Silvercrest Asset Management Group Inc. 10-Q

Item 1. Financial Statements Silvercrest Asset Management Group Inc. Condensed Consolidated Statements of Financial Condition (Unaudited) (In thousands, except share and par value data) March 31, 2021 December 31, 2020 Assets Cash and cash equivalents $ 42,644 $ 62,498 Investments 53 914 Receivables, net 8,589 8,341 Due from Silvercrest Funds 1,228 1,018 Furniture, equipment and leasehold improvements, net 5,384 5,523 Goodwill 63,675 63,675 Operating lease assets 29,254 30,068 Finance lease assets 293 254 Intangible assets, net 25,896 26,553 Deferred tax asset—tax receivable agreement 11,398 11,397 Prepaid expenses and other assets 3,807 3,563 Total assets $ 192,221 $ 213,804 Liabilities and Equity Accounts payable and accrued expenses $ 20,564 $ 18,040 Accrued compensation 9,753 33,849 Borrowings under credit facility 11,732 12,600 Operating lease liabilities 35,231 36,127 Finance lease liabilities 298 259 Deferred tax and other liabilities 9,509 9,530 Total liabilities 87,087 110,405 Commitments and Contingencies (Note 10) Equity Preferred Stock, par value $ 0.01 , 10,000,000 shares authorized; none issued and outstanding, as of March 31, 2021 and December 31, 2020 — — Class A common stock, par value $ 0.01 , 50,000,000 shares authorized; 9,658,297 and 9,650,692 issued and outstanding, as of March 31, 2021 and December 31, 2020, respectively 96 96 Class B common stock, par value $ 0.01 , 25,000,000 shares authorized; 4,769,835 and 4,721,646 issued and outstanding, as of March 31, 2021 and December 31, 2020, respectively 47 46 Additional Paid-In Capital 51,102 51,039 Retained earnings 20,505 19,498 Total Silvercrest Asset Management Group Inc.’s equity 71,750 70,679 Non-controlling interests 33,384 32,720 Total equity 105,134 103,399 Total liabilities and equity $ 192,221 $ 213,804 See accompanying notes to condensed consolidated financial statements. 1 Silvercrest Asset Management Group Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share and per share data) Three months ended March 31, 2021 2020 Revenue Management and advisory fees $ 30,205 $ 27,388 Family office services 1,032 977 Total revenue 31,237 28,365 Expenses Compensation and benefits 17,649 15,708 General and administrative 7,900 43 Total expenses 25,549 15,751 Income before other income (expense), net 5,688 12,614 Other income (expense), net Other income (expense), net 7 7 Interest income 2 6 Interest expense ( 105 ) ( 191 ) Total other income (expense), net ( 96 ) ( 178 ) Income before provision for income taxes 5,592 12,436 Provision for income taxes 1,257 2,746 Net income 4,335 9,690 Less: net income attributable to non-controlling interests ( 1,783 ) ( 4,158 ) Net income attributable to Silvercrest $ 2,552 $ 5,532 Net income per share: Basic $ 0.26 $ 0.59 Diluted $ 0.26 $ 0.59 Weighted average shares outstanding: Basic 9,651,765 9,391,367 Diluted 9,660,007 9,396,072 See accompanying notes to condensed consolidated financial statements. 2 Silvercrest Asset Management Group Inc. Condensed Consolidated Statements of Changes in Equity (Unaudited) (In thousands) Class A Common Stock Shares Class A Common Stock Amount Class B Common Stock Shares Class B Common Stock Amount Additional Paid-In Capital Retained Earnings Total Silvercrest Asset Management Group Inc.’s Equity Non- controlling Interest Total Equity January 1, 2020 9,330 $ 93 5,031 $ 49 $ 49,246 $ 15,648 $ 65,036 $ 32,771 $ 97,807 Distributions to partners — — — — — — — ( 2,226 ) ( 2,226 ) Repayment of notes receivable from partners — — — — — — — 300 300 Equity-based compensation — — — — 9 — 9 100 109 Net Income — — — — — 5,532 5,532 4,158 9,690 Deferred tax, net of amounts payable under tax receivable agreement — — — — ( 364 ) — ( 364 ) — ( 364 ) Accrued interest on notes receivable from partners — — — — — — — ( 2 ) ( 2 ) Share conversion 176 2 ( 176 ) ( 2 ) 1,149 — 1,149 ( 1,149 ) — Dividends paid on Class A common stock - $ 0.15 per share — — — — — ( 1,520 ) ( 1,520 ) — ( 1,520 ) March 31, 2020 9,506 $ 95 4,855 $ 47 $ 50,040 $ 19,660 $ 69,842 $ 33,952 $ 103,794 January 1, 2021 9,651 96 4,722 46 $ 51,039 $ 19,498 $ 70,679 $ 32,720 $ 103,399 Distributions to partners — — — — — — — ( 1,758 ) ( 1,758 ) Issuance of notes receivable from partners — — — — — — — ( 475 ) ( 475 ) Issuance of Class B shares — — 56 1 — — 1 475 476 Repayment of notes receivable from partners — — — — — — — 228 228 Equity-based compensation — — — — — — — 469 469 Net Income — — — — — 2,552 2,552 1,783 4,335 Deferred tax, net of amounts payable under tax receivable agreement — — — — 7 — 7 — 7 Accrued interest on notes receivable from partners — — — — — — — ( 2 ) ( 2 ) Share conversion 8 — ( 8 ) — 56 — 56 ( 56 ) — Dividends paid on Class A common stock - $ 0.16 per share — — — — — ( 1,545 ) ( 1,545 ) — ( 1,545 ) March 31, 2021 9,658 $ 96 4,770 $ 47 $ 51,102 $ 20,505 $ 71,750 $ 33,384 $ 105,134 See accompanying notes to condensed consolidated financial statements. 3 Silvercrest Asset Management Group Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three months ended March 31, 2021 2020 Cash Flows From Operating Activities Net income $ 4,335 $ 9,690 Adjustments to reconcile net income to net cash used in operating activities: Equity-based compensation 469 108 Depreciation and amortization 968 1,007 Deferred income taxes ( 12 ) 2,306 Non-cash interest on notes receivable from partners ( 2 ) ( 2 ) Interest on notes payable 32 — Non-cash lease expense 814 323 Distributions received from investment funds 861 1,004 Cash flows due to changes in operating assets and liabilities: Receivables and Due from Silvercrest Funds ( 458 ) 1,803 Prepaid expenses and other assets ( 652 ) ( 732 ) Accounts payable and accrued expenses 3,045 ( 6,354 ) Accrued compensation ( 24,096 ) ( 23,910 ) Operating lease liabilities ( 896 ) ( 400 ) Deferred and other liabilities ( 2 ) 40 Net cash used in operating activities ( 15,594 ) ( 15,117 ) Cash Flows From Investing Activities Acquisition of furniture, equipment and leasehold improvements $ ( 142 ) $ ( 173 ) Net cash used in investing activities ( 142 ) ( 173 ) Cash Flows From Financing Activities Earn-outs paid related to acquisitions $ ( 114 ) $ ( 413 ) Repayments of notes payable ( 900 ) ( 900 ) Principal payments on financing leases ( 30 ) ( 30 ) Distributions to partners ( 1,758 ) ( 2,226 ) Dividends paid on Class A common stock ( 1,544 ) ( 1,520 ) Payments from partners on notes receivable 228 300 Net cash used in financing activities ( 4,118 ) ( 4,789 ) Net decrease in cash and cash equivalents ( 19,854 ) ( 20,079 ) Cash and cash equivalents, beginning of period 62,498 52,832 Cash and cash equivalents, end of period $ 42,644 $ 32,753 Three months ended March 31, 2021 2020 Supplemental Disclosures of Cash Flow Information Net cash paid during the period for: Income taxes $ 1,273 $ 940 Interest 64 183 Supplemental Disclosures of Non-cash Financing and Investing Activities Recognition of deferred tax assets as a result of share conversions $ 21 $ 602 Notes receivable from new partners issued for capital contributions to Silvercrest L.P. 475 — Assets acquired under finance lease 86 — See accompanying notes to condensed consolidated financial statements. 4 Silvercrest Asset Management Group Inc. Notes to Condensed Consolidated Financial Statements As of March 31, 2021 and December 31, 2020 and for the Three Months ended March 31, 2021 and 2020 (Unaudited) (Dollars in thousands, except per share and par value data and as otherwise indicated) 1. ORGANIZATION AND BUSINESS Silvercrest Asset Management Group Inc. (“Silvercrest”), together with its consolidated subsidiary, Silvercrest L.P., a limited partnership, (collectively the “Company”), was formed as a Delaware corporation on July 11, 2011. Silvercrest is a holding company that was formed in order to carry on the business of Silvercrest L.P., the managing member of our operating subsidiary, and its subsidiaries. Effective on June 26, 2013, Silvercrest became the sole general partner of Silvercrest L.P. and its only material asset is the general partner interest in Silvercrest L.P., represented by 9,658,297 Class A units or approximately 66.9 % of the outstanding interests of Silvercrest L.P. Silvercrest controls all of the businesses and affairs of Silvercrest L.P. and, through Silvercrest L.P. and its subsidiaries, continues to conduct the business previously conducted by these entities prior to the reorganization. Silvercrest L.P., together with its consolidated subsidiaries (collectively “SLP”), provides investment management and family office services to individuals and families and their trusts, and to endowments, foundations and other institutional investors primarily located in the United States of America. The business includes the management of funds of funds and other investment funds, collectively referred to as the “Silvercrest Funds”. Silvercrest L.P. was formed on December 10, 2008 and commenced operations on January 1, 2009. On March 11, 2004, Silvercrest Asset Management Group LLC (“SAMG LLC”) acquired 100 % of the outstanding shares of James C. Edwards Asset Management, Inc. (“JCE”) and subsequently changed JCE’s name to Silvercrest Financial Services, Inc. (“SFS”). On December 31, 2004, SLP acquired 100 % of the outstanding shares of the LongChamp Group, Inc. (now SAM Alternative Solutions, Inc.) (“LGI”). Effective March 31, 2005, SLP entered into an Asset Contribution Agreement with and acquired all of the assets, properties, rights and certain liabilities of Heritage Financial Management, LLC (“HFM”). Effective October 3, 2008, SLP acquired 100 % of the outstanding limited liability company interests of Marathon Capital Group, LLC (“MCG”) through a limited liability company interest purchase agreement dated September 22, 2008. On November 1, 2011, SLP acquired certain assets of Milbank Winthrop & Co. (“Milbank”). On April 1, 2012, SLP acquired 100 % of the outstanding limited liability company interests of MW Commodity Advisors, LLC (“Commodity Advisors”). On March 28, 2013, SLP acquired certain assets of Ten-Sixty Asset Management, LLC (“Ten-Sixty”). On June 30, 2015, SLP acquired certain assets of Jamison, Eaton & Wood, Inc. (“Jamison”). On January 11, 2016, SLP acquired certain assets of Cappiccille & Company, LLC (“Cappiccille”). On January 15, 2019, SLP acquired certain assets of Neosho Capital LLC (“Neosho”). On July 1, 2019, SLP acquired substantially all of the assets and assumed certain liabilities of Cortina Asset Management, LLC (“Cortina”). See Notes 3, 7 and 8 for additional information related to the acquisition, goodwill and intangible assets arising from these acquisitions. Tax Receivable Agreement In connection with the Company’s initial public offering (the “IPO”) and reorganization of SLP that were completed on June 26, 2013, Silvercrest entered into a tax receivable agreement (the “TRA”) with the partners of SLP (the “SLP Partners”) that requires Silvercrest to pay the SLP Partners 85 % of the amount of cash savings, if any, in U.S. federal, state and local income tax that Silvercrest actually realizes (or is deemed to realize in the case of an early termination payment by it, or a change in control) as a result of the increases in tax basis and certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA or attributable to exchanges of shares of Class B common stock for shares of Class A common stock. The payments to be made pursuant to the tax receivable agreement are a liability of Silvercrest and not Silvercrest L.P. As of March 31, 2021, this liability is estimated to be $ 9,441 and is included in deferred tax and other liabilities in the Condensed Consolidated Statements of Financial Condition. Silvercrest expects to benefit from the remaining 15 % of cash savings realized, if any. The TRA was effective upon the consummation of the IPO and will continue until all such tax benefits have been utilized or expired, unless Silvercrest exercises its right to terminate the TRA for an amount based on an agreed upon value of the payments remaining to be made under the agreement. The TRA will automatically terminate with respect to Silvercrest’s obligations to an SLP partner if such SLP partner (i) is terminated for cause, (ii) breaches his or her non-solicitation covenants with Silvercrest or any of its subsidiaries or (iii) voluntarily resigns or retires and competes with Silvercrest or any of its subsidiaries in the 12-month period following resignation of employment or retirement, and no further payments will be made to such partner under the TRA. For purposes of the TRA, cash savings in income tax will be computed by comparing Silvercrest’s actual income tax liability