What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-02 · 211 added, 332 removed, 298 unchanged (65% of the section changed)

4 unchanged sentences

In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "backlog," "believes," "expects," "potential," "probable," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words.

All statements, other than statements of historical fact, included in this report are forward-looking statements, including with respect to the worldwide COVID-19 pandemic, and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business.

All statements, other than statements of historical fact, included in this report are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business.

Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements.

All statements other than statements of historical fact are forward-looking statements and, based on various underlying assumptions and expectations, are subject to known and unknown risks, uncertainties and assumptions and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore's business.

We believe these factors include, but are not limited to, those described under "Risk Factors" discussed in the Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A.

"Risk Factors" of our Form 10-Q for the first quarter of 2020.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included or incorporated by reference in this report, including those statements herein with respect to the adverse impact that the COVID-19 pandemic has had, and may continue to have, on our business.

We believe these factors include, but are not limited to, those described under "Risk Factors" discussed in the Annual Report on Form 10-K for the year ended December 31, 2020.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included or incorporated by reference in this report.

In addition, new risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

3 unchanged sentences

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.

Investment Banking.

Our Investment Banking business earns fees from our clients for providing advice on mergers, acquisitions, divestitures, leveraged buyouts, restructurings, activism and defense and similar corporate finance matters, and from underwriting and private placement activities, as well as commissions and fees from research and our sales and trading activities.

Our Investment Banking business earns fees from our clients for providing advice on mergers, acquisitions, divestitures, leveraged buyouts, restructurings, activism and defense and similar corporate finance matters, and from underwriting and private placement activities, as well as commissions, fees and principal revenues from research and our sales and trading activities.

The amount and timing of the fees paid vary by the type of engagement or services provided.

4 unchanged sentences

Underwriting fees are recognized when the offering has been deemed to be completed and placement fees are generally recognized at the time of the client's acceptance of capital or capital commitments.

Commissions and Related Fees includes commissions, which are recorded on a trade-date basis or, in the case of payments under commission sharing arrangements, on the date earned.

Commissions and Related Fees also include subscription fees for the sales of research.

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 merger and acquisition ("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.

Commissions and Related Revenue includes commissions, which are recorded on a trade-date basis or, in the case of payments under commission sharing arrangements, on the date earned.

Commissions and

Related Revenue also includes subscription fees for the sales of research, as well as revenues from principal transactions primarily executed on a riskless principal basis.

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 merger and acquisition ("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.

For further information see COVID-19 in "Liquidity and Capital Resources" .

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, fiduciary fees, 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.

Management fees for third party clients generally represent a percentage of assets under management ("AUM").

8 unchanged sentences

Other Revenue and Interest Expense.

Other Revenue and Interest Expense is derived from investing customer funds in financing transactions.

These transactions are principally repurchases and resales of Mexican government and government agency securities.

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 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, 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 2020, Other Revenue also includes a gain on the sale of the ECB Trust Business.

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

Other Revenue 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

• 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

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

Interest Expense includes interest expense associated with our Notes Payable and lines of credit.

Prior to the sale of our ECB business in Mexico, which was sold on December 16, 2020, Other Revenue and Interest Expense was also derived from investing customer funds in financing transactions.

These transactions were principally repurchases and resales of Mexican government and government agency securities.

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

Operating Expenses

7 unchanged sentences

These awards are generally subject to annual vesting requirements over a four-year period beginning at the date of grant, which occurs in the first quarter of each year;

accordingly, the expense is generally

amortized over the stated vesting period, subject to retirement eligibility.

accordingly, the expense is generally amortized over the stated vesting period, subject to retirement eligibility.

With respect to annual awards, our retirement eligibility criteria generally stipulates that if an employee has at least five years of continuous service, is at least 55 years of age and has a combined age and years of service of at least 65 years, the employee is eligible for retirement.

4 unchanged sentences

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 and January 1, 2017.

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.

In April 2021, our Board of Directors approved the issuance of Class L Interests to our named executive officers, pursuant to which the named executive officers may receive a discretionary distribution of profits from Evercore LP, to be paid in the first quarter of 2022.

Distributions pursuant to these interests are anticipated to be made in lieu of any cash incentive compensation payments which may otherwise have been made to our named executive officers in respect of their service for 2021.

Our Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers, who exceed defined benchmark results over a four-year performance period beginning January 1, 2017.

The first cash distribution under the 2017 Long-term Incentive Plan occurred in March 2021.

Remaining amounts are due to be paid, in cash or Class A Shares, at our discretion, in equal installments in the first quarter of 2022 and 2023, subject to employment at the time of payment.

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

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.

In April 2021, our Board of Directors approved the issuance of the 2021 Long-term Incentive Plan.

Similar to the above arrangement, this plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding our executive officers, who exceed defined benchmark results over a four-year performance period beginning in 2021.

This plan is due to be paid, in cash or Class A Shares, at our discretion, in three equal installments in the first quarter of 2025, 2026 and 2027, subject to employment at the time of payment.

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

2 unchanged sentences

Non-Compensation 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.

3 unchanged sentences

• Special Charges, Including Business Realignment Costs – Includes expenses in 2020 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.

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.

Acquisition and Transition Costs – Includes costs incurred in connection with acquisitions, divestitures and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services, including costs in 2020 associated with the sale of the ECB Trust Business.

• 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.

• Intangible Asset and Other Amortization – Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions.

7 unchanged sentences

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 14 to our unaudited condensed 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.

4 unchanged sentences

Results of Operations

The following is a discussion of our results of operations for the three and nine months ended September 30, 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 COVID-19 pandemic, see the discussion in "Business Segments" and "Liquidity and Capital Resources" below.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

The following is a discussion of our results of operations for the three months ended March 31, 2021 and 2020.

For the Three Months Ended March 31,

2021 2020 Change

(dollars in thousands, except per share data)

2 unchanged sentences

Underwriting Fees 79,257 21,118 275 %

Commissions and Related Fees

Commissions and Related Revenue 53,526 55,566 (4 %)

Asset Management and Administration Fees 14,949 12,747 17 %

Other Revenue, Including Interest and Investments

Other Revenue, Including Interest and Investments 7,230 (14,948) NM

Total Revenues 666,880 433,047 54 %

Interest Expense 4,570 6,040 (24 %)

Net Revenues 662,310 427,007 55 %

Operating Expenses 468,095 352,446 33 %

5 unchanged sentences

Provision for Income Taxes 31,681 13,551 134 %

Net Income 165,551 38,880 326 %

Net Income Attributable to Noncontrolling Interest 21,199 7,705 175 %

Net Income Attributable to Evercore Inc.

$ 144,352 $ 31,175 363 %

Diluted Net Income Per Share Attributable to Evercore Inc.

Common Shareholders $ 3.25 $ 0.74 339 %

As of September 30, 2020 and 2019 , we employed approximately 1,900 people worldwide.

Three Months Ended September 30, 2020 versus September 30, 2019

Net Income Attributable to Evercore Inc.

was $42.6 million for the three months ended September 30, 2020 , a decrease of $0.7 million , or 2% , compared to $43.3 million for the three months ended September 30, 2019 .

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

Net Revenues were $402.5 million for the three months ended September 30, 2020 , an increase of $0.3 million versus Net Revenues of $402.2 million for the three months ended September 30, 2019 .

