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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-02-25 · 284 added, 263 removed, 513 unchanged (52% of the section changed)

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Key Financial Measures

Total revenues reflect revenues from our Investment Banking and Investment Management business segments that include fees for services, transaction-related client reimbursements plus other revenue.

Total revenues reflect revenues from our Investment Banking and Investment Management business segments that include fees for services, transaction-related client reimbursements and other revenue.

Net revenues reflect total revenues less interest expense.

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Cash received before the subscription period ends is initially recorded as deferred revenue (a contract liability) and recognized as revenue over the remaining subscription period.

Revenue trends in our advisory business generally are correlated to the volume of M&A activity and/or restructuring activity, which tends to be counter-cyclical to M&A.

However, deviations from this trend can occur in any given year or quarter for a number of reasons.

For example, changes in our market share or the ability of our clients to close certain large transactions can cause our revenue results to diverge from the level of overall M&A or restructuring activity.

Revenue trends in our advisory business generally are correlated to the volume of M&A activity, restructuring activity, which tends to be counter-cyclical to M&A, and capital advisory activity.

Demand for these capabilities can vary in any given year or quarter for a number of reasons.

For example, changes in our market share or the ability of our clients to close certain large transactions can cause our revenue results to diverge from the level of overall M&A, restructuring or capital advisory activity.

Revenue trends in our equities business are correlated to market volumes, which generally decrease in periods of low market volatility or unfavorable market or economic conditions.

Revenue trends in our equities business may also be impacted by new regulation, such as MiFID II, which could impact the demand for our research and trading services from EU investors, as well as the manner in which institutional clients pay for research, including paying for research in cash rather than through trading commissions.

For further information, see COVID-19 in "Results of Operations."

Investment Management.

Our Investment Management business includes operations related to the Wealth Management and Institutional Asset Management businesses and interests in private equity funds which we do not manage.

Revenue sources primarily include management fees, which include fees earned from portfolio companies, fiduciary fees, consulting fees (through October 2017), performance fees (including carried interest) and gains (or losses) on our investments.

Revenue sources primarily include management fees, fiduciary fees, performance fees and gains (or losses) on our investments.

We completed the sale of the ECB Trust business on July 2, 2020 and the remaining ECB business on December 16, 2020.

Following these transactions, there are no remaining consolidated businesses in the Institutional Asset Management business.

See Note 5 to our consolidated financial statements for further information.

Management fees for third party clients generally represent a percentage of AUM.

Fiduciary and consulting fees, which are generally a function of the size and complexity of each engagement, are individually negotiated.

In 2017, we completed the sale of the Institutional Trust and Independent Fiduciary business of ETC.

Fiduciary fees, which are generally a function of the size and complexity of each engagement, are individually negotiated.

We record performance fees upon the earlier of the termination of the investment fund or when the likelihood of clawback is mathematically improbable.

Portfolio company fees include monitoring, director and transaction fees associated with services provided to the portfolio companies of the private equity funds we hold interests in.

Gains and losses include both realized and unrealized gains and losses on principal investments, including those arising from our equity interest in investment partnerships.

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Revenue and expenses associated with these transactions are recognized over the term of the repurchase or resale transaction.

Other Revenue also includes interest income and income (losses) earned on investment securities, including our investment funds which are used as an economic hedge against our deferred cash compensation program, certificates of deposit, cash and cash equivalents and on our debt security investment in G5 Holdings S.A.

("G5"), as well as adjustments to amounts due pursuant to our 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 we do not manage.

In 2017, Other Revenue also includes a gain on the sale of the Institutional Trust and Independent Fiduciary business of ETC and the release of cumulative foreign exchange losses related to the restructuring of our former equity method investment in G5.

These transactions were part of our ECB business in Mexico, which was sold on December 16, 2020.

See Note 5 to our consolidated financial statements for further information.

Other Revenue also includes the following:

• 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 our debt security investment in G5 Holdings S.A.

• Adjustments to amounts due pursuant to our tax receivable agreement, subsequent to its initial establishment, related to changes in enacted tax rates

• Gains (losses) resulting from foreign currency fluctuations

• Principal trading and realized and unrealized gains and losses on interests in private equity funds which we do not manage

• A net loss on the sales of our businesses at ECB, as well as a loss related to the release of cumulative foreign exchange losses resulting from the sale and wind-down of our businesses in Mexico in 2020

Interest Expense also includes interest expense associated with our Notes Payable, subordinated borrowings and lines of credit.

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Increasing the number of high-caliber, experienced senior level employees is critical to our growth efforts.

"Business" for further information.

In our advisory businesses, these hires generally do not begin to generate significant revenue in the year they are hired.

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A change in estimated forfeitures is recognized through a cumulative adjustment in the period of the change.

Our Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers, 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 the first quarter of 2019.

The 2017 Long-term Incentive Plan is due to be paid, in cash or Class A Shares, at our discretion, in three equal installments in the first quarter of 2021, 2022 and 2023, subject to employment at the time of payment.

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 (for the performance period beginning on January 1, 2013).

The 2017 Long-term Incentive Plan is due to be paid, in cash or Class A Shares, at our discretion, in three equal installments in the first quarter of 2021, 2022 and 2023 (for the performance period beginning on January 1, 2017), subject to employment at the time of payment.

These awards are subject to retirement eligibility requirements after the performance criteria has been achieved.

We periodically assess the probability of the benchmarks being achieved and expense the probable payout over the requisite service period of the award.

The performance period for the 2017 Long-term Incentive Plan ended on December 31, 2020.

From time to time, we also grant performance awards to certain individuals which include both performance and service based vesting requirements.

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Non-Compensation Expenses.

The balance of our operating expenses includes costs for occupancy and equipment rental, professional fees, travel and related expenses, communications and information technology services, depreciation and amortization, execution, clearing and custody fees, acquisition and transition costs and other operating expenses.

Our other operating expenses include costs for occupancy and equipment rental, professional fees, travel and related expenses, communications and information technology services, depreciation and amortization, execution, clearing and custody fees, acquisition and transition costs and other operating expenses.

We refer to all of these expenses as non-compensation expenses.

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Other Expenses include the following:

Amortization of LP Units/Interests and Certain Other Awards – Includes amortization costs or the reversal of expenses associated with the vesting of Class E LP Units, Class G and H limited partnership interests of Evercore LP ("Class G and H LP Interests") and Class J LP Units issued in conjunction with the acquisition of ISI and certain other related awards.

Special Charges – Includes expenses in 2019 related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York, the impairment of goodwill in our Institutional Asset Management reporting unit and separation and transition benefits for certain employees terminated as a result of the review of our operations.

Includes expenses in 2018 related to separation benefits and costs for the termination of certain contracts associated with closing our agency trading platform in the U.K.

• Amortization of LP Units and Certain Other Awards – Includes amortization costs associated with the vesting of Class J limited partnership units of Evercore LP ("Class J LP Units") issued in conjunction with the acquisition of ISI and certain other related awards.

• Special Charges, Including Business Realignment Costs – Includes the following expenses for the years ended December 31, 2020, 2019 and 2018:

◦ 2020 – Includes expenses related to separation and transition benefits and related costs as a result of our review of operations and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of our headquarters in New York and our business realignment initiatives, as well as charges related to the impairment of assets resulting from the wind-down of our businesses in Mexico

◦ 2019 – Includes expenses related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York, the impairment of goodwill in our Institutional Asset Management reporting unit and separation and transition benefits and related costs as a result of the review of our operations

◦ 2018 – Includes expenses related to separation benefits and costs for the termination of certain contracts associated with closing our agency trading platform in the U.K.

Expenses in 2017 related to the impairment of goodwill in our Institutional Asset Management reporting unit, the impairment of our former equity method investment in G5 and the transition of certain employees in conjunction with the sale of the Institutional Trust and Independent Fiduciary business of ETC.

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.

• 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 our ECB businesses.

• Fair Value of Contingent Consideration – Includes expense, or the reversal of expense, associated with changes in the fair value of contingent consideration issued to the sellers of certain of our acquisitions.

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Income from Equity Method Investments

Our share of the income (loss) from our equity interests in ABS, Atalanta Sosnoff, Luminis and G5 (through December 31, 2017, the date we exchanged all of our outstanding equity interests for debentures of G5) are included within Income from Equity Method Investments, as a component of Income Before Income Taxes, on the Consolidated Statements of Operations .

Our share of the income (loss) from our equity interests in ABS, Atalanta Sosnoff and Luminis are included within Income from Equity Method Investments, as a component of Income Before Income Taxes, on the Consolidated Statements of Operations.

Provision for Income Taxes

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We record noncontrolling interest relating to the ownership interests of certain of our current and former Senior Managing Directors and other officers and their estate planning vehicles in Evercore LP, as well as the portions of our operating subsidiaries not owned by Evercore.

As described in Note 17 to our consolidated financial statements herein, Evercore Inc.

Evercore Inc.

is the sole general partner of Evercore LP and has a majority economic interest in Evercore LP.

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consolidates Evercore LP and records a noncontrolling interest for the economic interest in Evercore LP held by the limited partners.

We generally allocate net income or loss to participating noncontrolling interests held at Evercore LP and at the operating entity level, where required, by multiplying the relative ownership interest of the noncontrolling interest holders for the period by

the net income or loss of the entity to which the noncontrolling interest relates.

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.

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The following is a discussion of our results of operations for the years ended December 31, 2020 and 2019.

For a more detailed discussion of the factors that affected the revenue and operating expenses of our Investment Banking and Investment Management business segments in these periods, as well as the impact of the application of ASC 606, " Revenue from Contracts with Customers " ("ASC 606"), on the year ended December 31, 2018 , see the discussion in "Business Segments" below.

During 2018 , certain balances for prior periods were reclassified to conform to their current presentation.

We disaggregated "Investment Banking Revenue" into "Advisory Fees," "Underwriting Fees" and "Commissions and Related Fees" and renamed "Investment Management Revenue" to "Asset Management and Administration Fees," which includes management fees from our wealth management and institutional asset management businesses.