to the amount of such taxes that it would have been required to pay had there been no increase in its share of the tax basis of the tangible and intangible assets of SLP. 5 Estimating the amount of payments that Silvercrest may be required to make under the TRA is imprecise by nature, because the actual increase in its share of the tax basis, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including: • the timing of exchanges of Silvercrest’s Class B units for shares of Silvercrest’s Class A common stock—for instance, the increase in any tax deductions will vary depending on the fair market value, which may fluctuate over time, of the depreciable and amortizable assets of SLP at the time of the exchanges; • the price of Silvercrest’s Class A common stock at the time of exchanges of Silvercrest’s Class B units—the increase in Silvercrest’s share of the basis in the assets of SLP, as well as the increase in any tax deductions, will be related to the price of Silvercrest’s Class A common stock at the time of these exchanges; • the extent to which these exchanges are taxable—if an exchange is not taxable for any reason (for instance, if a principal who holds Silvercrest’s Class B units exchanges units in order to make a charitable contribution), increased deductions will not be available; • the tax rates in effect at the time Silvercrest utilizes the increased amortization and depreciation deductions; and • the amount and timing of Silvercrest’s income—Silvercrest will be required to pay 85% of the tax savings, as and when realized, if any. If Silvercrest does not have taxable income, it generally will not be required to make payments under the TRA for that taxable year because no tax savings will have been actually realized. In addition, the TRA provides that upon certain mergers, asset sales, other forms of business combinations, or other changes of control, Silvercrest’s (or its successors’) obligations with respect to exchanged or acquired Silvercrest Class B units, whether exchanged or acquired before or after such transaction, would be based on certain assumptions, including that Silvercrest would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the TRA. Decisions made by the continuing SLP Partners in the course of running Silvercrest’s business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by an exchanging or selling principal under the TRA. For example, the earlier disposition of assets following an exchange or acquisition transaction will generally accelerate payments under the TRA and increase the present value of such payments, and the disposition of assets before an exchange or acquisition transaction will increase an existing owner’s tax liability without giving rise to any rights of a principal to receive payments under the TRA. Were the IRS to successfully challenge the tax basis increases described above, Silvercrest would not be reimbursed for any payments previously made under the TRA. As a result, in certain circumstances, Silvercrest could make payments under the TRA in excess of its actual cash savings in income tax. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying Condensed Consolidated Financial Statements include the accounts of Silvercrest and its wholly owned subsidiaries SLP, SAMG LLC, SFS, MCG, Silvercrest Investors LLC, Silvercrest Investors II LLC and Silvercrest Investors III LLC as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020. All intercompany transactions and balances have been eliminated. The Condensed Consolidated Statement of Financial Condition at December 31, 2020 was derived from the audited Consolidated Statement of Financial Condition at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three months ended March 31, 2021 and 2020 are not necessarily indicative of the operating results that may be expected for the full fiscal year ending December 31, 2021 and 2020 or any future period. The Condensed Consolidated Financial Statements of the Company included herein are unaudited and have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the interim financial position and results, have been made. The Company’s Condensed Consolidated Financial Statements and the related notes should be read together with the Condensed Consolidated Financial Statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 6 The Company evaluates for consolidation those entities it controls through a majority voting interest or otherwise, including those Silvercrest Funds over which the general partner or equivalent is presumed to have control, e.g. by virtue of the limited partners not being able to remove the general partner. The initial step in determin ing whether a fund for which SLP is the general partner is required to be consolidated is assessing whether the fund is a variable interest entity (“VIE”) or a voting interest entity (“VoIE”) . SLP then considers whether the fund is a VoIE in which the unaffiliated limited partners have substantive “kick-out” rights that provide the ability to dissolve (liquidate) the limited partnership or otherwise remove the general partner without cause. SLP considers the “kick-out” rights to be substantive if the general partner for the fund can be removed by the vote of a simple majority of the unaffiliated limited partners and there are no significant barriers to the unaffiliated limited partners’ ability to exercise these rights in that among other things, (1) there are no conditions or timing limits on when the rights can be exercised, (2) there are no financial or operational barriers associated with replacing the general partner, (3) there are a number of qualified replacement investment advisors that would accept appointment at the same fee level, (4) each fund’s documents provide for the ability to call and conduct a vote, and (5) the information necessary to exercise the kick-out rights and related vote are available from the fund and its administrator. If the fund is a VIE, SLP then determines whether it has a variable interest in the fund, and if so, whether SLP is the primary beneficiary. In determining whether SLP is the primary beneficiary, SLP evaluates its control rights as well as economic interests in the entity held either directly or indirectly by SLP. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that SLP is not the primary beneficiary, a quantitative analysis may also be performed. Amendments to the governing documents of the respective Silvercrest Funds could affect an entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date, SLP assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly. During the three months ended March 31, 2021 and 2020, each fund is deemed to be a VoIE and neither SLP nor Silvercrest consolidated any of the Silvercrest Funds. Non-controlling Interest As of March 31, 2021, Silvercrest holds approximately 66.9 % of the economic interests in SLP. Silvercrest is the sole general partner of SLP and, therefore, controls the management of SLP. As a result, Silvercrest consolidates the financial position and the results of operations of SLP and its subsidiaries, and records a non-controlling interest, as a separate component of equity on its Condensed Consolidated Statements of Financial Condition for the remaining economic interests in SLP. The non-controlling interest in the income or loss of SLP is included in the Condensed Consolidated Statements of Operations as a reduction or addition to net income derived from SLP. Segment Reporting The Company views its operations as comprising one operating segment, the investment management industry. Each of the Company’s acquired businesses has similar economic characteristics and has been, or is in the process of becoming, fully integrated. Furthermore, our chief operating decision maker, who is the Company’s Chief Executive Officer, monitors and reviews financial information at a consolidated level for assessing operating results and the allocation of resources. Use of Estimates The preparation of the Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues, expenses and other income reported in the Condensed Consolidated Financial Statements and the accompanying notes. Actual results could differ from those estimates. Significant estimates and assumptions made by management include the fair value of acquired assets and liabilities, determination of equity-based compensation, accounting for income taxes, determination of the useful lives of long-lived assets, and other matters that affect the Condensed Consolidated Financial Statements and related disclosures. Cash and Cash Equivalents The Company considers all highly liquid securities with original maturities of 90 days or less when purchased to be cash equivalents. 7 Equity Method Investments The Company accounts for investment activities related to entities over which the Company exercises significant influence but do not meet the requirements for consolidation, using the equity method of accounting, whereby the Company records its share of the underlying income or losses of these entities. Intercompany profit arising from transactions with affiliates is eliminated to the extent of its beneficial interest. Equity in losses of equity method investments is not recognized after the carrying value of an investment, including advances and loans, has been reduced to zero , unless guarantees or other funding obligations exist. The Company evaluates its equity method investments for impairment, whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The difference between the carrying value of the equity method investment and its estimated fair value is recognized as an impairment when the loss in value is deemed other than temporary. The Company’s equity method investments approximate their fair value at March 31, 2021 and December 31, 2020. The fair value of the equity method investments is estimated based on the Company’s share of the fair value of the net assets of the equity method investee. No impairment charges related to equity method investments were recorded during the three months ended March 31, 2021 or 2020. Receivables and Due from Silvercrest Funds Receivables consist primarily of amounts for management and advisory fees, performance fees, and allocations and family office service fees due from clients and are stated as net realizable value. The Company maintains an allowance for doubtful receivables based on estimates of expected losses and specific identification of uncollectible accounts. The Company charges actual losses to the allowance when incurred. Furniture, Equipment and Leasehold Improvements Furniture, equipment and leasehold improvements consist primarily of furniture, fixtures and equipment, computer hardware and software and leasehold improvements and are recorded at cost less accumulated depreciation. Depreciation and amortization are calculated using the straight-line method over the assets’ estimated useful lives, which for leasehold improvements is the lesser of the lease term or the life of the asset, generally 10 years, and 3 to 7 years for other fixed assets. Business Combinations The Company accounts for business combinations using the acquisition method of accounting. The acquisition method of accounting requires that purchase price, including the fair value of contingent consideration, of the acquisition be allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date. The method for determining relative fair value varied depending on the type of asset or liability and involved management making significant estimates related to assumptions such as future growth rates used to produce financial projections and the selection of unobservable inputs and other assumptions. The inputs used in establishing the fair value are in most cases unobservable and reflect the Company's own judgments about the assumptions market participants would use in pricing the assets acquired and liabilities assumed. Contingent consideration is recorded as part of the purchase price when such contingent consideration is not based on continuing employment of the selling shareholders. Contingent consideration that is related to continuing employment is recorded as compensation expense. Payments made for contingent consideration recorded as part of an acquisition’s purchase price are reflected as financing activities in the Company’s Condensed Consolidated Statements of Cash Flows. The Company remeasures the fair value of contingent consideration at each reporting period using a probability-adjusted discounted cash flow method based on significant inputs not observable in the market and any change in the fair value from either the passage of time or events occurring after the acquisition date, is recorded in earnings. Contingent consideration payments that exceed the acquisition date fair value of the contingent consideration are reflected as an operating activity in the Condensed Consolidated Statements of Cash Flows. The excess of the purchase price over the fair value of the identifiable assets acquired, including intangibles, and liabilities assumed is recorded as goodwill. The Company generally uses valuation specialists to perform appraisals and assist in the determination of the fair values of the assets acquired and liabilities assumed. These valuations require management to make estimates and assumptions that are critical in determining the fair values of the assets and liabilities. During the measurement period, the Company may record adjustments to the assets acquired and liabilities assumed. Any adjustments to provisional amounts that are identified during the measurement period are recorded in the reporting period in which the adjustment amounts are determined. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Goodwill and Intangible Assets Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Goodwill is not amortized but is evaluated for impairment at least annually, on October 1 st of each year, or whenever events or circumstances indicate that impairment may have occurred. 8 The Company accounts for Goodwill under Accounting Standard Codification (“ASC”) No. 350, “Intangibles - Goodwill and Other,” which provides an entity the option to first perform a qualitative assessment of whether a reporting unit’s fair value is more likely than not less than its carrying value, including goodwill. In performing its qualitative assessment, an entity considers the extent to which adverse events or circumstances identified, such as changes in economic conditions, industry and market conditions or entity specific events, could affect the comparison of the reporting unit’s fair value with its carrying amount. If an entity concludes that the fair value of a reporting unit is more likely than not less than its carrying amount, the entity is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and, accordingly, measure the amount, if any, of goodwill impairment loss to be recognized for that reporting unit. The Company utilized this option when performing its annual impairment assessment in 20 20 and 201 9 and concluded that its single reporting unit’s fair value was more likely than not greater than its carrying value, including goodwill. The Company has one reporting unit at March 31, 2021 and December 31, 2020. No goodwill impairment charges were recorded during the three months ended March 31, 2021 and 2020. Intangible assets of the Company are reviewed for impairment whenever events or changes in circumstances indicate that the net carrying amount of the asset may not be recoverable. In connection with such review, the Company also re-evaluates the periods of amortization for these assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed their fair value. Identifiable finite-lived intangible assets are amortized over their estimated useful lives ranging from 3 to 20 years . The method of amortization is based on the pattern over which the economic benefits and generally expected undiscounted cash flows of the intangible asset are consumed. Intangible assets for which no pattern can be reliably determined are amortized using the straight-line method. Intangible assets consist primarily of the contractual right to future management and advisory fees and performance fees and allocations from customer contracts or relationships. Long-lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the net carrying amount of the asset may not be recoverable. In connection with such review, the Company also reevaluates the periods of depreciation and amortization for these assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Partner Distributions Partner incentive allocations, which are determined by the general partner, can be formula-based or discretionary. Partner incentive allocations are treated as compensation expense and recognized in the period in which they are earned. In the event there is insufficient distributable cash flow to make incentive distributions, the general partner in its sole and absolute discretion may determine not to make any distributions called for under the partnership agreement. The remaining net income or loss after partner incentive allocations is generally allocated to unit holders based on their pro rata ownership. Redeemable Partnership Units If a principal of SLP is terminated for cause, SLP has the right to redeem all of the vested Class B units collectively held by the principal and his or her permitted transferees for a purchase price equal to the lesser of (i) the aggregate capital account balance in SLP of the principal and his or her permitted transferees or (ii) the purchase price paid by the terminated principal to first acquire the Class B units. SLP also makes distributions to its partners of various nature including incentive payments, profit distributions and tax distributions. The profit distributions and tax distributions are accounted for as equity transactions. 9 Class A Common Stock The Company’s Class A stockholders are entitled to one vote for each share held of record on all matters submitted to a vote of the Company’s stockholders. Class A stockholders are also entitled to receive dividends, when and if declared by the Company’s board of directors, out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock. Dividends consisting of shares of Class A common stock may be paid only as follows: (i) shares of Class A common stock may be paid only to holders of shares of Class A common stock and (ii) shares of Class A common stock will be paid proportionately with respect to each outstanding share of the Company’s Class A common stock. Upon the Company’s liquidation, dissolution or winding-up, or the sale of all, or substantially all, of the Company’s assets, after payment in full of all amounts required to be paid to creditors and to holders of preferred stock having a liquidation preference, if any, the Class A stockholders will be entitled to share ratably in the Company’s remaining assets available for distribution to Class A stockholders. Class B units of SLP held by principals will be exchangeable for shares of the Company’s Class A common stock, on a one-for-one basis , subject to customary adjustments for share splits, dividends and reclassifications. Class B Common Stock Shares of the Company’s Class B common stock are issuable only in connection with the issuance of Class B units of SLP. When a vested or unvested Class B unit is issued by SLP, the Company will issue the holder one share of its Class B common stock in exchange for the payment of its par value. Each share of the Company’s Class B common stock will be redeemed for its par value and cancelled by the Company if the holder of the corresponding Class B unit exchanges or forfeits its Class B unit pursuant to the terms of the Second Amended and Restated Limited Partnership Agreement of SLP and the terms of the Silvercrest Asset Management Group Inc. 2012 Equity Incentive Plan (the “2012 Equity Incentive Plan”). The Company’s Class B stockholders will be entitled to one vote for each share held of record on all matters submitted to a vote of the Company’s stockholders. The Company’s Class B stockholders will not participate in any dividends declared by the Company’s board of directors. Upon the Company’s liquidation, dissolution or winding-up, or the sale of all, or substantially all, of its assets, Class B stockholders only will be entitled to receive the par value of the Company’s Class B common stock. Revenue Recognition The Company generates revenue from management and advisory fees, performance fees and allocations, and family office services fees. Management and advisory fees and performance fees and allocations are generated by managing assets on behalf of separate accounts and acting as investment adviser for various investment funds. Performance fees and allocations also relate to assets managed in external investment strategies in which the Company has a revenue sharing arrangement and in funds in which the Company has no partnership interest. Management and advisory fees and family office services fees income is recognized through the course of the period in which these services are provided. Income from performance fees and allocations is recorded at the conclusion of the contractual performance period when all contingencies are resolved. In certain arrangements, the Company is only entitled to receive performance fees and allocations when the return on assets under management exceeds certain benchmark returns or other performance targets. The discretionary investment management agreements for the Company’s separately managed accounts do not have a specified term. Rather, each agreement may be terminated by either party at any time, unless otherwise agreed with the client, upon written notice of termination to the other party. The investment management agreements for the Company’s private funds are generally in effect from year to year, and may be terminated at the end of any year (or, in certain cases, on the anniversary of execution of the agreement) (i) by the Company upon 30 or 90 days ’ prior written notice and (ii) after receiving the affirmative vote of a simple majority of the investors in the private fund that are not affiliated with the Company, by the private fund on 60 or 90 days ’ prior written notice. The investment management agreements for the private funds may also generally be terminated effective immediately by either party where the non-terminating party (i) commits a material breach of the terms subject, in certain cases, to a cure period, (ii) is found to have committed fraud, gross negligence or willful misconduct or (iii) terminates, becomes bankrupt, becomes insolvent or dissolves. Each of the Company’s investment management agreements contains customary indemnification obligations from the Company to their clients. The management and advisory fees are primarily driven by the level of the Company’s assets under management. The assets under management increase or decrease based on the net inflows or outflows of funds into the Company’s various investment strategies and the investment performance of its clients’ accounts. In order to increase the Company’s assets under management and expand its business, the Company must develop and market investment strategies that suit the investment needs of its target clients and provide attractive returns over the long term. The Company’s ability to continue to attract clients will depend on a variety of factors including, among others: • the ability to educate the Company’s target clients about the Company’s classic value investment strategies and provide them with exceptional client service; 10 • the relative investment performance of the Company’s investment strategies, as compared to competing products and market indices; • competitive conditions in the investment management and broader financial services sectors; • investor sentiment and confidence; and • the decision to close strategies when the Company deems it to be in the best interests of its clients. The majority of management and advisory fees that the Company earns on separately managed accounts are based on the value of assets under management on the last day of each calendar quarter. Most of the management and advisory fees are billed quarterly in advance on the first day of each calendar quarter. The Company’s basic annual fee schedule for management of clients’ assets in separately managed accounts is generally: (i) for managed equity or balanced portfolios, 1 % of the first $ 10 million and 0.60 % on the balance, (ii) for managed fixed income only portfolios, 0.40 % on the first $ 10 million and 0.30 % on the balance, (iii) for the municipal value strategy, 0.65 %, (iv) for Cortina equity portfolios, 1.0 % on the first $ 25 million, 0.90 % on the next $ 25 million and 0.80 % on the balance and (v) for outsourced chief investment officer portfolios, 0.40 % on the first $ 50 million, 0.32 % of the next $ 50 million and 0.24 % on the balance. The Company’s fee for monitoring non-discretionary assets can range from 0.05 % to 0.01 % but can also be incorporated into an agreed-upon fixed family office service fee. The majority of the Company’s clients pay a blended fee rate since they are invested in multiple strategies. Management fees earned on investment funds that the Company advises are calculated primarily based on the net assets of the funds. Some funds calculate