Advisory Fees decreased $50.2 million , or 16% , Underwriting Fees increased $48.9 million , or 278% , and Commissions and Related Fees decreased $3.0 million , or 6% , compared to the three months ended September 30, 2019 .

Asset Management and Administration Fees increased $1.4 million , or 11% , compared to the three months ended September 30, 2019 .

Other Revenue, Including Interest and Investments, increased 26% compared to the three months ended September 30, 2019 , which was primarily attributable to gains on the investment funds

portfolio, which is used as an economic hedge against our deferred cash compensation program.

For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements .

Total Operating Expenses were $330.8 million for the three months ended September 30, 2020 , compared to $323.7 million for the three months ended September 30, 2019 , an increase of $7.1 million , or 2% .

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $259.8 million for the three months ended September 30, 2020 , an increase of $22.6 million, or 10% , versus $237.2 million for the three months ended September 30, 2019 .

The increase in the amount of compensation recognized in the three months ended September 30, 2020 is primarily driven by higher levels of incentive compensation recognized this year, higher amortization of unvested share-based and deferred cash awards and higher base salaries, primarily due to promotions.

Non-Compensation expenses, as a component of Operating Expenses, were $71.0 million for the three months ended September 30, 2020 , a decrease of $15.5 million, or 18% , versus $86.5 million for the three months ended September 30, 2019 .

Non-Compensation operating expenses decreased compared to the three months ended September 30, 2019 , primarily driven by decreased travel and related expenses related to prolonged travel restrictions.

Non-Compensation expenses per employee were approximately $40.4 thousand for the three months ended September 30, 2020 , versus $46.8 thousand for the three months ended September 30, 2019 .

Total Other Expenses of $8.0 million for the three months ended September 30, 2020 included Special Charges, Including Business Realignment Costs, of $7.4 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, Acquisition and Transition Costs of $0.5 million and intangible asset and other amortization of $0.2 million .

Total Other Expenses of $8.1 million for the three months ended September 30, 2019 included compensation costs of $4.6 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, intangible asset and other amortization of $2.2 million , Special Charges of $1.0 million , related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York and Acquisition and Transition Costs of $0.4 million.

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

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

In conjunction with the employment reductions, we expect to incur aggregate separation and transition benefits (including costs related to the acceleration of deferred compensation) and related costs of approximately $43.0 million , $7.3 million of which has been recorded in Special Charges, Including Business Realignment Costs, in the third quarter of 2020.

Our estimates of charges are based on a number of assumptions.

Actual results may differ materially if actual activity deviates from these assumptions.

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 64.5% for the three months ended September 30, 2020 , compared to 60.1% for the three months ended September 30, 2019 .

The compensation ratio is 66.3% for the three months ended September 30, 2020 when the $7.3 million of separation and transition benefits expense, which is presented within Special Charges, Including Business Realignment Costs, is also included.

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

Given the uncertainty about both revenues for the remainder of the year and market compensation for our employees, we have more uncertainty about the full year compensation ratio than at this time in prior years.

For further information see COVID-19 below.

Income from Equity Method Investments was $3.1 million for the three months ended September 30, 2020 , as compared to $2.6 million for the three months ended September 30, 2019 .

The increase was primarily a result of an increase in earnings from Atalanta Sosnoff and Luminis during the three months ended September 30, 2020 .

The provision for income taxes for the three months ended September 30, 2020 was $15.7 million , which reflected an effective tax rate of 23.5% .

The provision for income taxes for the three months ended September 30, 2019 was $20.4 million , which reflected an effective tax rate of 28.0% .

The provision for income taxes for the three months ended September 30, 2020 reflects an additional tax expense of $0.2 million and for the three months ended September 30, 2019 an additional deduction of $0.05 million due to the 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.

Net Income Attributable to Noncontrolling Interest was $8.5 million for the three months ended September 30, 2020 compared to $9.2 million for the three months ended September 30, 2019 .

The decrease in Net Income Attributable to Noncontrolling Interest primarily reflects lower income allocated to noncontrolling interest for Evercore LP during the three months ended September 30, 2020 .

Nine Months Ended September 30, 2020 versus September 30, 2019

As of March 31, 2021 and 2020, we employed approximately 1,800 and 1,850 people, respectively, worldwide.

Three Months Ended March 31, 2021 versus March 31, 2020

Net Income Attributable to Evercore Inc.

was $130.2 million for the nine months ended September 30, 2020 , a decrease of $62.1 million , or 32% , compared to $192.3 million for the nine months ended September 30, 2019 .

was $144.4 million for the three months ended March 31, 2021, an increase of $113.2 million, or 363%, compared to $31.2 million for the three months ended March 31, 2020.

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

Net Revenues were $1.34 billion for the nine months ended September 30, 2020 , a decrease of $12.0 million , or 1% , versus Net Revenues of $1.35 billion for the nine months ended September 30, 2019 .

Advisory Fees decreased $124.6 million , or 11% , Underwriting Fees increased $119.8 million , or 195% , and Commissions and Related Fees increased $15.9 million , or 12% , compared to the nine months ended September 30, 2019 .

Asset Management and Administration Fees increased $2.3 million , or 6% , compared to the nine months ended September 30, 2019 .

Other Revenue, Including Interest and Investments, decreased 64% compared to the nine months ended September 30, 2019 , which was primarily attributable to lower performance of our investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program, and lower performance of our legacy private equity investments.

We recorded $1.0 million of gains on the investment funds portfolio for the nine months ended September 30, 2020, compared to $9.2 million of gains for the nine months ended September 30, 2019 .

For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements .

Interest Expense increased 18% compared to the nine months ended September 30, 2019 , which was primarily attributable to interest expense on the 2019 Private Placement Notes which were issued in August 2019.

Total Operating Expenses were $1.09 billion for the nine months ended September 30, 2020 , compared to $1.05 billion for the nine months ended September 30, 2019 , an increase of $49.3 million , or 5% .

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $863.5 million for the nine months ended September 30, 2020 , an increase of $72.2 million , or 9% , versus $791.3 million for the nine months ended September 30, 2019 .

The increase in the amount of compensation recognized in the nine months ended September 30, 2020 is primarily driven by higher levels of incentive compensation recognized this year, higher amortization of unvested share-based and deferred cash awards and higher base salaries, primarily due to promotions.

Non-Compensation expenses, as a component of Operating Expenses, were $230.9 million for the nine months ended September 30, 2020 , a decrease of $23.0 million , or 9% , versus $253.9 million for the nine months ended September 30, 2019 .

Non-Compensation operating expenses decreased compared to the nine months ended September 30, 2019 , primarily driven by decreased travel and related expenses, related to prolonged travel restrictions, and decreased professional fees, partially offset by increased bad debt expense.

Non-Compensation expenses per employee were approximately $123.3 thousand for the nine months ended September 30, 2020 , versus $140.2 thousand for the nine months ended September 30, 2019 .

Total Other Expenses of $42.4 million for the nine months ended September 30, 2020 included Special Charges, Including Business Realignment Costs, of $39.6 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, intangible asset and other amortization of $1.2 million , 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 Acquisition and Transition Costs of $0.6 million .

Total Other Expenses of $22.4 million for the nine months ended September 30, 2019 included compensation costs of $12.3 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, intangible asset and other amortization of $6.5 million , Special Charges of $3.1 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York and Acquisition and Transition Costs of $0.5 million.