For the Years Ended December 31,

For a more detailed discussion of the factors that affected the revenue and operating expenses of our Investment Banking and Investment Management business segments in these periods, as well as the impact of the COVID-19 pandemic, see the discussion in "Business Segments" and COVID-19 below.

For the Years Ended December 31, Change

2020 2019 2018 2020 v.

(dollars in thousands, except per share data)

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Asset Management and Administration Fees 54,397 50,611 48,246 7 % 5 %

Other Revenue, Including Interest and Investments (3)

Other Revenue, Including Interest and Investments (6,309) 45,454 19,051 NM 139 %

Total Revenues 2,285,319 2,028,837 2,082,476 13 % (3 %)

Interest Expense 21,414 20,139 17,771 6 % 13 %

Net Revenues 2,263,905 2,008,698 2,064,705 13 % (3 %)

Operating Expenses 1,688,015 1,534,122 1,492,241 10 % 3 %

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Provision for Income Taxes 128,151 95,046 108,520 35 % (12 %)

Net Income 412,680 353,661 442,851 17 % (20 %)

Net Income Attributable to Noncontrolling Interest 62,106 56,225 65,611 10 % (14 %)

Net Income Attributable to Evercore Inc.

$ 350,574 $ 297,436 $ 377,240 18 % (21 %)

Diluted Net Income Per Share Attributable to Evercore Inc.

Common Shareholders $ 8.22 $ 6.89 $ 8.33 19 % (17 %)

The application of ASC 606 resulted in advisory revenue of $3.4 million being recognized in 2018 , representing variable consideration under the standard for which it is probable that a significant reversal of revenue will not occur, substantially all of which would have been recognized in the first quarter of 2019 under the legacy accounting standard.

The application of ASC 606 resulted in client related expenses for underwriting transactions being presented gross (previously presented net) in related revenues and expenses for the year ended December 31, 2018 .

Underwriting Fees reflect revenues for client related expenses of $4.7 million for the year ended December 31, 2018 .

Includes ($0.7) million of principal trading losses for the year ended December 31, 2017 and $2.0 million of net realized and unrealized gains on private equity investments for the year ended December 31, 2017, in order to conform to the current presentation.

2020 versus 2019

Net Income Attributable to Evercore Inc.

was $297.4 million in 2019 , a decrease of $79.8 million, or 21% , compared to $377.2 million in 2018 .

was $350.6 million in 2020, an increase of $53.1 million, or 18%, compared to $297.4 million in 2019.

The changes in our operating results during these years are described below.

Net Revenues were $2.009 billion in 2019 , a decrease of $56.0 million , or 3% , versus Net Revenues of $2.065 billion in 2018 .

Advisory Fees decreased 5% , Underwriting Fees increased 25% and Commissions and Related Fees decreased 5% compared to 2018 .

Asset Management and Administration Fees increased 5% compared to 2018 .

Other Revenue, Including Interest and Investments, increased 139% compared to 2018 , which was primarily attributable to gains on the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program.

Interest Expense increased 13% compared to 2018 , which was primarily attributable to interest expense on the private placement notes issued during 2019.

Net Revenues were $2.26 billion in 2020, an increase of $255.2 million, or 13%, versus Net Revenues of $2.01 billion in 2019.

Advisory Fees increased $101.7 million, or 6%, Underwriting Fees increased $186.5 million, or 208%, and Commissions and Related Fees increased $16.3 million, or 9%, compared to 2019.

Asset Management and Administration Fees increased $3.8 million, or 7%, compared to 2019.

Other Revenue, Including Interest and Investments, decreased compared to 2019, primarily due to a loss of $30.8 million resulting from the sale and wind-down of our businesses in Mexico, including $3.4 million related to the sale of the ECB businesses, as well as $27.4 million related to the release of cumulative foreign exchange losses.

See Note 5 to our consolidated financial statements for further information.

O ther Revenue, Including Interest and Investments, also decreased due to lower interest income and losses on our legacy private equity investments during 2020.

Interest Expense increased 6% compared to 2019, which was primarily attributable to interest expense on the 2019 Private

Placement Notes which were issued in August 2019.

See Note 14 to our consolidated financial statements for further information.

Total Operating Expenses were $1.69 billion in 2020, compared to $1.53 billion in 2019, an increase of $153.9 million, or 10%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $1.183 billion in 2019 , an increase of $0.9 million versus expense of $1.182 billion in 2018 .

The increase was primarily due to increased compensation costs resulting from the expansion of our businesses, including costs associated with new senior hires and increased amortization of share-based and other deferred compensation arrangements, partially offset by decreased annual cash bonus compensation expensed in 2019.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $1.37 billion in 2020, an increase of $188.5 million, or 16%, versus expense of $1.18 billion in 2019.

The increase in the amount of compensation recognized in 2020 principally reflects higher levels of compensation expense in 2020 related to higher revenues and higher amortization of prior period deferred compensation awards, partially offset by lower compensation expense related to senior new hires.

See Note 19 to our consolidated financial statements for further information.

Headcount increased 12% from December 31, 2018 to December 31, 2019 .

Non-compensation expenses as a component of Operating Expenses were $351.3 million in 2019 , an increase of $41.1 million, or 13% , versus $310.2 million in 2018 .

Non-compensation operating expenses increased compared to 2018 , primarily driven by increased headcount, increased occupancy costs, principally related to higher expenses associated with the expansion of our headquarters in New York, and increased costs related to technology initiatives, as well as increased bad debt expense.

In addition, the increase in Non-compensation expenses versus last year also reflects an increase in client related expenses which are subject to reimbursement from clients currently and in future periods.

Total Other Expenses of $36.9 million in 2019 included compensation costs of $18.2 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, Special Charges of $10.1 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York, the impairment of goodwill in the Institutional Asset Management reporting unit and separation and transition benefits for certain employees terminated as a result of the review of our operations (see below for further information), Acquisition and Transition Costs of $1.0 million and intangible asset and other amortization of $7.5 million .

Total Other Expenses of $30.4 million in 2018 included compensation costs of $15.2 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, Special Charges of $5.0 million primarily related to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K.

and separation benefits and related charges associated with our businesses in Mexico, as well as acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York, intangible asset and other amortization of $8.6 million , Acquisition and Transition Costs of $0.02 million and changes to the fair value of contingent consideration of $1.5 million .

In the first quarter of 2020, we completed a review of our operations focused on markets, sectors and people which delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position ourself for future growth.

This review, which began in the fourth quarter of 2019, will generate reductions of approximately 6% of our headcount.

In conjunction with the employment reductions, we expect to incur costs (including costs related to the acceleration of deferred compensation) of approximately $38 million, $2.9 million of which has been recorded in Special Charges in 2019.

Our estimates are based on a number of assumptions.

Actual results may differ materially and additional charges not currently expected may be incurred in connection with, or as a result of, these employment reductions.

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 59.8% for the year ended December 31, 2019 , compared to 58.0% for the year ended December 31, 2018 .

Including separation and transition benefits expense of $2.9 million which is presented within Special Charges, the compensation ratio for the year ended December 31, 2019 was 59.9%.

Income from Equity Method Investments was $11.0 million in 2019 , as compared to $9.3 million in 2018 .

The increase was primarily a result of an increase in earnings from ABS and Luminis.

Non-Compensation expenses, as a component of Operating Expenses, were $316.7 million in 2020, a decrease of $34.6 million, or 10%, versus $351.3 million in 2019.

Non-Compensation operating expenses decreased compared to 2019, primarily driven by decreased travel and related expenses, related to prolonged travel restrictions resulting from the COVID-19 pandemic.

See COVID-19 below for further information.

Non-Compensation expenses per employee were approximately $171.7 thousand in 2020, versus $193.8 thousand for 2019.

Total Other Expenses of $49.5 million in 2020 included (a) Special Charges, Including Business Realignment Costs, of $46.6 million related to separation and transition benefits and related costs (see below for further information) and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of our headquarters in New York and our business realignment initiatives, as well as charges related to the impairment of assets resulting from the wind-down of our businesses in Mexico, (b) intangible asset and other amortization of $1.2 million, (c) compensation costs of $1.1 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI and (d) Acquisition and Transition Costs of $0.6 million.

Total Other Expenses of $36.9 million in 2019 included (a) compensation costs of $18.2 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, (b) Special Charges, Including Business Realignment Costs, of $10.1 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York, the impairment of goodwill in the Institutional Asset Management reporting unit and separation and transition benefits for certain employees terminated as a result of the review of our operations (see below for further information), (c) intangible asset and other amortization of $7.5 million and (d) Acquisition and Transition Costs of $1.0 million.

In 2020, we completed a review of operations focused on markets, sectors and people which delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position ourself for future growth.

This review, which began in the fourth quarter of 2019, generated reductions of approximately 8% of our headcount.

In conjunction with the employment reductions, we incurred aggregate separation and transition benefits (including costs related to the acceleration of deferred compensation) and related costs of $41.7 million in 2020 and $2.9 million in 2019, which has been recorded in Special Charges, Including Business Realignment Costs

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 60.6% in 2020, compared to 59.8% in 2019.

The compensation ratio for 2020 and 2019 is 62.4% and 59.9%, respectively, when the $41.3 million and $2.9 million, respectively, of separation and transition benefits expense, which is presented within Special Charges, Including Business Realignment Costs, is also included.

The increase in the compensation ratio principally reflects higher levels of compensation expense in 2020 related to higher revenues and higher amortization of prior period deferred compensation awards, partially offset by lower compensation expense related to senior new hires.

See Note 19 to our consolidated financial statements for further information.

The compensation ratio in any given period is subject to fluctuation based, in part, on the amount of revenue earned in that period.

Income from Equity Method Investments was $14.4 million in 2020, compared to $11.0 million in 2019.

The increase was a result of an increase in earnings from ABS, Atalanta Sosnoff and Luminis in 2020.

The provision for income taxes in 2020 was $128.2 million, which reflected an effective tax rate of 23.7%.

The provision for income taxes in 2019 was $95.0 million, which reflected an effective tax rate of 21.2%.

The provision for income taxes for 2019 and 2018 reflects the net impact of the deduction 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 of $12.2 million and $23.4 million , respectively, the effect of certain nondeductible expenses, including expenses related to Class E and J LP Units and Class I-P and K-P Units, as well as the noncontrolling interest associated with LP Units and other adjustments.