investment fees based on the net assets of the funds as of the last business day of each calendar quarter, whereas other funds calculate investment fees based on the value of net assets on the first business day of the month. Depending on the investment fund, fees are paid either quarterly in advance or quarterly in arrears. For the Company’s private fund clients, the fees range from 0.25 % to 1.5 % annually. Certain management fees earned on investment funds for which the Company performs risk management and due diligence services are based on flat fee agreements customized for each engagement. The Company’s management and advisory fees may fluctuate based on a number of factors, including the following: • changes in assets under management due to appreciation or depreciation of its investment portfolios, and the levels of the contribution and withdrawal of assets by new and existing clients; • allocation of assets under management among its investment strategies, which have different fee schedules; • allocation of assets under management between separately managed accounts and advised funds, for which the Company generally earns lower overall management and advisory fees; and • the level of their performance with respect to accounts and funds on which the Company is paid incentive fees. The Company’s performance fees and allocations may fluctuate based on performance with respect to accounts and funds on which the Company is paid incentive fees and allocations. The Company’s family office services capabilities enable us to provide comprehensive and integrated services to its clients. The Company’s dedicated group of tax and financial planning professionals provide financial planning, tax planning and preparation, partnership accounting and fund administration and consolidated wealth reporting among other services. Family office services income fluctuates based on both the number of clients for whom the Company performs these services and the level of agreed-upon fees, most of which are flat fees. Therefore, non-discretionary assets under management, which are associated with family office services, do not typically serve as the basis for the amount of family office services revenue that is recognized. Family office services fees are also typically billed quarterly in advance at the beginning of the quarter or in arrears after the end of the quarter based on a contractual percentage of the assets managed or upon a contractually agreed-upon flat fee arrangement. Revenue is recognized on a ratable basis over the period in which services are performed. The Company accounts for performance-based revenue in accordance with ASC 606 by recognizing performance fees and allocations as revenue only when it is certain that the fee income is earned and payable pursuant to the relevant agreements. In certain arrangements, the Company is only entitled to receive performance fees and allocations when the return on assets under management exceeds certain benchmark returns or other performance targets. The Company records performance fees and allocations as a component of revenue once the performance fee or allocation, as applicable, has crystalized. As a result, there is no estimate or variability in the consideration when revenue is recorded. Equity-Based Compensation Equity-based compensation cost relating to the issuance of share-based awards to employees is based on the fair value of the award at the date of grant, which is expensed ratably over the requisite service period, net of estimated forfeitures. The forfeiture assumption is 11 ultimately adjusted to the actual forfeiture rate. Therefore, changes in the forfeiture assumptions may affect the timing of the total amount of expense recognized over the vesting period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that have the potential to be settled in cash at the election of the employee or prior to the reorganization related to redeemable partnership units are classified as liabilities (“Liability Awards”) and are adjusted to fair value at the end of each reporting period. Leases The Company accounts for leases under ASU No. 2016-02, “Topic 842, Leases” (“ASC 842”), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. ASC 842 established a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statement of operations. Income Taxes Silvercrest and SFS are subject to federal and state corporate income tax, which requires an asset and liability approach to the financial accounting and reporting of income taxes. SLP is not subject to federal and state income taxes, since all income, gains and losses are passed through to its partners. SLP is, however, subject to New York City unincorporated business tax. With respect to the Company’s incorporated entities, the annual tax rate is based on the income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Judgment is required in determining the tax expense and in evaluating tax positions. The tax effects of any uncertain tax position (“UTP”) taken or expected to be taken in income tax returns are recognized only if it is “more likely-than-not” to be sustained on examination by the taxing authorities, based on its technical merits as of the reporting date. The tax benefits recognized in the Condensed Consolidated Financial Statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company recognizes estimated accrued interest and penalties related to UTPs in income tax expense. The Company recognizes the benefit of a UTP in the period when it is effectively settled. Previously recognized tax positions are derecognized in the first period in which it is no longer more likely than not that the tax position would be sustained upon examination. Recent Accounting Developments In June 2016, the FASB issued ASU 2016-13, “Accounting for Credit Losses” which amends the Board’s guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. This amendment became effective for the Company on January 1, 2020 . The adoption of this ASU did not have a material effect on the Company’s Condensed Consolidated Financial Statements. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The ASU provides guidance for entities to evaluate the accounting for fees paid by a customer in a cloud computing arrangement which includes a software license. ASU 2018-15 became effective for the Company on January 1, 2020 . The adoption of this ASU did not have a material effect on the Company’s Condensed Consolidated Financial Statements . In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This ASU is effective for all public entities beginning March 12, 2020 through December 31, 2022. The Company expects the adoption of this guidance will not have a material effect on the Company’s Condensed Consolidated Financial Statements. 3. ACQUISITIONS Cortina: On April 12, 2019, SAMG LLC and SLP entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Cortina Asset Management, LLC, a Wisconsin limited liability company (“Cortina”), and certain interest holders of Cortina (together, the 12 “Principals of Cortina ”) to acquire, directly or through a designated affiliate, substantially all of the assets of Cortina relating to Cortina’s business of providing investment management, investment advisory, and related services (the “Cortina Acquisition”) . Subject to the terms and conditions set forth in the Purchase Agreement, SAMG LLC agreed to pay to Cortina an aggregate maximum amount of $ 44,937 , 80 % of which was agreed to be paid in cash at closing by SAMG LLC, and 20 % of which was agreed to be paid by SLP in the form of issuance and delivery to certain Principals of Cortina at closing of Class B Units in SLP, in each case subject to certain adjustments as described in the Purchase Agreement. On July 1, 2019, the acquisition was completed pursuant to the Purchase Agreement. At closing, SAMG LLC paid to Cortina an aggregate principal amount of $ 33,577 in cash, and SLP paid an additional $ 8,952 , in the form of issuance and delivery to certain Principals of Cortina of 662,713 Class B Units in SLP. The $33,577 paid in cash represented $ 35,072 in consideration, partially offset by net closing credits due to SAMG LLC for reimbursable expenses from Cortina. In addition, the Purchase Agreement provides for up to an additional $ 26,209 to be paid 80 % in cash with certain Principals of Cortina receiving the remaining 20 % in the form of Class B Units of SLP in potential earn-out payments over the next four years . SAMG LLC determined that the preliminary fair value of contingent consideration pursuant to the terms of the Purchase Agreement whereby the sellers of Cortina are potentially entitled to two retention payments and one growth payment contingent upon the achievement of various revenue targets is $ 13,800 . The estimated fair value of contingent consideration is recognized at the date of acquisition and adjusted for changes in facts and circumstances until the ultimate resolution of the contingency. Changes in the fair value of contingent consideration are reflected as a component of general and administrative expenses in the Condensed Consolidated Statements of Operations. The income approach was used to determine the fair value of these payments, by estimating a range of likely expected outcomes and payouts given these outcomes. The potential payouts were estimated using a Monte Carlo simulation and discounted back to their present values using a risk-free discount rate adjusted to account for SAMG LLC’s credit or counterparty risk to arrive at the present value of the contingent consideration payments. The discount rate for the contingent consideration payments was based on the revenue cost of capital for Cortina’s revenue. The first retention payment, due if revenue for the 12-month period from July 1, 2020 to June 30, 2021 is greater than or equal to 95% of the acquired revenue of $ 13,027 , which represents Cortina’s annual revenue run-rate as of closing (“Acquired Revenue”), is equal to $ 3,370 . If revenue for the period is equal to 75% or less of the Acquired Revenue, there is no first retention payment, and if revenue for the period is between 75% and 95%, the first retention payment will be determined using linear interpolation between $ 0 and $ 3,370 . The second retention payment is based on revenue for the 12-month period from July 1, 2021 to June 30, 2022, with a revenue threshold between 85% and 105% of Acquired Revenue and a maximum retention payment of $ 5,617 . If revenue for the period is equal to 85% or less of the Acquired Revenue, there is no second retention payment, and if revenue for the period is between 85% and 105%, the second retention payment will be determined using linear interpolation between $ 0 and $ 5,617 . The growth payment is based on revenue for the 12-month period from July 1, 2022 to June 30, 2023, with a revenue threshold between 95% and 140% of Acquired Revenue and a maximum payment of $ 17,222 . If revenue for the period is equal to 95% or less of the Acquired Revenue, there is no growth payment, and if revenue for the period is between 95% and 140%, the growth payment will be determined using linear interpolation between $ 0 and $ 17,222 . A fair value adjustment to contingent purchase price consideration of $ 2,300 and ($ 6,000 ) was recorded during the three months ended March 31, 2021 and 2020, respectively, and is included in general and administrative expense in the Condensed Consolidated Statement of Operations for the quarters then ended. SAMG LLC has a liability of $ 17,400 and $ 15,100 as of March 31, 2021 and December 31, 2020, respectively, related to earnout payments to be made in conjunction with the Cortina Acquisition which is included in accounts payable and accrued expenses in the Condensed Consolidated Statements of Financial Condition for contingent consideration. In connection with their receipt of the equity consideration, the Principals of Cortina became subject to the rights and obligations set forth in the limited partnership agreement of SLP and are entitled to distributions consistent with SLP’s distribution policy. In addition, the Principals of Cortina became parties to the exchange agreement between the Company and its principals, which governs the exchange of Class B Units for Class A common stock of the Company (the “Exchange Agreement”), the resale and registration rights agreement between the Company and its principals, which provides the Principals of Cortina with liquidity with respect to shares of Class A common stock of the Company received in exchange for Class B Units (the “Resale and Registration Rights Agreement”), and the TRA of the Company, which entitles the Principals of Cortina to share in a portion of the tax benefit received by the Company upon the exchange of Class B Units for Class A common stock of the Company. The Purchase Agreement includes customary representations, warranties and covenants. 