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

In conjunction with the employment reductions, we expect to incur aggregate separation and transition benefits (including costs related to the acceleration of deferred compensation) and related costs of approximately $43.0 million , $37.6 million of which has been recorded in Special Charges, Including Business Realignment Costs, in the first nine months of 2020.

Our estimates of charges are based on a number of assumptions.

Actual results may differ materially if actual activity deviates from these assumptions.

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 64.7% for the nine months ended September 30, 2020 , compared to 59.6% for the nine months ended September 30, 2019 .

The compensation ratio is 67.5% for the nine months ended September 30, 2020 when the $37.4 million 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 is primarily driven by higher levels of incentive compensation recognized this year, higher amortization of unvested share-based and deferred cash awards and higher base salaries, primarily due to promotions, as well as lower Other Revenue earned during the nine months ended September 30, 2020 resulting from lower performance on the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program, and legacy private equity investments.

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

For further information see COVID-19 below.

Income from Equity Method Investments was $8.6 million for the nine months ended September 30, 2020 , as compared to $7.2 million for the nine months ended September 30, 2019 .

The increase was primarily a result of an increase in earnings from Atalanta Sosnoff and Luminis during the nine months ended September 30, 2020 .

The provision for income taxes for the nine months ended September 30, 2020 was $51.0 million , which reflected an effective tax rate of 24.5% .

The provision for income taxes for the nine months ended September 30, 2019 was $60.3 million , which reflected an effective tax rate of 20.9% .

The provision for income taxes for the nine months ended September 30, 2020 reflects an additional tax expense of $0.1 million and for the nine months ended September 30, 2019 an additional deduction 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.

Net Income Attributable to Noncontrolling Interest was $27.0 million for the nine months ended September 30, 2020 compared to $35.7 million for the nine months ended September 30, 2019 .

The decrease in Net Income Attributable to Noncontrolling Interest primarily reflects lower income allocated to noncontrolling interest for Evercore LP during the nine months ended September 30, 2020.

Net Revenues were $662.3 million for the three months ended March 31, 2021, an increase of $235.3 million, or 55%, versus Net Revenues of $427.0 million for the three months ended March 31, 2020.

Advisory Fees increased $153.4 million, or 43%, Underwriting Fees increased $58.1 million, or 275%, and Commissions and Related Revenue decreased $2.0 million, or 4%, compared to the three months ended March 31, 2020.

Asset Management and Administration Fees increased $2.2 million, or 17%, compared to the three months ended March 31, 2020.

Other Revenue, Including Interest and Investments, increased compared to the three months ended March 31, 2020 , primarily reflecting a shift from losses of $22.2 million in the first quarter of 2020 to gains of $6.2 million in the first quarter of 2021 on our investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program.

Total Operating Expenses were $468.1 million for the three months ended March 31, 2021, compared to $352.4 million for the three months ended March 31, 2020, an increase of $115.6 million, or 33%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $395.4 million for the three months ended March 31, 2021, an increase of

$125.7 million, or 47%, versus expense of $269.7 million for the three months ended March 31, 2020.

The increase in the amount of compensation recognized for the three months ended March 31, 2021 principally reflects higher levels of incentive compensation, higher amortization of prior period deferred compensation awards and higher base salaries.

Non-Compensation expenses, as a component of Operating Expenses, were $72.7 million for the three months ended March 31, 2021, a decrease of $10.0 million, or 12%, versus $82.7 million for the three months ended March 31, 2020.

Non-Compensation operating expenses decreased compared to the three months ended March 31, 2020, primarily driven by decreased travel and related expenses, as a substantial number of employees continued to work remotely.

Non-Compensation expenses per employee were approximately $40.3 thousand for the three months ended March 31, 2021, versus $44.1 thousand for the three months ended March 31, 2020.

Total Other Expenses of $0.01 million for the three months ended March 31, 2021 reflected Acquisition and Transition Costs.

Total Other Expenses of $25.3 million for the three months ended March 31, 2020 included (a) Special Charges, Including Business Realignment Costs, of $23.7 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, (b) 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, (c) intangible asset and other amortization of $0.5 million and (d) Acquisition and Transition Costs of $0.01 million.

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 59.7% for the three months ended March 31, 2021, compared to 63.4% for the three months ended March 31, 2020.

The compensation ratio for the three months ended March 31, 2020 is 68.5% when the $22.0 million of separation and transition benefits expense, which is presented within Special Charges, Including Business Realignment Costs, is also included.

The decrease in the compensation ratio principally reflects leverage achieved on higher revenues, partially offset by higher levels of incentive compensation, higher amortization of prior period deferred compensation awards and higher base salaries.

Income from Equity Method Investments was $3.0 million for the three months ended March 31, 2021, compared to $3.1 million for the three months ended March 31, 2020.

The decrease was primarily driven by a decrease in earnings from Luminis, partially offset by an increase in earnings from ABS and Atalanta Sosnoff during the three months ended March 31, 2021.

The provision for income taxes for the three months ended March 31, 2021 was $31.7 million, which reflected an effective tax rate of 16.1%.

The provision for income taxes for the three months ended March 31, 2020 was $13.6 million, which reflected an effective tax rate of 25.8%.

The provision for income taxes for the three months ended March 31, 2021 and 2020 reflects the net impact of the deduction associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price of $16.7 million and $0.6 million, respectively, 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.

Net Income Attributable to Noncontrolling Interest was $21.2 million for the three months ended March 31, 2021 compared to $7.7 million for the three months ended March 31, 2020.

The increase in Net Income Attributable to Noncontrolling Interest primarily reflects higher income allocated to noncontrolling interest for Evercore LP during the three months ended March 31, 2021.

Business Segments

2 unchanged sentences

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

2021 2020 Change

(dollars in thousands)

1 unchanged sentence

Advisory Fees (1)

$ 511,918 $ 358,564 43 %

Underwriting Fees (2)

Commissions and Related Fees

79,257 21,118 275 %

Commissions and Related Revenue (3)

53,526 55,566 (4 %)

Other Revenue, net (4)

2,584 (21,592) NM

Net Revenues 647,285 413,656 56 %

Operating Expenses 456,526 339,795 34 %

3 unchanged sentences

Income from Equity Method Investments (5)

169 536 (68 %)

Pre-Tax Income $ 190,921 $ 49,171 288 %

Includes client related expenses of $4.2 million and $12.0 million for the three and nine months ended September 30, 2020 , respectively, and $7.9 million and $22.5 million for the three and nine months ended September 30, 2019, respectively .

Includes client related expenses of $1.7 million and $10.0 million for the three and nine months ended September 30, 2020 , respectively, and $1.6 million and $4.9 million for the three and nine months ended September 30, 2019, respectively .

Includes interest expense on the Notes Payable and lines of credit of $4.2 million and $13.6 million for the three and nine months ended September 30, 2020 , respectively, and $3.8 million and $8.4 million for the three and nine months ended September 30, 2019, respectively .

(1) Includes client related expenses of $3.2 million and $4.9 million for the three months ended March 31, 2021 and 2020, respectively.

(2) Includes client related expenses of $3.2 million and $2.0 million for the three months ended March 31, 2021 and 2020, respectively.

(3) We renamed "Commissions and Related Fees" to "Commissions and Related Revenue" and reclassified $0.2 million of principal trading gains and losses from our institutional equities business from "Other Revenue, net" to "Commissions and Related Revenue" for the three months ended March 31, 2020.