The provision for income taxes for 2020 reflects an additional tax expense of $0.02 million and for 2019 an additional tax benefit of $12.2 million due to the net impact associated with the appreciation or depreciation in our share price upon vesting of employee share-based awards above or below the original grant price, 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.

The increase in the tax rate also reflects the increase in compensation subject to the IRC section 162(m) disallowance.

Net Income Attributable to Noncontrolling Interest was $62.1 million in 2020 compared to $56.2 million in 2019.

The decrease in Net Income Attributable to Noncontrolling Interest primarily reflects lower income allocated to noncontrolling interest of Evercore LP during 2019, as well as lower income allocated to noncontrolling interest of EWM and Private Capital Advisory L.P.

during 2019, as a result of the purchases of additional EWM Class A Units and the remaining Private Capital Advisory L.P.

Common Interests during 2019.

The increase in Net Income Attributable to Noncontrolling Interest primarily reflects higher income in 2020, partially offset by the full year impact of our purchases of the remaining 10% of the Private Capital Advisory L.P.

business and the purchase of 17% of the EWM business in May 2019.

The COVID-19 pandemic continues to disrupt our business operations, and the substantial majority of our teams continue to work remotely.

The impact of the COVID-19 pandemic on our revenues and cash flows for 2020 was mitigated by our broad and diverse capabilities, including underwriting, restructuring, capital markets advisory and equities, together with strong M&A activity during the fourth quarter of 2020.

However, there remains uncertainty as to how the course of the pandemic, including the timing and acceptance of vaccinations, and government response may impact the markets and our clients' needs in the future.

For a further discussion of risks related to our business, refer to "Risk Factors" elsewhere in this Form 10-K.

For a discussion of 2019 versus 2018, refer to "Results of Operations" in our Form 10-K for the year ended December 31, 2019.

Impairment of Assets

At November 30, 2019, in accordance with ASC 350, "Intangibles - Goodwill and Other" ("ASC 350"), we performed our annual Goodwill impairment assessment.

We concluded that the fair value of our reporting units substantially exceeded their carrying values as of November 30, 2019, with the exception of our Institutional Asset Management reporting unit, which was less than its carrying value.

2020 – At November 30, 2020, in accordance with ASC 350, "Intangibles - Goodwill and Other" ("ASC 350"), we performed our annual Goodwill impairment assessment and concluded that the fair value of our reporting units substantially exceeded their carrying values.

2019 – At November 30, 2019, we determined that the fair value of our reporting units substantially exceeded their carrying values, with the exception of our Institutional Asset Management reporting unit, which was less than its carrying value.

In determining the fair value of this reporting unit, we utilized a discounted cash flow methodology based on the adjusted cash flows from operations.

The discounted cash flow methodology began with the forecasted cash flows of the reporting unit and applied a discount rate of approximately17%, which reflected the weighted average cost of capital adjusted for the risks inherent in the future cash flows.

The forecast inherent in the valuation assumes a compound annual growth rate in revenues of 3%.

As a result of the above analysis, we determined that the fair value of the Institutional Asset Management reporting unit was less than its carrying value as of November 30, 2019.

We recorded a goodwill impairment charge of $0.8 million in the Investment Management segment, which is included within Special Charges on the Consolidated Statement of Operations for the year ended December 31, 2019.

As a result of this analysis, we recorded a goodwill impairment charge of $0.8 million in the Investment Management segment, which is included within Special Charges, Including Business Realignment Costs, on the Consolidated Statement of Operations for the year ended December 31, 2019.

This charge resulted in a decrease of $0.5 million to Net Income Attributable to Evercore Inc.

(after adjustments for noncontrolling interest and income taxes) for the year ended December 31, 2019.

We entered into an agreement to sell the trust business of ECB (the "ECB Trust Business"), which is a part of our Investment Management segment.

Completion of this transaction is expected to occur in 2020.

As of December 31, 2019, the ECB Trust Business includes $0.5 million of goodwill, 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.

In accordance with ASC 350, we performed an impairment assessment of the goodwill remaining in the Institutional Asset Management reporting unit following the classification of the ECB Trust Business as Held for Sale in December 2019.

Additionally, in December 2019, we performed an impairment assessment of the goodwill remaining in the Institutional Asset Management reporting unit following the classification of the ECB Trust business as Held for Sale, in accordance with ASC 350.

In determining the fair value of this reporting unit, we utilized a discounted cash flow methodology based on the adjusted cash flows from operations.

The discounted cash flow methodology began with the forecasted cash flows of the reporting unit and applied a discount rate of approximately 17%, which reflected the weighted average cost of capital adjusted for the risks inherent in the future cash flows.

The forecast inherent in the valuation assumes a compound annual growth rate in revenues of 3%.

As a result of the above analysis, we determined that the fair value of the remaining business in the Institutional Asset Management reporting unit was less than its carrying value.

Accordingly, we recorded a goodwill impairment charge of $2.1 million in the Investment Management segment, which is included within Special Charges on the Consolidated Statement of Operations for the year ended December 31, 2019.

As a result of this analysis, we determined that the fair value of the remaining business in the Institutional Asset Management reporting unit was less than its carrying value.

Accordingly, we recorded a goodwill impairment charge of $2.1 million in the Investment Management segment, which is included within Special Charges, Including Business Realignment Costs, on the Consolidated Statement of Operations for the year ended December 31, 2019.

This charge resulted in a decrease of $1.4 million to Net Income Attributable to Evercore Inc.

(after adjustments for noncontrolling interest and income taxes) for the year ended December 31, 2019.

For a discussion of Impairment of Assets in 2017, refer to "Results of Operations" in our Form 10-K for the year ended December 31, 2018.

We recorded impairment charges of $1.7 million in Special Charges, Including Business Realignment Costs, on the Consolidated Statement of Operations for the year ended December 31, 2020, related to the impairment of assets resulting from the wind-down of our businesses in Mexico.

This was comprised of a charge of $1.2 million related to the impairment of operating lease right-of-use assets and a charge of $0.5 million related to the impairment of leasehold improvements.

See Note 5 to our consolidated financial statements for further information.

Business Segments

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The following table summarizes the operating results of the Investment Banking segment.

For the Years Ended December 31,

For the Years Ended December 31, Change

2020 2019 2018 2020 v.

(dollars in thousands)

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Advisory Fees (1)

$ 1,755,273 $ 1,653,585 $ 1,743,473 6 % (5 %)

Underwriting Fees (2)

276,191 89,681 71,691 208 % 25 %

Commissions and Related Fees

205,767 189,506 200,015 9 % (5 %)

Other Revenue, net (3)(4)

(19,845) 19,023 (3,156) NM NM

Net Revenues 2,217,386 1,951,795 2,012,023 14 % (3 %)

Operating Expenses 1,637,542 1,485,477 1,448,301 10 % 3 %

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Income from Equity Method Investments (5)

1,546 916 518 69 % 77 %

Pre-Tax Income $ 532,278 $ 433,616 $ 533,874 23 % (19 %)

(1) Includes client related expenses of $14.9 million, $32.2 million and $31.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Underwriting Fees reflect revenues for client related expenses of $7.2 million and $4.7 million for the years ended December 31, 2019 and 2018 , respectively.

Includes expenses associated with revenue sharing engagements with third parties of $1.1 million for the year ended December 31, 2017 .

Includes interest expense on the Notes Payable, subordinated borrowings and lines of credit of $12.9 million, $9.2 million and $10.0 million for the years ended December 31, 2019, 2018 and 2017 , respectively, and includes an estimated gain of $77.5 million related to a reduction in the liability for amounts due pursuant to the tax receivable agreement and a loss of $16.3 million related to the release of cumulative foreign exchange losses resulting from the restructuring of our former equity method investment in G5 for the year ended December 31, 2017 .

Also includes ($0.7) million of principal training losses that were previously included in Investment Banking Revenue for the year ended December 31, 2017 to conform to the current presentation.

Includes an impairment charge related to our former equity method investment in G5 of $14.4 million for the year ended December 31, 2017 .

Equity in Luminis and G5 - Advisory (through December 31, 2017, the date we exchanged all of our outstanding equity

interests for debentures of G5) is classified as Income from Equity Method Investments.

For 2019 , the dollar value of North American announced and completed M&A activity increased 11% and decreased 10% , respectively, compared to 2018 , while the dollar value of Global announced and completed M&A activity decreased 2% and 13% , respectively, compared to 2018 .

The dollar value of North American and Global announced M&A activity between $1 - $5 billion decreased 17% and 13% , respectively, compared to 2018 :

For the Years Ended December 31,

(2) Includes client related expenses of $14.4 million, $7.2 million and $4.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

(3) Includes interest expense on Notes Payable, subordinated borrowings and lines of credit of $18.2 million, $12.9 million and $9.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

(4) Includes a loss of $21.1 million resulting from the sale and wind-down of our businesses in Mexico, related to the release of cumulative foreign exchange losses, for the year ended December 31, 2020.

(5) Equity in Luminis is classified as Income from Equity Method Investments.

For 2020, the dollar value of North American announced and completed M&A activity decreased 23% and 13%, respectively, compared to 2019, and the dollar value of Global announced and completed M&A activity decreased 4% and 6%, respectively, compared to 2019.

For 2020, the dollar value of North American and Global announced M&A activity between $1 - $5 billion increased 16% and decreased 2%, respectively, compared to 2019.

For the Years Ended December 31, Change

2020 2019 2018 2020 v.

Industry Statistics ($ in billions) *

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2020 versus 2019

Net Investment Banking Revenues were $1.952 billion in 2019 , compared to $2.012 billion in 2018 , which represented a decrease of 3% .

We earned 661 fees from Advisory clients in 2019 , compared to 663 in 2018 .

We had 328 fees earned in excess of $1.0 million in 2019 , compared to 345 in 2018 , representing a 5% decrease .

The decrease in revenues from 2018 primarily reflects a decrease of $89.9 million , or 5% , in Advisory Fees, reflecting the decrease in the number of total and large Advisory fees earned in 2019.