13 The strategic acquisition of Cortina, a long-standing innovative and high-caliber growth equity asset management firm, establishes a growth equity capability for the Company. Furthermore, the Company gains investment professionals that have significant experience and knowledge of the industry and establishes a presence in the Midwest. During the three months ended March 31, 2020 , the Company incurred $ 72 in costs related to the Cortina Acquisition, and has included these in general, administrative and other in the Condensed Consolidated Statement of Operations. The Company believes the recorded goodwill is supported by the anticipated revenues and expected synergies of integrating the operations of Cortina into the Company. Most of the goodwill is expected to be deductible for tax purposes. Neosho: On December 13, 2018, the Company executed an Asset Purchase Agreement (the “Asset Purchase Agreement”) by and among the Company, SLP, SAMG LLC (the “Buyer”) and Neosho Capital LLC, a Delaware limited liability company (“Neosho” or the “Seller”), and Christopher K. Richey, Alphonse I. Chan, Robert K. Choi and Vincent G. Pandes, each such individual a principal of Neosho (together, the “Principals of Neosho”), to acquire certain assets of Neosho. The transaction contemplated by the Asset Purchase Agreement closed on January 15, 2019 and is referred to herein as the “Neosho Acquisition”. Pursuant to the terms of the Asset Purchase Agreement, SAMG LLC acquired substantially all of the business and assets of the Seller, a provider of investment management and advisory services, including goodwill and the benefit of the amortization of goodwill related to such assets. In consideration of the purchased assets and goodwill, SAMG LLC paid to the Seller and the Principals of Neosho an aggregate purchase price consisting of (1) a cash payment of $ 399 (net of cash acquired) and (2) Class B units of SLP issued to the Principals of Neosho with a value equal to $ 20 and an equal number of shares of Class B common stock of the Company, having voting rights but no economic interest. The Company determined that the acquisition-date fair value of the contingent consideration was $ 1,686 , based on the likelihood that the financial and performance targets described in the Asset Purchase Agreement will be achieved. SAMG LLC will make a payment of $ 300 to the Principals of Neosho on the first anniversary of the closing date. SAMG LLC will make earnout payments to the Principals of Neosho as soon as practicable following December 31, 2020, 2021, 2022 and 2023, in an amount equal to the greater of (i) $ 100 and (ii) the product obtained by multiplying (x) 50 % by (y) the revenue of Neosho as of such payment date less the revenue of Neosho as of the immediately preceding payment date for the prior year. Earnout payments will be paid 75 % in cash and 25 % in equity. The estimated fair value of contingent consideration is recognized at the date of acquisition and adjusted for changes in facts and circumstances until the ultimate resolution of the contingency. Changes in the fair value of contingent consideration are reflected as a component of general and administrative expenses in the Condensed Consolidated Statements of Operations. The fair value of the contingent consideration was based on discounted cash flow models using projected revenue for each earnout period. The discount rate applied to the projected revenue was determined based on the weighted average cost of capital for the Company and took into account that the overall risk associated with the payments was similar to the overall risks of the Company as there is no target, floor or cap associated the contingent payments. The Company has a liability of $ 1,028 related to earnout payments to be made in conjunction with the Neosho Acquisition which is included in accounts payable and accrued expenses in the Condensed Consolidated Statements of Financial Condition as of March 31, 2021 and December 31, 2020, for contingent consideration. During the three months ended March 31, 2021 and 2020 , the Company made contingent purchase price payments to Neosho of $ 0 and $ 300 , respectively. 4. INVESTMENTS AND FAIR VALUE MEASUREMENTS Investments Investments include $ 53 and $ 914 as of March 31, 2021 and December 31, 2020, respectively, representing the Company’s interests in the Silvercrest Funds which have been established and managed by the Company and its affiliates. The Company’s financial interest in these funds can range in amounts up to 2 % of the net assets of the funds. The Company applies the equity method to account for its interests in affiliated investment funds, despite the Company’s insignificant financial interest therein, because the Company exercises significant influence over and typically serves as the general partner, managing member, or equivalent of these funds. During 2007, the Silvercrest Funds granted the unaffiliated investors in each respective fund the right, by a simple majority of the fund’s unaffiliated investors, without cause, to remove the general partner or equivalent of that fund or to accelerate the liquidation date of that fund in accordance with certain procedures. At March 31, 2021 and December 31, 2020, the Company determined that none of the Silvercrest Funds were required to be consolidated. The Company’s involvement with these entities began on the dates that they were formed, which range from July 2003 to July 2014. 14 Fair Value Measurements GAAP establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. • Level I: Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments in Level I include listed equities and listed derivatives. • Level II: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments which are generally included in Level II include corporate bonds and loans, less liquid and restricted equity securities, certain over-the counter derivatives, and certain fund of hedge funds investments in which the Company has the ability to redeem its investment at net asset value at, or within three months of, the reporting date. • Level III: Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in Level III generally include general and limited partnership interests in private equity and real estate funds, credit-oriented funds, certain over-the-counter derivatives, funds of hedge funds which use net asset value per share to determine fair value in which the Company may not have the ability to redeem its investment at net asset value at, or within three months of, the reporting date, distressed debt and non-investment grade residual interests in securitizations and collateralized debt obligations. Liabilities that are included in Level III generally include contingent consideration related to the acquisition earnouts. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. At March 31, 2021 and December 31, 2020, the Company did no t have any financial assets or liabilities that are recorded at fair value on a recurring basis, with the exception of the contingent consideration related to the acquisition earnouts. Contingent Consideration For business acquisitions, the Company recognizes the fair value of goodwill and other acquired intangible assets, and estimated contingent consideration at the acquisition date as part of purchase price. This fair value measurement is based on unobservable (Level 3) inputs. The following table represents changes in the fair value of estimated contingent consideration for the year ended December 31, 2020 and the three months ended March 31, 2021: Balance at January 1, 2020 $ 15,921 Additions to estimated contingent consideration — Payments of contingent consideration ( 741 ) Non-cash changes in fair value of estimated contingent consideration 1,222 Balance at December 31, 2020 16,402 Additions to estimated contingent consideration — Payments of contingent consideration ( 114 ) Non-cash changes in fair value of estimated contingent consideration 2,300 Balance at March 31, 2021 $ 18,588 Estimated contingent consideration is included in accounts payable and accrued expenses in the Condensed Consolidated Statements of Financial Condition. Payments of contingent consideration are included in earn-outs paid related to acquisitions in financing activities in the Condensed Consolidated Statements of Cash Flows. In determining fair value of the estimated contingent consideration, the acquired business’ future performance is estimated using financial projections for the acquired business. These financial projections, as well as alternative scenarios of financial performance, are measured against the performance targets specified in each respective acquisition agreement. In addition, discount rates are 15 established based on the cost of debt and the cost of equity. The Company uses the Monte Carlo Simulation Model to determine the fair value of the Company’s estimated contingent consideration. The significant unobservable inputs used in the fair value measurement of the Company’s estimated contingent consideration are the forecasted growth rates over the measurement period and discount rates. Significant increases or decreases in the Company’s forecasted growth rates over the measurement period or discount rates would result in a higher or lower fair value measurement. Inputs used in the fair value measurement of estimated contingent consideration at March 31, 2021 and December 31, 2020 are summarized below: Monte Carlo Simulation Model March 31, 2021 December 31, 2020 Fair Value Hierarchy Fair Value $ 18,588 $ 16,402 Level 3 Forecasted growth rate 17.2 % 16.4 % Discount rate 11.9 % 11.7 % Please refer to Note 3. Acquisitions for more details on contingent consideration related to acquisition earnouts. At March 31, 2021 and December 31, 2020, financial instruments that are not held at fair value are categorized in the table below: March 31, 2021 December 31, 2020 Carrying Amount Fair Value Carrying Amount Fair Value Fair Value Hierarchy Financial Assets: Cash and cash equivalents $ 42,644 $ 42,644 $ 62,498 $ 62,498 Level 1 (1) Investments $ 53 $ 53 $ 914 $ 914 N/A (2) Financial liabilities: Borrowings under credit facility $ 11,700 $ 11,700 $ 12,600 $ 12,600 Level 2 (3) (1) Includes $ 1,880 and $ 1,398 of cash equivalents at March 31, 2021 and December 31, 2020, respectively, that fall under Level 1 in the fair value hierarchy. (2) Investments consist of the Company’s equity method investments in affiliated investment funds which have been established and managed by the Company and its affiliates. Fair value of investments is based on the net asset value of the affiliated investment funds which is a practical expedient for fair value, which is not included in the fair value hierarchy under GAAP. (3) The carrying value of borrowings under the revolving credit agreement approximates fair value, which is determined based on interest rates currently available to the Company for similar debt and the weighted average cost of capital of the Company. 5. RECEIVABLES, NET The following is a summary of receivables as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 Management and advisory fees receivable $ 3,329 $ 3,780 Unbilled receivables 5,706 5,107 Other receivables 2 2 Receivables 9,037 8,889 Allowance for doubtful receivables ( 448 ) ( 548 ) Receivables, net $ 8,589 $ 8,341 16 6. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET The following is a summary of furniture, equipment and leasehold improvements, net as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 Leasehold improvements $ 7,937 $ 7,936 Furniture and equipment 7,414 7,275 Artwork 504 502 Total cost 15,855 15,713 Accumulated depreciation and amortization ( 10,471 ) ( 10,190 ) Furniture, equipment and leasehold improvements, net $ 5,384 $ 5,523 Depreciation expense for the three months ended March 31, 2021 and 2020 was $ 281 and $ 273 , respectively. During the three months ended March 31, 2021, the Company wrote off leased assets of $ 82 , with accumulated depreciation of $ 64 . 