Evercore Inc. 10-Q

Item 1. Financial Statements Condensed Consolidated Financial Statements (Unaudited) Page Condensed Consolidated Statements of Financial Condition as of September 30, 2020 and December 31, 2019 4 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 5 Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019 6 Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2020 and 2019 7 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 8 Notes to Unaudited Condensed Consolidated Financial Statements 9 3 Table of Contents EVERCORE INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (dollars in thousands, except share data) September 30, 2020 December 31, 2019 Assets Current Assets Cash and Cash Equivalents $ 1,149,291 $ 633,808 Investment Securities and Certificates of Deposit (includes available-for-sale debt securities with an amortized cost of $114,204 at December 31, 2019) 100,846 623,946 Financial Instruments Owned and Pledged as Collateral at Fair Value 13,279 12,431 Securities Purchased Under Agreements to Resell 8,766 13,566 Accounts Receivable (net of allowances of $10,833 and $7,881 at September 30, 2020 and December 31, 2019, respectively) 282,357 296,355 Receivable from Employees and Related Parties 25,900 22,416 Other Current Assets 61,749 87,900 Total Current Assets 1,642,188 1,690,422 Investments 82,262 89,490 Deferred Tax Assets 279,214 268,591 Operating Lease Right-of-Use Assets 278,055 199,988 Furniture, Equipment and Leasehold Improvements (net of accumulated depreciation and amortization of $136,815 and $117,387 at September 30, 2020 and December 31, 2019, respectively) 149,781 126,799 Goodwill 126,273 130,758 Intangible Assets (net of accumulated amortization of $8,793 and $7,292 at September 30, 2020 and December 31, 2019, respectively) 802 2,303 Other Assets 86,883 90,262 Total Assets $ 2,645,458 $ 2,598,613 Liabilities and Equity Current Liabilities Accrued Compensation and Benefits $ 429,932 $ 518,991 Accounts Payable and Accrued Expenses 41,084 39,726 Securities Sold Under Agreements to Repurchase 22,050 26,000 Payable to Employees and Related Parties 21,512 31,703 Operating Lease Liabilities 41,018 33,316 Taxes Payable 2,275 3,400 Current Portion of Notes Payable 37,948 — Other Current Liabilities 22,020 15,517 Total Current Liabilities 617,839 668,653 Operating Lease Liabilities 302,725 217,251 Notes Payable 336,562 375,062 Amounts Due Pursuant to Tax Receivable Agreements 84,949 84,952 Other Long-term Liabilities 96,369 126,445 Total Liabilities 1,438,444 1,472,363 Commitments and Contingencies (Note 17) Equity Evercore Inc. Stockholders' Equity Common Stock Class A, par value $0.01 per share (1,000,000,000 shares authorized, 72,014,728 and 68,698,675 issued at September 30, 2020 and December 31, 2019, respectively, and 40,605,372 and 39,176,010 outstanding at September 30, 2020 and December 31, 2019, respectively) 720 687 Class B, par value $0.01 per share (1,000,000 shares authorized, 53 and 84 issued and outstanding at September 30, 2020 and December 31, 2019, respectively) — — Additional Paid-In-Capital 2,216,722 2,016,524 Accumulated Other Comprehensive Income (Loss) ( 31,403 ) ( 27,596 ) Retained Earnings 606,542 558,269 Treasury Stock at Cost (31,409,356 and 29,522,665 shares at September 30, 2020 and December 31, 2019, respectively) ( 1,821,655 ) ( 1,678,168 ) Total Evercore Inc. Stockholders' Equity 970,926 869,716 Noncontrolling Interest 236,088 256,534 Total Equity 1,207,014 1,126,250 Total Liabilities and Equity $ 2,645,458 $ 2,598,613 See Notes to Unaudited Condensed Consolidated Financial Statements. 4 Table of Contents EVERCORE INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (dollars and share amounts in thousands, except per share data) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Revenues Investment Banking: Advisory Fees $ 270,662 $ 320,885 $ 965,662 $ 1,090,309 Underwriting Fees 66,499 17,598 181,182 61,428 Commissions and Related Fees 43,853 46,820 153,353 137,417 Asset Management and Administration Fees 14,025 12,650 39,725 37,452 Other Revenue, Including Interest and Investments 12,479 9,911 13,047 35,886 Total Revenues 407,518 407,864 1,352,969 1,362,492 Interest Expense 5,003 5,666 16,372 13,921 Net Revenues 402,515 402,198 1,336,597 1,348,571 Expenses Employee Compensation and Benefits 259,812 241,702 864,600 803,657 Occupancy and Equipment Rental 18,043 16,946 54,318 51,225 Professional Fees 17,324 21,577 53,165 60,912 Travel and Related Expenses 3,182 17,589 23,089 54,650 Communications and Information Services 13,868 12,146 40,704 34,773 Depreciation and Amortization 6,214 8,419 20,060 23,123 Execution, Clearing and Custody Fees 2,840 3,265 10,230 9,483 Special Charges, Including Business Realignment Costs 7,380 1,029 39,614 3,087 Acquisition and Transition Costs 454 380 560 488 Other Operating Expenses 9,712 8,801 30,539 26,185 Total Expenses 338,829 331,854 1,136,879 1,067,583 Income Before Income from Equity Method Investments and Income Taxes 63,686 70,344 199,718 280,988 Income from Equity Method Investments 3,111 2,562 8,552 7,226 Income Before Income Taxes 66,797 72,906 208,270 288,214 Provision for Income Taxes 15,677 20,402 51,042 60,253 Net Income 51,120 52,504 157,228 227,961 Net Income Attributable to Noncontrolling Interest 8,510 9,226 27,031 35,709 Net Income Attributable to Evercore Inc. $ 42,610 $ 43,278 $ 130,197 $ 192,252 Net Income Attributable to Evercore Inc. Common Shareholders $ 42,610 $ 43,278 $ 130,197 $ 192,252 Weighted Average Shares of Class A Common Stock Outstanding Basic 40,694 39,704 40,441 40,246 Diluted 42,343 42,789 42,185 43,437 Net Income Per Share Attributable to Evercore Inc. Common Shareholders: Basic $ 1.05 $ 1.09 $ 3.22 $ 4.78 Diluted $ 1.01 $ 1.01 $ 3.09 $ 4.43 See Notes to Unaudited Condensed Consolidated Financial Statements. 5 Table of Contents EVERCORE INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (dollars in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Net Income $ 51,120 $ 52,504 $ 157,228 $ 227,961 Other Comprehensive Income (Loss), net of tax: Unrealized Gain (Loss) on Securities and Investments, net ( 23 ) ( 45 ) ( 1,720 ) ( 715 ) Foreign Currency Translation Adjustment Gain (Loss), net 6,773 ( 3,258 ) ( 2,868 ) ( 4,406 ) Other Comprehensive Income (Loss) 6,750 ( 3,303 ) ( 4,588 ) ( 5,121 ) Comprehensive Income 57,870 49,201 152,640 222,840 Comprehensive Income Attributable to Noncontrolling Interest 9,496 8,724 26,250 34,943 Comprehensive Income Attributable to Evercore Inc. $ 48,374 $ 40,477 $ 126,390 $ 187,897 See Notes to Unaudited Condensed Consolidated Financial Statements. 6 Table of Contents EVERCORE INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) (dollars in thousands, except share data) For the Three Months Ended September 30, 2020 Accumulated Additional Other Class A Common Stock Paid-In Comprehensive Retained Treasury Stock Noncontrolling Total Shares Dollars Capital Income (Loss) Earnings Shares Dollars Interest Equity Balance at June 30, 2020 71,977,753 $ 720 $ 2,166,837 $ ( 37,167 ) $ 590,866 ( 31,393,480 ) $ ( 1,820,728 ) $ 231,622 $ 1,132,150 Net Income — — — — 42,610 — — 8,510 51,120 Other Comprehensive Income — — — 5,764 — — — 986 6,750 Treasury Stock Purchases — — — — — ( 15,876 ) ( 927 ) — ( 927 ) Evercore LP Units Exchanged for Class A Common Stock 200 — 11 — — — — ( 8 ) 3 Equity-based Compensation Awards 36,775 — 49,874 — — — — 4,231 54,105 Dividends — — — — ( 26,934 ) — — — ( 26,934 ) Noncontrolling Interest (Note 14) — — — — — — — ( 9,253 ) ( 9,253 ) Balance at September 30, 2020 72,014,728 $ 720 $ 2,216,722 $ ( 31,403 ) $ 606,542 ( 31,409,356 ) $ ( 1,821,655 ) $ 236,088 $ 1,207,014 For the Nine Months Ended September 30, 2020 Accumulated Additional Other Class A Common Stock Paid-In Comprehensive Retained Treasury Stock Noncontrolling Total Shares Dollars Capital Income (Loss) Earnings Shares Dollars Interest Equity Balance at December 31, 2019 68,698,675 $ 687 $ 2,016,524 $ ( 27,596 ) $ 558,269 ( 29,522,665 ) $ ( 1,678,168 ) $ 256,534 $ 1,126,250 Cumulative Effect of Accounting Change (1) — — — — ( 1,310 ) — — — ( 1,310 ) Net Income — — — — 130,197 — — 27,031 157,228 Other Comprehensive Income (Loss) — — — ( 3,807 ) — — — ( 781 ) ( 4,588 ) Treasury Stock Purchases — — — — — ( 1,886,691 ) ( 143,487 ) — ( 143,487 ) Evercore LP Units Exchanged for Class A Common Stock 806,555 8 42,353 — — — — ( 33,762 ) 8,599 Equity-based Compensation Awards 2,509,498 25 159,410 — — — — 9,926 169,361 Dividends — — — — ( 80,614 ) — — — ( 80,614 ) Noncontrolling Interest (Note 14) — — ( 1,565 ) — — — — ( 22,860 ) ( 24,425 ) Balance at September 30, 2020 72,014,728 $ 720 $ 2,216,722 $ ( 31,403 ) $ 606,542 ( 31,409,356 ) $ ( 1,821,655 ) $ 236,088 $ 1,207,014 (1) The cumulative adjustment relates to the adoption of Accounting Standards Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") on January 1, 2020, for which the Company recorded an adjustment to Retained Earnings to reflect the increase in the Company's Allowance for Doubtful Accounts as a result of the use of the current expected credit loss model. See Notes 2 and 3 for further information. For the Three Months Ended September 30, 2019 Accumulated Additional Other Class A Common Stock Paid-In Comprehensive Retained Treasury Stock Noncontrolling Total Shares Dollars Capital Income (Loss) Earnings Shares Dollars Interest Equity Balance at June 30, 2019 68,508,501 $ 685 $ 1,916,503 $ ( 31,988 ) $ 463,002 ( 28,643,895 ) $ ( 1,609,916 ) $ 236,549 $ 974,835 Net Income — — — — 43,278 — — 9,226 52,504 Other Comprehensive Income (Loss) — — — ( 2,801 ) — — — ( 502 ) ( 3,303 ) Treasury Stock Purchases — — — — — ( 493,943 ) ( 39,035 ) — ( 39,035 ) Evercore LP Units Exchanged for Class A Common Stock 24,789 1 1,501 — — — — ( 1,010 ) 492 Equity-based Compensation Awards 40,571 — 50,175 — — — — 6,993 57,168 Dividends — — — — ( 26,722 ) — — — ( 26,722 ) Noncontrolling Interest (Note 14) — — — — — — — ( 12,651 ) ( 12,651 ) Balance at September 30, 2019 68,573,861 $ 686 $ 1,968,179 $ ( 34,789 ) $ 479,558 ( 29,137,838 ) $ ( 1,648,951 ) $ 238,605 $ 1,003,288 For the Nine Months Ended September 30, 2019 Accumulated Additional Other Class A Common Stock Paid-In Comprehensive Retained Treasury Stock Noncontrolling Total Shares Dollars Capital Income (Loss) Earnings Shares Dollars Interest Equity Balance at December 31, 2018 65,872,014 $ 659 $ 1,818,100 $ ( 30,434 ) $ 364,882 ( 26,123,438 ) $ ( 1,395,087 ) $ 249,819 $ 1,007,939 Net Income — — — — 192,252 — — 35,709 227,961 Other Comprehensive Income (Loss) — — — ( 4,355 ) — — — ( 766 ) ( 5,121 ) Treasury Stock Purchases — — — — — ( 3,014,400 ) ( 253,864 ) — ( 253,864 ) Evercore LP Units Exchanged for Class A Common Stock 281,685 3 30,828 — — — — ( 12,187 ) 18,644 Equity-based Compensation Awards 2,420,162 24 160,733 — — — — 19,109 179,866 Dividends — — — — ( 77,576 ) — — — ( 77,576 ) Noncontrolling Interest (Note 14) — — ( 41,482 ) — — — — ( 53,079 ) ( 94,561 ) Balance at September 30, 2019 68,573,861 $ 686 $ 1,968,179 $ ( 34,789 ) $ 479,558 ( 29,137,838 ) $ ( 1,648,951 ) $ 238,605 $ 1,003,288 See Notes to Unaudited Condensed Consolidated Financial Statements. 7 Table of Contents EVERCORE INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands) For the Nine Months Ended September 30, 2020 2019 Cash Flows From Operating Activities Net Income $ 157,228 $ 227,961 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net (Gains) Losses on Investments, Investment Securities and Contingent Consideration 3,471 ( 9,330 ) Equity Method Investments 2,341 2,516 Equity-Based and Other Deferred Compensation 271,145 278,422 Gain on Sale of ECB Trust Business ( 1,355 ) — Noncash Lease Expense 28,564 22,736 Depreciation, Amortization and Accretion 22,440 26,438 Bad Debt Expense 5,888 2,569 Deferred Taxes ( 260 ) ( 14,621 ) Decrease (Increase) in Operating Assets: Investment Securities 2,250 ( 459 ) Financial Instruments Owned and Pledged as Collateral at Fair Value ( 2,859 ) ( 1,351 ) Securities Purchased Under Agreements to Resell 2,753 1,299 Accounts Receivable 4,037 ( 1,567 ) Receivable from Employees and Related Parties ( 3,503 ) 3,153 Other Assets 24,576 ( 25,491 ) (Decrease) Increase in Operating Liabilities: Accrued Compensation and Benefits ( 213,817 ) ( 389,446 ) Accounts Payable and Accrued Expenses 283 4,059 Securities Sold Under Agreements to Repurchase 109 18 Payables to Employees and Related Parties ( 10,194 ) ( 3,147 ) Taxes Payable ( 1,125 ) ( 32,868 ) Other Liabilities ( 8,777 ) 64 Net Cash Provided by Operating Activities 283,195 90,955 Cash Flows From Investing Activities Investments Purchased ( 143 ) ( 3,822 ) Distributions of Private Equity Investments 650 1,698 Investment Securities: Proceeds from Sales and Maturities of Investment Securities and Futures Contracts Activity 554,141 376,934 Purchases of Investment Securities and Futures Contracts Activity ( 247,920 ) ( 570,783 ) Maturity of Certificates of Deposit 214,266 100,000 Purchase of Certificates of Deposit — ( 211,861 ) Purchase of Furniture, Equipment and Leasehold Improvements ( 41,580 ) ( 46,155 ) Proceeds from Sale of Business 1,830 — Net Cash Provided by (Used In) Investing Activities 481,244 ( 353,989 ) Cash Flows From Financing Activities Issuance of Noncontrolling Interests 540 600 Distributions to Noncontrolling Interests ( 23,262 ) ( 44,947 ) Short-Term Borrowings — 30,000 Repayment of Short-Term Borrowings — ( 30,000 ) Issuance of Notes Payable — 205,718 Debt Issuance Costs — ( 2,032 ) Purchase of Treasury Stock and Noncontrolling Interests ( 144,338 ) ( 304,078 ) Dividends ( 81,297 ) ( 73,875 ) Net Cash Provided by (Used in) Financing Activities ( 248,357 ) ( 218,614 ) Effect of Exchange Rate Changes on Cash ( 1,302 ) ( 4,869 ) Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 514,780 ( 486,517 ) Cash, Cash Equivalents and Restricted Cash-Beginning of Period 643,886 800,096 Cash, Cash Equivalents and Restricted Cash-End of Period $ 1,158,666 $ 313,579 SUPPLEMENTAL CASH FLOW DISCLOSURE Payments for Interest $ 18,110 $ 14,750 Payments for Income Taxes $ 42,777 $ 120,929 Accrued Dividends $ 10,266 $ 10,903 Noncash Purchase of Noncontrolling Interest $ 851 $ 2,701 See Notes to Unaudited Condensed Consolidated Financial Statements. 