included in the determination of the benefit obligation for the Defined Benefit Plan and the BEP were included in net income from continuing operations as the Bank assumed the related liability upon sale of the assets of its Eastern Insurance Group subsidiary. Service costs included in net income from discontinued operations and included in the above table were $1.5 million and $4.5 million for the three and nine months ended September 30, 2023, respectively.

Except as described above, service costs for the Defined Benefit Plan and the BEP are recognized within salaries and employee benefits in the Consolidated Statements of Income. During the three and nine months ended September 30, 2024, service costs associated with the DB SERP amounted to less than $0.1 million. There were no service costs associated with the DB SERP during the three and nine months ended September 30, 2023. There were no service costs associated with the ODCRP during the three and nine months ended September 30, 2024 or 2023. 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 years beginning November 1, 2023 and 2022. Accordingly, during the three and nine months ended September 30, 2024 and 2023, there were no contributions made to the Defined Benefit Plan.

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, 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 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 (“RSAs”) vest pro-rata on an annual basis over a five-year period. The maximum term for stock options is ten years.

During the three months ended September 30, 2024, the Company granted a total of 146,178 RSUs to certain executives who joined the Company following the merger with Cambridge. These RSUs vest pro-rata on an annual basis over a period of three years from the date of grant, subject to continued employment. During that same period, the Company also granted a total of 67,350 PSUs, for which vesting is contingent upon the Compensation and Human Capital Management Committee of the Board of Director’s certification, after the conclusion of a period of approximately 2.3 years.

On July 12, 2024, the Company completed its previously announced merger with Cambridge. In connection with the merger and as a component of the purchase consideration, the Company issued 118,693 restricted stock award shares with a fair value of $1.1 million, net of a $0.7 million post-combination fair value adjustment, and, with respect to RSUs and PSUs, credited pre-merger service for employees retained following the merger with Cambridge which amounted to $3.0 million.

In May 2024, the Company granted a total of 56,352 shares of restricted stock to the Company’s non-employee directors which vest after approximately one year from the date of grant. In May 2023, the Company granted a total of 47,820 shares of restricted stock to the Company’s non-employee directors which vested approximately one year from the date of grant.

In March 2024, the Company granted to all of the Company’s executive officers and certain other employees a total of 416,276 RSUs, which vest pro-rata on an annual basis over a period of three years from the date of the grant, and a total of 234,091 PSUs for which vesting is contingent upon the Compensation and Human Capital Management Committee of the Board of Director’s certification, after the conclusion of a period of approximately 2.8 years from the date of the grant, that the Company has attained a threshold level of certain performance criteria over such period. In March 2023, the Company granted to all of the Company’s executive officers and certain other employees a total of 318,577 RSUs, which vest pro-rata on an annual basis over a period of three years from the date of the grant, and a total of 108,984 PSUs for which vesting is contingent upon the Compensation and Human Capital Management Committee of the Board of Director’s certification, after the conclusion of a three-year period from the date of the grant, that the Company has attained a threshold level of certain performance criteria over such period.

As of September 30, 2024 and December 31, 2023, there were 3,969,089 shares and 4,872,494 shares that remained available for issuance as restricted stock or RSU awards (including those that may be issued as performance shares and PSUs), respectively, and 18,675,815 shares that remained available for issuance upon the exercise of stock options at both dates. As of both September 30, 2024 and December 31, 2023, no stock options had been awarded under the 2021 Plan.

The following table summarizes the Company’s restricted stock award activity for the periods indicated:

	For the Nine Months Ended September 30,
	2024			2023
Restricted Stock Awards	Number of Shares	Weighted-Average Grant Price Per Share		Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock as of the beginning of the respective period	420,400	$	19.15	525,460	$	20.08
Granted	56,352	13.84		47,820	11.50
Vested	(88,948)	13.06		(28,690)	19.17
Forfeited	(3,026)	14.87		—	—
Converted in connection with merger	118,693	$	14.87	—	$	—
Non-vested restricted stock as of the end of the respective period (1)	503,471	$	17.94	544,590	$	19.37

(1)Includes the effect of modifications to previously awarded and unvested restricted share awards for two plan participants to accelerate vesting. The financial effect of the modifications on total unrecognized compensation expense was not significant.

During the nine months ended September 30, 2024 and 2023, 88,948 and 28,690 RSA awards vested, respectively. In the aggregate, the amount of RSAs granted each year had a grant date fair value of $1.2 million and $0.5 million, respectively.

The following table summarizes the Company’s restricted stock unit activity for the periods indicated:

	For the Nine Months Ended September 30,
	2024			2023
Restricted Stock Units	Number of Shares	Weighted-Average Grant Price Per Share		Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock units as of the beginning of the respective period	952,001	$	19.46	972,325	$	21.08
Granted	562,454	13.83		318,577	15.63
Vested	(348,012)	18.87		(231,407)	21.08
Forfeited	(13,816)	13.45		(3,199)	16.72
Converted in connection with merger	236,766	$	14.87	—	$	—
Non-vested restricted stock units as of the end of the respective period (1)	1,389,393	$	16.50	1,056,296	$	19.45

(1)Includes the effect of modifications to previously awarded and unvested restricted share awards for one plan participant to accelerate vesting. The financial effect of the modifications on total unrecognized compensation expense was not significant.

During the nine months ended September 30, 2024 and 2023, 348,012 and 231,407 RSU awards vested, respectively. Such awards had a grant date fair value of $6.6 million and $4.9 million, respectively.

The following table summarizes the Company’s performance stock unit activity for the periods indicated:

	For the Nine Months Ended September 30,
	2024			2023
Performance Stock Units	Number of Shares	Weighted-Average Grant Price Per Share		Number of Shares	Weighted-Average Grant Price Per Share
Non-vested performance stock units as of the beginning of the respective period	633,034	$	19.40	533,676	$	21.12
Granted	301,441	10.82		108,984	10.16
Vested	(76,353)	14.87		—	—
Forfeited	—	—		—	—
Converted in connection with merger	111,617	$	14.87	—	$	—
Non-vested performance stock units as of the end of the respective period	969,739	$	16.63	642,660	$	19.26

During the nine months ended September 30, 2024, 76,353 PSU awards vested which represent the accelerated vesting of awards assumed from Cambridge which were converted to awards of the Company upon completion of the merger. Such awards had a grant date value of $1.1 million. No PSU awards vested during the nine months ended September 30, 2023.

Included in vested RSU and PSU shares, as shown in the tables above, are shares withheld for employee payroll taxes. The aggregate number of RSU and PSU shares withheld for payroll taxes during the nine months ended September 30, 2024 and 2023 was 139,585 and 74,625, respectively.

The following table shows share-based compensation expense under the 2021 Plan and the related tax benefit for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Share-based compensation expense	$	5.7	$	3.7	$	13.6	$	11.4
Related tax benefit (1)	1.6		1.0		3.8		3.2

(1)Estimated based upon the Company’s statutory rate for each respective period.

As of September 30, 2024 and December 31, 2023, there was $27.4 million and $26.8 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, 2024, this cost is expected to be recognized over a weighted average remaining period of approximately 1.7 years. As of December 31, 2023, this cost was expected to be recognized over a weighted average remaining period of approximately 2.2 years.