7. GOODWILL The following is a summary of the changes to the carrying amount of goodwill for the three months ended March 31, 2021 and the year ended December 31, 2020: March 31, 2021 December 31, 2020 Beginning Gross balance $ 81,090 $ 81,090 Accumulated impairment losses ( 17,415 ) ( 17,415 ) Net balance 63,675 63,675 Ending Gross balance 81,090 81,090 Accumulated impairment losses ( 17,415 ) ( 17,415 ) Net balance $ 63,675 $ 63,675 17 8. INTANGIBLE ASSETS, NET The following is a summary of intangible assets as of March 31, 2021 and December 31, 2020: Customer Relationships Other Intangible Assets Total Cost Balance, January 1, 2021 $ 44,060 $ 2,461 $ 46,521 Balance, March 31, 2021 44,060 2,461 46,521 Useful lives 10-20 years 3-5 years Accumulated amortization Balance, January 1, 2021 ( 17,507 ) ( 2,461 ) ( 19,968 ) Amortization expense ( 657 ) — ( 657 ) Balance, March 31, 2021 ( 18,164 ) ( 2,461 ) ( 20,625 ) Net book value $ 25,896 $ — $ 25,896 Cost Balance, January 1, 2020 $ 44,060 $ 2,467 $ 46,527 Disposal — ( 6 ) ( 6 ) Balance, December 31, 2020 44,060 2,461 46,521 Useful lives 10-20 years 3-5 years Accumulated amortization Balance, January 1, 2020 ( 14,833 ) ( 2,408 ) ( 17,241 ) Amortization expense ( 2,674 ) ( 59 ) ( 2,733 ) Disposal — 6 6 Balance, December 31, 2020 ( 17,507 ) ( 2,461 ) ( 19,968 ) Net Book Value $ 26,553 $ — $ 26,553 Amortization expense related to intangible assets was $ 657 and $ 703 for the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2020, the Company wrote off other intangible assets related to a non-compete agreement with one of the principals of Jamison which was no longer in effect at March 31, 2020 with a cost of $ 6 and the related accumulated amortization of $ 5 . Amortization related to the Company’s finite life intangible assets is scheduled to be expensed over the next five years and thereafter as follows: 2021 (remainder of) $ 1,972 2022 2,575 2023 2,416 2024 2,289 2025 2,193 Thereafter 14,451 Total $ 25,896 9. DEBT Credit Facility On June 24, 2013, the subsidiaries of Silvercrest L.P. entered into a $ 15.0 million credit facility with City National Bank. The subsidiaries of Silvercrest L.P. are the borrowers under such facility and Silvercrest L.P. guarantees the obligations of its subsidiaries under the credit facility. The credit facility is secured by certain assets of Silvercrest L.P. and its subsidiaries. The credit facility consisted of a $ 7.5 million delayed draw term loan that was scheduled to mature on June 24, 2025 and a $ 7.5 million revolving credit facility that was scheduled to mature on June 21, 2019 . On July 1, 2019, the credit facility was amended to increase the term loan by $ 18.0 million to $ 25.5 million, extend the draw date on the term loan facility to July 1, 2024 , extend the maturity date of the term loan to July 1, 2026 and increase the revolving credit facility by $ 2.5 million to $ 10.0 million. On June 19, 2020, the revolving credit facility was further amended to extend the maturity date to June 19, 2021 . The loan bears interest at either (a) the higher of the prime rate plus a margin of 0.25 percentage points and 2.5 % or (b) the LIBOR rate plus 2.75 percentage points, at the borrowers’ option . Borrowings under the term loan on or prior to June 30, 2021 are payable in 20 equal quarterly installments. Borrowings under the 18 term loan after June 30, 2021 will be payable in equal quarterly installments through the maturity date. The credit facility contains restrictions on, among other things, (i) incurrence of additional debt, (ii) creating liens on certain assets, (iii) making certain investments, (iv) consolidating, merging or otherwise disposing of substantially all of our assets, (v) the sale of certain assets, and (vi) entering into transactions with affiliates. In addition, the credit facility contains certain financial covenants including a test on discretionary assets under management, maximum debt to EBITDA and a fixed charge coverage ratio. The credit facility contains customary events of default, including the occurrence of a change in control which includes a person or group of persons acting together acquiring more than 30 % of the total voting securities of Silvercrest. The Company was in compliance with the covenants under the credit facility as of March 31, 2021 . As of March 31, 2021 and December 31, 2020, the Company did no t have any outstanding borrowings under the revolving credit facility. As of March 31, 2021 and December 31, 2020, the Company had $ 11,700 and $ 12,600 , respectively, outstanding under the term loan. Accrued but unpaid interest was $ 32 and $ 0 as of March 31, 2021 and December 31, 2020, respectively. Interest expense, which also includes amortization of deferred financing fees, incurred on the revolving credit facility and term loan for the three months ended March 31, 2021 and 2020 was $ 102 and $ 189 , respectively. 10. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company leases office space pursuant to operating leases that are subject to specific escalation clauses. Rent expense charged to operations for the three months ended March 31, 2021 and 2020 amounted to $ 1,608 and $ 1,595 , respectively. The Company received sub-lease income from sub-tenants during the three months ended March 31, 2021 and 2020 of $ 38 and $ 38 , respectively. Therefore, for the three months ended March 31, 2021 and 2020, net rent expense amounted to $ 1,570 and $ 1,557 , respectively, and is included in general and administrative expenses in the Condensed Consolidated Statements of Operations. As security for performance under the leases, the Company is required to maintain letters of credit in favor of the landlord totaling $ 506 as of March 31, 2021 and December 31, 2020. Furthermore, the Company maintains an $ 80 letter of credit in favor of its Boston landlord. Both are collateralized by the Company’s revolving credit facility with City National Bank. In March 2014, the Company entered into a lease agreement for additional office space in Richmond, VA. The lease commenced on May 1, 2014 and had an original expiration date of July 31, 2019 . The lease is subject to escalation clauses and provides for a rent-free period of three months . Monthly rent expense is $ 5 . The Company paid a refundable security deposit of $ 3 . In September 2016, the Company entered into Lease Amendment Number One (“Amendment Number One”) to expand its space and extend its lease. This expansion was to occur on or about October 1, 2017 , and the lease was extended to November 30, 2024 . The lease was further amended on January 16, 2018 (“Amendment Number Two”) to update the expansion date to January 12, 2018 and to extend the term of the lease to November 30, 2028 . The amended lease provides for a rent credit of $ 40 . Monthly rent expense under the amended lease is $ 10 . In June 2015, the Company entered into a lease agreement for office space in Charlottesville, VA. The lease commenced on June 30, 2015 and expired, as amended, on June 30, 2019 . On June 6, 2019, the Company extended this lease for three years , with the new term beginning on July 1, 2019 and expiring on June 30, 2022 . Monthly rent expense is $ 2 . The Company paid a refundable security deposit of $ 2 . In connection with the acquisition of Jamison Eaton & Wood, Inc. (the “Jamison Acquisition”), the Company assumed lease agreements for office space in Bedminster and Princeton, NJ. The Bedminster lease, as extended, expires on March 31, 2022 . Monthly rent expense on the Bedminster lease is $ 11 . The Bedminster lease is subject to escalation clauses and provides for a rent-fee period of four months . The Princeton lease, as extended, expired on April 30, 2016 . In December 2015, the Company extended its lease related to its New York City office space. The amended lease commenced on October 1, 2017 and expires on September 30, 2028 . The lease is subject to escalation clauses and provides for a rent-free period of twelve months and for tenant improvements of up to $ 2,080 . Monthly rent under this extension is $ 446 . In January 2016, the Company entered into a lease agreement for office space in Princeton, NJ. The lease commenced April 23, 2016 and expires on August 31, 2022 . This lease replaces the Princeton lease discussed above that expired on April 30, 2016. Monthly rent expense on this lease is $ 6 . The lease is subject to escalation clauses and provides for a rent-free period of five months . In January 2018, the Company extended its lease related to its Boston, MA office space. The amended lease commenced on January 1, 2018 and expires on April 30, 2023 . The lease provides for a rent-free period of one month . Monthly rent under this extension is $ 33 . 19 With the Neosho Acquisition, the Company assumed a lease agreement for office space in La Jolla, CA. The lease expired on January 31, 2020 . Monthly rent expense was $ 3 . On November 5, 2019, the Company entered into a lease agreement for office space in San Diego, CA. The lease commenced on February 1, 2020 and expires on June 30, 2025 . The lease is subject to escalation clauses and provides for a rent-free period of four months and for tenant improvements of up to $ 27 . Monthly rent expense under this lease is $ 12 . With the Cortina Acquisition, the Company assumed a lease agreement for office space in Milwaukee, WI. The lease was extended on June 17, 2020 and expires December 31, 2022 . Monthly rent expense is $ 12 . The components of lease expense for the three months ended March 31, 2021 and 2020 were as follows: Three Months Ended March 31, 2021 Three Months Ended March 31, 2020 Operating Lease Cost $ 1,542 $ 1,523 Finance Lease Cost: Amortization of ROU assets 30 31 Interest on lease liabilities 3 2 Total $ 33 $ 33 Future minimum lease payments and rentals under lease agreements for office space are as follows: Operating Leases Non-cancellable Subleases Operating Lease Liabilities Remainder of 2021 $ 4,877 $ ( 145 ) $ 4,732 2022 6,377 ( 35 ) 6,342 2023 5,928 ( 6 ) 5,922 2024 6,008 — 6,008 2025 5,933 — 5,933 Thereafter 16,134 — 16,134 Total $ 45,257 $ ( 186 ) $ 45,071 Weighted-average remaining lease term – operating leases (months) 86.8 Weighted-average discount rate 4.3 % The Company has finance leases for the following office equipment: (i) a three-year lease agreement for one copier totaling $ 11 with monthly minimum payments of $ 0.3 , which began on March 1, 2018 and continues through February 28, 2021 , (ii) a three-year lease agreement for one copier totaling $ 13 with monthly minimum payments of $ 0.4 , which began on March 1, 2019 and continue through February 28, 2022 , (iii) a 39 -month lease agreement for one copier totaling $ 12 with monthly minimum lease payments of $ 0.4 , which began on March 1, 2019 and continue through May 31, 2022 , (iv) a lease agreement for one copier that was assumed as part of the Cortina Acquisition with monthly minimum lease payments of $ 1 , which began on July 1, 2019 and continue through November 30, 2021 , (v) a three year lease agreement for two copiers totaling $ 51 with monthly minimum lease payments of $ 1 , which began on August 1, 2019 and continue through July 31, 2022 , (vi) a five year lease agreement for a copier totaling $ 82 with monthly minimum lease payments of $ 1 , which began on May 1, 2020 and continue through April 30, 2025 , (vii) a three year lease agreement for a copier totaling $ 59 with minimum monthly lease payments of $ 2 , which began on June 1, 2020 and continue through May 31, 2023 , (viii) a three year lease agreement for two copiers totaling $ 43 with minimum monthly lease payments of $ 1 , which began on August 20, 2020 and continue through August 19, 2023 , (ix) a three year lease agreement for two copiers totaling $ 39 with minimum monthly lease payments of $ 1 , which began on August 20, 2020 and continue through August 19, 2023 and (x) a five year lease agreement for four copiers totaling $ 86 with minimum monthly lease payments of $ 2 , which began on February 1, 2021 and continue through January 31, 2026 . The aggregate principal balance of finance leases was $ 297 and $ 259 as of March 31, 2021 and December 31, 2020, respectively. The assets relating to finance leases that are included in equipment as of March 31, 2021 and December 31, 2020 are as follows: March 31, 2021 December 31, 2020 Finance lease assets included in furniture and equipment $ 422 $ 417 Less: Accumulated depreciation and amortization ( 129 ) ( 163 ) $ 293 $ 254 20 Depreciation expense relating to finance lease assets was $ 30 and $ 31 for the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2021, the Company wrote off leased assets of $ 82 , with accumulated depreciation of $ 64 . Future minimum lease payments under finance leases are as follows: Future Minimum Lease Commitments Remainder of 2021 $ 87 2022 91 2023 59 2024 34 2025 24 Thereafter 2 Total $ 297 Weighted-average remaining lease term – finance leases (months) 38.7 Weighted-average discount rate 3.9 % 11. EQUITY SLP has historically made, and will continue to make, distributions of its net income to the holders of its partnership units for income