(4) Includes interest expense on Notes Payable of $4.6 million and $4.8 million for the three months ended March 31, 2021 and 2020, respectively.

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

For the three months ended September 30, 2020 , the dollar value of North American announced M&A activity increased 48% , while the dollar value of North American completed M&A activity decreased 58% compared to the three months ended September 30, 2019 .

For the three months ended September 30, 2020 , the dollar value of Global announced M&A activity increased 38% , while the dollar value of Global completed M&A activity decreased 35% compared to the three months ended September 30, 2019 .

For the three months ended September 30, 2020 , the dollar value of North American and Global announced M&A activity between $1 - $5 billion increased 24% and 9% , respectively, compared to the three months ended September 30, 2019 .

For the nine months ended September 30, 2020 , the dollar value of North American announced and completed M&A activity decreased 43% and 19% , respectively, compared to the nine months ended September 30, 2019 , and the dollar value of Global announced and completed M&A activity decreased 18% and 16% , respectively, compared to the nine months ended September 30, 2019 .

For the nine months ended September 30, 2020 , the dollar value of North American and Global announced M&A activity between $1 - $5 billion decreased 6% and 19% , respectively, compared to the nine months ended September 30, 2019 .

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the three months ended March 31, 2021, the dollar value of North American announced and completed M&A activity increased 172% and 19%, respectively, compared to the three months ended March 31, 2020, and the dollar value of Global announced and completed M&A activity increased 95% and 35%, respectively, compared to the three months ended March 31, 2020.

For the three months ended March 31, 2021, the dollar value of North American and Global announced M&A activity between $1 - $5 billion increased 225% and 174%, respectively, compared to the three months ended March 31, 2020.

For the Three Months Ended March 31,

2021 2020 Change

Industry Statistics ($ in billions) *

8 unchanged sentences

Investment Banking Fees of at Least $1 million from Advisory Client Transactions 103 73 41 %

Refinitiv October 5, 2020

Total Number of Underwriting Transactions 39 12 225 %

Total Number of Underwriting Transactions as a Bookrunner 31 8 288 %

Refinitiv April 6, 2021

** Includes revenue generating clients only from Advisory and Underwriting transactions

Investment Banking Results of Operations

Three Months Ended September 30, 2020 versus September 30, 2019

Net Investment Banking Revenues were $385.5 million for the three months ended September 30, 2020 , compared to $388.0 million for the three months ended September 30, 2019 , a decrease of $2.5 million , or 1% .

We earned 206 fees from Advisory clients for the three months ended September 30, 2020 , compared to 213 for the three months ended September 30, 2019 , representing a 3% decrease .

We earned 74 fees in excess of $1.0 million for the three months ended September 30, 2020 and 2019.

The decrease in revenues from the three months ended September 30, 2019 reflects a decrease of $50.2 million , or 16% , in Advisory Fees, reflecting a decrease in the number of advisory fees earned and a decline in revenue earned from large transactions during the three months ended September 30, 2020 .

The decrease in Advisory Fees was predominantly offset by an increase in Underwriting Fees.

Underwriting Fees increased $48.9 million , or 278% , compared to the three months ended September 30, 2019 , as underwriting activity remained elevated from prior year levels.

We participated in 30 underwriting transactions for the three months ended September 30, 2020 (compared to 18 for the three months ended September 30, 2019 ), 23 of which were as a bookrunner (compared to 10 for the three months ended September 30, 2019 ).

Commissions and Related Fees decreased $3.0 million , or 6% , compared to the three months ended September 30, 2019 .

Other Revenue, net, for the three months ended September 30, 2020 , increased 64% compared to the three months ended September 30, 2019 , primarily reflecting gains of $7.8 million on the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program, for the three months ended September 30, 2020 , compared to $0.5 million of gains for the three months ended September 30, 2019.

For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements .

Operating Expenses were $318.7 million for the three months ended September 30, 2020 , compared to $311.7 million for the three months ended September 30, 2019 , an increase of $7.0 million , or 2% .

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $250.9 million for the three months ended September 30, 2020 , compared to $228.5 million for the three months ended September 30, 2019 , an increase of $22.4 million, or 10% .

Non-Compensation expenses, as a component of Operating Expenses, were $67.8 million for the three months ended September 30, 2020 , compared to $83.2 million for the three months ended September 30, 2019 , a decrease of $15.4 million , or 19%.

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

Other Expenses of $7.7 million for the three months ended September 30, 2020 included Special Charges, Including Business Realignment Costs, of $7.4 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, intangible asset and other amortization of $0.2 million and Acquisition and Transition Costs of $0.2 million .

Other Expenses of $7.9 million for the three months ended September 30, 2019 included compensation costs of $4.6 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, intangible asset and other amortization of $2.2 million , Special Charges of $1.0 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York and Acquisition and Transition Costs of $0.2 million.

Nine Months Ended September 30, 2020 versus September 30, 2019

Net Investment Banking Revenues were $1.29 billion for the nine months ended September 30, 2020 , compared to $1.31 billion for the nine months ended September 30, 2019 , a decrease of $11.1 million , or 1% .

We earned 475 fees from Advisory clients for the nine months ended September 30, 2020 , compared to 489 for the nine months ended September 30, 2019 , representing a 3% decrease .

We earned 224 fees in excess of $1.0 million for the nine months ended September 30, 2020 , compared to 223 for the nine months ended September 30, 2019 .

The decrease in revenues from the nine months ended September 30, 2019 reflects a decrease of $124.6 million , or 11% in Advisory Fees, reflecting a decrease in the number of Advisory fees earned and a decline in revenue earned from large transactions during the nine months ended September 30, 2020 .

The decrease in Advisory Fees was predominantly offset by an increase in Underwriting Fees.

Underwriting Fees increased $119.8 million , or 195% , compared to the nine months ended September 30, 2019 , as we closed several of the largest deals in our history.

We participated in 78 underwriting transactions for the nine months ended September 30, 2020 (compared to 57 for the nine months ended September 30, 2019 ), 52 of which were as a bookrunner (compared to 37 for the nine months ended September 30, 2019 ).

Commissions and Related Fees increased $15.9 million , or 12% , compared to the nine months ended September 30, 2019 , as a result of elevated volatility during the first half of 2020.

Other Revenue, net, for the nine months ended September 30, 2020 , decreased versus the nine months ended September 30, 2019 , primarily reflecting lower performance of the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program, and increased interest expense primarily attributable to the 2019 Private Placement Notes which were issued in August 2019.

For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements .

Operating Expenses were $1.06 billion for the nine months ended September 30, 2020 , compared to $1.01 billion for the nine months ended September 30, 2019 , an increase of $48.9 million , or 5% .

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $837.5 million for the nine months ended September 30, 2020 , compared to $765.7 million for the nine months ended September 30, 2019 , an increase of $71.8 million , or 9% .

Non-Compensation expenses, as a component of Operating Expenses, were $220.4 million for the nine months ended September 30, 2020 , compared to $243.3 million for the nine months ended September 30, 2019 , a decrease of $22.9 million, or 9% .

Non-Compensation operating expenses decreased from the prior year primarily driven by decreased travel and related expenses, related to prolonged travel restrictions, and decreased professional fees, partially offset by increased bad debt expense.

Other Expenses of $42.1 million for the nine months ended September 30, 2020 included Special Charges, Including Business Realignment Costs, of $39.6 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, intangible asset and other amortization of $1.2 million , 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 Acquisition and Transition Costs of $0.3 million .