8 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 1 – Organization Evercore Inc., together with its subsidiaries (the "Company"), is an investment banking and investment management firm, incorporated in Delaware and headquartered in New York, New York. The Company is a holding company which owns a controlling interest in, and is the sole general partner of, Evercore LP, a Delaware limited partnership ("Evercore LP"). The Company operates from its offices and through its affiliates in North America, Europe, the Middle East and Asia. The Investment Banking segment includes the advisory business through which the Company provides advice to clients on significant mergers, acquisitions, divestitures, shareholder activism and other strategic corporate transactions, with a particular focus on advising prominent multinational corporations and substantial private equity firms on large, complex transactions. The Company also provides restructuring advice to companies in financial transition, as well as to creditors, shareholders and potential acquirers. In addition, the Company provides its clients with capital markets advice, underwrites securities offerings, raises funds for financial sponsors and provides advisory services focused on secondary transactions for private funds interests, as well as on primary and secondary transactions for real estate oriented financial sponsors and private equity interests. The Investment Banking business also includes the Evercore ISI business through which the Company offers macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors. The Investment Management segment includes the wealth management business through which the Company provides investment advisory, wealth management and fiduciary services for high-net-worth individuals and associated entities, the institutional asset management business through which the Company, directly and through affiliates, manages financial assets for sophisticated institutional investors and the private equity business, which holds interests in private equity funds which are not managed by the Company. Note 2 – Significant Accounting Policies For a further discussion of the Company's accounting policies, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 . Basis of Presentation – The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. As permitted by the rules and regulations of the United States Securities and Exchange Commission, the unaudited condensed consolidated financial statements contain certain condensed financial information and exclude certain footnote disclosures normally included in audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The accompanying condensed consolidated financial statements are unaudited and are prepared in accordance with U.S. GAAP. In the opinion of the Company's management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including normal recurring accruals, necessary to fairly present the accompanying unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2019 . The December 31, 2019 Unaudited Condensed Consolidated Statement of Financial Condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. The accompanying unaudited condensed consolidated financial statements of the Company are comprised of the consolidation of Evercore LP and Evercore LP's wholly owned and majority-owned direct and indirect subsidiaries, including Evercore Group L.L.C. ("EGL"), a registered broker-dealer in the U.S. The Company's policy is to consolidate all subsidiaries in which it has a controlling financial interest, as well as any variable interest entities ("VIEs") where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE. The Company reviews factors, including the rights of the equity holders and obligations of equity holders to absorb losses or receive expected residual returns, to determine if the investment is a VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly or indirectly by the Company. The consolidation analysis is generally performed qualitatively. This analysis, which requires judgment, is performed at each reporting date. Evercore LP is a VIE and the Company is the primary beneficiary. Specifically, the Company has the majority economic interest in Evercore LP and has decision making authority that significantly affects the economic performance of the entity while the limited partners have no kick-out or substantive participating rights. The assets and liabilities of Evercore LP represent substantially all of the consolidated assets and liabilities of the Company with the exception of U.S. corporate taxes and related items, which are presented on the Company's (Parent Company Only) Condensed Statements of Financial Condition in Note 25 9 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 . Evercore ISI International Limited ("Evercore ISI U.K."), Evercore Partners International LLP ("Evercore U.K."), Evercore (Japan) Ltd. ("Evercore Japan") and Evercore Consulting (Beijing) Co. Ltd. ("Evercore Beijing") are also VIEs, and the Company is the primary beneficiary of these VIEs. Specifically for Evercore ISI U.K., Evercore Japan and Evercore Beijing (as of January 1, 2019 for Evercore Japan and Evercore Beijing), the Company provides financial support through transfer pricing agreements with these entities, which exposes the Company to losses that are potentially significant to these entities, and has decision making authority that significantly affects the economic performance of these entities. The Company has the majority economic interest in Evercore U.K. and has decision making authority that significantly affects the economic performance of this entity. The Company included in its Unaudited Condensed Consolidated Statements of Financial Condition Evercore ISI U.K., Evercore U.K., Evercore Japan and Evercore Beijing assets of $ 228,884 and liabilities of $ 102,217 at September 30, 2020 and assets of $ 227,885 and liabilities of $ 129,494 at December 31, 2019 . All intercompany balances and transactions with the Company's subsidiaries have been eliminated upon consolidation. The Company adopted ASU No. 2016-13 on January 1, 2020, using a modified retrospective method of transition. The Company recorded a cumulative-effect adjustment to decrease retained earnings by $ 1,310 as of January 1, 2020. Following the adoption of ASU 2016-13, the Company’s accounting policies are as follows: Accounts Receivable and Contract Assets – Accounts Receivable consists primarily of investment banking fees and expense reimbursements charged to the Company's clients. The Company records Accounts Receivable, net of any allowance for doubtful accounts, when relevant revenue recognition criteria has been achieved and payment is conditioned on the passage of time. The Company maintains an allowance for doubtful accounts to provide coverage for estimated losses from its client receivables. The Company determines the adequacy of the allowance by estimating the probability of loss based on the Company's analysis of historical credit loss experience of its client receivables, and taking into consideration current market conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company has determined that long-term forecasted information is not relevant to its fee receivables, which are primarily short-term. The Company updates its average credit loss rates periodically and maintains a quarterly allowance review process to consider current factors that would require an adjustment to the credit loss allowance. In addition, the Company periodically performs a qualitative assessment to monitor risks associated with current and forecasted conditions that may require an adjustment to the expected credit loss rates. Expected credit losses for newly recognized financial assets and changes to expected credit losses during the period are recognized in earnings. The Investment Banking and Investment Management receivables collection periods generally are within 90 days of invoice, with the exception of placement fees, which are generally collected within 180 days of invoice, and fees related to private funds capital raising, which are collected in a period exceeding one year. The collection period for restructuring transaction receivables may exceed 90 days . Receivables that are collected in a period exceeding one year are reflected in Other Assets on the Consolidated Statements of Financial Condition. The Company records contract assets within Other Current Assets and Other Assets on the Consolidated Statements of Financial Condition when payment is due from a client conditioned on future performance or the occurrence of other events. The Company also recognizes a contract asset for the incremental costs of obtaining a contract with a customer if the benefit of those costs is expected to be longer than one year . The Company applies a practical expedient to expense costs to obtain a contract as incurred when the amortization period is one year or less. Note 3 – Recent Accounting Pronouncements ASU 2016-13 – In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13. ASU 2016-13 provides amendments to Accounting Standards Codification ("ASC") 326, "Financial Instruments - Credit Losses," which amend the guidance on the impairment of financial instruments and add an impairment model (the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Entities will recognize an allowance for its estimate of expected credit losses as of the end of each reporting period. ASU 2016-13 also eliminates the concept of other-than-temporary impairment for available-for-sale debt securities and requires impairments on these securities to be recognized in earnings through an allowance when fair value is less than amortized cost and a credit loss exists or when the securities are expected to be sold before a recovery of amortized cost. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted after December 15, 2018. 10 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) The Company adopted ASU 2016-13 on January 1, 2020 using the modified retrospective approach by means of a cumulative-effect adjustment to decrease retained earnings by $ 1,310 as of January 1, 2020. As a result of adopting ASU 2016-13, the Company’s allowance for credit losses on financial assets that are measured at amortized cost will reflect management’s estimate of credit losses over the remaining expected life of such assets. These expected credit losses are measured based on historical experience, current conditions and forecasts that affect the collectability of the reported amounts. Expected credit losses for newly recognized financial assets, and changes to expected credit losses during the period are recognized in earnings. The impact of the new guidance primarily relates to the Company’s trade accounts receivable. The Company previously used the specific identification method for establishing credit provisions and write-offs of its trade accounts receivable. ASU 2018-13 – In August 2018, the FASB issued ASU No. 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 provides amendments to ASC 820, " Fair Value Measurements and Disclosures" ("ASC 820"), which remove the requirements surrounding the disclosure and policy of transfers between fair value levels and the valuation processes for recurring Level 3 fair value measurements. In addition, ASU 2018-13 adds disclosure requirements for changes in unrealized gains and losses for Level 3 measurements and the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted. The amendments on changes in unrealized gains and losses and unobservable inputs for Level 3 measurements should be applied prospectively, and all other amendments in this update should be applied retrospectively. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto. ASU 2018-17 – In October 2018, the FASB issued ASU No. 2018-17, "Consolidation (Topic 810) - Targeted Improvements to Related Party Guidance for Variable Interest Entities" ("ASU 2018-17"). ASU 2018-17 provides amendments to ASC 810, " Consolidation" which states that any indirect interest held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted. The amendments are required to be retrospectively applied with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company adopted ASU 2018-17 on January 1, 2020. The adoption of ASU 2018-17 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto. ASU 2019-12 – In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). ASU 2019-12 provides amendments to ASC 740, "Income Taxes" ("ASC 740") which simplify the accounting for income taxes by removing certain exceptions in ASC 740 and clarify and amend certain existing guidance. The amendments in this update are effective during interim and annual periods beginning after December 15, 2020, with early adoption permitted. The amendments on separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented, amendments on ownership changes of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis, with a cumulative-effect adjustment recorded through retained earnings as of the beginning of the period of adoption, and all other amendments should be applied prospectively. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto. ASU 2020-01 – In January 2020, the FASB issued ASU No. 2020-01, "Clarifying the Interactions Between Topic 321, 323, and Topic 815" ("ASU 2020-01"). ASU 2020-01 provides amendments to clarify the accounting for certain equity securities when the equity method of accounting is applied or discontinued and scope considerations related to forward contracts and purchased options on certain securities. The amendments in this update are effective during interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto. ASU 2020-06 – In August 2020, the FASB issued ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU 2020-06"). ASU 2020-06 provides amendments to reduce the number of models used to account for convertible instruments and to simplify the accounting for contracts in an entity's own equity. ASU 2020-06 also provides amendments to diluted earnings per share calculations, which require entities to use the if-converted method for convertible instruments and to include the effect of potential share settlement from instruments that may be settled in cash or in shares. The amendments in this update are effective during interim and annual periods beginning after December 15, 2021, with early adoption permitted. The amendments should be applied using a modified or full retrospective transition method. The Company is currently 11 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto. Note 4 – Revenue and Accounts Receivable The following table presents revenue recognized by the Company for the three and nine months ended September 30, 2020 and 2019 : For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Investment Banking: Advisory Fees $ 270,662 $ 320,885 $ 965,662 $ 1,090,309 Underwriting Fees 66,499 17,598 181,182 61,428 Commissions and Related Fees 43,853 46,820 153,353 137,417 Total Investment Banking $ 381,014 $ 385,303 $ 1,300,197 $ 1,289,154 Investment Management: Asset Management and Administration Fees: Wealth Management $ 13,664 $ 12,155 $ 38,624 $ 35,408 Institutional Asset Management 361 495 1,101 2,044 Total Investment Management $ 14,025 $ 12,650 $ 39,725 $ 37,452 Contract Balances The change in the Company’s contract assets and liabilities during the periods primarily reflects timing differences between the Company’s performance and the client’s payment. The Company’s receivables, contract assets and deferred revenue (contract liabilities) for the nine months ended September 30, 2020 and 2019 are as follows: 12 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) For the Nine Months Ended September 30, 2020 Receivables (Current) (1) Receivables (Long-term) (2) Contract Assets (Current) (3) Contract Assets (Long-term) (2) Deferred Revenue (Current Contract Liabilities) (4) Deferred Revenue (Long-term Contract Liabilities) (5) Balance at January 1, 2020 $ 296,355 $ 63,554 $ 31,525 $ 2,504 $ 2,492 $ 615 Increase (Decrease) ( 13,998 ) ( 580 ) ( 12,244 ) ( 88 ) 9,784 ( 234 ) Balance at September 30, 2020 $ 282,357 $ 62,974 $ 19,281 $ 2,416 $ 12,276 $ 381 For the Nine Months Ended September 30, 2019 Receivables (Current) (1) Receivables (Long-term) (2) Contract Assets (Current) (3) Contract Assets (Long-term) (2) Deferred Revenue (Current Contract Liabilities) (4) Deferred Revenue (Long-term Contract Liabilities) (5) Balance at January 1, 2019 $ 309,075 $ 60,948 $ 2,833 $ 541 $ 4,016 $ 1,731 Increase (Decrease) ( 3,403 ) 3,628 ( 1,799 ) 1,787 912 ( 1,116 ) Balance at September 30, 2019 $ 305,672 $ 64,576 $ 1,034 $ 2,328 $ 4,928 $ 615 (1) Included in Accounts Receivable on the Unaudited Condensed Consolidated Statements of Financial Condition . (2) Included in Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition . (3) Included in Other Current Assets on the Unaudited Condensed Consolidated Statements of Financial Condition . (4) Included in Other Current Liabilities on the Unaudited Condensed Consolidated Statements of Financial Condition . (5) Included in Other Long-term Liabilities on the Unaudited Condensed Consolidated Statements of Financial Condition . The Company's contract assets represent arrangements in which an estimate of variable consideration has been included in the transaction price and thereby recognized as revenue that precedes the contractual due date. Under ASC 606, revenue is recognized when all material conditions for completion have been met and it is probable that a significant revenue reversal will not occur in a future period. The Company recognized revenue of $ 5,652 and $ 11,543 on the Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 , respectively, and $ 3,377 and $ 10,870 for the three and nine months ended September 30, 2019, respectively , that was initially included in deferred revenue on the Company’s Unaudited Condensed Consolidated Statements of Financial Condition . Generally, performance obligations under client arrangements will be settled within one year ; therefore, the Company has elected to apply the practical expedient in ASC 606-10-50-14. The allowance for credit losses for the three and nine months ended September 30, 2020 and 2019 is as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Beginning Balance (1) $ 11,125 $ 7,359 $ 9,191 $ 6,037 Bad debt expense 557 819 5,888 2,569 Write-offs, foreign currency translation and other adjustments ( 849 ) ( 6,235 ) ( 4,246 ) ( 6,663 ) Ending Balance $ 10,833 $ 1,943 $ 10,833 $ 1,943 (1) Beginning Balance for the nine months ended September 30, 2020 includes the cumulative-effect adjustment of $ 1,310 , which reflects the increase in the Company's Allowance for Doubtful Accounts as a result of the use of the current expected credit loss model related to the adoption of ASU 2016-13 on January 1, 2020. See Notes 2 and 3 for further information. 13 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) The change in the balance during the three and nine months ended September 30, 2020 is primarily related to an increase in the current period provision of expected credit losses and the write-off of aged receivables, as well as the impact of the change in the amount of receivables outstanding greater than 120 days at September 30, 2020. For long-term accounts receivable and long-term contract assets, the Company monitors clients’ creditworthiness based on collection experience and other internal metrics. The following table presents the Company’s long-term accounts receivable and long-term contract assets from the Company's private and secondary fund advisory businesses as of September 30, 2020, by year of origination: Amortized Cost Basis by Origination Year 2020 2019 2018 2017 2016 Total Long-term Accounts Receivable and Long-Term Contract Assets $ 32,140 $ 20,900 $ 10,845 $ 1,093 $ 412 $ 65,390 Note 5 – Business Developments, Special Charges, Including Business Realignment Costs, and Intangible Asset Amortization Business Developments Sale of ECB Trust Business - On July 2, 2020, the Company completed the sale of the trust business of Evercore Casa de Bolsa, S.A. de C.V. ("ECB") (the "ECB Trust Business"), which was a part of its Investment Management segment, for a purchase price of MXN 39,500 ( $ 1,830 ). As a result of this transaction, the Company deconsolidated assets of $ 475 , representing an allocation of goodwill based on the relative fair value of the business being sold to the total fair value of the Institutional Asset Management reporting unit. This transaction resulted in a pre-tax gain of $ 1,355 included in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 . Special Charges, Including Business Realignment Costs The Company recognized $ 7,380 and $ 39,614 for the three and nine months ended September 30, 2020 , respectively, as Special Charges, Including Business Realignment Costs. For the three and nine months ended September 30, 2020 , these costs include $ 7,253 and $ 37,558 , respectively, for separation and transition benefits and related costs as a result of the Company's review of its operations, described below, and $ 127 and $ 2,056 , respectively, for the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of the Company's headquarters in New York and the Company's business realignment initiatives. In the first quarter of 2020 , the Company substantially completed a review of operations focused on markets, sectors and people which have delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position itself for future growth. This review, which began in the fourth quarter of 2019 , will generate reductions of approximately 8 % of the Company's headcount. In conjunction with the employment reductions, the Company is expected to incur aggregate separation and transition benefits (including costs related to the acceleration of deferred compensation) and related costs of approximately $ 43,000 , $ 37,558 of which has been recorded in Special Charges, Including Business Realignment Costs, in the first nine months of 2020, and $ 2,850 of which was recorded in 2019. The Company's estimates of charges are based on a number of assumptions. Actual results may differ materially if actual activity deviates from these assumptions. In connection with its business realignment initiatives, in April 2020, the Company entered into an agreement for the leaders of its business in Mexico to purchase ECB, the Company's Mexico based broker-dealer focused principally on providing Investment Management services, for a purchase price of MXN 35,000 . This sale will be completed following regulatory approval. In addition, in October 2020 the Company announced the decision to transition its advisory presence in Mexico to a strategic alliance relationship with a newly-formed independent strategic advisory firm founded by certain former employees. The Company recognized $ 1,029 and $ 3,087 for the three and nine months ended September 30, 2019 , respectively, as Special Charges, Including Business Realignment Costs, incurred related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of the Company's headquarters in New York. 14 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Intangible Asset Amortization Expense associated with the amortization of intangible assets for Investment Banking was $ 169 and $ 1,183 for the three and nine months ended September 30, 2020 , respectively, and $ 2,190 and $ 6,570 for the three and nine months ended September 30, 2019 , respectively, included within Depreciation and Amortization expense on the Unaudited Condensed Consolidated Statements of Operations . Expense associated with the amortization of intangible assets for Investment Management was $ 105 and $ 318 for the three and nine months ended September 30, 2020 , respectively, and $ 109 and $ 328 for the three and nine months ended September 30, 2019 , respectively, included within Depreciation and Amortization expense on the Unaudited Condensed Consolidated Statements of Operations . Note 6 – Related Parties Investment Banking Revenue includes advisory fees earned from clients that have Senior Managing Directors and certain Senior Advisors and executives as a member of their Board of Directors of $ 4,859 and $ 13,628 for the three and nine months ended September 30, 2020 , respectively. Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition includes the long-term portion of loans receivable from certain employees of $ 11,060 and $ 13,137 as of September 30, 2020 and December 31, 2019 , respectively. See Note 16 for further information. Note 7 – Investment Securities and Certificates of Deposit The Company's Investment Securities and Certificates of Deposit as of September 30, 2020 and December 31, 2019 were as follows: September 30, 2020 December 31, 2019 Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Debt Securities $ — $ — $ — $ — $ 114,204 $ 591 $ 11 $ 114,784 Equity Securities 666 — 322 344 666 — 168 498 Debt Securities Carried by Broker-Dealers 4,806 — 55 4,751 225,727 1,648 20 227,355 Investment Funds 87,794 7,957 — 95,751 58,704 7,809 — 66,513 Total Investment Securities (carried at fair value) $ 93,266 $ 7,957 $ 377 $ 100,846 $ 399,301 $ 10,048 $ 199 $ 409,150 Certificates of Deposit (carried at contract value) — 214,796 Total Investment Securities and Certificates of Deposit $ 100,846 $ 623,946 Scheduled maturities of the Company's available-for-sale debt securities as of September 30, 2020 and December 31, 2019 were as follows: September 30, 2020 December 31, 2019 Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ — $ — $ 108,662 $ 109,217 Due after one year through five years — — 5,542 5,567 Total $ — $ — $ 114,204 $ 114,784 Debt Securities Debt Securities are classified as available-for-sale securities within Investment Securities and Certificates of Deposit on the Unaudited Condensed Consolidated Statements of Financial Condition . These securities are stated at fair value with unrealized gains and losses included in Accumulated Other Comprehensive Income (Loss) and realized gains and losses included in earnings. 15 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) The Company had net realized gains (losses) of $ 2 and $ 75 for the three and nine months ended September 30, 2020 , respectively, and ($ 3 ) and ($ 9 ) for the three and nine months ended September 30, 2019, respectively . Equity Securities Equity Securities are carried at fair value with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations . The Company had net realized and unrealized gains (losses) of $ 92 and ($ 154 ) for the three and nine months ended September 30, 2020 , respectively, and $ 30 and $ 223 for the three and nine months ended September 30, 2019, respectively . Debt Securities Carried by Broker-Dealers EGL and other broker-dealers invest in fixed income portfolios consisting primarily of U.S. Treasury bills, municipal bonds and other debt securities. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations , as required for broker-dealers in securities. The Company had net realized and unrealized gains (losses) of ($ 1,240 ) for the nine months ended September 30, 2020 and ($ 55 ) and $ 459 for the three and nine months ended September 30, 2019, respectively . Investment Funds The Company invests in a portfolio of exchange-traded funds and mutual funds as an economic hedge against the Company's deferred cash compensation program. See Note 16 for further information. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations . The Company had net realized and unrealized gains of $ 7,798 and $ 5,008 for the three and nine months ended September 30, 2020 , respectively, and $ 532 and $ 9,231 for the three and nine months ended September 30, 2019, respectively . In February 2020, the Company entered into four-month futures contracts on a stock index fund, with a notional amount of $ 38,908 , as an economic hedge against the Company's deferred cash compensation program. These contracts settled in June 2020. See Note 17 for further information. In April 2019, the Company entered into three-month futures contracts on a stock index fund with a notional amount of $ 14,815 for $ 680 , as an economic hedge against the Company's deferred cash compensation program. These contracts settled in June 2019. See Note 17 for further information. Certificates of Deposit At December 31, 2019 , the Company held certificates of deposit of $ 214,796 with certain banks with original maturities of six months or less when purchased. These certificates of deposit matured in January 2020. Note 8 – Financial Instruments Owned and Pledged as Collateral at Fair Value, Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase The Company, through ECB, enters into repurchase agreements with clients seeking overnight money market returns whereby ECB transfers to the clients Mexican government securities in exchange for cash and concurrently agrees to repurchase the securities at a future date for an amount equal to the cash exchanged plus a stipulated premium or interest factor. ECB deploys the cash received from, and acquires the securities deliverable to, clients under these repurchase arrangements by purchasing securities in the open market, which the Company reflects as Financial Instruments Owned and Pledged as Collateral at Fair Value on the Unaudited Condensed Consolidated Statements of Financial Condition , or by entering into reverse repurchase agreements with unrelated third parties. The Company accounts for these repurchase and reverse repurchase agreements as collateralized financing transactions, which are carried at their contract amounts, which approximate fair value given that the contracts mature the following business day. The Company records a liability on its Unaudited Condensed Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase. The Company records as assets on its Unaudited Condensed Consolidated Statements of Financial Condition , Financial Instruments Owned and Pledged as Collateral at Fair Value (where the Company has acquired the securities deliverable to clients under these repurchase arrangements by purchasing securities in the open market) and Securities Purchased Under Agreements to Resell (where the Company has acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties). These Mexican government securities had an estimated average time to maturity of approximately 1.2 years , as of September 30, 2020 , and are pledged as collateral against repurchase agreements. Generally, collateral is posted 16 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) equal to the contract value at inception and is subject to market changes. These repurchase agreements are primarily with institutional customer accounts managed by ECB and permit the counterparty to pledge the securities. ECB has procedures in place to monitor the daily risk limits for positions taken, as well as the credit risk based on the collateral pledged under these agreements against their contract value from inception to maturity date. The daily risk measure is Value at Risk ("VaR"), which is a statistical measure, at a 98 % confidence level, of the potential daily losses from adverse market movements in an ordinary market environment based on a historical simulation using the prior year's historical data. ECB's Risk Management Committee (the "Committee") has established a policy to maintain VaR at levels below 0.1 % of the value of the portfolio. If at any point in time the threshold is exceeded, ECB personnel are alerted by an automated interface with ECB's trading systems and begin to make adjustments in the portfolio in order to mitigate the risk and bring the portfolio in compliance. Concurrently, ECB personnel must notify the Committee of the variance and the actions taken to reduce the exposure to loss. In addition to monitoring VaR, ECB periodically performs discrete stress tests ("Stress Tests") to assure that the level of potential losses that would arise from extreme market movements that may not be anticipated by VaR measures are within acceptable levels. As of September 30, 2020 and December 31, 2019 , a summary of the Company's assets, liabilities and collateral received or pledged related to these transactions was as follows: September 30, 2020 December 31, 2019 Asset (Liability) Balance Market Value of Collateral Received or (Pledged) Asset (Liability) Balance Market Value of Collateral Received or (Pledged) Assets Financial Instruments Owned and Pledged as Collateral at Fair Value $ 13,279 $ 12,431 Securities Purchased Under Agreements to Resell 8,766 $ 8,763 13,566 $ 13,572 Total Assets $ 22,045 $ 25,997 Liabilities Securities Sold Under Agreements to Repurchase $ ( 22,050 ) $ ( 22,057 ) $ ( 26,000 ) $ ( 25,992 ) Note 9 – Investments The Company's investments reported on the Unaudited Condensed Consolidated Statements of Financial Condition consist of investments in unconsolidated affiliated companies, other investments in private equity partnerships, equity securities in private companies and investments in G5 Holdings S.A. ("G5"), Glisco Manager Holdings LP and Trilantic Capital Partners ("Trilantic"). The Company's investments are relatively high-risk and illiquid assets. The Company's investments in ABS Investment Management Holdings, LP and ABS Investment Management GP LLC (collectively, "ABS"), Atalanta Sosnoff Capital, LLC ("Atalanta Sosnoff") and Luminis Partners ("Luminis") are in voting interest entities. The Company's share of earnings (losses) on these investments is included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations . The Company also has investments in private equity partnerships which consist of investment interests in private equity funds which are voting interest entities. Realized and unrealized gains and losses on the private equity investments are included within Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations . Equity Method Investments A summary of the Company's investments accounted for under the equity method of accounting as of September 30, 2020 and December 31, 2019 was as follows: September 30, 2020 December 31, 2019 ABS $ 37,310 $ 40,052 Atalanta Sosnoff 12,268 12,300 Luminis 5,522 4,923 Total $ 55,100 $ 57,275 17 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) ABS On December 29, 2011, the Company made an investment accounted for under the equity method of accounting in ABS Investment Management, LLC. Effective as of September 1, 2018, ABS Investment Management, LLC underwent an internal reorganization pursuant to which the Company contributed its ownership interest in ABS Investment Management, LLC to ABS in exchange for ownership interests in ABS Investment Management Holdings LP and ABS Investment Management GP LLC. Taken together, the ownership interests in ABS Investment Management Holdings LP and ABS Investment Management GP LLC are substantially equivalent to the contributed ownership interests in ABS Investment Management, LLC. At September 30, 2020 , the Company's economic ownership interest in ABS was 46 % . This investment resulted in earnings of $ 1,917 and $ 5,740 for the three and nine months ended September 30, 2020 , respectively, and $ 1,936 and $ 5,588 for the three and nine months ended September 30, 2019, respectively , included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations . Atalanta Sosnoff On December 31, 2015, the Company amended the Operating Agreement with Atalanta Sosnoff and deconsolidated its assets and liabilities, accounting for its interest under the equity method of accounting from that date forward. At September 30, 2020 , the Company's economic ownership interest in Atalanta Sosnoff was 49 % . This investment resulted in earnings of $ 624 and $ 1,641 for the three and nine months ended September 30, 2020 , respectively, and $ 344 and $ 882 for the three and nine months ended September 30, 2019, respectively , included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations . Luminis On January 1, 2017, the Company acquired an interest in Luminis and accounted for its interest under the equity method of accounting. At September 30, 2020 , the Company's ownership interest in Luminis was 20 % . This investment resulted in earnings of $ 570 and $ 1,171 for the three and nine months ended September 30, 2020 , respectively, and $ 282 and $ 756 for the three and nine months ended September 30, 2019, respectively , included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations . Other The Company allocates the purchase price of its equity method investments, in part, to the inherent finite-lived identifiable intangible assets of the investees. The Company's share of the earnings of the investees has been reduced by the amortization of these identifiable intangible assets of $ 79 and $ 237 for the three and nine months ended September 30, 2020 , respectively, and $ 171 and $ 513 for the three and nine months ended September 30, 2019, respectively . The Company assesses its equity method investments for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Debt Security Investment On December 31, 2017, the Company exchanged all of its outstanding equity interests in G5 for debentures of G5. The Company records its investment in G5 as a held-to-maturity debt security within Investments on the Unaudited Condensed Consolidated Statements of Financial Condition. The securities are mandatorily redeemable on December 31, 2027, or earlier, subject to the occurrence of certain events. The Company is accreting its investment to its redemption value ratably, or on an accelerated basis if certain revenue thresholds are met by G5, from December 31, 2017 to December 31, 2027. This investment is subject to currency translation from Brazilian real to the U.S. dollar, included in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations . This investment had a balance of $ 6,684 and $ 9,235 as of September 30, 2020 and December 31, 2019 , respectively. Investments in Private Equity Private Equity Funds The Company's investments related to private equity partnerships and associated entities include investments in Glisco Partners II, L.P. ("Glisco II"), Glisco Partners III, L.P. ("Glisco III"), Glisco Capital Partners IV ("Glisco IV"), Trilantic Capital Partners Associates IV, L.P. ("Trilantic IV"), Trilantic Capital Partners V, L.P. ("Trilantic V") and Trilantic Capital Partners VI (North America), L.P. ("Trilantic VI"). Portfolio holdings of the private equity funds are carried at fair value. Accordingly, the 18 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Company reflects its pro rata share of unrealized gains and losses occurring from changes in fair value. Additionally, the Company reflects its pro rata share of realized gains, losses and carried interest associated with any investment realizations. A summary of the Company's investments in the private equity funds as of September 30, 2020 and December 31, 2019 was as follows: September 30, 2020 December 31, 2019 Glisco II, Glisco III and Glisco IV $ 2,695 $ 3,820 Trilantic IV, Trilantic V and Trilantic VI 9,034 9,727 Total Private Equity Funds $ 11,729 $ 13,547 Net realized and unrealized gains (losses) on private equity fund investments were $ 697 and ($ 1,646 ) for the three and nine months ended September 30, 2020 , respectively, and ($ 49 ) and ($ 176 ) for the three and nine months ended September 30, 2019, respectively . In the event the funds perform poorly, the Company may be obligated to repay certain carried interest previously distributed. As of September 30, 2020 , $ 347 of previously distributed carried interest received from the funds was subject to repayment. General Partners of Private Equity Funds which are VIEs Following the Glisco transaction, the Company concluded that Glisco Capital Partners II, Glisco Capital Partners III and Glisco Manager Holdings LP are VIEs and that the Company is not the primary beneficiary of these VIEs. The Company's assessment of the primary beneficiary of these entities included assessing which parties have the power to significantly impact the economic performance of these entities and the obligation to absorb losses, which could be potentially significant to the entities, or the right to receive benefits from the entities that could be potentially significant. Neither the Company nor its related parties will have the ability to make decisions that significantly impact the economic performance of these entities. Further, as a limited partner in these entities, the Company does not possess substantive participating rights. The Company had assets of $ 2,975 and $ 4,658 included in its Unaudited Condensed Consolidated Statements of Financial Condition at September 30, 2020 and December 31, 2019 , respectively, related to these unconsolidated VIEs, representing the carrying value of the Company's investments in the entities. The Company's exposure to the obligations of these VIEs is generally limited to its investments in these entities. The Company's maximum exposure to loss as of September 30, 2020 and December 31, 2019 was $ 5,483 and $ 8,810 , respectively, which represents the carrying value of the Company's investments in these VIEs, as well as any unfunded commitments to the current and future funds. Investment in Trilantic Capital Partners In 2010, the Company made a limited partnership investment in Trilantic in exchange for 500 Class A partnership units of Evercore LP ("Class A LP Units") having a fair value of $ 16,090 . This investment gave the Company the right to invest in Trilantic's current and future private equity funds, beginning with Trilantic Fund IV. The Company accounts for this investment at its cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company allocates the cost of this investment to its investments in current and future Trilantic funds as the Company satisfies the capital calls of these funds. The Company bases this allocation on its expectation of Trilantic's future fundraising ability and performance. During the nine months ended September 30, 2020 , $ 14 and $ 110 of this investment was allocated to Trilantic Fund V and VI, respectively. From 2010 to 2019, $ 1,178 , $ 5,135 and $ 3,015 of this investment was allocated to Trilantic Fund IV, V and VI, respectively. This investment had a balance of $ 6,638 and $ 6,762 as of September 30, 2020 and December 31, 2019 , respectively. The Company has a $ 5,000 commitment to invest in Trilantic Fund V, of which $ 376 was unfunded at September 30, 2020 . The Company also has a $ 12,000 commitment to invest in Trilantic Fund VI, of which $ 9,054 was unfunded at September 30, 2020 . The Company funded $ 3,015 of the commitment to invest in Trilantic Fund VI during the nine months ended September 30, 2019. Other Investments In 2015, the Company received an equity security in a private company in exchange for advisory services. This investment is accounted for at its cost minus impairment, if any, plus or minus changes resulting from observable price changes and had a balance of $ 1,079 as of September 30, 2020 and December 31, 2019 . In May 2019, the Company received preferred equity securities in a private company in exchange for advisory services. This investment is accounted for at its cost minus impairment, if any, plus or minus changes resulting from observable price changes and had a balance of $ 645 and $ 693 as of September 30, 2020 and December 31, 2019 , respectively. 19 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Following the Glisco transaction in 2016, the Company recorded an investment in Glisco Manager Holdings LP representing the fair value of the deferred consideration resulting from this transaction. This investment is accounted for at its cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company amortizes the balance of its investment as distributions are received related to the deferred consideration. This investment had a balance of $ 387 and $ 899 as of September 30, 2020 and December 31, 2019 , respectively. Note 10 – Leases Operating Leases – The Company leases office space under non-cancelable lease agreements, which expire on various dates through 2035 . The lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company reflects lease expense over the lease terms on a straight-line basis. Occupancy lease agreements, in addition to base rentals, generally are subject to escalation provisions based on certain costs incurred by the landlord. The Company does not have any leases with variable lease payments. Occupancy and Equipment Rental on the Unaudited Condensed Consolidated Statements of Operations includes operating lease cost for office space of $ 12,248 and $ 36,272 for the three and nine months ended September 30, 2020 , respectively, and $ 10,649 and $ 30,992 for the three and nine months ended September 30, 2019, respectively , and variable lease cost of $ 1,841 and $ 4,696 for the three and nine months ended September 30, 2020 , respectively, and $ 1,754 and $ 6,572 for the three and nine months ended September 30, 2019, respectively . On July 1, 2018, the Company entered into a new lease agreement for office space at its headquarters at 55 East 52nd St., New York, New York. Under the terms of the agreement, the Company committed to extend the lease term for the Company's current space and add space on up to seven additional floors, three of which commenced as of the lease’s effective date. The Company anticipates that it will take possession of the remainder of these floors over the next three years. On December 6, 2019, the lease was modified to add an additional floor and to extend the lease term for all current and prospective space to end on December 31, 2035. In conjunction with the lease of office space, the Company has entered into letters of credit in the amounts of $ 5,549 and $ 5,536 , as of September 30, 2020 and December 31, 2019 , respectively, which are secured by cash that is included in Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition. The Company has entered into various operating leases for the use of office equipment (primarily computers, printers, copiers and other information technology related equipment). Occupancy and Equipment Rental on the Unaudited Condensed Consolidated Statements of Operations includes operating lease cost for office equipment of $ 1,170 and $ 3,497 for the three and nine months ended September 30, 2020 , respectively, and $ 1,132 and $ 3,059 for the three and nine months ended September 30, 2019, respectively . The Company uses its secured incremental borrowing rate to determine the present value of its right-of-use assets and lease liabilities. The determination of an appropriate incremental borrowing rate requires significant assumptions and judgment. The Company's incremental borrowing rate was calculated based on the Company's recent debt issuances and current market conditions. The Company scales the rates appropriately depending on the life of the leases. The Company incurred net operating cash outflows of $ 22,469 and $ 15,778 for the nine months ended September 30, 2020 and 2019, respectively, related to its operating leases, which were net of cash received from lease incentives of $ 10,267 and $ 12,854 , respectively. Other information as it relates to the Company's operating leases is as follows: 20 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 New Right-of-Use Assets obtained in exchange for new operating lease liabilities $ 19,818 $ 13,598 $ 107,986 $ 28,909 September 30, 2020 September 30, 2019 Weighted-average remaining lease term - operating leases 11.5 years 9.0 years Weighted-average discount rate - operating leases 4.11 % 5.53 % As of September 30, 2020 , the maturities of the undiscounted operating lease liabilities for which the Company has commenced use are as follows: 2020 (October 1 through December 31) $ 12,472 2021 52,192 2022 51,660 2023 36,560 2024 29,595 Thereafter 277,230 Total lease payments 459,709 Less: Tenant Improvement Allowances ( 18,586 ) Less: Imputed Interest ( 97,380 ) Present value of lease liabilities 343,743 Less: Current lease liabilities ( 41,018 ) Long-term lease liabilities $ 302,725 In conjunction with the lease agreement to expand its headquarters at 55 East 52nd St., New York, New York, and lease agreements at certain other locations, the Company entered into leases for office space which have not yet commenced and thus are not yet included on the Company's Unaudited Condensed Consolidated Statements of Financial Condition as right-of-use assets and lease liabilities. The Company anticipates that it will take possession of these spaces by the end of 2023. These spaces will have lease terms of 3 to 13 years once the Company has taken possession. The additional future payments under these arrangements are $ 197,835 as of September 30, 2020 . Note 11 – Fair Value Measurements ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily-available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. Investments measured and reported at fair value are classified and disclosed in one of the following categories: Level I – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities, listed derivatives and treasury bills. As required by ASC 820, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price. Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. The estimated 21 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) fair values of corporate bonds, municipal bonds and other debt securities held at December 31, 2019 are based on prices provided by external pricing services. Level III – Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The following table presents the categorization of investments and certain other financial assets measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 : September 30, 2020 Level I Level II Level III Total Debt Securities Carried by Broker-Dealers (1) $ 219,849 $ — $ — $ 219,849 Other Debt and Equity Securities (2) 10,243 — — 10,243 Investment Funds 95,751 — — 95,751 Financial Instruments Owned and Pledged as Collateral at Fair Value 13,279 — — 13,279 Total Assets Measured At Fair Value $ 339,122 $ — $ — $ 339,122 December 31, 2019 Level I Level II Level III Total Corporate Bonds, Municipal Bonds and Other Debt Securities Carried by Broker-Dealers $ 168,650 $ 58,705 $ — $ 227,355 Other Debt and Equity Securities (2) 111,823 6,449 — 118,272 Investment Funds 66,513 — — 66,513 Financial Instruments Owned and Pledged as Collateral at Fair Value 12,431 — — 12,431 Total Assets Measured At Fair Value $ 359,417 $ 65,154 $ — $ 424,571 (1) Includes $ 215,098 of treasury bills classified within Cash and Cash Equivalents on the Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2020 . (2) Includes $ 9,899 and $ 2,990 of treasury bills and notes and municipal bonds classified within Cash and Cash Equivalents on the Unaudited Condensed Consolidated Statements of Financial Condition as of September 30, 2020 and December 31, 2019 , respectively. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. During the fourth quarter of 2019 , the Company determined that the fair value of the Institutional Asset Management reporting unit was $ 8,777 . The fair value of the reporting unit was estimated by utilizing a discounted cash flow methodology based on adjusted cash flows from operations. Goodwill is measured at fair value on a non-recurring basis as a Level III asset. The carrying amount and estimated fair value of the Company's financial instrument assets and liabilities, which are not measured at fair value on the Unaudited Condensed Consolidated Statements of Financial Condition , are listed in the tables below. 22 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) September 30, 2020 Carrying Estimated Fair Value Amount Level I Level II Level III Total Financial Assets: Cash and Cash Equivalents $ 924,294 $ 924,294 $ — $ — $ 924,294 Debt Security Investment 6,684 — — 6,684 6,684 Securities Purchased Under Agreements to Resell 8,766 — 8,766 — 8,766 Receivables (1) 345,331 — 342,398 — 342,398 Contract Assets (2) 21,697 — 21,517 — 21,517 Receivable from Employees and Related Parties 25,900 — 25,900 — 25,900 Closely-held Equity Securities 1,724 — — 1,724 1,724 Financial Liabilities: Accounts Payable and Accrued Expenses $ 41,084 $ — $ 41,084 $ — $ 41,084 Securities Sold Under Agreements to Repurchase 22,050 — 22,050 — 22,050 Payable to Employees and Related Parties 21,512 — 21,512 — 21,512 Notes Payable (3) 374,510 — 400,507 — 400,507 December 31, 2019 Carrying Estimated Fair Value Amount Level I Level II Level III Total Financial Assets: Cash and Cash Equivalents $ 630,818 $ 630,818 $ — $ — $ 630,818 Certificates of Deposit 214,796 — 214,796 — 214,796 Debt Security Investment 9,235 — — 9,235 9,235 Securities Purchased Under Agreements to Resell 13,566 — 13,566 — 13,566 Receivables (1) 359,909 — 357,047 — 357,047 Contract Assets (2) 34,029 — 33,854 — 33,854 Receivable from Employees and Related Parties 22,416 — 22,416 — 22,416 Closely-held Equity Securities 1,772 — — 1,772 1,772 Financial Liabilities: Accounts Payable and Accrued Expenses $ 39,726 $ — $ 39,726 $ — $ 39,726 Securities Sold Under Agreements to Repurchase 26,000 — 26,000 — 26,000 Payable to Employees and Related Parties 31,703 — 31,703 — 31,703 Notes Payable 375,062 — 382,274 — 382,274 (1) Includes Accounts Receivable, as well as long-term receivables, which are included in Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition . (2) Includes current and long-term contract assets included in Other Current Assets and Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition . (3) Includes current and long-term Notes Payable included in Current Portion of Notes Payable and Notes Payable on the Unaudited Condensed Consolidated Statements of Financial Condition . 23 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 12 – Notes Payable On March 30, 2016, the Company issued an aggregate of $ 170,000 of senior notes, including: $ 38,000 aggregate principal amount of its 4.88 % Series A senior notes due 2021 (the "Series A Notes"), $ 67,000 aggregate principal amount of its 5.23 % Series B senior notes due 2023 (the "Series B Notes"), $ 48,000 aggregate principal amount of its 5.48 % Series C senior notes due 2026 (the "Series C Notes") and $ 17,000 aggregate principal amount of its 5.58 % Series D senior notes due 2028 (the "Series D Notes" and together with the Series A Notes, the Series B Notes and the Series C Notes, the "2016 Private Placement Notes"), pursuant to a note purchase agreement (the "2016 Note Purchase Agreement") dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933. Interest on the 2016 Private Placement Notes is payable semi-annually and the 2016 Private Placement Notes are guaranteed by certain of the Company's domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the 2016 Private Placement Notes (without regard to Series), in an amount not less than 5 % of the aggregate principal amount of the 2016 Private Placement Notes then outstanding at 100 % of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the 2016 Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the 2016 Private Placement Notes plus accrued and unpaid interest to the prepayment date. The 2016 Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default. As of September 30, 2020 , the Company was in compliance with all of these covenants. On August 1, 2019, the Company issued $ 175,000 and £ 25,000 of senior unsecured notes through private placement. These notes reflect a weighted average life of 12 years and a weighted average stated interest rate of 4.26 % . These notes include: $ 75,000 aggregate principal amount of its 4.34 % Series E senior notes due 2029 (the "Series E Notes"), $ 60,000 aggregate principal amount of its 4.44 % Series F senior notes due 2031 (the "Series F Notes"), $ 40,000 aggregate principal amount of its 4.54 % Series G senior notes due 2033 (the "Series G Notes") and £ 25,000 aggregate principal amount of its 3.33 % Series H senior notes due 2033 (the "Series H Notes" and together with the Series E Notes, the Series F Notes and the Series G Notes, the "2019 Private Placement Notes"), each of which were issued pursuant to a note purchase agreement dated as of August 1, 2019 (the "2019 Note Purchase Agreement"), among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933. Interest on the 2019 Private Placement Notes is payable semi-annually and the 2019 Private Placement Notes are guaranteed by certain of the Company's domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the 2019 Private Placement Notes (without regard to Series), in an amount not less than 5 % of the aggregate principal amount of the 2019 Private Placement Notes then outstanding at 100 % of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the 2019 Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the 2019 Private Placement Notes plus accrued and unpaid interest to the prepayment date. The 2019 Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio and a minimum tangible net worth, and customary events of default. As of September 30, 2020 , the Company was in compliance with all of these covenants. 24 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Notes Payable is comprised of the following as of September 30, 2020 and December 31, 2019 : Carrying Value (a) Note Maturity Date Effective Annual Interest Rate September 30, 2020 December 31, 2019 Evercore Inc. 4.88% Series A Senior Notes 3/30/2021 5.16 % $ 37,948 $ 37,873 Evercore Inc. 5.23% Series B Senior Notes 3/30/2023 5.44 % 66,671 66,581 Evercore Inc. 5.48% Series C Senior Notes 3/30/2026 5.64 % 47,636 47,595 Evercore Inc. 5.58% Series D Senior Notes 3/30/2028 5.72 % 16,854 16,842 Evercore Inc. 4.34% Series E Senior Notes 8/1/2029 4.46 % 74,321 74,282 Evercore Inc. 4.44% Series F Senior Notes 8/1/2031 4.55 % 59,446 59,422 Evercore Inc. 4.54% Series G Senior Notes 8/1/2033 4.64 % 39,625 39,613 Evercore Inc. 3.33% Series H Senior Notes 8/1/2033 3.42 % 32,009 32,854 Total $ 374,510 $ 375,062 Less: Current Portion of Notes Payable ( 37,948 ) — Notes Payable $ 336,562 $ 375,062 (a) Carrying value has been adjusted to reflect the presentation of debt issuance costs as a direct reduction from the related liability. Note 13 – Evercore Inc. Stockholders' Equity Dividends – The Company's Board of Directors declared on October 20, 2020 , a quarterly cash dividend of $ 0.61 per share, to the holders of record of shares of Class A common stock ("Class A Shares") as of November 27, 2020 , which will be paid on December 11, 2020 . During the three and nine months ended September 30, 2020 , the Company declared and paid dividends of $ 0.58 and $ 1.74 per share, respectively, totaling $ 23,586 and $ 70,348 , respectively, and accrued deferred cash dividends on unvested restricted stock units ("RSUs"), totaling $ 3,348 and $ 10,266 , respectively. The Company also paid deferred cash dividends of $ 182 and $ 10,949 during the three and nine months ended September 30, 2020 , respectively. During the three and nine months ended September 30, 2019 , the Company declared and paid dividends of $ 0.58 and $ 1.66 per share, respectively, totaling $ 22,944 and $ 66,673 , respectively, and accrued deferred cash dividends on unvested RSUs, totaling $ 3,778 and $ 10,903 , respectively. The Company also paid deferred cash dividends of $ 134 and $ 7,202 during the three and nine months ended September 30, 2019 , respectively. Treasury Stock – During the three months ended September 30, 2020 , the Company purchased 16 Class A Shares from employees at market values ranging from $ 54.81 to $ 65.34 per share (at an average cost per share of $ 58.37 ), primarily for the net settlement of stock-based compensation awards. The result of these purchases was an increase in Treasury Stock of $ 927 on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2020 . During the nine months ended September 30, 2020 , the Company purchased 1,033 Class A Shares primarily from employees at market values ranging from $ 38.23 to $ 81.31 per share (at an average cost per share of $ 76.18 ), primarily for the net settlement of stock-based compensation awards, and 854 Class A Shares at market values ranging from $ 58.28 to $ 81.96 per share (at an average cost per share of $ 75.93 ) pursuant to the Company's share repurchase program. The aggregate 1,887 Class A Shares were purchased at an average cost per share of $ 76.07 , and the result of these purchases was an increase in Treasury Stock of $ 143,487 on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2020 . LP Units – During the three and nine months ended September 30, 2020, 0.2 and 807 Evercore LP partnership units ("LP Units"), respectively, were exchanged for Class A Shares. This resulted in increases to Common Stock of $ 8 for the nine months ended September 30, 2020, and Additional Paid-In-Capital of $ 8 and $ 33,762 for the three and nine months ended September 30, 2020, respectively, on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2020 . Accumulated Other Comprehensive Income (Loss) – As of September 30, 2020 , Accumulated Other Comprehensive Income (Loss) on the Company's Unaudited Condensed Consolidated Statement of Financial Condition includes an accumulated Unrealized Gain (Loss) on Securities and Investments, net, and Foreign Currency Translation Adjustment Gain (Loss), net, of ($ 5,473 ) and ($ 25,930 ) , respectively. 25 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 14 – Noncontrolling Interest Noncontrolling Interest recorded in the unaudited condensed consolidated financial statements of the Company relates to the following approximate interests in certain consolidated subsidiaries, which are not owned by the Company. In circumstances where the governing documents of the entity to which the noncontrolling interest relates require special allocations of profits or losses to the controlling and noncontrolling interest holders, the net income or loss of these entities is allocated based on these special allocations. September 30, 2020 2019 Subsidiary: Evercore LP 11 % 12 % Evercore Wealth Management ("EWM") (1) 24 % 20 % Real Estate Capital Advisory ("RECA") (2) 38 % 38 % (1) Noncontrolling Interests represent a blended rate for multiple classes of interests in EWM. (2) Noncontrolling Interests represent the Class R Interests of Private Capital Advisory L.P. The Noncontrolling Interests for Evercore LP, EWM and RECA have rights, in certain circumstances, to convert into Class A Shares. Changes in Noncontrolling Interest for the three and nine months ended September 30, 2020 and 2019 were as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Beginning balance $ 231,622 $ 236,549 $ 256,534 $ 249,819 Comprehensive Income: Net Income Attributable to Noncontrolling Interest 8,510 9,226 27,031 35,709 Other Comprehensive Income (Loss) 986 ( 502 ) ( 781 ) ( 766 ) Total Comprehensive Income 9,496 8,724 26,250 34,943 Evercore LP Units Exchanged for Class A Shares ( 8 ) ( 1,010 ) ( 33,762 ) ( 12,187 ) Amortization and Vesting of LP Units 4,231 6,993 9,926 19,109 Other Items: Distributions to Noncontrolling Interests ( 9,253 ) ( 13,251 ) ( 23,262 ) ( 44,947 ) Issuance of Noncontrolling Interest — 600 540 3,301 Purchase of Noncontrolling Interest — — ( 138 ) ( 11,433 ) Total Other Items ( 9,253 ) ( 12,651 ) ( 22,860 ) ( 53,079 ) Ending balance $ 236,088 $ 238,605 $ 236,088 $ 238,605 Other Comprehensive Income – Other Comprehensive Income (Loss) attributed to Noncontrolling Interest includes Unrealized Gains (Losses) on Securities and Investments, net, of ($ 3 ) and ($ 254 ) for the three and nine months ended September 30, 2020 , respectively, and ($ 7 ) and ($ 105 ) for the three and nine months ended September 30, 2019, respectively , and Foreign Currency Translation Adjustment Gains (Losses), net, of $ 989 and ($ 527 ) for the three and nine months ended September 30, 2020 , respectively, and ($ 495 ) and ($ 661 ) for the three and nine months ended September 30, 2019, respectively . 