tax purposes as required under the terms of its Second Amended and Restated Limited Partnership Agreement and also made, and will continue to make, additional distributions of net income under the terms of its Second Amended and Restated Limited Partnership Agreement. Partnership distributions totaled $ 1,758 and $ 2,226 , for the three months ended March 31, 2021 and 2020, respectively. Pursuant to SLP’s Second Amended and Restated Limited Partnership Agreement, partner incentive allocations are treated as distributions of net income. The remaining net income or loss after partner incentive allocations was generally allocated to the partners based on their pro rata ownership. Net income allocation is subject to the recovery of the allocated losses of prior periods. Distributions of partner incentive allocations of net income for the three months ended March 31, 2021 and 2020 amounted to $ 27,619 and $ 27,245 , respectively. The distributions are included in non-controlling interests in the Condensed Consolidated Statements of Financial Condition and Condensed Consolidated Statement of Changes in Equity for the three months ended March 31, 2021 and 2020. The Company treats SLP’s partner incentive allocations as compensation expense and accrues such amounts when earned. During the three months ended March 31, 2021 and 2020, SLP accrued partner incentive allocations of $ 8,004 and $ 7,377 , respectively. Silvercrest—Equity Silvercrest has the following authorized and outstanding equity: Shares at March 31, 2021 Authorized Outstanding Voting Rights Economic Rights Common shares Class A, par value $ 0.01 per share 50,000,000 9,658,297 1 vote per share (1), (2) All (1), (2) Class B, par value $ 0.01 per share 25,000,000 4,769,835 1 vote per share (3), (4) None (3), (4) Preferred shares Preferred stock, par value $ 0.01 per share 10,000,000 — See footnote (5) below See footnote (5) below (1) Each share of Class A common stock is entitled to one vote per share. Class A common stockholders have 100 % of the rights of all classes of Silvercrest’s capital stock to receive dividends. (2) During 2021 and 2020 Silvercrest granted 0 and 8,242 restricted stock units, respectively, which will vest and settle in the form of Class A shares of Silvercrest, of which 8,242 remain unvested as of March 31, 2021. (3) Each share of Class B common stock is entitled to one vote per share. (4) Each Class B unit of SLP held by a principal is exchangeable for one share of the Company’s Class A common stock. The principals collectively hold 4,769,835 Class B units, which represent the right to receive their proportionate share of the distributions made by SLP, and 74,907 restricted stock units which will vest and settle in the form of Class B units of SLP. The 74,907 restricted stock units which have been issued to our principals entitle the holders thereof to participate 21 in distributions from SLP as if the underlying Class B units are outstanding and thus are taken into account to determine the economic interest of each holder of units in SLP. However, because the Class B units underlying the restricted stock units have not been issued and are not deemed outstanding, the holders of restricted stock units have no voting rights with respect to those Class B units. Silvercrest will not issue shares of Class B common stock in respect of restricted stock units of SLP until such time that the underlying Class B units are issued . (5) Silvercrest’s board of directors has the authority to issue preferred stock in one or more classes or series and to fix the rights, preferences, privileges and related restrictions, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, or the designation of the class or series, without the approval of its stockholders. Silvercrest is dependent on cash generated by SLP to fund any dividends. Generally, SLP will distribute its profits to all of its partners, including Silvercrest, based on the proportionate ownership each holds in SLP. Silvercrest will fund dividends to its stockholders from its proportionate share of those distributions after provision for its income taxes and other obligations. During the three months ended March 31, 2021, Silvercrest issued the following shares: Class A Common Stock Transaction # of Date Shares Class A common stock outstanding - January 1, 2021 9,650,692 Issuance of Class A common stock upon conversion of Class B units to Class A common stock March 2021 7,605 Class A common shares outstanding – March 31, 2021 9,658,297 Class B Common Stock Transaction # of Date Shares Class B common stock outstanding - January 1, 2021 4,721,646 Issuance of Class B common stock upon vesting of restricted stock units January 2021 21,598 Issuance of Class B common stock January 2021 34,196 Cancellation of Class B common stock upon conversion of Class B units to Class A common stock March 2021 ( 7,605 ) Class B common shares outstanding – March 31, 2021 4,769,835 In January 2021, the Company issued 21,598 shares of Class B common stock upon the vesting of restricted stock units. In January 2021, the Company issued 34,196 shares of Class B common stock to certain principals in connection with their admission to SLP. In March 2021, the Company redeemed from certain existing partners 7,605 shares of Class B common stock in connection with the exchange of a like number of Class B units to Class A common stock pursuant to the Resale and Registration Rights Agreement between the Company and its principals. The total amount of shares of Class B common stock outstanding and held by principals equals the number of Class B units those individuals hold in SLP. Shares of Silvercrest’s Class B common stock are issuable only in connection with the issuance of Class B units of SLP. When a vested or unvested Class B unit is issued by SLP, Silvercrest will issue to the holder one share of its Class B common stock in exchange for the payment of its par value. Each share of Silvercrest’s Class B common stock will be redeemed for its par value and cancelled by Silvercrest if the holder of the corresponding Class B unit exchanges or forfeits its Class B unit pursuant to the terms of the Second Amended and Restated Limited Partnership Agreement of SLP, the terms of the 2012 Equity Incentive Plan of Silvercrest, or otherwise. 12. NOTES RECEIVABLE FROM PARTNERS Partner contributions to SLP are made in cash, in the form of five or six year interest-bearing promissory notes and/or in the form of nine year interest-bearing limited recourse promissory notes . Certain notes receivable are payable in annual installments and are collateralized by SLP’s units that are purchased with the note. Notes receivable from partners are reflected as a reduction of non-controlling interests in the Condensed Consolidated Statements of Financial Condition. 22 Notes receivable from partners are as follows for the three months ended March 31, 2021 and the year ended December 31, 2020: March 31, 2021 December 31, 2020 Beginning balance $ 353 $ 645 New notes issued to partners 475 — Repayment of notes ( 228 ) ( 300 ) Interest accrued and capitalized on notes receivable 2 8 Ending balance $ 602 $ 353 Full recourse notes receivable from partners as of March 31, 2021 and December 31, 2020 are $ 602 and $ 353 , respectively. There were no limited recourse notes receivable from partners as of March 31, 2021 or December 31, 2020. There is no allowance for credit losses on notes receivable from partners as of March 31, 2021 or December 31, 2020. 13. RELATED PARTY TRANSACTIONS During the first three months of 2021 and 2020, the Company provided services to the following, which operate as feeder funds investing through master-feeder or mini-master feeder structures: • the domesticated Silvercrest Hedged Equity Fund, L.P. (formed in 2011 and formerly Silvercrest Hedged Equity Fund); • Silvercrest Hedged Equity Fund (International), Ltd. (which invests through Silvercrest Hedged Equity Fund, L.P.); • the domesticated Silvercrest Emerging Markets Fund, L.P. (formed in 2011 and formerly Silvercrest Emerging Markets Fund); • Silvercrest Market Neutral Fund (currently in liquidation); • Silvercrest Market Neutral Fund (International) (currently in liquidation); • Silvercrest Municipal Advantage Master Fund LLC; • Silvercrest Municipal Advantage Portfolio A LLC; • Silvercrest Municipal Advantage Portfolio P LLC; • Silvercrest Municipal Advantage Portfolio S LLC (formed in 2015); • the Silvercrest Jefferson Fund, L.P. (formed in 2014); and • the Silvercrest Jefferson Fund, Ltd. (the Company took over as investment manager in 2014, formerly known as the Jefferson Global Growth Fund, Ltd.), which invests in Silvercrest Jefferson Master Fund, L.P. (formed in 2014). The Company also provides services to the following, which operate and invest separately as stand-alone funds: • the Silvercrest Global Opportunities Fund, L.P. (currently in liquidation); • Silvercrest Global Opportunities Fund (International), Ltd. (currently in liquidation); • Silvercrest Municipal Special Situations Fund LLC (merged into Silvercrest Municipal Advantage Portfolio S LLC in 2015); • Silvercrest Municipal Special Situations Fund II LLC (merged into Silvercrest Municipal Advantage Portfolio S LLC in 2015); • Silvercrest International Fund, L.P. (previously known as Silvercrest Global Fund, L.P.); • Silvercrest Special Situations Fund, L.P.; and • Silvercrest Commodity Strategies Fund, L.P. (liquidated as of December 31, 2017). Pursuant to agreements with the above entities, the Company provides investment advisory services and receives an annual management fee of 0 % to 1.75 % of assets under management and a performance fee or allocation of 0 % to 10 % of the above entities’ net appreciation over a high-water mark. 23 For the three months ended March 31, 2021 and 2020, the Company earned from the above activities management fee income, which is included in “Management and advisory fees” in the Condensed Consolidated Statements of Operations, of $ 1,209 and $ 1,218 , respectively. As of March 31, 2021 and December 31, 2020, the Company was owed $ 1,228 and $ 1,018 , respectively, from its various funds, which is included in Due from Silvercrest Funds on the Condensed Consolidated Statements of Financial Condition. For the three months ended March 31, 2021 and 2020, the Company earned management and advisory fees of $ 376 and $ 366 , respectively, from assets managed on behalf of certain of its employees. As of March 31, 2021 and December 31, 2020, the Company is owed approximately $ 9 and $ 10 , respectively, from certain of its employees, which is included in Receivables, net on the Condensed Consolidated Statements of Financial Condition. 14. INCOME TAXES As of March 31, 2021, the Company had net deferred tax assets of $ 11,343 , which is recorded as a deferred tax asset of $ 11,398 specific to Silvercrest which consists primarily of assets related to temporary differences between the financial statement and tax bases of intangible assets related to its acquisition of partnership units of SLP, a deferred tax liability of $ 4 specific to SLP which consists primarily of assets related to deferred rent expenses offset in part by amounts for differences in the financial statement and tax bases of intangible assets and a deferred tax liability of $ 51 related to the corporate activity of SFS which is primarily related to temporary differences between the financial statement and tax bases of intangible assets. Of the total net deferred taxes at March 31, 2021, $ 18 of the net deferred tax liabilities relate to non-controlling interests. These amounts are included in prepaid expenses and other assets and deferred tax and other liabilities on the Condensed Consolidated Statement of Financial Condition, respectively. As of December 31, 2020, the Company had a net deferred tax asset of $ 11,305 , which is recorded as a net deferred tax asset of $ 11,397 specific to Silvercrest, which consists primarily of net assets related to temporary differences between the financial statement and tax bases of intangibles related to its acquisition of partnership units of SLP, a net deferred tax liability of $ 37 specific to SLP which consists primarily of liabilities related to differences between the financial statement and tax bases of intangible assets, and a net deferred tax liability of $ 55 related to the corporate activity of SFS which is primarily related to temporary differences between the financial statement and tax bases of intangible assets. The current tax expense was $ 1,269 and $ 440 for the three months ended March 31, 2021 and 2020, respectively. Of the amount for the three months ended March 31, 2021, $ 