Other Expenses of $22.1 million for the nine months ended September 30, 2019 included compensation costs of $12.3 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, intangible asset and other amortization of $6.5 million , Special Charges of $3.1 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York and Acquisition and Transition Costs of $0.2 million.

Three Months Ended March 31, 2021 versus March 31, 2020

Investment Banking Net Revenues were $647.3 million for the three months ended March 31, 2021, compared to $413.7 million for the three months ended March 31, 2020, an increase of $233.6 million, or 56%.

We earned 248 fees from Advisory clients for the three months ended March 31, 2021, compared to 222 for the three months ended March 31, 2020, representing a 12% increase.

We earned 103 fees in excess of $1.0 million for the three months ended March 31, 2021, compared to 73 for the three months ended March 31, 2020, representing a 41% increase.

The increase in revenues from the three months ended March 31, 2020 was partially attributed to an increase of $153.4 million, or 43%, in Advisory Fees, reflecting an increase in the number of Advisory fees earned and an increase in revenue earned from large transactions during the three months ended March 31, 2021.

Underwriting Fees increased $58.1 million, or 275%, compared to the three months ended March 31, 2020, reflecting an increase in the number of transactions we participated in, as well as the relative size of our participation in those transactions.

Commissions and Related Revenue decreased $2.0 million, or 4%, compared to the three months ended March 31, 2020.

Other Revenue, net, for the three months ended March 31, 2021 increased versus the three months ended March 31, 2020, primarily reflecting a shift from losses of $22.2 million in the first quarter of 2020 to gains of $6.2 million in the first quarter of 2021 on our investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program.

Operating Expenses were $456.5 million for the three months ended March 31, 2021, compared to $339.8 million for the three months ended March 31, 2020, an increase of $116.7 million, or 34%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $386.7 million for the three months ended March 31, 2021, compared to $260.9 million for the three months ended March 31, 2020, an increase of $125.8 million, or 48%.

Non-Compensation expenses, as a component of Operating Expenses, were $69.8 million for the three months ended March 31, 2021, compared to $78.9 million for the three months ended March 31, 2020, a decrease of $9.1 million, or 12%.

Non-Compensation operating expenses decreased from the three months ended March 31, 2020 primarily driven by decreased travel and related expenses, as a substantial number of employees continued to work remotely.

Other Expenses of $0.01 million for the three months ended March 31, 2021 reflected Acquisition and Transition Costs.

Other Expenses of $25.2 million for the three months ended March 31, 2020 included (a) Special Charges, Including Business Realignment Costs, of $23.6 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, (b) 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, (c) intangible asset and other amortization of $0.5 million and (d) Acquisition and Transition Costs of $0.01 million.

Investment Management

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

2021 2020 Change

(dollars in thousands)

4 unchanged sentences

Other Revenue, net 76 604 (87 %)

Net Revenues 15,025 13,351 13 %

Operating Expenses 11,569 12,651 (9 %)

Other Expenses

Other Expenses — 32 NM

Total Expenses 11,569 12,683 (9 %)

1 unchanged sentence

Income from Equity Method Investments (2)

2,855 2,592 10 %

Pre-Tax Income $ 6,311 $ 3,260 94 %

(1) Prior period includes the ECB business.

On July 2, 2020, we sold the trust business of ECB and on December 16, 2020, we sold the remaining ECB business.

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

3 unchanged sentences

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

Institutional Asset Management – conducted through ECB.

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

In April 2020, we entered into an agreement for the leaders of our business in Mexico to purchase ECB.

This sale will be completed following regulatory approval.

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

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

5 unchanged sentences

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

As of September 30, 2020 , $0.3 million of previously distributed carried interest received from the funds was subject to repayment.

As of March 31, 2021, $0.8 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.

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

On July 2, 2020, we sold the trust business of ECB and on December 16, 2020, we sold the remaining ECB business.

Assets Under Management

AUM for our Investment Management businesses of $10.9 billion at September 30, 2020 increased compared to $10.7 billion at December 31, 2019 .

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, 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.

AUM for our Wealth Management business of $10.6 billion at March 31, 2021 increased compared to $10.2 billion at December 31, 2020.

The amounts of AUM presented in the table below reflect the fair value of assets which we manage on behalf of Wealth Management clients.

As defined in 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 71% and 69% of Level I investments, 25% and 27% of Level II investments and 4% of Level III investments as of September 30, 2020 and December 31, 2019 , respectively.

Institutional Asset Management maintained 85% of Level I investments and 15% of Level II investments as of September 30, 2020 and December 31, 2019 .

Wealth Management maintained 74% and 72% of Level 1 investments, 22% and 24% of Level 2 investments and 4% of Level 3 investments as of March 31, 2021 and December 31, 2020, respectively.

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

Accordingly, client flows, market movements, foreign currency fluctuations and changes in our product mix will impact the level of management fees we receive from our investment management businesses.

Accordingly, client flows, market movements, and changes in our product mix will impact the level of management fees we receive from our Wealth Management business.

Fees vary with the type of assets managed and the channel in which they are managed, with higher fees earned on equity assets and alternative investment funds, such as hedge funds and private equity funds, and lower fees earned on fixed income and cash management products.

1 unchanged sentence

The fees we earn are also impacted by our investment performance, as the appreciation or depreciation in the value of the assets that we manage directly impacts our fees.

The following table summarizes AUM activity for the nine months ended September 30, 2020 :

The following table summarizes AUM activity for the three months ended March 31, 2021:

Management (1)

Institutional

(dollars in millions)

Balance at December 31, 2020 $ 10,163

Market Appreciation (Depreciation)

Balance at September 30, 2020

Unconsolidated Affiliates - Balance at September 30, 2020:

Outflows (197)

Market Appreciation 269

Balance at March 31, 2021 $ 10,555

Unconsolidated Affiliates - Balance at March 31, 2021:

Atalanta Sosnoff $ 7,824

(1) Assets Under Management includes Evercore assets which are managed by Evercore Wealth Management of $223.4 million and $319.8 million as of September 30, 2020 and December 31, 2019 , respectively.

The following table represents the composition of our AUM for Wealth Management and Institutional Asset Management as of September 30, 2020 :

(1) Assets Under Management includes Evercore assets which are managed by Evercore Wealth Management of $76.4 million as of March 31, 2021 and December 31, 2020.

The following table represents the composition of AUM for Wealth Management as of March 31, 2021:

Wealth Management

Institutional Asset Management

Equities 66 %

Fixed Income 22 %

Liquidity (1)

Alternatives 4 %

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

4 unchanged sentences

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.

For the nine months ended September 30, 2020 , AUM for Wealth Management increased 5% , primarily reflecting a 4% 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 10% and 5%, respectively, during the period.

Wealth Management lagged the fixed income composite on a 1 and 3 year basis by approximately 140 basis points and 60 basis points, respectively.

For the period, the S&P 500 and fixed income composite were up approximately 6% and 4%, respectively.

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.

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.

For the nine months ended September 30, 2020 , AUM for Institutional Asset Management decreased 13% , primarily reflecting a 15% decrease due to market depreciation, partially offset by a 2% increase due to flows.

ECB's AUM market depreciation 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 for the nine months ended September 30, 2020 .

AUM from our unconsolidated affiliates increased 3% compared to December 31, 2019 , primarily related to positive performance in Atalanta Sosnoff.