Underwriting Fees increased $18.0 million , or 25% , compared to 2018 .

The increase in Underwriting Fees from 2018 primarily reflects an increase in both the volume of deals and the size of certain transactions versus the prior year.

Net Investment Banking Revenues were $2.22 billion in 2020, compared to $1.95 billion in 2019, an increase of $265.6 million, or 14%.

We earned 687 fees from Advisory clients in 2020, compared to 661 in 2019, representing a 4% increase.

We earned 386 fees in excess of $1.0 million in 2020, compared to 328 in 2019, representing an 18% increase.

The increase in revenues from 2019 was partially attributed to an increase of $101.7 million, or 6%, in Advisory Fees, reflecting an increase in the number of Advisory fees earned and an increase in revenue earned from large transactions during 2020.

Underwriting Fees increased $186.5 million, or 208%, compared to 2019, reflecting an increase in the number of transactions we participated in, as well as the relative size of our participation in those transactions.

We participated in 118 underwriting transactions in 2020 (compared to 71 in 2019), 85 of which were as a bookrunner (compared to 53 in 2019).

Commissions and Related Fees decreased $10.5 million , or 5% , compared to 2018, principally driven by the trend of institutional clients adjusting the level of payments for research services.

Other Revenue, net, in 2019 , was higher than 2018 , primarily reflecting gains on the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program.

Commissions and Related Fees increased $16.3 million, or 9%, compared to 2019, as a result of elevated volatility during 2020.

Other Revenue, net, in 2020, decreased versus 2019, primarily reflecting a loss of $21.1 million resulting from the sale and wind-down of our businesses in Mexico, related to the release of cumulative foreign exchange losses, as well as lower interest income and increased interest expense on the 2019 Private Placement Notes, which were issued in August 2019.

Operating Expenses were $1.64 billion in 2020, compared to $1.49 billion in 2019, an increase of $152.1 million, or 10%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $1.149 billion in 2019 , compared to $1.151 billion in 2018 , a decrease of $2.3 million.

The decrease was primarily due to decreased annual cash bonus compensation expensed in 2019, partially offset by increased amortization of share-based and other deferred compensation arrangements, as well as increased compensation costs resulting from the expansion of our businesses, including costs associated with new senior hires.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $1.33 billion in 2020, compared to $1.15 billion in 2019, an increase of $186.1 million, or 16%.

See Note 19 to our consolidated financial statements for further information.

Non-compensation expenses, as a component of Operating Expenses, were $336.9 million in 2019 , compared to $297.3 million in 2018 , an increase of $39.6 million, or 13% .

Non-compensation operating expenses increased from the prior year primarily driven by increased headcount within the business, increased occupancy costs, principally related to higher expenses associated with the expansion of our headquarters in New York, and increased costs related to technology initiatives, as well as increased bad debt expense.

Other Expenses of $33.6 million in 2019 included compensation costs of $18.2 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, Special Charges of $7.2 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York and separation and transition benefits for certain employees terminated as a result of the review of our operations, Acquisition and Transition Costs of $0.7 million and intangible asset and other amortization of $7.5 million .

Other Expenses of $30.4 million in 2018 included compensation costs of $15.2 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, Special Charges of $5.0 million related to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K.

and separation benefits and related charges associated with our businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York, intangible asset and other amortization of $8.6 million and changes to the fair value of contingent consideration of $1.5 million .

Non-Compensation expenses, as a component of Operating Expenses, were $302.8 million in 2020, compared to $336.9 million in 2019, a decrease of $34.1 million, or 10%.

Non-Compensation operating expenses decreased from the prior year primarily driven by decreased travel and related expenses, related to prolonged travel restrictions resulting from the COVID-19 pandemic.

See COVID-19 above for further information.

Other Expenses of $49.1 million in 2020 included (a) Special Charges, Including Business Realignment Costs, of $46.6 million related to separation and transition benefits and related costs and the acceleration of depreciation expense for leasehold

improvements and certain other fixed assets in conjunction with the expansion of our headquarters in New York and our business realignment initiatives, as well as charges related to the impairment of assets resulting from the wind-down of our businesses in Mexico, (b) intangible asset and other amortization of $1.2 million, (c) compensation costs of $1.1 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, and (d) Acquisition and Transition Costs of $0.3 million.

Other Expenses of $33.6 million in 2019 included (a) compensation costs of $18.2 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, (b) intangible asset and other amortization of $7.5 million, (c) Special Charges, Including Business Realignment Costs, of $7.2 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York and separation and transition benefits for certain employees terminated as a result of the review of our operations and (d) Acquisition and Transition Costs of $0.7 million.

For a discussion of 2019 versus 2018, refer to "Results of Operations" in our Form 10-K for the year ended December 31, 2019.

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The following table summarizes the operating results of the Investment Management segment.

For the Years Ended December 31,

For the Years Ended December 31, Change

2020 2019 2018 2020 v.

(dollars in thousands)

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Institutional Asset Management (1)

Disposed and Restructured Businesses (1)(2)

1,328 2,528 3,371 (47 %) (25 %)

Asset Management and Administration Fees 54,397 50,611 48,246 7 % 5 %

Other Revenue, net (2)

(7,878) 6,292 4,436 NM 42 %

Net Revenues 46,519 56,903 52,682 (18 %) 8 %

Operating Expenses 50,473 48,645 43,940 4 % 11 %

Other Expenses (3)

345 3,247 21 (89 %) NM

Total Expenses 50,818 51,892 43,961 (2 %) 18 %

Operating Income

Operating Income (Loss) (4,299) 5,011 8,721 NM (43 %)

Income from Equity Method Investments (4)

12,852 10,080 8,776 28 % 15 %

Pre-Tax Income $ 8,553 $ 15,091 $ 17,497 (43 %) (14 %)

Includes the Institutional Trust and Independent Fiduciary business of ETC, which was sold in the fourth quarter of 2017.

Includes client related expenses of $0.2 million for the year ended December 31, 2017 .

$2.0 million of net realized and unrealized gains on private equity investments have been classified in Other Revenue, net, for the year ended December 31, 2017 , to conform to the current presentation.

Includes a gain of $7.8 million related to the sale of the Institutional Trust and Independent Fiduciary business of ETC for the year ended December 31, 2017 .

Includes impairment charges related to the impairment of goodwill in the Institutional Asset Management reporting unit of $2.9 million and $7.1 million for the years ended December 31, 2019 and 2017, respectively.

Also includes $3.9 million related to the transition of certain employees in conjunction with the sale of the Institutional Trust and Independent Fiduciary business of ETC for the year ended December 31, 2017 .

Equity in ABS, Atalanta Sosnoff and G5 - Wealth Management (through December 31, 2017) is classified as Income from Equity Method Investments.

(1) Includes the ECB business, which was sold in 2020.

(2) Includes a loss of $9.7 million resulting from the sale and wind-down of our businesses in Mexico, including $3.4 million related to the sale of our ECB businesses and $6.3 million related to the release of cumulative foreign exchange losses for the year ended December 31, 2020.

(3) Includes an impairment charge related to the impairment of goodwill in the Institutional Asset Management reporting unit of $2.9 million for the year ended December 31, 2019.

(4) Equity in ABS and Atalanta Sosnoff is classified as Income from Equity Method Investments.

Investment Management Results of Operations

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• Wealth Management – conducted through EWM and ETC.

Fee-based revenues from EWM are primarily earned on a percentage of AUM, while ETC primarily earns fees from negotiated trust services and fiduciary consulting arrangements (through October 2017).

Institutional Asset Management – conducted through ECB.

Fee-based revenues from ECB are primarily earned on a percentage of AUM.

Fee-based revenues from EWM are primarily earned on a percentage of AUM, while ETC primarily earns fees from negotiated trust services.

• Private Equity – conducted through our investment interests in private equity funds.

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We are also passive investors in Trilantic IV, Trilantic V and Trilantic VI.

In the event the private equity funds perform below certain thresholds we may be obligated to repay certain carried interest previously distributed.

As of December 31, 2019 , there was no previously distributed carried interest received from the funds that was subject to repayment.

In the event the private equity funds perform below

certain thresholds we may be obligated to repay certain carried interest previously distributed.

As of December 31, 2020, $0.4 million of previously distributed carried interest received from the funds was subject to repayment.

• We also hold interests in ABS and Atalanta Sosnoff that are accounted for under the equity method of accounting.

The results of these investments are included within Income from Equity Method Investments.

The Investment Management segment also includes the results of the following businesses that were deconsolidated or restructured prior to December 31, 2019:

On December 31, 2017, we exchanged all of our outstanding equity interests in G5 for debentures of G5.

This investment is accounted for as a held-to-maturity security going forward.

On October 18, 2017, we sold the Institutional Trust and Independent Fiduciary business of ETC.

Following the sale, the remaining operations of ETC were integrated into EWM.

Our Investment Management results include the ECB businesses, which were previously included in Institutional Asset Management above.

These businesses were sold in 2020.

See Note 5 to our consolidated financial statements for further information.

Assets Under Management

AUM for our Investment Management businesses of $10.7 billion at December 31, 2019 increased compared to $9.1 billion at December 31, 2018 .

AUM for our consolidated Investment Management businesses of $10.2 billion at December 31, 2020 decreased compared to $10.7 billion at December 31, 2019, reflecting the deconsolidation of $1.5 billion of assets resulting from the sale of our ECB business, partially offset by market appreciation in our Wealth Management business.

The amounts of AUM presented in the table below primarily reflect the assets which we manage.

These assets reflect the fair value of assets managed on behalf of Institutional Asset Management and Wealth Management clients.

As defined in ASC 820 " Fair Value Measurements and Disclosures " ("ASC 820"), valuations performed for Level I investments are based on quoted prices obtained from active markets generated by third parties and Level II investments are valued through the use of models based on either direct or indirect observable inputs in the use of models or other valuation methodologies performed by third parties to determine fair value.

For both the Level I and Level II investments, we obtain both active quotes from nationally recognized exchanges and third-party pricing services to determine market or fair value quotes, respectively.

For Level III investments, pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment.

These assets reflect the fair value of assets managed on behalf of Institutional Asset Management (deconsolidated on December 16, 2020) and Wealth Management clients.

As defined in ASC 820 "Fair Value Measurements and Disclosures" ("ASC 820"), valuations performed for Level 1 investments are based on quoted prices obtained from active markets generated by third parties and Level 2 investments are valued through the use of models based on either direct or indirect observable inputs in the use of models or other valuation methodologies performed by third parties to determine fair value.

For both the Level 1 and Level 2 investments, we obtain both active quotes from nationally recognized exchanges and third-party pricing services to determine market or fair value quotes, respectively.

For Level 3 investments, 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.

Wealth Management maintained 69% and 63% of Level I investments, 27% and 32% of Level II investments and 4% and 5% of Level III investments as of December 31, 2019 and 2018 , respectively.

Institutional Asset Management maintained 85% and 82% of Level I investments and 15% and 18% of Level II investments as of December 31, 2019 and 2018 , respectively.

Wealth Management maintained 72% and 69% of Level 1 investments, 24% and 27% of Level 2 investments and 4% of Level 3 investments as of December 31, 2020 and 2019, respectively.

Institutional Asset Management maintained 85% of Level 1 investments and 15% of Level 2 investments as of December 31, 2019.

The fees that we receive for providing investment advisory and management services are primarily driven by the level and composition of AUM.

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Institutional

Management Total

(dollars in millions)

Balance at December 31, 2018 $ 7,560 $ 1,575 $ 9,135

Market Appreciation (Depreciation)

Balance at December 31, 2018

Inflows 1,056 1,057 2,113

Outflows (826) (1,158) (1,984)

Market Appreciation 1,268 160 1,428

Balance at December 31, 2019 $ 9,058 $ 1,634 $ 10,692

Inflows 969 645 1,614

Outflows (869) (616) (1,485)

Market Appreciation (Depreciation) 1,005 (125) 880

Deconsolidation of ECB (December 16, 2020) — (1,538) (1,538)

Balance at December 31, 2020 $ 10,163 $ — $ 10,163

Unconsolidated Affiliates - Balance at December 31, 2020:

Atalanta Sosnoff $ — $ 7,718 $ 7,718

ABS $ — $ 6,574 $ 6,574

(1) Assets Under Management includes Evercore assets which are managed by Evercore Wealth Management of $76.4 million and $319.8 million as of December 31, 2020 and 2019, respectively.

The following table represents the composition of our AUM for Wealth Management and Institutional Asset Management as of December 31, 2019 :

The following table represents the composition of AUM for Wealth Management as of December 31, 2020:

Wealth Management

Institutional Asset Management

Equities 62 %

Fixed Income 24 %

Liquidity (1)

Alternatives 5 %

(1) Includes cash, cash equivalents and U.S.

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Investment performance in the Wealth Management businesses is measured against appropriate indices based on the AUM, most frequently the S&P 500 and a composite fixed income index principally reflecting BarCap and MSCI indices.

In 2020, AUM for Wealth Management increased 12%, reflecting an 11% increase due to market appreciation and a 1% increase due to flows.

Wealth Management outperformed the S&P 500 on a 1 and 3-year basis by approximately 6% and 4%, respectively, during the period.

Wealth Management lagged the fixed income composite on a 1 and 3 year basis by approximately 80 basis points and 50 basis points, respectively.

For the period, the S&P 500 and fixed income composite were up approximately 18% and 5%, respectively.

In 2019, AUM for Wealth Management increased 20%, reflecting a 17% increase due to market appreciation and a 3% increase due to flows.

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Wealth Management lagged the fixed income composite on a 1 and 3 year basis by approximately 40 basis points and 30 basis points, respectively.

For the period, the S&P 500 was up approximately 31% and the fixed income composite was up approximately 6%.

In 2018 , AUM for Wealth Management increased 3%, reflecting a 6% increase due to flows, partially offset by a 3% decrease due to market depreciation.

Wealth Management lagged the S&P 500 by approximately 1% during the period on both a 1 and 3 year basis.

Wealth Management lagged the fixed income composite by approximately 40 basis points on a 1 year basis and tracked the fixed income composite on a 3 year basis.

For the period, the S&P 500 was down approximately 4% and the fixed income composite was up approximately 1%.

Our Institutional Asset Management business reflects assets managed by ECB, which primarily manages Mexican Government and corporate fixed income securities, as well as equity products.

For the period, the S&P 500 and fixed income composite were up approximately 31% and 6%, respectively.

Our Institutional Asset Management business reflected assets managed by ECB prior to its deconsolidation on December 16, 2020.

ECB primarily manages Mexican Government and corporate fixed income securities, as well as equity products.

ECB utilizes the IPC Index, which is a capitalization weighted index of leading equities traded on the Mexican Stock Exchange and the Cetes 28 Index, which is an index of Treasury Bills issued by the Mexican Government, as benchmarks in reviewing their performance and managing their investment decisions.

ECB's AUM market depreciation for the year reflects market volatility, as well as the impact of the fluctuation of foreign currency.

ECB outperformed the equities index and outperformed the fixed income index on two of their three portfolios in 2020.

In 2019, AUM for Institutional Asset Management increased 4%, reflecting a 10% increase due to market appreciation, partially offset by a 6% decrease due to flows.

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ECB outperformed the equities index and outperformed the fixed income index on two of their three portfolios in 2019.

In 2018 , AUM for Institutional Asset Management decreased 4%, primarily reflecting a 7% decrease due to flows, partially offset by a 3% increase due to market appreciation.

ECB's AUM market appreciation reflects favorable market volatility, as well as the impact of the fluctuation of foreign currency.

ECB outperformed the equities index and performed within a reasonable range of the fixed income index on a 1 year basis.

AUM from our unconsolidated affiliates increased 18% compared to December 31, 2018 , related to positive performance in Atalanta Sosnoff and ABS.

AUM from our unconsolidated affiliates increased 12% compared to December 31, 2019, primarily related to positive performance in Atalanta Sosnoff and ABS.

2020 versus 2019

Net Investment Management Revenues were $56.9 million in 2019 , compared to $52.7 million in 2018 , which represented an increase of 8% .

Asset Management and Administration Fees earned from the management of client portfolios increased 7% from 2019, primarily driven by an increase of $5.0 million in fees from Wealth Management clients, as associated AUM increased 12%.

Fee-based revenues included $0.2 million and $0.4 million of revenues from performance fees during 2019 and 2018 , respectively.

Income from Equity Method Investments increased from 2018 , primarily as a result of an increase in earnings from our investment in ABS in 2019.

Fee-based revenues included $0.08 million and $0.2 million of revenues from performance fees in 2020 and 2019, respectively.

Other Revenue, net, decreased from 2019, primarily driven by a loss of $9.7 million resulting from the sale and wind-down of our businesses in Mexico, including $3.4 million related to the sale of our ECB businesses, as well as $6.3 million related to the release of cumulative foreign exchange losses, and losses on our legacy private equity investments.

See Note 5 to our consolidated financial statements for further information.

These items contributed to an overall decrease in Net Investment Management Revenues of 18% ($46.5 million in 2020, compared to $56.9 million in 2019).

Income from Equity Method Investments increased from 2019, as a result of an increase in earnings from our investments in ABS and Atalanta Sosnoff.

Operating Expenses were $50.5 million in 2020, compared to $48.6 million in 2019, an increase of $1.8 million, or 4%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $36.6 million in 2020, compared to $34.1 million in 2019, an increase of $2.5 million, or 7%.

Non-compensation expenses, as a component of Operating Expenses, were $14.5 million in 2019 , compared to $12.9 million in 2018 , an increase of $1.6 million, or 12%.

Other Expenses of $3.2 million in 2019 included Special Charges of $2.9 million related to the impairment of goodwill in the Institutional Asset Management reporting unit and Acquisition and Transition Costs of $0.3 million.

Other Expenses of $0.02 million in 2018 included Acquisition and Transition Costs.

Non-Compensation expenses, as a component of Operating Expenses, were $13.9 million in 2020, compared to $14.5 million in 2019, a decrease of $0.6 million, or 4%.

Other Expenses of $0.3 million in 2020 included Acquisition and Transition Costs of $0.3 million and Special Charges, Including Business Realignment Costs, of $0.05 million, related to separation and transition benefits and related costs.

Other Expenses of $3.2 million in 2019 included Special Charges, Including Business Realignment Costs, of $2.9 million related to the impairment of goodwill in the Institutional Asset Management reporting unit and Acquisition and Transition Costs of $0.3 million.

For a discussion of 2019 versus 2018, refer to "Results of Operations" in our Form 10-K for the year ended December 31, 2019.

Our operating cash flows are primarily influenced by the timing and receipt of investment banking and investment management fees, and the payment of operating expenses, including incentive compensation to our employees and interest expense on our repurchase agreements, Notes Payable, subordinated borrowings and lines of credit, and the payment of income taxes.

Our operating cash flows are primarily influenced by the timing and receipt of investment banking and investment management fees (for further information see COVID-19 above), and the payment of operating expenses, including incentive compensation to our employees and interest expense on our repurchase agreements (prior to the sale of our ECB business), Notes Payable, subordinated borrowings and lines of credit, and the payment of income taxes.

Investment Banking advisory fees are generally collected within 90 days of billing.

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Fees from our Wealth Management and Institutional Asset Management businesses are generally billed and collected within 90 days.

We traditionally pay a substantial portion of incentive compensation to personnel in the Investment Banking business and to executive officers during the first three months of each calendar year with respect to the prior year's results.

Likewise, payments to fund investments related to hedging our deferred cash compensation plans are generally funded in the first three months of each calendar year.

Our investing and financing cash flows are primarily influenced by activities to invest our cash in highly liquid securities or bank certificates of deposit, deploy capital to fund investments and acquisitions, raise capital through the issuance of stock or debt, repurchase of outstanding Class A Shares, and/or noncontrolling interest in Evercore LP, as well as our other subsidiaries, payment of dividends and other periodic distributions to our stakeholders.

We generally make dividend payments and other distributions on a quarterly basis.

generally make dividend payments and other distributions on a quarterly basis.

We periodically draw down on our lines of credit to balance the timing of our operating, investing and financing cash flow needs.