860 relates to Silvercrest’s corporate tax expense, $ 408 relates to SLP’s state and local liability and $ 1 relates to SFS’s corporate tax expense. The deferred tax expense for the three months ended March 31, 2021 and 2020 was ($ 12 ) and $ 2,306 , respectively. When combined with current tax expense, the total income tax provision for the three months ended March 31, 2021 and 2020 is $ 1,257 and $ 2,746 , respectively. There was no discrete tax expense for the three months ended March 31, 2021. The discrete tax expense for the three months ended March 31, 2020 was $ 1,096 , which represents additional tax expense associated with a favorable fair value adjustment to contingent purchase price consideration related to earnout payments to be made in conjunction with the Cortina Acquisition. The current tax expense increased from the comparable period in 2020 mainly due to increased profitability and because the 2020 current tax expense was reduced by favorable timing differences related to various deferred assets recorded at SLP. Of the total current tax expense for the three months ended March 31, 2021 and 2020, $ 137 and $ 150 , respectively, relates to non-controlling interests. Of the deferred tax expense for the three months ended March 31, 2021 and 2020, ($ 13 ) and $ 104 , respectively, relates to non-controlling interests. When combined with current tax expense, the total income tax provision for the three months ended March 31, 2021 and 2020 related to non-controlling interests is $ 124 and $ 254 , respectively. In the normal course of business, the Company is subject to examination by federal, state, and local tax regulators. As of March 31, 2021, the Company’s U.S. federal income tax returns for the years 2017 through 2021 are open under the normal three-year statute of limitations and therefore subject to examination. The guidance for accounting for uncertainty in income taxes prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company does not believe that it has any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months. Furthermore, the Company does not have any material uncertain tax positions at March 31, 2021 and 2020. 24 15. REDEEMABLE PARTNERSHIP UNITS If a principal of SLP is terminated for cause, SLP would have the right to redeem all of the vested Class B units collectively held by the principal and his or her permitted transferees for a purchase price equal to the lesser of (i) the aggregate capital account balance in SLP of the principal and his or her permitted transferees and (ii) the purchase price paid by the terminated principal to first acquire the Class B units. 16. EQUITY-BASED COMPENSATION Restricted Stock Units and Stock Options On November 2, 2012, the Company’s board of directors adopted the 2012 Equity Incentive Plan. A total of 1,687,500 shares were originally reserved and available for issuance under the 2012 Equity Incentive Plan. As of March 31, 2021, 323,830 shares are available for grant. The equity interests may be issued in the form of shares of the Company’s Class A common stock and Class B units of SLP. (All references to units or interests of SLP refer to Class B units of SLP and accompanying shares of Class B common stock of Silvercrest). The purposes of the 2012 Equity Incentive Plan are to (i) align the long-term financial interests of our employees, directors, consultants and advisers with those of our stockholders; (ii) attract and retain those individuals by providing compensation opportunities that are consistent with our compensation philosophy; and (iii) provide incentives to those individuals who contribute significantly to our long-term performance and growth. To accomplish these purposes, the 2012 Equity Incentive Plan provides for the grant of units of SLP. The 2012 Equity Incentive Plan also provides for the grant of stock options, stock appreciation rights, or SARs, restricted stock awards, restricted stock units, performance-based stock awards and other stock-based awards (collectively, stock awards) based on our Class A common stock. Awards may be granted to employees, including officers, members, limited partners or partners who are engaged in the business of one or more of our subsidiaries, as well as non-employee directors and consultants. The Compensation Committee may impose vesting conditions and awards may be forfeited if the vesting conditions are not met. During the period that any vesting restrictions apply, unless otherwise determined by the Compensation Committee, the recipient of awards that vest in the form of units of SLP will be eligible to participate in distributions of income from SLP. In addition, before the vesting conditions have been satisfied, the transferability of such units is generally prohibited and such units will not be eligible to be exchanged for cash or shares of our Class A common stock. In May 2016, the Company granted 3,791 RSUs under the 2012 Equity Incentive Plan at a fair value of $ 13.19 per share to existing Class B unit holders. These RSUs vested and settled in the form of Class B units of SLP. Twenty-five percent of the RSUs granted vested and settled on each of the first, second, third and fourth anniversaries of the grant date. In May 2016, the Company granted 3,000 RSUs under the 2012 Equity Incentive Plan at a fair value of $ 13.19 per share to certain members of the Board of Directors. These RSUs vested and settled in the form of Class A shares of Silvercrest. One hundred percent of the RSUs granted vested and settled on the first anniversary of the grant date. In May 2016, the Company granted 7,582 RSUs under the 2012 Equity Incentive Plan at a fair value of $ 13.19 per share to an employee. These RSUs vested and settled in the form of Class A shares of Silvercrest. Twenty-five percent of the RSUs granted vested and settled on each of the first, second, third and fourth anniversaries of the grant date . In October 2018, the Company granted 105,398 non-qualified stock options (“NQOs”) under the 2012 Equity Incentive Plan to an existing Class B unit holder. The fair value of the NQOs has been derived using the Black-Scholes method with the following assumptions: Strike price of $ 13.97 , Risk Free rate of 2.94 % (5-year treasury rate), expiration of 5 years and volatility of 32.7 %. Additionally, the calculation of the compensation expense assumes a forfeiture rate of 1.0 %, based on historical experience. These NQOs will vest and become exercisable into of Class B units of SLP. One third of the NQOs will vest and become exercisable on each of the first, second and third anniversaries of the grant date. In May 2019, the Company granted 25 60,742 NQOs under the 2012 Equity Incentive Plan to an existing Class B unit holder. The fair value of the NQOs has been derived using the Black-Scholes method with the following assumptions: Strike price of $ 14.54 , Risk Free rate of 2.32 % (5-year treasury rate), expiration of 5 years and volatility of 34.2 %. Additionally, the calculation of the compensation expense assumes a forfeiture rate of 1.0 %, based on historical experience. These NQOs will vest and become exercisable into of Class B units of SLP. One third of the NQOs will vest and become exercisable on each of the first, second and third anniversaries of the grant date. In May 2019, the Company granted 34,388 RSUs under the 2012 Equity Incentive Plan at a fair value of $ 14.54 per share to an existing Class B unit holder. These RSUs will vest and settle in the form of Class B shares of SLP. Twenty-five percent of the RSUs granted vest and settle on each of the first, second, third and fourth anniversaries of the grant date . In March 2020, the Company granted 8,242 RSUs under the 2012 Equity Incentive Plan at a fair value of $ 11.83 per share to a Board member. These RSUs will vest and settle in the form of Class A shares of Silvercrest. All of the RSUs granted vest on the third anniversary of the grant date . In May 2020, the Company granted 86,764 NQOs under the 2012 Equity Incentive Plan to an existing Class B unit holder. The fair value of the NQOs has been derived using the Black-Scholes method with the following assumptions: Strike price of $ 10.18 , Risk Free rate of 0.64 % (10-year treasury rate), expiration of 10 years and volatility of 48.0 %. Additionally, the calculation of the compensation expense assumes a forfeiture rate of 1.0 %, based on historical experience. These NQOs will vest and become exercisable into of Class B units of SLP. One-third of the NQOs will vest and become exercisable on each of the first, second and third anniversaries of the grant date. In May 2020, the Company granted 49,116 RSUs under the 2012 Equity Incentive Plan at a fair value of $ 10.11 per share to an existing Class B unit holder. These RSUs will vest and settle in the form of Class B shares of SLP. Twenty-five percent of the RSUs granted vest and settle on each of the first, second, third and fourth anniversaries of the grant date. In January 2021, the Company granted 21,598 RSUs under the 2012 Equity Incentive Plan at a fair value of $ 13.89 per share to existing Class B unit holders. These RSUs vested and settled immediately in the form of Class B shares of SLP. For the three months ended March 31, 2021 and 2020, the Company recorded compensation expense related to such RSUs and NQOs of $ 469 and $ 108 , respectively, as part of total compensation expense in the Condensed Consolidated Statements of Operations for the period then ended. As of March 31, 2021 and December 31, 2020, there was $ 1,173 and $ 1,342 , respectively, of unrecognized compensation expense related to unvested awards. As of March 31, 2021 and December 31, 2020, the unrecognized compensation expense related to unvested awards is expected to be recognized over a period of 1.81 and 1.44 years , respectively. A summary of the RSU grants by the Company as of March 31, 2021 and 2020 is presented below: Restricted Stock Units Granted Units Fair Value per unit Total granted at January 1, 2021 83,150 $ 10.18 – 14.54 Granted 21,598 13.89 Vested ( 21,598 ) ( 13.89 ) Total granted at March 31, 2021 83,150 $ 10.18 – 14.54 Total granted at January 1, 2020 37,234 $ 13.19 – 14.54 Granted 8,242 11.83 Total granted at March 31, 2020 45,476 $ 11.83 – 14.54 A summary of the NQO grants by the Company as of March 31, 2021 and 2020 is presented below: Non-Qualified Options Granted Units Fair Value per unit Total granted at January 1, 2021 252,904 $ 10.18 – 14.54 Total granted at March 31, 2021 252,904 $ 10.18 – 14.54 Total granted at January 1, 2020 166,140 $ 13.97 Total granted at March 31, 2020 166,140 $ 13.97 26 17. DEFINED CONTRIBUTION AND DEFERRED COMPENSATION PLANS SAMG LLC has a defined contribution 401(k) savings plan (the “Plan”) for all eligible employees who meet the minimum age and service requirements as defined in the Plan. The Plan is designed to be a qualified plan under sections 401(a) and 401(k) of the Internal Revenue Code. For employees who qualify under the terms of the Plan, on an annual basis Silvercrest matches dollar for dollar an employee’s contributions up to the first 4 % of compensation. For the three months ended March 31, 2021 and 2020, Silvercrest made matching contributions of $ 22 and $ 22 , respectively, for the benefit of employees. 18. SOFT DOLLAR ARRANGEMENTS The Company obtains research and other services through “soft dollar” arrangements. The Company receives credits from broker-dealers whereby technology-based research, market quotation and/or market survey services are effectively paid for in whole or in part by “soft dollar” brokerage arrangements. Section 28(e) of the Securities Exchange Act of 1934, as amended, provides a “safe harbor” to an investment adviser against claims that it breached its fiduciary duty under state or federal law (including ERISA) solely because the adviser caused its clients’ accounts to pay more than the lowest available commission for executing a securities trade in return for brokerage and research services. To rely on the safe harbor offered by Section 28(e), (i) the Company must make a good-faith determination that the amount of commissions is reasonable in relation to the value of the brokerage and research services being received and (ii) the brokerage and research services must provide lawful and appropriate assistance to the Company in carrying out its investment decision-making responsibilities. If the use of soft dollars is limited or prohibited in the future by regulation, the Company may have to bear the costs of such research and other services. For the three months ended March 31, 2021 and 2020, the Company utilized “soft dollar” credits of $ 52 and $ 155 , respectively. ***** 27