Three Months Ended September 30, 2020 versus September 30, 2019

Net Investment Management Revenues were $17.1 million for the three months ended September 30, 2020 , compared to $14.2 million for the three months ended September 30, 2019 , which represented an increase of $2.9 million, or 20% .

Asset Management and Administration Fees earned from the management of client portfolios increased 11% from the three months ended September 30, 2019 , primarily driven by an increase of $1.5 million in fees from Wealth Management clients, as associated AUM increased 10% .

Fee-based revenues included $0.01 million of revenues from performance fees for the three months ended September 30, 2020 and 2019 .

Other Revenue, net, increase d from the three months ended September 30, 2019 , primarily as a result of the gain on the sale of the ECB Trust Business, as well as higher performance from our legacy private equity investments.

Income from Equity Method Investments increased from the three months ended September 30, 2019 , primarily as a result of an increase in earnings from our investment in Atalanta Sosnoff.

Operating Expenses were $12.2 million for the three months ended September 30, 2020 , compared to $12.0 million for the three months ended September 30, 2019 , an increase of $0.1 million , or 1% .

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $9.0 million for the three months ended September 30, 2020 , compared to $8.6 million for the three months ended September 30, 2019 , an increase of $0.4 million, or 5%.

Non-Compensation expenses, as a component of Operating Expenses, were $3.2 million for the three months ended September 30, 2020 , compared to $3.4 million for the three months ended September 30, 2019 , a decrease of $0.2 million , or 6% .

Other Expenses of $0.3 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, included Acquisition and Transition Costs.

Nine Months Ended September 30, 2020 versus September 30, 2019

Net Investment Management Revenues were $42.1 million for the nine months ended September 30, 2020 , compared to $43.0 million for the nine months ended September 30, 2019 , which represented a decrease of $0.9 million, or 2% .

Asset Management and Administration Fees earned from the management of client portfolios increased 6% from the nine months ended September 30, 2019 , primarily driven by an increase of $3.2 million in fees from Wealth Management clients, as associated AUM increased 10% .

Fee-based revenues included $0.08 million and $0.02 million of revenues from performance fees for the nine months ended September 30, 2020 and 2019 , respectively.

Other Revenue, net, decrease d from the nine months ended September 30, 2019 , primarily as a result of lower performance from our legacy private equity investments.

Income from Equity Method Investments increased from the nine months ended September 30, 2019 , as a result of an increase in earnings from our investments in Atalanta Sosnoff and ABS in 2020.

Operating Expenses were $36.5 million for the nine months ended September 30, 2020 , compared to $36.2 million for the nine months ended September 30, 2019 , an increase of $0.3 million , or 1% .

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $26.0 million for the nine months ended September 30, 2020 , compared to $25.6 million for the nine months ended September 30, 2019 , an increase of $0.4 million, or 2% .

Non-Compensation expenses, as a component of Operating Expenses, were $10.5 million for the nine months ended September 30, 2020 , compared to $10.6 million for the nine months ended September 30, 2019 , a decrease of $0.1 million , or 1% .

Other Expenses of $0.3 million for the nine months ended September 30, 2020 included Acquisition and Transition Costs of $0.3 million and Special Charges, Including Business Realignment Costs of $0.03 million, related to separation and transition benefits and related costs.

Other Expenses of $0.3 million for the nine months ended September 30, 2019 included Acquisition and Transition Costs.

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 below), and the payment of operating expenses, including incentive compensation to our employees and interest expense on our repurchase agreements, Notes Payable and lines of credit, and the payment of income taxes.

For the three months ended March 31, 2021, AUM for Wealth Management increased 4%, reflecting a 3% 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 8% and 3%, respectively, during the period.

Wealth Management lagged the fixed income composite on a 1 and 3 year basis by approximately 10 basis points and 50 basis points, respectively, during the period.

For the three months ended March 31, 2021, the S&P 500 was up approximately 6% and the fixed income composite was down approximately 1%.

AUM from our unconsolidated affiliates increased 3% compared to December 31, 2020, primarily related to positive performance in ABS and Atalanta Sosnoff.

Three Months Ended March 31, 2021 versus March 31, 2020

Investment Management Net Revenues were $15.0 million for the three months ended March 31, 2021, compared to $13.4 million for the three months ended March 31, 2020, which represented an increase of 13%.

Asset Management and Administration Fees earned from the management of client portfolios increased 17% for the three months ended March 31, 2021, primarily driven by an increase of $2.6 million in fees from Wealth Management clients, as associated AUM increased 28%.

Fee-based revenues included $0.07 million of revenues from performance fees for the three months ended March 31, 2020.

Income from Equity Method Investments increased from the three months ended March 31, 2020, as a result of an increase in earnings from our investments in ABS and Atalanta Sosnoff.

Operating Expenses were $11.6 million for the three months ended March 31, 2021, compared to $12.7 million for the three months ended March 31, 2020, a decrease of $1.1 million, or 9%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $8.7 million for the three months ended March 31, 2021, compared to $8.8 million for the three months ended March 31, 2020, a decrease of $0.1 million, or 1%.

Non-Compensation expenses, as a component of Operating Expenses, were $2.9 million for the three months ended March 31, 2021, compared to $3.9 million for the three months ended March 31, 2020, a decrease of $1.0 million, or 26%.

Other Expenses of $0.03 million for the three months ended March 31, 2020 included Special Charges, Including Business Realignment Costs, related to separation and transition benefits and related costs as a result of the review of our operations.

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 (prior to the sale of our ECB business), Notes Payable and lines of credit, and the payment of income taxes.

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

1 unchanged sentence

Commissions earned from our agency trading activities are generally received from our clearing broker within 11 days.

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

Fees from our Wealth Management business (and previously our Institutional Asset Management business, prior to the sale of our ECB business) 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 and prior year's deferred compensation.

4 unchanged sentences

A summary of our operating, investing and financing cash flows is as follows:

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(dollars in thousands)

1 unchanged sentence

Operating activities:

Net income $ 165,551 $ 38,880

Non-cash charges 106,528 121,556

8 unchanged sentences

End of Period $ 419,597 $ 600,140

Nine Months Ended September 30, 2020 .

Cash, Cash Equivalents and Restricted Cash were $1.16 billion at September 30, 2020 , an increase of $514.8 million versus Cash, Cash Equivalents and Restricted Cash of $643.9 million at December 31, 2019 .

Operating activities resulted in a net inflow of $283.2 million , primarily related to earnings, partially offset by the payment of 2019 bonus awards and deferred cash compensation.

Cash of $481.2 million was provided by investing activities primarily related to net proceeds from sales and maturities of investment securities and the maturity of certificates of deposit, partially offset by purchases of equipment and leasehold improvements, primarily related to the expansion of our headquarters in New York.

Financing activities during the period used cash of $248.4 million , primarily for purchases of treasury stock and the payment of dividends and distributions to noncontrolling interest holders.

Three Months Ended March 31, 2021.

Cash, Cash Equivalents and Restricted Cash were $419.6 million at March 31, 2021, a decrease of $418.6 million versus Cash, Cash Equivalents and Restricted Cash of $838.2 million at December 31, 2020.

Operating activities resulted in a net outflow of $330.1 million, primarily related to the payment of 2020 bonus awards and deferred cash compensation, partially offset by earnings.

Cash of $190.2 million was provided by investing activities primarily related to net proceeds from sales and maturities of investment securities, partially offset by the purchase of certificates of deposit and purchases of equipment and leasehold improvements, primarily related to the expansion of our headquarters in New York.