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For the Years Ended December 31,

2020 2019 2018

(dollars in thousands)

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Operating activities:

Net income $ 412,680 $ 353,661 $ 442,851

Non-cash charges 481,698 414,852 334,335

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End of Period $ 838,224 $ 643,886 $ 800,096

Cash, Cash Equivalents and Restricted Cash were $838.2 million at December 31, 2020, an increase of $194.3 million versus Cash, Cash Equivalents and Restricted Cash of $643.9 million at December 31, 2019.

Operating activities resulted in a net inflow of $978.4 million, primarily related to earnings.

Cash of $483.9 million was used by investing activities primarily related to net purchases of investment securities and purchases of equipment and leasehold improvements, primarily related to the expansion of our headquarters in New York, partially offset by the maturity of certificates of deposit.

Financing activities during the period used cash of $307.8 million, primarily for purchases of treasury stock and the payment of dividends and distributions to noncontrolling interest holders.

Cash is also impacted due to the effect of foreign exchange rate fluctuation when translating non-U.S.

currencies to U.S.

Cash, Cash Equivalents and Restricted Cash were $643.9 million at December 31, 2019, a decrease of $156.2 million versus Cash, Cash Equivalents and Restricted Cash of $800.1 million at December 31, 2018.

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For further information see Note 14 to our consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash were $800.1 million at December 31, 2018, an increase of $182.7 million versus Cash, Cash Equivalents and Restricted Cash of $617.4 million at December 31, 2017.

Operating activities resulted in a net inflow of $849.6 million, primarily related to earnings.

Cash of $212.6 million was used in investing activities primarily related to purchases of furniture, equipment and leasehold improvements, primarily related to the expansion of our headquarters in New York, and net purchases of investment securities and certificates of deposit.

Financing activities during the period used cash of $452.9 million, primarily for purchases of treasury stock and noncontrolling interests, the payment of dividends and distributions to noncontrolling interest holders.

For a discussion of 2018, refer to "Cash Flows" in our Form 10-K for the year ended December 31, 2019.

Liquidity and Capital Resources

Our current assets include Cash and Cash Equivalents, Investment Securities and Certificates of Deposit, Accounts Receivable and contract assets, included in Other Current Assets, relating to Investment Banking and Investment Management revenues.

Our current liabilities include accrued expenses, accrued liabilities related to improvements in our leased facilities, accrued employee compensation and short-term borrowings.

Our current assets principally include Cash and Cash Equivalents, Investment Securities and Certificates of Deposit, Accounts Receivable and contract assets, included in Other Current Assets, relating to Investment Banking and Investment Management revenues.

Our current liabilities principally include accrued expenses, accrued liabilities related to improvements in our leased facilities, accrued employee compensation and short-term borrowings.

We traditionally have made payments for employee bonus awards and year-end distributions to partners in the first quarter of the year with respect to the prior year's results.

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From time to time, advances and/or commitments may also be granted to new employees at or near the date they begin employment, or to existing employees for the purpose of incentive or retention.

Cash distributions related to partnership tax allocations are made to the partners of Evercore LP and certain other entities in accordance with our corporate estimated payment calendar;

Cash distributions related to

partnership tax allocations are made to the partners of Evercore LP and certain other entities in accordance with our corporate estimated payment calendar;

these payments are made prior to the end of each calendar quarter.

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We regularly monitor our liquidity position, including cash, other significant working capital, current assets and liabilities, long-term liabilities, lease commitments and related fixed assets, principal investment commitments related to our Investment Management business, dividends on Class A Shares, partnership distributions and other capital transactions, as well as other matters relating to liquidity and compliance with regulatory requirements.

Our liquidity is highly dependent on our revenue stream from our operations, principally from our Investment Banking business, which is a function of closing advisory transactions and earning success fees, the timing and realization of which is irregular and dependent upon factors that are not subject to our control.

Our revenue stream funds the payment of our expenses, including annual bonus payments, a portion of which are guaranteed, deferred compensation arrangements, interest expense on our repurchase agreements, Notes Payable, lines of credit and other financing arrangements and income taxes.

Our liquidity is highly dependent on our revenue stream from our operations, principally from our Investment Banking business, which is a function of closing transactions and earning success fees, the timing and realization of which is irregular and dependent upon factors that are not subject to our control.

Our revenue stream funds the payment of our expenses, including annual bonus payments, a portion of which are guaranteed, deferred compensation arrangements, interest expense on our repurchase agreements (prior to the sale of our ECB business), Notes Payable, lines of credit and other financing arrangements and income taxes.

Payments made for income taxes may be reduced by deductions taken for the increase in tax basis of our investment in Evercore LP.

Certain of these tax deductions, when realized, require payment under our long-term liability, Amounts Due Pursuant to Tax Receivable Agreements.

The value of these future deductions and amounts pursuant to the Tax Receivable Agreement were reduced upon the enactment of the Tax Cuts and Jobs Act of December 22, 2017.

We intend to fund these payments from cash and cash equivalents on hand, principally derived from cash flows from operations.

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These adverse conditions could also have an impact on our goodwill impairment assessment, which is done annually, as of November 30th, or more frequently if circumstances indicate impairment may have occurred.

Changes in regulation, market structure or business activity arising from the U.K.'s implementation of its separation from the European Union may have a negative impact on our business operations in the U.K., and globally, over the intermediate term.

We will continue to monitor and manage the potential implications of the separation, including assessing opportunities that may arise, as the potential impact on the U.K.

and European economy becomes more evident.

For further information, see COVID-19 in "Results of Operations."

We assess our equity method investments for impairment annually, or more frequently if circumstances indicate impairment may have occurred.

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On October 23, 2017, our Board of Directors authorized (in addition to the net settlement of equity awards) the repurchase of Class A Shares and/or LP Units so that from that date forward, we are able to repurchase an aggregate of the lesser of $750.0 million worth of Class A Shares and/or LP Units and 8.5 million Class A Shares and/or LP Units.

Under this share repurchase program, shares may be repurchased from time to time in open market transactions, in privately-negotiated transactions or otherwise.

Under this share repurchase program, shares may be repurchased from time to time in open market transactions, in privately-negotiated transactions or

The timing and the actual amount of shares repurchased will depend on a variety of factors, including legal requirements, price, economic and market conditions and the objective to reduce the dilutive effect of equity awards granted as compensation to employees.

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The aggregate 1,922,393 Class A Shares repurchased during 2020 were acquired for aggregate purchase consideration of $146.6 million, at an average cost per share of $76.25.

On May 31, 2019, we purchased, at fair value, the remaining 10% of the Private Capital Advisory L.P.

Common Interests for $28.4 million .

On May 31, 2019, we purchased, at fair value, an additional 17% of the EWM Class A Units for $24.5 million (in cash of $21.8 million and the issuance of 31,383 Class A LP Units having a fair value of $2.7 million).

On March 29, 2018, we purchased, at fair value, an additional 15% of the Private Capital Advisory L.P.

Common Interests for $25.5 million .

On March 3, 2017, we purchased, at fair value, an additional 13% of the Private Capital Advisory L.P.

Common Interests for $7.1 million , and on December 11, 2017, we purchased, at fair value, an additional 1% of the Private Capital Advisory L.P.

Common Interests for $25.5 million and on May 31, 2019, we purchased, at fair value, the remaining 10% of the Private Capital Advisory L.P.

Common Interests for $28.4 million.

Private Placements

On March 30, 2016, we issued an aggregate $170.0 million of senior notes, including:

$38.0 million aggregate principal amount of our 4.88% Series A senior notes due 2021 (the "Series A Notes"), $67.0 million aggregate principal amount of our 5.23% Series B senior notes due 2023 (the "Series B Notes"), $48.0 million aggregate principal amount of our 5.48% Series C senior notes due 2026 (the "Series C Notes") and $17.0 million aggregate principal amount of our 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 the 2016 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.

$38.0 million aggregate principal amount of our 4.88% Series A senior notes due 2021 (the "Series A Notes"), $67.0 million aggregate principal amount of our 5.23% Series B senior notes due 2023 (the "Series B Notes"), $48.0 million aggregate principal amount of our 5.48% Series C senior notes due 2026 (the "Series C Notes") and $17.0 million aggregate principal amount of our 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 the 2016 Note Purchase Agreement dated as of March 30, 2016 (the "2016 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 2016 Private Placement Notes is payable semi-annually and the 2016 Private Placement Notes are guaranteed by certain of our domestic subsidiaries.

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Interest on the 2019 Private Placement Notes is payable semi-annually and the 2019 Private Placement Notes are guaranteed by certain of our domestic subsidiaries.

We may, at our 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 us 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.

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 December 31, 2020, we were in compliance with all of these covenants.

We intend to use the proceeds from the 2019 Private Placement Notes to fund investments in our business, including facilities and technology, and for other general corporate purposes.

Lines of Credit

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Drawings under this facility bear interest at the prime rate.

On January 2, 2018, East drew down $30.0 million on this facility, which was repaid on March 2, 2018.

On March 11, 2019, East drew down $30.0 million on this facility, which was repaid on May 3, 2019.

On June 21, 2019, East amended this facility with PNC such that, among other things, the interest rate provisions were modified to LIBOR plus 125 basis points and the maturity date was extended to October 31, 2020 (as amended, the "Existing PNC Facility").

East amended this facility on October 30, 2020 such that, among other things, the 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 $20.0 million, to be used for working capital and other corporate activities.

The facility is unsecured and matures on October 31, 2020, subject to an extension agreed to between East and PNC.

The facility is unsecured.

In addition, the agreement contains certain reporting requirements and debt covenants consistent with the Existing PNC Facility.

We and our consolidated subsidiaries were in compliance with these covenants as of December 31, 2020.

Drawings under this facility bear interest at LIBOR plus 150 basis points.

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 $30.0 million.

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 December 31, 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 $7.9 million 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.

In addition, EGL's clearing broker provides temporary funding for the settlement of securities transactions.

Other Commitments

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We have made certain capital commitments with respect to our investment activities, as well as commitments related to contingent consideration from our acquisitions, which are included in the Contractual Obligations section below.

As of December 31, 2019, our commitment for contingent consideration related to an arrangement with the former employer of certain Real Estate Capital Advisory ("RECA") employees was fully paid.

For further information see Notes 5 and 20 to our consolidated financial statements .

Pursuant to deferred compensation and deferred consideration arrangements, we are obligated to make cash payments in future periods.

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We expect to spend approximately $9.0 million, net of a tenant improvement allowance, to improve the premises under this lease over the next twelve months.

For further information see Note 10 to our consolidated financial statements .

Our work at these premises, which was temporarily suspended at the end of the first quarter as a result of the COVID-19 pandemic, resumed in June.

For further information see Note 10 to our consolidated financial statements and COVID-19 in "Results of Operations."

Collateralized Financing Activity at ECB

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 or by entering into reverse repurchase agreements with unrelated third parties.

We account for these repurchase and reverse repurchase agreements as collateralized financing transactions.

We record a liability on our Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase.

We record as assets on our Consolidated Statements of Financial Condition , Financial Instruments Owned and Pledged as Collateral at Fair Value (where we have 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 we have acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties).

These Mexican government securities included in Financial Instruments Owned and Pledged as Collateral at Fair Value on the Consolidated Statements of Financial Condition have an estimated average time to maturity of approximately 1.0 year , as of December 31, 2019 , and are pledged as collateral against repurchase agreements, which are collateralized financing agreements.

Generally, collateral is posted 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, generally mature within one business day and permit the counterparty to pledge the securities.

Increases and decreases in asset and liability levels related to these transactions are a function of growth in ECB's AUM, as well as clients' investment allocations requiring positioning in repurchase transactions.

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.

The table below includes a key stress test monitored by the Committee, noted as the sensitivity to a 100 basis point change in interest rates.

This analysis assists ECB in understanding the impact of an extreme move in rates, assuring the Collateralized Financing portfolio is structured to maintain risk at an acceptable level, even in extreme circumstances.

The Committee meets monthly to analyze the overall market risk exposure based on positions taken, as well as the credit risk, based on the collateral pledged under these agreements against the contract value from inception to maturity date.

In these meetings the Committee evaluates risk from an operating perspective, VaR, and an exceptional perspective, Stress Tests, to determine the appropriate level of risk limits in the current environment.

We periodically assess the collectability or credit quality related to securities purchased under agreements to resell.

As of December 31, 2019 and 2018 , a summary of ECB's assets, liabilities and risk measures related to its collateralized financing activities is as follows:

Market Value of Collateral Received or (Pledged)

Our ECB business was sold in December 2020.

See Note 5 to our consolidated financial statements for further information.

Prior to its sale, our ECB business entered into repurchase agreements with clients seeking overnight money market returns whereby ECB transferred to the clients Mexican government securities in exchange for cash and concurrently agreed to repurchase the securities at a future date for an amount equal to the cash exchanged plus a stipulated premium or interest factor.

ECB deployed the cash received from, and acquired the securities deliverable to, clients under these repurchase

arrangements by purchasing securities in the open market or by entering into reverse repurchase agreements with unrelated third parties.

We accounted for these repurchase and reverse repurchase agreements as collateralized financing transactions.

We recorded a liability on our Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase.

We recorded as assets on our Consolidated Statements of Financial Condition, Financial Instruments Owned and Pledged as Collateral at Fair Value (where we had 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 we had acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties).

These Mexican government securities included in Financial Instruments Owned and Pledged as Collateral at Fair Value on the Consolidated Statements of Financial Condition were pledged as collateral against repurchase agreements, which were collateralized financing agreements.

Generally, collateral was posted equal to the contract value at inception and was subject to market changes.

These repurchase agreements were primarily with institutional customer accounts managed by ECB, generally matured within one business day and permitted the counterparty to pledge the securities.

Increases and decreases in asset and liability levels related to these transactions were a function of growth in ECB's AUM, as well as clients' investment allocations requiring positioning in repurchase transactions.

There were no remaining assets or liabilities related to collateralized financing activities as of December 31, 2020.

See Note 5 to our consolidated financial statements for further information.

As of December 31, 2019, a summary of ECB's assets, liabilities and risk measures related to its collateralized financing activities was as follows:

December 31, 2019

Amount Market Value of Collateral Received or (Pledged)

(dollars in thousands)

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Securities Purchased Under Agreements to Resell 13,566 $ 13,572

Total Assets $ 25,997

Securities Sold Under Agreements to Repurchase $ (26,000) $ (25,992)

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Payment Due by Period

Less than 1 year

Total Less than 1 year 1-3 years 3-5 years More than

(dollars in thousands)

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Investment Banking Commitments (1)

274 274 — — —

Investment Management Commitments 11,975 11,975 — — —

Total $ 1,250,947 $ 130,555 $ 207,784 $ 122,548 $ 790,060

(1) Excludes unvested deferred compensation commitments.

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Under the terms of the agreement, we committed to extend the lease term for our current space and add space on up to seven additional floors, three of which commenced as of the lease’s effective date.

We anticipate we will take possession of the remainder of these floors over the next four years.

We anticipate we 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.

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We had total commitments (not reflected on our Consolidated Statements of Financial Condition) relating to future capital contributions to private equity funds of $12.0 million and $13.8 million as of December 31, 2020 and 2019, respectively.

to fund these commitments with cash flows from operations.

We expect to fund these commitments with cash flows from operations.

We may be required to fund these commitments at any time through June 2028, depending on the timing and level of investments by our private equity funds.

As of December 31, 2019, we fully paid our commitment for contingent consideration related to an arrangement with the former employer of certain RECA employees.

For further information see Notes 5 and 20 to our consolidated financial statements .

Off-Balance Sheet Arrangements

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As of December 31, 2020, the fair value of our investments with these products, based on closing prices, was $107.9 million.

We estimate that a hypothetical 10% adverse change in the market value of the investments would have resulted in a decrease in pre-tax income of approximately $6.7 million for the year ended December 31, 2019 .

We estimate that a hypothetical 10%, 20% and 30% adverse change in the market value of the investments would have resulted in a decrease in pre-tax income of approximately $10.8 million, $21.6 million and $32.4 million, respectively, for the year ended December 31, 2020.

In February 2020, we entered into four-month futures contracts on a stock index fund with a notional amount of $38.9 million, and in April 2019, we entered into three-month futures contracts on a stock index fund with a notional amount of $14.8 million, as an economic hedge against our deferred cash compensation program.

These contracts settled in June 2020 and June 2019, respectively.

In accordance with ASC 815 " Derivatives and Hedging " ("ASC 815"), these contracts were carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Consolidated

Statements of Operations.

We had realized gains (losses) of ($4.0) million and $0.1 million for the years ended December 31, 2020 and 2019, respectively.

See "-Liquidity and Capital Resources" above for a discussion of collateralized financing transactions at ECB.

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Exchange Rate Risk

We have foreign operations, through our subsidiaries and affiliates, primarily in Europe, Asia and Mexico, as well as provide services to clients in other jurisdictions, which creates foreign exchange rate risk.

We have foreign operations, through our subsidiaries and affiliates, primarily in Europe, Asia and Mexico (currently in wind-down), as well as provide services to clients in other jurisdictions, which creates foreign exchange rate risk.

We have not entered into any transactions to hedge our exposure to foreign exchange fluctuations in these subsidiaries through the use of derivative instruments or otherwise.

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Historically, the value of these foreign currencies has fluctuated relative to the U.S.

For the year ended December 31, 2019, the net impact of the fluctuation of foreign currencies recorded in Other Comprehensive Income within the Consolidated Statement of Comprehensive Income was $3.9 million .

For the year ended December 31, 2020, the net impact of the fluctuation of foreign currencies recorded in Other Comprehensive Income (Loss) within the Consolidated Statement of Comprehensive Income was ($0.7) million.

Foreign Currency Gain (Loss), net, within the Consolidated Statement of Comprehensive Income for the year ended December 31, 2020 also included the reclassification of $27.4 million of cumulative foreign currency translation losses to Other Revenue, Including Interest and Investments, on the Consolidated Statement of Operations for the year ended December 31, 2020.

It is generally not our intention to hedge our foreign currency exposure in these subsidiaries, and we will reevaluate this policy from time to time.

In April 2019, we entered into three month futures contracts on a stock index fund with a notional amount of $14.8 million for $0.7 million , as an economic hedge against our deferred cash compensation program.

These contracts settled in June 2019.

In accordance with ASC 815 " Derivatives and Hedging ", these contracts are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations .

In February 2020, we entered into four month futures contracts on a stock index fund with a notional amount of $38.9 million , as an economic hedge against our deferred cash compensation program.

These contracts will settle in June 2020.

We maintain cash and cash equivalents, as well as certificates of deposit, with financial institutions with high credit ratings.

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Receivables are reported net of any allowance for doubtful accounts.

We maintain an allowance for doubtful accounts to provide coverage for probable losses from our customer receivables and derive the estimate through specific identification for the allowance for doubtful accounts and an assessment of the client's creditworthiness.

We maintain an allowance for doubtful accounts to provide coverage for probable losses from our customer receivables and determine the adequacy of the allowance by estimating the probability of loss based on our analysis of historical credit loss experience of our client receivables, and taking into consideration current market conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.

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.

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Other Current Assets and Other Assets include 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 (contract assets).

As of December 31, 2019 , total contract assets recorded in Other Current Assets and Other Assets amounted to $31.5 million and $2.5 million , respectively.

As of December 31, 2020, total contract assets recorded in Other Current Assets and Other Assets amounted to $29.3 million and

$5.3 million, respectively.

As of December 31, 2019, total contract assets recorded in Other Current Assets and Other Assets amounted to $31.5 million and $2.5 million, respectively.

With respect to our Investment Securities portfolio, which is comprised primarily of highly-rated corporate and municipal bonds, treasury bills, exchange-traded funds, mutual funds and securities investments, we manage our credit risk exposure by limiting concentration risk and maintaining investment grade credit quality.

As of December 31, 2019 , we had Investment Securities of $409.2 million , of which 84% were corporate and municipal securities and treasury bills and notes, primarily with S&P ratings ranging from AAA to BB+.

As of December 31, 2020, we had Investment Securities of $1.1 billion, of which 90% were treasury bills.

Critical Accounting Policies and Estimates

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Revenue Recognition

We adopted ASU 2014-09, " Revenue from Contracts with Customers " ("ASU 2014-09"), effective January 1, 2018 using the modified retrospective method of transition applied to contracts which were not completed as of January 1, 2018.

We adopted Accounting Standards Update ("ASU") No.

2014-09, " Revenue from Contracts with Customers " ("ASU 2014-09"), effective January 1, 2018 using the modified retrospective method of transition applied to contracts which were not completed as of January 1, 2018.

ASU 2014-09 creates ASC 606, which provides a five step model to revenue recognition as follows:

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We apply this model to our Investment Banking and Asset Management revenue streams.

Prior to January 1, 2018, we recorded revenue in accordance with ASC 605, " Revenue Recognition " ("ASC 605").

Under ASC 605, we recognized success related advisory fees upon closing of the transaction regardless of the probability of the outcome, which differs under ASC 606

as described further below.

Furthermore, ASC 605 allowed expenses related to underwriting transactions to be reflected net in related revenues;

under ASC 606, those expenses are presented gross in the results of operations.

Investment Banking Revenue

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For performance obligations satisfied at a point in time, determining when control transfers requires us to make significant judgments that affect the timing of when revenue is recognized.

We record Investment Banking Revenue on the Consolidated Statements of Operations for the following:

In general, advisory fees are paid at the time we sign an engagement letter, during the course of the engagement or when an engagement is completed.

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When assessing probability, we apply careful analysis and judgment to the remaining factors necessary for completion of a transaction, including factors outside of our control.

A transaction can fail to be completed for many reasons which are outside of our control, including failure of parties to agree upon final terms, to secure necessary board or shareholder approvals, to secure necessary financing, to achieve necessary regulatory approvals, or due to adverse market conditions.

A transaction can fail to be completed for

many reasons which are outside of our control, including failure of parties to agree upon final terms, to secure necessary board or shareholder approvals, to secure necessary financing, to achieve necessary regulatory approvals, or due to adverse market conditions.

In the case of bankruptcy engagements, fees are subject to approval of the court.

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The management of assets under administration represents a distinct performance obligation that is satisfied over time.

For ongoing engagements, fees are billed quarterly either in advance or in arrears.

For ongoing engagements, fees are billed monthly or quarterly either in advance or in arrears.

Fees paid in advance of services rendered and satisfaction of the performance obligation are initially recorded as deferred revenue (a contract liability) in Other Current Liabilities on the Consolidated Statements of Financial Condition, and are recognized in Asset Management and Administration Fees on the Consolidated Statements of Operations ratably over the period in which the related services are rendered and the performance obligation is satisfied.

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We maintain an allowance for doubtful accounts to provide coverage for estimated losses from our client receivables.

We determine the adequacy of the allowance by estimating the probability of loss based on our analysis of the client's creditworthiness and specifically reserve against exposure where we determine the receivables are impaired, which may include situations where a fee is in dispute or litigation has commenced.

We adopted ASU No.

2016-13 "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") on January 1, 2020, using a modified retrospective method of transition.

We recorded a cumulative-effect adjustment to decrease retained earnings by $1.3 million as of January 1, 2020.

Following the adoption of ASU 2016-13, we determine the adequacy of the allowance by estimating the probability of loss based on our analysis of historical credit loss experience of our client receivables, and taking into consideration current market conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.

We have determined that long-term forecasted information is not relevant to our fee receivables, which are primarily short-term.

We update our average credit loss rates periodically and maintain a quarterly allowance review process to consider current factors that would require an adjustment to the credit loss allowance.

In addition, we periodically perform 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.

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We apply a practical expedient to expense costs to obtain a contract as incurred when the amortization period is one year or less.

The valuation of our investments in securities and of our financial investments in the funds we manage impacts both the carrying value of direct investments and the determination of management and performance fees, including carried interest.

Effective January 1, 2008, we adopted ASC 820, which among other things requires enhanced disclosures about financial instruments carried at fair value.

See Note 12 to the consolidated financial statements for further information.

Level I investments include financial instruments owned and pledged as collateral and readily-marketable equity securities.

Level II investments include our investments in corporate and municipal bonds and other debt securities.

We adopted ASC 825, " Financial Instruments", which permits entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings.

The valuation of our investments in securities and of our investments in private equity funds which we do not manage impacts both the carrying value of direct investments and the determination of management and performance fees, including carried interest.

Per ASC 820, we disclose information about financial instruments carried at fair value, including their classification in the fair value hierarchy.

Level 1 investments include treasury bills, financial instruments owned and pledged as collateral, readily-marketable equity securities and investment funds.

Level 2 investments include our investments in corporate and municipal bonds and other debt securities.

See Note 12 to our consolidated financial statements for further information.

ASC 825, " Financial Instruments" permits entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings.

We have not elected to apply the fair value option to any specific financial assets or liabilities.

Investment Securities

Investment Securities and Futures Contracts

Investment Securities include investments in U.S.

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2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01") in January 2018.

The securities are carried at fair value on the Consolidated Statements of Financial Condition;

the debt securities are valued based on quoted prices that exist in the marketplace for similar issues and the equity securities are valued using quoted market prices on applicable exchanges or markets.

These securities are carried at fair value on the Consolidated Statements of Financial Condition;

debt securities are valued based on quoted prices that exist in the marketplace for similar issues and equity securities are valued using quoted market prices on applicable exchanges or markets.

Investment Securities transactions are recorded as of the trade date.

We invest in readily marketable debt and equity securities which are managed by EWM, as well as in a portfolio of exchange-traded funds and mutual funds as an economic hedge against our deferred cash compensation program.

The debt securities are classified as available-for-sale and any unrealized gains and losses are recorded as net increases or decreases to Accumulated Other Comprehensive Income (Loss), net of tax, and realized gains and losses on these securities are included in Other Revenue, Including Interest and Investments on the Consolidated Statements of Operations.

Realized and unrealized gains and losses on the equity securities are recorded in Other Revenue, Including Interest and Investments, beginning on January 1, 2018, from the application of ASU 2016-01.

EGL and other broker-dealers also invest in fixed income portfolios consisting primarily of U.S.

We also periodically enter into futures contracts.

In accordance with ASC 815, futures contracts are carried at fair value.

We invest in readily marketable debt and equity securities, as well as in a portfolio of exchange-traded funds and mutual funds, and periodically enter into futures contracts, as an economic hedge against our deferred cash compensation program.

Debt securities are classified as available-for-sale and any unrealized gains and losses are recorded as net increases or decreases to Accumulated Other Comprehensive Income (Loss), net of tax, and realized gains and losses on these securities are included in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations.

Realized and unrealized gains and losses on equity securities are recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations beginning on January 1, 2018, following the application of ASU 2016-01.

Realized and unrealized gains and losses on futures contracts are recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations.

EGL and our other broker-dealers also invest in fixed income portfolios consisting primarily of U.S.

treasury securities, municipal bonds and other debt securities, which are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations, as required for broker-dealers in securities.

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We pledge our Financial Instruments Owned and Pledged as Collateral at Fair Value to collateralize certain financing arrangements which permits the counterparty to pledge the securities.

Our ECB business was sold in December 2020;

following the sale, there are no remaining Financial Instruments Owned and Pledged as Collateral at Fair Value.

See Notes 5 and 9 to our consolidated financial statements for further information.

Equity and Other Deferred Compensation

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Management considers the level of historical taxable income, scheduled reversals of deferred taxes, projected future taxable income and tax planning strategies that can be implemented by us in making this assessment.

If actual results differ from these estimates or we adjust these estimates in future periods, we may need to adjust our valuation allowance, which could materially impact our consolidated financial condition and results of operations.

We adopted ASU 2016-09 effective January 1, 2017.

ASU 2016-09 requires that the tax deduction associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense.

If actual results differ from these estimates or we adjust these estimates in

future periods, we may need to adjust our valuation allowance, which could materially impact our consolidated financial condition and results of operations.

2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"), the tax deduction associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price is reflected in income tax expense.

See Note 2 to our consolidated financial statements for further information.

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In addition to goodwill and intangible assets, we annually assess our equity method investments for impairment (or more frequently if circumstances indicate impairment may have occurred) per ASC 323-10.

We concluded there was no impairment of goodwill, intangible assets or equity method investments during the year ended December 31, 2020.

We recorded impairment charges of $1.7 million for the year ended December 31, 2020, related to the impairment of assets resulting from the wind-down of our businesses in Mexico.

See Note 5 to our consolidated financial statements for further information.

We recorded impairment charges of $2.9 million for the year ended December 31, 2019 related to the goodwill in our Institutional Asset Management reporting unit, which resulted in a decrease of $1.9 million to Net Income Attributable to Evercore Inc.

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We concluded there was no impairment of goodwill, intangible assets or equity method investments during the year ended December 31, 2018.

We recorded an impairment charge of $14.4 million for the year ended December 31, 2017 related to our former equity method investment in G5.

We also recorded a goodwill impairment charge of $7.1 million for the year ended December 31, 2017 related to the goodwill in our Institutional Asset Management reporting unit, which resulted in a decrease of $3.7 million to Net Income Attributable to Evercore Inc.

(after adjustments for noncontrolling interest and income taxes).

We concluded there was no impairment of intangible assets or our other equity method investments during the year ended December 31, 2017.

See Notes 5 and 11 to our consolidated financial statements for further information.

Variable Interest Entities

Our policy is to consolidate all subsidiaries in which we have a controlling financial interest, as well as any variable interest entities ("VIEs") where we are deemed to be the primary beneficiary, when we have the power to make the decisions that most significantly affect the economic performance of the VIE and have the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE.

We review 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 we are the primary beneficiary, we evaluate our economic interests in the entity held either directly or indirectly by us.

The consolidation analysis is generally performed qualitatively.

This analysis, which requires judgment, is performed at each reporting date.

Recently Issued Accounting Standards

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What changed 10-K

Item 7. Management’s Discussion and Analysis