26 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) LP Units Exchanged – During the three and nine months ended September 30, 2020, 0.2 and 807 LP Units, respectively, were exchanged for Class A Shares. This resulted in decreases to Noncontrolling Interest and increases to Additional-Paid-In-Capital of $ 8 and $ 33,762 for the three and nine months ended September 30, 2020, respectively, on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2020 . See Note 13 for further information. Interests Purchased – During the first quarter of 2020, the Company purchased, at fair value, an additional 1 % of the EWM Class A Units for $ 1,703 (which was paid in cash of $ 852 during the nine months ended September 30, 2020 and through the issuance of notes payable of $ 851 , included within Other Current Liabilities on the Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2020). This purchase resulted in a decrease to Noncontrolling Interest of $ 138 and a decrease to Additional Paid-In-Capital of $ 1,565 , on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2020 . On May 31, 2019, the Company purchased, at fair value, the remaining 10 % of the Private Capital Advisory L.P. Common Interests for $ 28,382 . This purchase resulted in a decrease to Noncontrolling Interest of $ 6,674 and a decrease to Additional Paid-In-Capital of $ 21,708 , on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2019 . On May 31, 2019, the Company also purchased, at fair value, an additional 17 % of the EWM Class A Units for $ 24,533 (in cash of $ 21,832 and the issuance of 31 Class A LP Units having a fair value of $ 2,701 ). This purchase resulted in a net decrease to Noncontrolling Interest of $ 4,759 and a decrease to Additional Paid-In-Capital of $ 19,774 , on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2019 . Note 15 – Net Income Per Share Attributable to Evercore Inc. Common Shareholders The calculations of basic and diluted net income per share attributable to Evercore Inc. common shareholders for the three and nine months ended September 30, 2020 and 2019 are described and presented below. 27 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Basic Net Income Per Share Attributable to Evercore Inc. Common Shareholders Numerator: Net income attributable to Evercore Inc. common shareholders $ 42,610 $ 43,278 $ 130,197 $ 192,252 Denominator: Weighted average Class A Shares outstanding, including vested RSUs 40,694 39,704 40,441 40,246 Basic net income per share attributable to Evercore Inc. common shareholders $ 1.05 $ 1.09 $ 3.22 $ 4.78 Diluted Net Income Per Share Attributable to Evercore Inc. Common Shareholders Numerator: Net income attributable to Evercore Inc. common shareholders $ 42,610 $ 43,278 $ 130,197 $ 192,252 Noncontrolling interest related to the assumed exchange of LP Units for Class A Shares (b) (b) (b) (b) Associated corporate taxes related to the assumed elimination of Noncontrolling Interest described above (b) (b) (b) (b) Diluted net income attributable to Evercore Inc. common shareholders $ 42,610 $ 43,278 $ 130,197 $ 192,252 Denominator: Weighted average Class A Shares outstanding, including vested RSUs 40,694 39,704 40,441 40,246 Assumed exchange of LP Units for Class A Shares (a)(b) — 648 96 756 Additional shares of the Company's common stock assumed to be issued pursuant to non-vested RSUs and deferred consideration, as calculated using the Treasury Stock Method 1,249 2,037 1,248 2,035 Shares that are contingently issuable (c) 400 400 400 400 Diluted weighted average Class A Shares outstanding 42,343 42,789 42,185 43,437 Diluted net income per share attributable to Evercore Inc. common shareholders $ 1.01 $ 1.01 $ 3.09 $ 4.43 (a) The Company previously had outstanding Class J limited partnership units of Evercore LP ("Class J LP Units"), which converted into Class E limited partnership units of Evercore LP ("Class E LP Units") and ultimately became exchangeable into Class A Shares on a one -for-one basis. As of September 30, 2020 , no Class J LP Units remained issued or outstanding. See Note 16 for further information. During the nine months ended September 30, 2020 and the three and nine months ended September 30, 2019 , the Class J LP Units were dilutive and consequently the effect of their exchange into Class A Shares has been included in the calculation of diluted net income per share attributable to Evercore Inc. common shareholders under the if-converted method. In computing this adjustment, the Company assumes that all Class J LP Units are converted into Class A Shares. (b) The Company has outstanding Class A and E LP Units, which give the holders the right to receive Class A Shares upon exchange on a one -for-one basis. During the three and nine months ended September 30, 2020 and 2019 , the Class A and E LP Units were antidilutive and consequently the effect of their exchange into Class A Shares has been excluded from the calculation of diluted net income per share attributable to Evercore Inc. common shareholders. The units that would have been 28 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) included in the denominator of the computation of diluted net income per share attributable to Evercore Inc. common shareholders if the effect would have been dilutive were 5,070 and 5,161 for the three and nine months ended September 30, 2020 , respectively, and 5,310 and 5,238 for the three and nine months ended September 30, 2019, respectively . The adjustment to the numerator, diluted net income attributable to Class A common shareholders, if the effect would have been dilutive, would have been $ 6,560 and $ 18,990 for the three and nine months ended September 30, 2020 , respectively, and $ 6,804 and $ 25,996 for the three and nine months ended September 30, 2019, respectively . In computing this adjustment, the Company assumes that all vested Class A LP Units and all Class E LP Units are converted into Class A Shares, that all earnings attributable to those shares are attributed to Evercore Inc. and that the Company is subject to the statutory tax rates of a C-Corporation under a conventional corporate tax structure in the U.S. at prevailing corporate tax rates. The Company does not anticipate that the Class A and E LP Units will result in a dilutive computation in future periods. (c) The Company has outstanding Class I-P units of Evercore LP ("Class I-P Units") which are contingently exchangeable into Class I limited partnership units of Evercore LP ("Class I LP Units"), and ultimately Class A Shares, and outstanding Class K-P units of Evercore LP ("Class K-P Units") which are contingently exchangeable into Class K limited partnership units of Evercore LP ("Class K LP Units"), and ultimately Class A Shares, as they are subject to certain performance thresholds being achieved. For the purposes of calculating diluted net income per share attributable to Evercore Inc. common shareholders, the Company's Class I-P Units and Class K-P Units are included in diluted weighted average Class A Shares outstanding as of the beginning of the period in which all necessary performance conditions have been satisfied. If all necessary performance conditions have not been satisfied by the end of the period, the number of shares that are included in diluted weighted average Class A Shares outstanding is based on the number of shares that would be issuable if the end of the reporting period were the end of the performance period. The Units that were assumed to be converted to an equal number of Class A Shares for purposes of computing diluted net income per share attributable to Evercore Inc. common shareholders were 400 for each of the three and nine months ended September 30, 2020 and 2019 . The shares of Class B common stock have no right to receive dividends or a distribution on liquidation or winding up of the Company. The shares of Class B common stock do not share in the earnings of the Company and no earnings are allocable to such class. Accordingly, basic and diluted net income per share of Class B common stock have not been presented. Note 16 – Share-Based and Other Deferred Compensation LP Units Equities business – In conjunction with the acquisition of the operating businesses of International Strategy & Investment ("ISI") in 2014, the Company issued Evercore LP units and interests which have been treated as compensation. In July 2017, the Company exchanged all of the previously outstanding 4,148 Class H limited partnership interests of Evercore LP ("Class H LP Interests") for 1,012 vested ( 963 of which were subject to certain liquidated damages and continued employment provisions) and 938 unvested Class J LP Units. These units converted into an equal amount of Class E LP Units, and became exchangeable into Class A Shares of the Company, ratably on February 15, 2018, 2019 and 2020. These Class J LP Units had the same vesting and delivery schedule, acceleration and forfeiture triggers, and distribution rights as the Class H LP Interests. In connection with this exchange, one share of Class B common stock has been issued to each holder of Class J LP Units, which entitles each holder to one vote on all matters submitted generally to holders of Class A and Class B common stock for each Class E LP Unit and Class J LP Unit held. As the number of Class J LP Units exchanged was within the number of Class H LP Interests that the Company determined were probable of being exchanged on the date of modification, the Company expensed the previously unrecognized grant date fair value of the Class H LP Interests ratably over the remaining vesting period of the Class J LP Units. Compensation expense related to the Class J LP Units was $ 1,067 for the nine months ended September 30, 2020 , and $ 4,527 and $ 12,276 for the three and nine months ended September 30, 2019, respectively . On February 15, 2020, 223 Class J LP Units vested and were converted to an equal amount of Class E LP Units. Following the conversion, no Class J LP Units remain issued and outstanding. Othe r Performance-based Awards – In November 2016, the Company issued 400 Class I-P Units in conjunction with the appointment of the current Co-Chief Executive Officer (then Executive Chairman). These Class I-P Units convert into a specified number of Class I LP Units, which are exchangeable on a one -for-one basis to Class A Shares, contingent on the achievement of certain market and service conditions, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following January 15, 2022, subject to a one year prior written notice requirement) or a change in control. These Class I-P Units are segregated into two groups of 200 units each, with share price threshold vesting conditions which are required to exceed a certain level for 20 consecutive trading days (which were met as of March 31, 2017). The Company 29 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) determined the fair value of the award to be $ 24,412 and is expensing the award ratably over the implied service period, which ends on March 1, 2022. As the award contains market-based conditions, the entire expense will be recognized if the award does not vest for any reason other than the service conditions. Compensation expense related to this award was $ 1,164 and $ 3,468 for the three and nine months ended September 30, 2020 , respectively, and $ 1,164 and $ 3,455 for the three and nine months ended September 30, 2019, respectively . In November 2017, the Company issued 64 Class K-P Units to an employee of the Company. These Class K-P Units convert into a specified number of Class K LP Units (which are exchangeable on a one -for-one basis to Class A Shares), contingent upon the achievement of certain defined benchmark results and continued service through December 31, 2021. An additional 16 Class K-P Units may be issued contingent upon the achievement of certain defined benchmark results (which were probable of achievement as of September 30, 2020 ) and continued service through December 31, 2021. The Company determined the value of the award probable to vest as of September 30, 2020 to be $ 6,250 and records expense for these units over the service period. In June 2019, the Company issued 220 Class K-P Units to an employee of the Company. These Class K-P Units convert into a number of Class K LP Units (which are exchangeable on a one -for-one basis to Class A Shares), contingent and based upon the achievement of certain defined benchmark results and continued service through February 4, 2023 for the first tranche, which consists of 120 Class K-P Units convertible into a number of Class K LP Units, and February 4, 2028 for the second tranche, which consists of 100 Class K-P Units convertible into a number of Class K LP Units. The Company determined the value of the award probable to vest as of September 30, 2020 to be $ 21,692 and records expense for these units over the service period. Compensation expense related to the Class K-P Units was $ 3,066 and $ 5,392 for the three and nine months ended September 30, 2020 , respectively, and $ 1,277 and $ 1,911 for the three and nine months ended September 30, 2019, respectively . Stock Incentive Plan During the second quarter of 2020, the Company's stockholders approved the Amended and Restated 2016 Evercore Inc. Stock Incentive Plan (the "Amended 2016 Plan"), which amended the prior Amended and Restated 2016 Evercore Inc. Stock Incentive Plan. The Amended 2016 Plan, among other things, authorizes an additional 6,000 shares of the Company's Class A Shares. The Amended 2016 Plan permits the Company to grant to key employees, directors and consultants incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, RSUs and other awards based on the Company's Class A Shares. The Company intends to use newly-issued Class A Shares to satisfy any awards under the Amended 2016 Plan and its predecessor plan. Class A Shares underlying any award granted under the 2016 Plan that expire, terminate or are canceled or satisfied for any reason without being settled in stock again become available for awards under the plans. The total shares available to be granted in the future under the Amended 2016 Plan was 7,030 as of September 30, 2020 . The Company also grants, at its discretion, dividend equivalents, in the form of unvested RSU awards, or deferred cash dividends, concurrently with the payment of dividends to the holders of Class A Shares, on all unvested RSU grants awarded in conjunction with annual bonuses, as well as new hire awards. The dividend equivalents have the same vesting and delivery terms as the underlying RSU award. The Company estimates forfeitures in the aggregate compensation cost to be amortized over the requisite service period of its awards. The Company periodically monitors its estimated forfeiture rate and adjusts its assumptions to the actual occurrence of forfeited awards. A change in estimated forfeitures is recognized through a cumulative adjustment in the period of the change. Equity Grants During the nine months ended September 30, 2020 , pursuant to the above Stock Incentive Plans, the Company granted employees 1,946 RSUs that are Service-based Awards. Service-based Awards granted during the nine months ended September 30, 2020 had grant date fair values of $ 44.21 to $ 81.53 per share, with an average value of $ 80.94 per share, for an aggregate fair value of $ 157,467 , and generally vest ratably over four years . During the nine months ended September 30, 2020 , 2,529 Service-based Awards vested and 103 Service-based Awards were forfeited. Compensation expense related to Service-based Awards was $ 46,880 and $ 147,352 for the three and nine months ended September 30, 2020 , respectively, and $ 50,152 and $ 162,296 for the three and nine months ended September 30, 2019, respectively . Deferred Cash The Company's deferred cash compensation program provides participants the ability to elect to receive a portion of their deferred compensation in cash, which is indexed to notional investment portfolios selected by the participant and vests ratably over four years and requires payment upon vesting. The Company granted $ 179,705 and $ 1,460 of deferred cash awards pursuant 30 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) to the deferred cash compensation program during the first and third quarters of 2020 , respectively. As of September 30, 2020 , the total compensation cost related to the deferred cash compensation program not yet recognized was $ 197,164 . The weighted-average period over which this compensation cost is expected to be recognized is 31 months . In November 2016, the Company granted a restricted cash award in conjunction with the appointment of a current Co-Chief Executive Officer (then Executive Chairman) with a target payment amount of $ 35,000 , of which $ 11,000 vested on March 1, 2019, $ 6,000 vested on March 1, 2020, and $ 6,000 is scheduled to vest on each of the next three anniversaries of March 1, 2020, provided that the current Co-Chief Executive Officer continues to remain employed through each such vesting date, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following May 1, 2019, subject to a six month prior written notice requirement) or a change in control. The Company had the discretion to increase (by an amount up to $ 35,000 ) or decrease (by an amount up to $ 8,750 ) the total amount payable under this award. In 2017, the Company granted deferred cash awards of $ 29,500 to certain employees. These awards vest in five equal installments over the period ending June 30, 2022, subject to continued employment. The Company records expense for these awards ratably over the vesting period. Compensation expense related to deferred cash awards was $ 30,164 and $ 95,178 for the three and nine months ended September 30, 2020 , respectively, and $ 20,688 and $ 73,456 for the three and nine months ended September 30, 2019, respectively . Long-term Incentive Plan The Company's Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers of the Company, who exceed defined benchmark results over four -year performance periods beginning January 1, 2013 (the "2013 Long-term Incentive Plan") and January 1, 2017 (the "2017 Long-term Incentive Plan"). The 2013 Long-term Incentive Plan was paid in cash in installments in 2017, 2018 and 2019. The 2017 Long-term Incentive Plan, which aggregate $ 34,215 of current liabilities and $ 68,431 of long-term liabilities on the Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2020 , is due to be paid, in cash or Class A Shares, at the Company's discretion, in three equal installments in the first quarter of 2021, 2022 and 2023, subject to employment at the time of payment. These awards are subject to retirement eligibility requirements after the performance criteria has been achieved. The Company periodically assesses the probability of the benchmarks being achieved and expenses the probable payout over the requisite service period of the award. During the first quarter of 2020, in assessing the potential impact of the COVID-19 pandemic on the Company's full year 2020 results, management decreased its expectation for the probable payout of this plan, which resulted in a reversal of $ 6,810 of expense during the first quarter of 2020. This analysis included a review of both historical and projected performance for those eligible under the plan. As markets continued to stabilize during the third quarter of 2020 and Advisory activity increased, management determined it would be appropriate to increase its expectation for the probable payout of the plan. The Company recorded $ 9,160 and $ 5,339 of expense for the three and nine months ended September 30, 2020 , respectively, and $ 8,302 and $ 24,928 of expense for the three and nine months ended September 30, 2019, respectively . The Company distributed cash payments of $ 19,516 for the nine months ended September 30, 2019 related to the 2013 Long-term Incentive Plan. As of September 30, 2020 , based on the Company's current assessment of the probability of the level of benchmarks being achieved, the total remaining expense to be accrued for the 2017 Long-term Incentive Plan over the future vesting period ending March 15, 2023 is $ 30,627 . Employee Loans Receivable Periodically, the Company provides new and existing employees with cash payments in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to five years and in certain circumstances, subject to the achievement of performance requirements. Generally, the terms of these awards include a requirement of either full or partial repayment of these awards based on the terms of their employment agreements with the Company. In circumstances where the employee meets the Company's minimum credit standards, the Company amortizes these awards to compensation expense over the relevant service period, which is generally the period they are subject to forfeiture. Compensation expense related to these awards was $ 8,101 and $ 16,516 for the three and nine months ended September 30, 2020 , respectively, and $ 6,631 and $ 15,976 for the three and nine months ended September 30, 2019, respectively . The remaining unamortized amount of these awards was $ 34,852 as of September 30, 2020 . Separation and Transition Benefits During the first quarter of 2020 , the Company substantially completed a review of operations focused on markets, sectors and people which have delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position 31 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) itself for future growth. This review, which began in the fourth quarter of 2019, will generate reductions of approximately 8 % of the Company's headcount. In conjunction with the employment reductions, the Company expects to incur expense related to separation benefits and stay arrangements of approximately $ 27,877 and the acceleration of deferred compensation previously granted to affected employees of approximately $ 15,123 (which includes approximately $ 11,911 related to 172 RSUs). These charges are expected to be incurred in 2019 and 2020 , primarily within the Investment Banking segment. The Company's estimates of charges are based on a number of assumptions. Actual results may differ materially if actual activity deviates from these assumptions. For the three and nine months ended September 30, 2020 , the separation benefits, stay arrangements and accelerated deferred cash compensation (together, the "Termination Costs") resulted in expense of $ 4,151 and $ 26,967 , respectively, and the acceleration of the amortization of share-based payments resulted in expense of $ 3,102 and $ 10,437 , respectively, each recorded in Special Charges, Including Business Realignment Costs, primarily within the Investment Banking segment, on the Company’s Unaudited Condensed Consolidated Statements of Operations. In addition, in conjunction with the Company's review of its operations, the Termination Costs resulted in expense of $ 1,578 and the acceleration of the amortization of share-based payments resulted in expense of $ 1,272 , each recorded in Special Charges, Including Business Realignment Costs, primarily within the Investment Banking segment, on the Company’s Consolidated Statements of Operations for the year ended December 31, 2019. The Company granted separation and transition benefits to certain employees, resulting in expense included in Employee Compensation and Benefits, primarily within the Investment Banking segment, of $ 2,762 and $ 7,575 for the three and nine months ended September 30, 2019, respectively . This is comprised of expense related to the Termination Costs of $ 2,071 and $ 5,664 , respectively, and expense related to the acceleration of the amortization of share-based payments of $ 691 and $ 1,911 , for the three and nine months ended September 30, 2019, respectively . The following table presents the change in the Company's Termination Costs liability for the nine months ended September 30, 2020 : For the Nine Months Ended September 30, 2020 Balance at January 1, 2020 $ 1,151 Termination Costs Incurred 26,967 Cash Benefits Paid ( 18,589 ) Non-Cash Charges ( 624 ) Balance at September 30, 2020 $ 8,905 Note 17 – Commitments and Contingencies For a further discussion of the Company's commitments, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 . Private Equity – As of September 30, 2020 , the Company had unfunded commitments for capital contributions of $ 11,998 to private equity funds. These commitments will be funded as required through the end of each private equity fund's investment period, subject to certain conditions. Such commitments are satisfied in cash and are generally required to be made as investment opportunities are consummated by the private equity funds. Lines of Credit – On June 24, 2016, Evercore Partners Services East L.L.C. ("East") entered into a loan agreement with PNC Bank, National Association ("PNC") for a revolving credit facility in an aggregate principal amount of up to $ 30,000 , to be used for working capital and other corporate activities. This facility is secured by East's accounts receivable and the proceeds therefrom, as well as certain assets of EGL, including certain of EGL's accounts receivable. In addition, the agreement contains certain reporting covenants, as well as certain debt covenants that prohibit East and the Company from incurring other indebtedness, subject to specified exceptions. The Company and its consolidated subsidiaries were in compliance with these covenants as of September 30, 2020 . Drawings under this facility bear interest at the prime rate. On March 11, 2019, East drew down $ 30,000 on this facility, which was repaid on May 3, 2019. East amended this facility on October 30, 2020 such that, among other things, the 32 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) interest rate provisions were modified to LIBOR plus 150 basis points and the maturity date was extended to October 31, 2022 (as amended, the "Existing PNC Facility"). On July 26, 2019, East entered into an additional loan agreement with PNC for a revolving credit facility in an aggregate principal amount of up to $ 20,000 , to be used for working capital and other corporate activities. The facility is unsecured. In addition, the agreement contains certain reporting requirements and debt covenants consistent with the Existing PNC Facility. The Company and its consolidated subsidiaries were in compliance with these covenants as of September 30, 2020 . On October 30, 2020, East amended this facility such that, among other things, the revolving credit facility has increased to an aggregate principal amount of $ 30,000 . Drawings under this facility will bear interest at LIBOR plus 180 basis points and the maturity date was extended to October 31, 2022. East is only permitted to borrow under this facility if there is no undrawn availability under the Existing PNC Facility and must repay indebtedness under this facility prior to repaying indebtedness under the Existing PNC Facility. There have been no drawings under this facility as of September 30, 2020 . ECB maintains a line of credit with BBVA Bancomer to fund its trading activities on an intra-day and overnight basis. The facility has a maximum aggregate principal amount of approximately $ 6,783 and is secured by trading securities. No interest is charged on the intra-day facility. The overnight facility is charged the Inter-Bank Balance Interest Rate plus 10 basis points. There have been no significant draw downs on ECB's line of credit since August 10, 2006. The line of credit is renewable annually. Other Commitments – In addition, the Company enters into commitments to pay contingent consideration related to certain of its acquisitions. The Company paid $ 81 and $ 2,008 of its commitment for contingent consideration related to its acquisition of Kuna & Co, KG during the nine months ended September 30, 2020 and 2019 , respectively. At September 30, 2020 , the Company had a remaining commitment of $ 252 for contingent consideration related to its acquisition of Kuna & Co. KG. The Company also had a commitment at September 30, 2019 for contingent consideration related to an arrangement with the former employer of certain RECA employees, which provided for contingent consideration to be paid to the former employer of up to $ 4,463 , based on the completion of certain client engagements. The contingent consideration was fully paid as of December 31, 2019 . Restricted Cash – The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statements of financial condition that sum to the total of amounts shown in the Unaudited Condensed Consolidated Statements of Cash Flows: September 30, 2020 2019 Cash and Cash Equivalents $ 1,149,291 $ 304,718 Restricted Cash included in Other Assets 9,375 8,861 Total Cash, Cash Equivalents and Restricted Cash shown in the Statement of Cash Flows $ 1,158,666 $ 313,579 Restricted Cash included in Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition primarily represents letters of credit which are secured by cash as collateral for the lease of office space and security deposits for certain equipment. The restrictions will lapse when the leases end. Futures Contracts – In February 2020, the Company entered into four-month futures contracts on a stock index fund with a notional amount of $ 38,908 , as an economic hedge against the Company's deferred cash compensation program. These contracts settled in June 2020. In accordance with ASC 815, "Derivatives and Hedging," ("ASC 815") these contracts are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations . The Company had net realized losses of ($ 3,998 ) for the nine months ended September 30, 2020 . In April 2019, the Company entered into three-month futures contracts on a stock index fund with a notional amount of $ 14,815 for $ 680 , as an economic hedge against the Company's deferred cash compensation program. These contracts settled in June 2019. In accordance with ASC 815, these contracts are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations . The Company had net realized gains of $ 59 for the nine months ended September 30, 2019 . 33 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Foreign Exchange – On occasion, the Company enters into foreign currency exchange forward contracts as an economic hedge against exchange rate risk for foreign currency denominated accounts receivable in EGL. There were no foreign currency exchange forward contracts outstanding as of September 30, 2020 . The Company entered into foreign currency exchange forward contracts to sell 3.8 billion Japanese yen for $ 35,598 during the first quarter of 2019 as an economic hedge against the exchange rate risk for Japanese yen denominated accounts receivable in EGL. These contracts settled in April 2019. Contingencies In the normal course of business, from time to time, the Company and its affiliates are involved in judicial or regulatory proceedings, arbitration or mediation concerning matters arising in connection with the conduct of its businesses, including contractual and employment matters. In addition, Mexican, United Kingdom, German, Hong Kong, Singapore, Canadian, Dubai and United States government agencies and self-regulatory organizations, as well as state securities commissions in the United States, conduct periodic examinations and initiate administrative proceedings regarding the Company's business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, investment advisor, or its directors, officers or employees. In view of the inherent difficulty of determining whether any loss in connection with such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot estimate the amount of such loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings (including the matter described below), individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC 450, " Contingencies" ("ASC 450") when warranted. Once established, such provisions are adjusted when there is more information available or when an event occurs requiring a change. Note 18 – Regulatory Authorities EGL is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Under the Alternative Net Capital Requirement, EGL's minimum net capital requirement is $ 250 . EGL's regulatory net capital as of September 30, 2020 and December 31, 2019 was $ 493,456 and $ 331,510 , respectively, which exceeded the minimum net capital requirement by $ 493,206 and $ 331,260 , respectively. Certain other non-U.S. subsidiaries are subject to various securities and banking regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries are in excess of their local capital adequacy requirements at September 30, 2020 . Evercore Trust Company, N.A. ("ETC"), which is limited to fiduciary activities, is regulated by the Office of the Comptroller of the Currency ("OCC") and is a member bank of the Federal Reserve System. The Company, Evercore LP and ETC are subject to written agreements with the OCC that, among other things, require the Company and Evercore LP to maintain at least $ 5,000 in Tier 1 capital in ETC (or such other amount as the OCC may require) and maintain liquid assets in ETC in an amount at least equal to the greater of $ 3,500 or 180 days coverage of ETC's operating expenses. The Company was in compliance with the aforementioned agreements as of September 30, 2020 . Note 19 – Income Taxes The Company's Provision for Income Taxes was $ 15,677 and $ 51,042 for the three and nine months ended September 30, 2020 , respectively, and $ 20,402 and $ 60,253 for the three and nine months ended September 30, 2019, respectively . The effective tax rate was 23.5 % and 24.5 % for the three and nine months ended September 30, 2020 , respectively, and 28.0 % and 20.9 % for the three and nine months ended September 30, 2019, respectively . The effective tax rate reflects net excess tax benefits and deficiencies associated with the appreciation or depreciation in the Company's share price upon vesting of employee share-based awards above or below the original grant price. The Company's Provision for Income Taxes for the nine months ended September 30, 2020 reflects an additional tax expense of $ 100 and resulted in an increase in the effective tax rate of 0.05 percentage points, and for the nine months ended September 30, 2019 an additional deduction of $ 12,176 and resulted in a reduction in the effective tax rate of 4 percentage points related to the effect of share price changes upon the vesting of share-based awards. The effective tax rate for 2020 and 2019 also reflects the effect of certain nondeductible expenses, including expenses related to Class J LP Units and Class I-P and K-P Units, as well as the noncontrolling interest associated with LP Units and other adjustments. 34 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Additionally, the Company is subject to the income tax effects associated with the new global intangible low-taxed income ("GILTI") provisions in the period incurred. For the three and nine months ended September 30, 2020 and 2019, no additional income tax expense associated with the GILTI provisions has been reported and it is not expected to be material to the Company’s effective tax rate for the year. The Company reported an increase in deferred tax assets of $ 525 associated with changes in Unrealized Gain (Loss) on Securities and Investments and an increase of $ 1,244 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the nine months ended September 30, 2020 . The Company reported an increase in deferred tax assets of $ 219 associated with changes in Unrealized Gain (Loss) on Securities and Investments and an increase of $ 1,333 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the nine months ended September 30, 2019 . The Company classifies interest relating to tax matters and tax penalties as a component of income tax expense in its Unaudited Condensed Consolidated Statements of Operations. As of September 30, 2020 , there were $ 376 of unrecognized tax benefits that, if recognized, $ 306 would affect the effective tax rate. Related to the unrecognized tax benefits, the Company accrued interest and penalties of $ 15 and $ 1 , respectively, during the three months ended September 30, 2020 . During the three months ended September 30, 2020 , $ 118 of unrecognized tax benefits were recognized by the Company as a result of a lapse in the statute of limitations, of which $ 96 affected the effective tax rate. In addition, the Company also recognized a tax benefit for accrued interest and penalties of $ 42 and $ 3 , respectively, associated with the lapse in the statute of limitations. Note 20 – Segment Operating Results Business Segments – The Company's business results are categorized into the following two segments: Investment Banking and Investment Management. Investment Banking includes providing advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, as well as services related to securities underwriting, private placement services and commissions for agency-based equity trading services and equity research. Investment Management includes advising third-party investors in Institutional Asset Management and Wealth Management and interests in private equity funds which are not managed by the Company. In April 2020, the Company entered into an agreement for the leaders of its business in Mexico to purchase ECB, the Company's Mexico based broker-dealer focused principally on providing Investment Management services. This sale will be completed following regulatory approval. In addition, in October 2020, the Company announced the decision to transition its advisory presence in Mexico to a strategic alliance relationship with a newly-formed independent strategic advisory firm founded by certain former employees. See Note 5 for further information. The Company's segment information for the three and nine months ended September 30, 2020 and 2019 is prepared using the following methodology: • Revenue, expenses and income (loss) from equity method investments directly associated with each segment are included in determining pre-tax income. • Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other performance and time-based factors. • Segment assets are based on those directly associated with each segment, or for certain assets shared across segments, those assets are allocated based on the most relevant measures applicable, including headcount and other factors. • Investment gains and losses, interest income and interest expense are allocated between the segments based on the segment in which the underlying asset or liability is held. Other Revenue, net, included in each segment's Net Revenues includes interest income and income (losses) earned on investment securities, including our investment funds and futures contracts which are used as an economic hedge against our deferred cash compensation program, certificates of deposit, cash and cash equivalents and on the Company’s debt security investment in G5, as well as adjustments to amounts due pursuant to the Company’s tax receivable agreement, subsequent to its initial establishment, related to changes in enacted tax rates, and gains (losses) resulting from foreign currency fluctuations, principal trading and realized and unrealized gains and losses on interests in Private Equity funds which are not managed by the Company. Other Revenue, net, also includes interest expense associated with the Company’s Notes Payable and lines of credit, as well as revenue and expenses associated with repurchase or resale transactions. In 2020, Other Revenue also includes a gain on the sale of the ECB Trust Business. Each segment's Operating Expenses include: a) employee compensation and benefits expenses that are incurred directly in support of the segment and b) non-compensation expenses, which include expenses for premises and occupancy, professional fees, 35 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) travel and entertainment, communications and information services, execution, clearing and custody fees, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, technology, human capital, facilities management and senior management activities. Other Expenses include the following: • Amortization of LP Units and Certain Other Awards – Includes amortization costs associated with the vesting of Class J LP Units issued in conjunction with the acquisition of ISI and certain other related awards. • Special Charges, Including Business Realignment Costs – Includes expenses in 2020 related to separation and transition benefits and related costs as a result of the Company's review of its operations and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of the Company's headquarters in New York and the Company's business realignment initiatives. Includes expenses in 2019 related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of the Company's headquarters in New York. • Acquisition and Transition Costs – Includes costs incurred in connection with acquisitions, divestitures and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services, including costs in 2020 associated with the sale of the ECB Trust Business. • Intangible Asset and Other Amortization – Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions. The Company evaluates segment results based on net revenues and pre-tax income, both including and excluding the impact of the Other Expenses. No client accounted for more than 10% of the Company's Consolidated Net Revenues for the three and nine months ended September 30, 2020 . The following information presents each segment's contribution. 36 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Investment Banking Net Revenues (1) $ 385,463 $ 388,012 $ 1,294,493 $ 1,305,586 Operating Expenses 318,655 311,697 1,057,926 1,008,985 Other Expenses (2) 7,703 7,917 42,092 22,084 Operating Income 59,105 68,398 194,475 274,517 Income from Equity Method Investments 570 282 1,171 756 Pre-Tax Income $ 59,675 $ 68,680 $ 195,646 $ 275,273 Identifiable Segment Assets $ 2,460,068 $ 2,018,087 $ 2,460,068 $ 2,018,087 Investment Management Net Revenues (1) $ 17,052 $ 14,186 $ 42,104 $ 42,985 Operating Expenses 12,171 12,040 36,529 36,206 Other Expenses (2) 300 200 332 308 Operating Income 4,581 1,946 5,243 6,471 Income from Equity Method Investments 2,541 2,280 7,381 6,470 Pre-Tax Income $ 7,122 $ 4,226 $ 12,624 $ 12,941 Identifiable Segment Assets $ 185,390 $ 193,016 $ 185,390 $ 193,016 Total Net Revenues (1) $ 402,515 $ 402,198 $ 1,336,597 $ 1,348,571 Operating Expenses 330,826 323,737 1,094,455 1,045,191 Other Expenses (2) 8,003 8,117 42,424 22,392 Operating Income 63,686 70,344 199,718 280,988 Income from Equity Method Investments 3,111 2,562 8,552 7,226 Pre-Tax Income $ 66,797 $ 72,906 $ 208,270 $ 288,214 Identifiable Segment Assets $ 2,645,458 $ 2,211,103 $ 2,645,458 $ 2,211,103 37 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) (1) Net revenues include Other Revenue, net, allocated to the segments as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Investment Banking (A) $ 4,449 $ 2,709 $ ( 5,704 ) $ 16,432 Investment Management 3,027 1,536 2,379 5,533 Total Other Revenue, net $ 7,476 $ 4,245 $ ( 3,325 ) $ 21,965 (A) Investment Banking Other Revenue, net, includes interest expense on the Notes Payable and lines of credit of $ 4,218 and $ 13,594 for the three and nine months ended September 30, 2020 , respectively, and $ 3,786 and $ 8,354 for the three and nine months ended September 30, 2019, respectively . (2) Other Expenses are as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Investment Banking Amortization of LP Units and Certain Other Awards $ — $ 4,551 $ 1,067 $ 12,346 Special Charges, Including Business Realignment Costs 7,380 1,029 39,582 3,087 Acquisition and Transition Costs 154 180 260 180 Intangible Asset and Other Amortization 169 2,157 1,183 6,471 Total Investment Banking 7,703 7,917 42,092 22,084 Investment Management Special Charges, Including Business Realignment Costs — — 32 — Acquisition and Transition Costs 300 200 300 308 Total Investment Management 300 200 332 308 Total Other Expenses $ 8,003 $ 8,117 $ 42,424 $ 22,392 Geographic Information – The Company manages its business based on the profitability of the enterprise as a whole. The Company's revenues were derived from clients located and managed in the following geographical areas: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Net Revenues: (1) United States $ 285,271 $ 317,203 $ 1,042,248 $ 977,870 Europe and Other 104,197 77,779 284,442 337,207 Latin America 5,571 2,971 13,232 11,529 Total $ 395,039 $ 397,953 $ 1,339,922 $ 1,326,606 (1) Excludes Other Revenue, Including Interest and Investments, and Interest Expense. 38 Table of Contents EVERCORE INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) The Company's total assets are located in the following geographical areas: September 30, 2020 December 31, 2019 Total Assets: United States $ 2,260,680 $ 2,158,347 Europe and Other 339,921 373,822 Latin America 44,857 66,444 Total $ 2,645,458 $ 2,598,613 39 Table of Contents