Financing activities during the period used cash of $280.5 million, primarily for purchases of treasury stock, the payment of our Notes Payable and dividends and distributions to noncontrolling interest holders, partially offset by the issuance of the 2021 Private Placement Notes.

For further information, see Note 11 to our unaudited condensed consolidated financial statements.

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

currencies to U.S.

Nine Months Ended September 30, 2019.

Cash, Cash Equivalents and Restricted Cash were $313.6 million at September 30, 2019, a decrease of $486.5 million versus Cash, Cash Equivalents and Restricted Cash of $800.1 million at December 31, 2018.

Operating activities resulted in a net inflow of $91.0 million, primarily related to earnings, partially offset by the payment of 2018 incentive compensation.

Cash of $354.0 million was used in investing activities primarily related to net purchases of investment securities and certificates of deposit and purchases of furniture, equipment and leasehold improvements, primarily related to the expansion of our headquarters in New York.

Financing activities during the period used cash of $218.6 million, primarily for purchases of treasury stock and noncontrolling interests, the payment of dividends and distributions to noncontrolling interest holders, partially offset by the issuance of the 2019 Private Placement Notes.

For further information see Note 12 to our unaudited condensed consolidated financial statements.

Three Months Ended March 31, 2020.

Cash, Cash Equivalents and Restricted Cash were $600.1 million at March 31, 2020, a decrease of $43.7 million versus Cash, Cash Equivalents and Restricted Cash of $643.9 million at December 31, 2019.

Operating activities resulted in a net outflow of $174.3 million, primarily related to the payment of 2019 bonus awards and deferred cash compensation, partially offset by earnings.

Cash of $324.8 million was provided by investing activities primarily related to the maturity of certificates of deposit and net proceeds from sales and maturities of investment securities, partially offset by purchases of equipment and leasehold improvements, primarily related to the expansion of our headquarters in New York.

Financing activities during the period used cash of $185.8 million, primarily for purchases of treasury stock and the payment of dividends and distributions to noncontrolling interest holders.

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

currencies to U.S.

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.

3 unchanged sentences

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

In addition, dividends on Class A Shares, and related distributions to partners of Evercore LP, are paid when and if declared by the Board of Directors, which is generally quarterly.

In addition, dividends on

Class A Shares, and related distributions to partners of Evercore LP, are paid when and if declared by the Board of Directors, which is generally quarterly.

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 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 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.

14 unchanged sentences

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.

For information on the current environment see COVID-19 below.

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.

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

These circumstances could include unfavorable market conditions or the loss of key personnel of the investee.

The worldwide COVID-19 pandemic has posed, and is expected to continue posing, significant challenges for our business.

Our revenues and cash flows have been adversely impacted to date, although our broad and diverse capabilities, including underwriting, restructuring, capital markets advisory and equity commissions and related fees, have enabled us to predominantly offset weakened M&A activity and offer relevant services to our clients.

Our teams, the substantial majority of whom are working remotely, continue to work diligently, though there remains uncertainty as to how the pandemic and government response may impact the markets and our clients' needs in the future.

We continue to monitor our cash levels, liquidity, regulatory capital requirements, debt covenants and our other contractual obligations regularly, as well as decisions related to capital projects and returning capital to investors.

For a further discussion of risks related to our business, refer to "Risk Factors" in our 2019 Form 10-K and in Item 1A.

"Risk Factors" of our Form 10-Q for the first quarter of 2020.

Treasury and Noncontrolling Interest Repurchases

3 unchanged sentences

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

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.

This program may be suspended or discontinued at any time and does not have a specified expiration date.

During the nine months ended September 30, 2020 , we repurchased 854,134 Class A Shares, at an average cost per share of $75.93 , for $64.9 million pursuant to our repurchase program.

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

This program may be suspended or discontinued at any time and does not have a

specified expiration date.

During the three months ended March 31, 2021, we repurchased 1,023,234 Class A Shares, at an average cost per share of $125.00, for $127.9 million pursuant to our repurchase program.

On April 27, 2021, 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.

In addition, periodically, we buy shares into treasury from our employees in order to allow them to satisfy their minimum tax requirements for share deliveries under our share equity plan.

During the nine months ended September 30, 2020 , we repurchased 1,032,557 Class A Shares, at an average cost per share of $76.18 , for $78.6 million primarily related to minimum tax withholding requirements of share deliveries.

The aggregate 1,886,691 Class A Shares repurchased during the nine months ended September 30, 2020 , were acquired for aggregate purchase consideration of $143.5 million, at an average cost per share of $76.07 .

For further information see COVID-19 above.

During the three months ended March 31, 2021, we repurchased 917,196 Class A Shares, at an average cost per share of $116.61, for $107.0 million primarily related to minimum tax withholding requirements of share deliveries.

The aggregate 1,940,430 Class A Shares repurchased during the three months ended March 31, 2021 were acquired for aggregate purchase consideration of $234.9 million, at an average cost per share of $121.03.

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 Notes, $67.0 million aggregate principal amount of our 5.23% Series B Notes, $48.0 million aggregate principal amount of our 5.48% Series C Notes and $17.0 million aggregate principal amount of our 5.58% Series D Notes, pursuant to 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 Notes, $67.0 million aggregate principal amount of our 5.23% Series B Notes, $48.0 million aggregate principal amount of our 5.48% Series C Notes and $17.0 million aggregate principal amount of our 5.58% Series D Notes, pursuant to 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.

In March 2021, we repaid the $38.0 million aggregate principal amount of our Series A Notes.

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.

occurrence of a change of control, the holders of the 2016 Private Placement Notes will have the right to require us to prepay the entire unpaid principal amounts held by each holder of the 2016 Private Placement Notes plus accrued and unpaid interest to the prepayment date.

We may, at our option, prepay all, or from time to time any part of, the 2016 Private Placement Notes (without regard to Series), in an amount not less than 5% of the aggregate principal amount of the 2016 Private Placement Notes then outstanding at 100% of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the 2016 Private Placement Notes will have the right to require us to prepay the entire unpaid principal amounts held by each holder of the 2016 Private Placement Notes plus accrued and unpaid interest to the prepayment date.

The 2016 Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default.

As of September 30, 2020 , we were in compliance with all of these covenants.

As of March 31, 2021, we were in compliance with all of these covenants.

On August 1, 2019, we issued $175.0 million and £25.0 million of senior unsecured notes through private placement.

5 unchanged sentences

The 2019 Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio and a minimum tangible net worth, and customary events of default.

As of September 30, 2020 , we were in compliance with all of these covenants.

As of March 31, 2021, we were in compliance with all of these covenants.

On March 29, 2021, we issued an aggregate of $38.0 million of senior notes, comprised of $38.0 million aggregate principal amount of our 1.97% Series I Notes, pursuant to the 2021 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 2021 Private Placement Notes is payable semi-annually and the 2021 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 2021 Private Placement Notes, in an amount not less than 5% of the aggregate principal amount of the 2021 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 2021 Private Placement Notes will have the right to require us to prepay the entire unpaid principal amounts held by each holder of the 2021 Private Placement Notes plus accrued and unpaid interest to the prepayment date.

The 2021 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 March 31, 2021, we were in compliance with all of these covenants.

Lines of Credit

2 unchanged sentences

In addition, the agreement contains certain reporting covenants, as well as certain debt covenants that prohibit East and us from incurring other indebtedness, subject to specified exceptions.

We and our consolidated subsidiaries were in compliance with these covenants as of September 30, 2020 .

Drawings under this facility bear interest at the prime rate.

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

We and our consolidated subsidiaries were in compliance with these covenants as of March 31, 2021.

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.

2 unchanged sentences

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 September 30, 2020 .

We and our consolidated subsidiaries were in compliance with these covenants as of March 31, 2021.

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.

1 unchanged sentence

East is only permitted to borrow under this facility if there is no undrawn availability under the Existing PNC Facility and must repay indebtedness under this facility prior to repaying indebtedness under the Existing PNC Facility.

There have been no drawings under this facility as of September 30, 2020 .

ECB maintains a line of credit with BBVA Bancomer to fund its trading activities on an intra-day and overnight basis.

The facility has a maximum aggregate principal amount of approximately $6.8 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.

There have been no drawings under this facility as of March 31, 2021.

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

Other Commitments

2 unchanged sentences

in 2018 and future years in conjunction with the enactment of the Tax Cuts and Jobs Act on December 22, 2017.

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.

We have made certain capital commitments with respect to our investment activities, which are included in the Contractual Obligations section below.

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

5 unchanged sentences

We expect to spend approximately $5.0 million, net of a tenant improvement allowance, to improve the premises under this lease over the next twelve months.

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 unaudited condensed consolidated financial statements and COVID-19 above.

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 Unaudited Condensed 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 Unaudited Condensed 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 Unaudited Condensed Consolidated Statements of Financial Condition have an estimated average time to maturity of approximately 1.2 years , as of September 30, 2020 , 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 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.

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 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 September 30, 2020 and December 31, 2019 , a summary of ECB's assets, liabilities and risk measures related to its collateralized financing activities is as follows:

September 30, 2020

December 31, 2019

Market Value of Collateral Received or (Pledged)

(dollars in thousands)

Financial Instruments Owned and Pledged as Collateral at Fair Value

Securities Purchased Under Agreements to Resell

Securities Sold Under Agreements to Repurchase

Net Liabilities

Risk Measures

Portfolio sensitivity to a 100 basis point increase in the interest rate

Portfolio sensitivity to a 100 basis point decrease in the interest rate

Our work at these premises, which was temporarily suspended at the end of the first quarter of 2020 as a result of the COVID-19 pandemic, resumed in June 2020.

For further information see Note 9 to our unaudited condensed consolidated financial statements.

Contractual Obligations

For a further discussion of our contractual obligations, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

On July 1, 2018, we entered into a new lease agreement for office space at our headquarters at 55 East 52nd St., New York, New York.

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 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.

When all floors have commenced, we will have approximately 375,000 square feet of space at this location.

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

We had total commitments (not reflected on our Unaudited Condensed Consolidated Statements of Financial Condition ) relating to future capital contributions to private equity funds of $12.0 million and $13.8 million as of September 30, 2020 and December 31, 2019 , respectively.

We had total commitments (not reflected on our Unaudited Condensed Consolidated Statements of Financial Condition) relating to future capital contributions to private equity funds of $11.8 million and $12.0 million as of March 31, 2021 and December 31, 2020, respectively.

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

6 unchanged sentences

Market and Investment Risk

We hold equity securities and invest in exchange-traded funds and mutual funds, principally as an economic hedge against our deferred compensation program.

As of September 30, 2020 , the fair value of our investments with these products, based on closing prices, was $96.1 million.

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 $9.6 million, $19.2 million and $28.8 million, respectively, for the three months ended September 30, 2020 .

We hold equity securities and invest in exchange-traded funds principally as an economic hedge against our deferred compensation program.

As of March 31, 2021, the fair value of our investments with these products, based on closing prices, was $131.3 million.

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 $13.1 million, $26.3 million and $39.4 million, respectively, for the three months ended March 31, 2021.

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.

1 unchanged sentence

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

The Company had realized losses of ($4.0) million for the nine months ended September 30, 2020 .

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 the deferred cash compensation program.

These contracts settled in June 2019.

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

The Company had net realized gains of $0.1 million for the nine months ended September 30, 2019 .

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

We had net unrealized losses of $9.2 million for the three months ended March 31, 2020.

Private Equity Funds

1 unchanged sentence

Valuations and analysis regarding our investments in Trilantic and Glisco are performed by their respective professionals, and thus we are not involved in determining the fair value for the portfolio companies of such funds.

We estimate that a hypothetical 10% adverse change in the value of the private equity funds would have resulted in a decrease in pre-tax income of approximately $1.5 million for the three months ended September 30, 2020 .

We estimate that a hypothetical 10% adverse change in the value of the private equity funds would have resulted in a decrease in pre-tax income of approximately $1.7 million for the three months ended March 31, 2021.

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.

4 unchanged sentences

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

For the nine months ended September 30, 2020 , the net impact of the fluctuation of foreign currencies recorded in Other Comprehensive Income (Loss) within the Unaudited Condensed Consolidated Statement of Comprehensive Income was ($2.9) million .

For the three months ended March 31, 2021, the net impact of the fluctuation of foreign currencies recorded in Other Comprehensive Income (Loss) within the Unaudited Condensed

Consolidated Statement of Comprehensive Income was $1.6 million.

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.

5 unchanged sentences

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 determine the adequacy of the allowance by estimating the probability of loss based on the 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 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.

The collection period for restructuring transaction receivables may exceed 90 days.

We recorded bad debt expense of approximately $5.9 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 and December 31, 2019 , total receivables recorded in Accounts Receivable amounted to $282.4 million and $296.4 million , respectively, net of an allowance for doubtful accounts, and total receivables recorded in Other Assets amounted to $63.0 million and $63.6 million, respectively.

We reversed bad debt expense of approximately $1.7 million for the three months ended March 31, 2021 and recorded bad debt expense of approximately $0.5 million for the three months ended March 31, 2020.

As of March 31, 2021 and December 31, 2020, total receivables recorded in Accounts Receivable amounted to $356.4 million and $368.3 million, respectively, net of an allowance for doubtful accounts, and total receivables recorded in Other Assets amounted to $68.5 million and $71.0 million, respectively.

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 September 30, 2020 , total contract assets recorded in Other Current Assets and Other Assets amounted to $19.3 million and $2.4 million , respectively.

As of March 31, 2021, total contract assets recorded in Other Current Assets and Other Assets amounted to $27.8 million and $4.2 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.

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 September 30, 2020 , we had Investment Securities of $100.8 million , of which 5% were treasury bills and notes.

As of March 31, 2021, we had Investment Securities of $799.2 million, of which 84% were treasury bills.

Critical Accounting Policies and Estimates

4 unchanged sentences

For a discussion of our critical accounting policies and estimates, refer to our Annual Report on Form 10-K for the year ended December 31, 2020.

We adopted ASU 2016-13 on January 1, 2020, which requires credit losses to be based on expected losses rather than incurred losses.

See Notes 2 and 3 to our unaudited condensed consolidated financial statements for further information.

Recently Issued Accounting Standards

For a discussion of other recently issued accounting standards and their impact or potential impact on our consolidated financial statements, see Note 3 to our unaudited condensed consolidated financial statements .

For a discussion of recently issued accounting standards and their impact or potential impact on our consolidated financial statements, see Note 3 to our unaudited condensed consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis