Edgar Filing: Evercore Partners Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

_____________________________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

001-32975

(Commission File Number)

_____________________________________________________

EVERCORE PARTNERS INC.

(Exact name of registrant as specified in its charter)

_____________________________________________________



Delaware		20-4748747
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

55 East 52 ^nd Street

38th floor

New York, New York 10055

(Address of principal executive offices)

Registrant’s telephone number: (212) 857-3100

_____________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of shares of the registrant’s Class A common stock, par value $0.01 per share, outstanding as of July 27, 2016 was 38,788,899. The number of shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding as of July 27, 2016 was 25 (excluding 75 shares of Class B common stock held by a subsidiary of the registrant).

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In this report, references to “Evercore”, the “Company”, “we”, “us”, “our” refer to Evercore Partners Inc., a Delaware corporation, and its consolidated subsidiaries. Unless the context otherwise requires, references to (1) “Evercore Partners Inc.” refer solely to Evercore Partners Inc., and not to any of its consolidated subsidiaries and (2) “Evercore LP” refer solely to Evercore LP, a Delaware limited partnership, and not to any of its consolidated subsidiaries.



		Page
Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	52
Part II. Other Information
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 6.	Exhibits	56
Signatures

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PART I. FINANCIAL INFORMATION



Item 1.	Condensed Consolidated Financial Statements (Unaudited)



Condensed Consolidated Financial Statements (Unaudited)
	Page
Condensed Consolidated Statements of Financial Condition as of June 30, 2016 and December 31, 2015	4
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015	5
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015	6
Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2016 and 2015	7
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	8
Notes to Unaudited Condensed Consolidated Financial Statements	9

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EVERCORE PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

(dollars in thousands, except share data)



	June 30, 2016			December 31, 2015
Assets
Current Assets
Cash and Cash Equivalents	$	247,270		$	448,764
Marketable Securities	68,726			43,787
Assets Held for Sale	6,849			—
Financial Instruments Owned and Pledged as Collateral at Fair Value	12,297			41,742
Securities Purchased Under Agreements to Resell	21,989			2,191
Accounts Receivable (net of allowances of $1,212 and $1,313 at June 30, 2016 and December 31, 2015, respectively)	189,003			175,497
Receivable from Employees and Related Parties	18,033			21,189
Other Current Assets	15,480			16,294
Total Current Assets	579,647			749,464
Investments	122,790			126,651
Deferred Tax Assets	303,971			298,115
Furniture, Equipment and Leasehold Improvements (net of accumulated depreciation and amortization of $48,344 and $42,656 at June 30, 2016 and December 31, 2015, respectively)	45,049			47,980
Goodwill	164,701			166,461
Intangible Assets (net of accumulated amortization of $28,174 and $21,754 at June 30, 2016 and December 31, 2015, respectively)	34,602			41,010
Assets Segregated for Bank Regulatory Requirements	10,200			10,200
Other Assets	45,690			39,290
Total Assets	$	1,306,650		$	1,479,171
Liabilities and Equity
Current Liabilities
Accrued Compensation and Benefits	$	117,803		$	263,862
Accounts Payable and Accrued Expenses	34,507			43,878
Securities Sold Under Agreements to Repurchase	34,288			44,000
Payable to Employees and Related Parties	31,995			28,392
Taxes Payable	12,396			20,886
Liabilities Held for Sale	1,510			—
Other Current Liabilities	12,301			7,031
Total Current Liabilities	244,800			408,049
Notes Payable	167,976			119,250
Subordinated Borrowings	16,550			22,550
Amounts Due Pursuant to Tax Receivable Agreements	186,030			186,036
Other Long-term Liabilities	48,199			36,070
Total Liabilities	663,555			771,955
Commitments and Contingencies (Note 15)
Equity
Evercore Partners Inc. Stockholders' Equity
Common Stock
Class A, par value $0.01 per share (1,000,000,000 shares authorized, 57,752,977 and 55,249,559 issued at June 30, 2016 and December 31, 2015, respectively, and 38,769,632 and 39,623,271 outstanding at June 30, 2016 and December 31, 2015, respectively)	577			552
Class B, par value $0.01 per share (1,000,000 shares authorized, 25 issued and outstanding at June 30, 2016 and December 31, 2015)	—			—
Additional Paid-In-Capital	1,278,232			1,210,742
Accumulated Other Comprehensive Income (Loss)	(42,046		)	(34,539		)
Retained Earnings (Deficit)	(26,651		)	(27,791		)
Treasury Stock at Cost (18,983,345 and 15,626,288 shares at June 30, 2016 and December 31, 2015, respectively)	(804,191		)	(644,412		)
Total Evercore Partners Inc. Stockholders' Equity	405,921			504,552
Noncontrolling Interest	237,174			202,664
Total Equity	643,095			707,216
Total Liabilities and Equity	$	1,306,650		$	1,479,171

See Notes to Unaudited Condensed Consolidated Financial Statements.

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EVERCORE PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(dollars and share amounts in thousands, except per share data)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2016			2015			2016			2015
Revenues
Investment Banking Revenue	$	327,174		$	246,550		$	567,800		$	464,188
Investment Management Revenue	22,255			24,505			40,684			46,586
Other Revenue, Including Interest	5,764			1,852			7,141			4,559
Total Revenues	355,193			272,907			615,625			515,333
Interest Expense	4,537			4,811			7,256			9,254
Net Revenues	350,656			268,096			608,369			506,079
Expenses
Employee Compensation and Benefits	221,334			173,144			401,249			336,270
Occupancy and Equipment Rental	10,582			11,684			21,356			23,914
Professional Fees	13,751			13,164			24,453			22,597
Travel and Related Expenses	15,989			13,400			29,818			26,570
Communications and Information Services	9,786			9,738			19,789			18,300
Depreciation and Amortization	6,626			6,313			13,008			12,714
Special Charges	—			(139		)	—			5,499
Acquisition and Transition Costs	(329		)	917			(329		)	1,401
Other Operating Expenses	10,312			8,764			20,295			16,705
Total Expenses	288,051			236,985			529,639			463,970
Income Before Income from Equity Method Investments and Income Taxes	62,605			31,111			78,730			42,109
Income from Equity Method Investments	1,664			1,998			2,951			3,105
Income Before Income Taxes	64,269			33,109			81,681			45,214
Provision for Income Taxes	30,676			16,723			40,410			22,935
Net Income	33,593			16,386			41,271			22,279
Net Income Attributable to Noncontrolling Interest	9,506			5,622			11,866			7,215
Net Income Attributable to Evercore Partners Inc.	$	24,087		$	10,764		$	29,405		$	15,064
Net Income Attributable to Evercore Partners Inc. Common Shareholders	$	24,087		$	10,764		$	29,405		$	15,064
Weighted Average Shares of Class A Common Stock Outstanding
Basic	39,249			36,445			39,435			36,584
Diluted	43,603			42,165			44,261			42,479
Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders:
Basic	$	0.61		$	0.30		$	0.75		$	0.41
Diluted	$	0.55		$	0.26		$	0.66		$	0.35

Dividends Declared per Share of Class A Common Stock	$	0.31		$	0.28		$	0.62		$	0.56

See Notes to Unaudited Condensed Consolidated Financial Statements.

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EVERCORE PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(dollars in thousands)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2016			2015			2016			2015
Net Income	$	33,593		$	16,386		$	41,271		$	22,279
Other Comprehensive Income (Loss), net of tax:
Unrealized Gain (Loss) on Marketable Securities and Investments, net	(832		)	(157		)	(816		)	(983		)
Foreign Currency Translation Adjustment Gain (Loss), net	(6,322		)	1,902			(8,539		)	(1,912		)
Other Comprehensive Income (Loss)	(7,154		)	1,745			(9,355		)	(2,895		)
Comprehensive Income	26,439			18,131			31,916			19,384
Comprehensive Income Attributable to Noncontrolling Interest	8,039			5,818			10,018			6,534
Comprehensive Income Attributable to Evercore Partners Inc.	$	18,400		$	12,313		$	21,898		$	12,850

See Notes to Unaudited Condensed Consolidated Financial Statements.

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EVERCORE PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

(dollars in thousands, except share data)



	For the Six Months Ended June 30, 2016
							Accumulated
				Additional			Other			Retained
	Class A Common Stock			Paid-In			Comprehensive			Earnings			Treasury Stock					Noncontrolling			Total
	Shares	Dollars		Capital			Income (Loss)			(Deficit)			Shares		Dollars			Interest			Equity
Balance at December 31, 2015	55,249,559	$	552	$	1,210,742		$	(34,539	)	$	(27,791	)	(15,626,288	)	$	(644,412	)	$	202,664		$	707,216
Net Income	—	—		—			—			29,405			—		—			11,866			41,271
Other Comprehensive Income (Loss)	—	—		—			(7,507		)	—			—		—			(1,848		)	(9,355		)
Treasury Stock Purchases, net	—	—		—			—			—			(3,357,057	)	(159,779		)	—			(159,779		)
Evercore LP Units Converted into Class A Common Stock	232,217	2		6,190			—			—			—		—			(6,192		)	—
Equity-based Compensation Awards	2,271,201	23		58,687			—			—			—		—			52,498			111,208
Dividends and Equivalents	—	—		3,870			—			(28,265		)	—		—			—			(24,395		)
Noncontrolling Interest (Note 12)	—	—		(1,257		)	—			—			—		—			(21,814		)	(23,071		)
Balance at June 30, 2016	57,752,977	$	577	$	1,278,232		$	(42,046	)	$	(26,651	)	(18,983,345	)	$	(804,191	)	$	237,174		$	643,095

	For the Six Months Ended June 30, 2015
							Accumulated
				Additional			Other			Retained
	Class A Common Stock			Paid-In			Comprehensive			Earnings			Treasury Stock					Noncontrolling			Total
	Shares	Dollars		Capital			Income (Loss)			(Deficit)			Shares		Dollars			Interest			Equity
Balance at December 31, 2014	46,414,240	$	464	$	950,147		$	(20,387	)	$	(17,814	)	(10,159,116	)	$	(361,129	)	$	160,952		$	712,233
Net Income	—	—		—			—			15,064			—		—			7,215			22,279
Other Comprehensive Income (Loss)	—	—		—			(2,214		)	—			—		—			(681		)	(2,895		)
Treasury Stock Purchases, net	—	—		—			—			—			(2,449,884	)	(123,639		)	—			(123,639		)
Evercore LP Units Purchased or Converted into Class A Common Stock	209,080	2		3,347			—			—			—		—			(3,793		)	(444		)
Equity-based Compensation Awards	2,146,611	22		65,199			—			—			—		—			43,400			108,621
Dividends and Equivalents	—	—		3,295			—			(25,998		)	—		—			—			(22,703		)
Noncontrolling Interest (Note 12)	—	—		610			—			—			—		—			(9,984		)	(9,374		)
Balance at June 30, 2015	48,769,931	$	488	$	1,022,598		$	(22,601	)	$	(28,748	)	(12,609,000	)	$	(484,768	)	$	197,109		$	684,078

See Notes to Unaudited Condensed Consolidated Financial Statements.

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EVERCORE PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(dollars in thousands)



	For the Six Months Ended June 30,
	2016			2015
Cash Flows From Operating Activities
Net Income	$	41,271		$	22,279
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:
Net (Gains) Losses on Investments, Marketable Securities and Contingent Consideration	198			2,313
Equity Method Investments	4,251			3,118
Equity-Based and Other Deferred Compensation	124,348			106,139
Depreciation, Amortization and Accretion	13,067			13,846
Bad Debt Expense	554			141
Deferred Taxes	(958		)	9,557
Decrease (Increase) in Operating Assets:
Marketable Securities	339			310
Financial Instruments Owned and Pledged as Collateral at Fair Value	27,417			48,004
Securities Purchased Under Agreements to Resell	(20,468		)	(26,962		)
Accounts Receivable	(17,790		)	9,618
Receivable from Employees and Related Parties	3,027			195
Other Assets	(7,671		)	(18,618		)
(Decrease) Increase in Operating Liabilities:
Accrued Compensation and Benefits	(148,263		)	(113,581		)
Accounts Payable and Accrued Expenses	(6,753		)	(963		)
Securities Sold Under Agreements to Repurchase	(7,011		)	(21,135		)
Payables to Employees and Related Parties	3,598			12,062
Taxes Payable	(11,291		)	448
Other Liabilities	11,305			(437		)
Net Cash Provided by Operating Activities	9,170			46,334
Cash Flows From Investing Activities
Investments Purchased	(1,529		)	(224		)
Distributions of Private Equity Investments	107			6,593
Marketable Securities:
Proceeds from Sales and Maturities	18,260			20,369
Purchases	(43,820		)	(15,704		)
Loans Receivable	—			(3,500		)
Assets Held for Sale	(906		)	—
Purchase of Furniture, Equipment and Leasehold Improvements	(4,732		)	(7,695		)
Net Cash Provided by (Used in) Investing Activities	(32,620		)	(161		)
Cash Flows From Financing Activities
Issuance of Noncontrolling Interests	885			307
Purchase of Noncontrolling Interests	(6,482		)	—
Distributions to Noncontrolling Interests	(17,193		)	(10,291		)
Cash Paid for Deferred and Contingent Consideration	(5,050		)	—
Short-Term Borrowing	50,000			45,000
Repayment of Short-Term Borrowing	(50,000		)	(45,000		)
Repayment of Subordinated Borrowings	(6,000		)	—
Payment of Notes Payable - Mizuho	(120,000		)	—
Issuance of Notes Payable	170,000			—
Debt Issuance Costs	(2,084		)	—
Purchase of Treasury Stock	(159,779		)	(123,639		)
Excess Tax Benefits Associated with Equity-Based Awards	4,385			8,877
Dividends - Class A Stockholders	(24,397		)	(22,703		)
Net Cash Provided by (Used in) Financing Activities	(165,715		)	(147,449		)
Effect of Exchange Rate Changes on Cash	(12,329		)	(805		)
Net Increase (Decrease) in Cash and Cash Equivalents	(201,494		)	(102,081		)
Cash and Cash Equivalents-Beginning of Period	448,764			352,160
Cash and Cash Equivalents-End of Period	$	247,270		$	250,079




SUPPLEMENTAL CASH FLOW DISCLOSURE
Payments for Interest	$	4,757		$	8,661
Payments for Income Taxes	$	50,131		$	16,841
Increase (Decrease) in Fair Value of Redeemable Noncontrolling Interest	$	—		$	(610	)
Dividend Equivalents Issued	$	3,870		$	3,295
Receipt of Securities in Settlement of Accounts Receivable	$	—		$	1,079
Purchase of Noncontrolling Interest	$	—		$	1,123

See Notes to Unaudited Condensed Consolidated Financial Statements.

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EVERCORE PARTNERS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

Note 1 – Organization

Evercore Partners Inc. and subsidiaries (the "Company") is an investment banking and investment management firm, incorporated in Delaware on July 21, 2005 and headquartered in New York, New York. The Company is a holding company which owns a controlling interest in Evercore LP, a Delaware limited partnership ("Evercore LP"). Subsequent to the Company’s initial public offering, the Company became the sole general partner of Evercore LP. The Company operates from its offices and through its affiliates in North America, Europe, South America and Asia.

The Investment Banking business includes the advisory business through which the Company provides advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, with a particular focus on advising prominent multinational corporations and substantial private equity firms on large, complex transactions. The Company also provides restructuring advice to companies in financial transition, as well as to creditors, shareholders and potential acquirers. In addition, the Company provides its clients with capital markets advice, underwrites securities offerings, raises funds for financial sponsors and provides advisory services focused on secondary transactions for private funds interests. The Investment Banking business also includes the Evercore ISI business through which the Company offers macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors.

The Investment Management business includes the institutional asset management business through which the Company, directly and through affiliates, manages financial assets for sophisticated institutional investors and provides independent fiduciary services to corporate employee benefit plans and high net-worth individuals, the wealth management business through which the Company provides investment advisory and wealth management services for high net-worth individuals and associated entities, and the private equity business through which the Company, directly and through affiliates, manages private equity funds.

Note 2 – Significant Accounting Policies

For a further discussion of the Company's accounting policies, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

Basis of Presentation – The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. As permitted by the rules and regulations of the United States Securities and Exchange Commission, the unaudited condensed consolidated financial statements contain certain condensed financial information and exclude certain footnote disclosures normally included in audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The accompanying condensed consolidated financial statements are unaudited and are prepared in accordance with U.S. GAAP. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including normal recurring accruals, necessary to fairly present the accompanying unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. The December 31, 2015 Unaudited Condensed Consolidated Statement of Financial Condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016.

The accompanying unaudited condensed consolidated financial statements of the Company are comprised of the consolidation of Evercore LP and Evercore LP’s wholly-owned and majority-owned direct and indirect subsidiaries, including Evercore Group L.L.C. ("EGL"), a registered broker-dealer in the U.S. The Company’s policy is to consolidate all subsidiaries in which it has a controlling financial interest, as well as any variable interest entities ("VIEs") where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE. The Company reviews factors, including the rights of the equity holders and obligations of equity holders to absorb losses or receive expected residual returns, to determine if the investment is a VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly or indirectly by the Company. The consolidation analysis is generally performed qualitatively. This analysis, which requires judgment, is performed at each reporting date.

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EVERCORE PARTNERS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

In February 2015, Accounting Standards Update ("ASU") No. 2015-02, "Amendments to the Consolidation Analysis," ("ASU 2015-02") was issued. This ASU eliminates the deferral of ASU No. 2010-10, "Amendments for Certain Investment Funds," which allows reporting entities with interests in certain investment funds to follow the consolidation guidance in Accounting Standards Codification ("ASC") No. 810, "Consolidation," ("ASC 810") and makes other changes to the variable interest model and the voting model. ASU 2015-02 modifies the evaluation performed by reporting entities on limited partnerships and similar entities and also impacts the evaluation performed by reporting entities on VIE determination, and determination of the primary beneficiary of a VIE.

The Company adopted ASU 2015-02 on January 1, 2016. Pursuant to the provisions of ASU 2015-02, Evercore LP is a VIE and the Company is the primary beneficiary. Prior to the adoption of ASU 2015-02, the Company consolidated Evercore LP as a voting interest entity. Specifically, the Company has the majority economic interest in Evercore LP and has decision making authority that significantly affects the economic performance of the entity while the limited partners have no kick-out or substantive participating rights. The assets and liabilities of Evercore LP represent substantially all of the consolidated assets and liabilities of the Company with the exception of U.S. corporate taxes and related items, which are presented on the Company's (Parent Company Only) statements of financial position in Note 23 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Evercore Asia Limited ("Evercore Asia"), Evercore Asia (Singapore) PTE. LTD. ("Evercore Singapore") and International Strategy & Investment (UK) Limited ("ISI UK") are also VIEs pursuant to ASC 810 and the Company is the primary beneficiary of these VIEs. Specifically, the Company provides financial support through transfer pricing agreements with these entities, which exposes the Company to losses that are potentially significant to the entities, and has decision making authority that significantly affects the economic performance of the entities. Following the adoption of ASU 2015-02, the Company also concluded that Evercore Partners International LLP ("EPI LLP") is a VIE and that the Company is the primary beneficiary of this VIE. The Company has the majority economic interest in EPI LLP and has decision making authority that significantly affects the economic performance of this entity. The Company included in its Unaudited Condensed Consolidated Statements of Financial Condition Evercore Asia, Evercore Singapore, ISI UK and EPI LLP assets of $148,727 and liabilities of $84,540 at June 30, 2016 and assets of $151,583 and liabilities of $110,424 at December 31, 2015.

All intercompany balances and transactions with the Company’s subsidiaries have been eliminated upon consolidation.

Note 3 – Recent Accounting Pronouncements

ASU 2014-09 – In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"). ASU 2014-09 provides amendments to ASC No. 605, "Revenue Recognition" and creates ASC No. 606, "Revenue from Contracts with Customers," which changes the requirements for revenue recognition and amends the disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, "Deferral of the Effective Date," which provides amendments that defer the effective date of ASU 2014-09 by one year. In April 2016, the FASB issued ASU No. 2016-10, "Identifying Performance Obligations and Licensing," which provides clarification to identifying performance obligations and the licensing implementation guidance in ASU 2014-09. In May 2016, the FASB issued ASU No. 2016-12, "Narrow-Scope Improvements and Practical Expedients," which provides clarification on certain issues identified in the guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition in ASU 2014-09. The amendments in these updates are effective either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption, during interim and annual periods beginning after December 15, 2017, with early adoption permitted beginning after December 15, 2016. The Company is currently assessing the impact of the adoption of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2014-12 – In June 2014, the FASB issued ASU No. 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period" ("ASU 2014-12"). ASU 2014-12 provides amendments to ASC No. 718, "Compensation - Stock Compensation," which clarify the guidance for whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the grant-date fair value of an award. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this update are effective either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter, during interim and

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annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2014-12 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2015-01 – In January 2015, the FASB issued ASU No. 2015-01, "Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items" ("ASU 2015-01"). ASU 2015-01 provides amendments to ASC No. 225-20, "Income Statement - Extraordinary and Unusual Items," which eliminate the concept of extraordinary items. The amendments in this update are effective either prospectively or retrospectively during interim and annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2015-01 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2015-02 - In February 2015, the FASB issued ASU No. 2015-02, "Amendments to the Consolidation Analysis" ("ASU 2015-02"). ASU 2015-02 provides amendments to ASC 810, which include the following: 1. Modify the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, 2. Eliminate the presumption that a general partner should consolidate a limited partnership, 3. Affect the consolidation analysis of reporting entities that are involved with VIEs, and 4. Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this update are effective during interim and annual periods beginning after December 15, 2015, with early adoption permitted, and may be applied retrospectively or using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The adoption of ASU 2015-02 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto. See Note 2 for further information.

ASU 2015-03 - In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03"). ASU 2015-03 provides amendments to Subtopic 835-30, "Interest - Imputation of Interest," which require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this update are effective retrospectively during interim and annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2015-03 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2015-05 - In April 2015, the FASB issued ASU No. 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement" ("ASU 2015-05"). ASU 2015-05 provides amendments to ASC No. 350, "Intangibles - Goodwill and Other," Subtopic 350-40, "Internal-Use Software" which help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement and determine whether an arrangement includes the sale or license of software. The amendments in this update are effective either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively during interim and annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2015-05 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2015-16 - In September 2015, the FASB issued ASU No. 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments" ("ASU 2015-16"). ASU 2015-16 provides amendments to ASC No. 805, "Business Combinations," which simplify the accounting for adjustments made to provisional amounts recognized in a business combination by eliminating the requirement to retrospectively account for those adjustments and require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2015-16 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2016-01 - In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). ASU 2016-01 provides amendments to ASC No. 740, "Financial Instruments," which change the requirements for certain aspects of recognition, measurement and presentation of financial assets and liabilities and amend the disclosure requirements. The amendments in this update should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values are effective prospectively during interim and annual periods beginning after

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December 15, 2017, with early adoption not permitted. The Company is currently assessing the impact of the adoption of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2016-02 - In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). ASU 2016-02 supersedes ASC No. 840, "Leases," and includes requirements for the recognition of a right-of-use asset and lease liability on the balance sheet by lessees for those leases classified as operating leases under previous guidance. The amendments in this update are effective using a modified retrospective approach at the beginning of the earliest period presented, during interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the impact of the adoption of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2016-07 - In March 2016, the FASB issued ASU No. 2016-07, "Simplifying the Transition to the Equity Method of Accounting" ("ASU 2016-07"). ASU 2016-07 provides amendments to ASC No. 323, "Investments - Equity Method and Joint Ventures," which simplify the accounting for equity method investments by eliminating the requirement to adjust the investment, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments in this update are effective prospectively to increases in the level of ownership interest or degree of influence that results in the adoption of the equity method, during interim and annual periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2016-09 - In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). ASU 2016-09 provides amendments to ASC No. 718, "Compensation - Stock Compensation," which simplify the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this update are effective during interim and annual periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

ASU 2016-13 - In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13 provides amendments to ASC No. 326, "Financial Instruments - Credit Losses," which amend the guidance on the impairment of financial instruments and adds an impairment model (the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Entities will recognize an allowance for its estimate of expected credit losses as of the end of each reporting period. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted after December 15, 2018. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.

Note 4 – Acquisition and Transition Costs, Special Charges and Intangible Asset Amortization

Acquisition and Transition Costs

The Company recognized ($329) for the three and six months ended June 30, 2016 and $917 and $1,401 for the three and six months ended June 30, 2015, respectively, as Acquisition and Transition Costs incurred in connection with acquisitions and other ongoing business development initiatives. These costs are primarily comprised of professional fees for legal and other services. In addition, in 2016 acquisition and transition costs included the reversal of $733 of a provision for certain settlements previously established in the fourth quarter of 2015.

Special Charges

The Company recognized ($139) and $5,499 for the three and six months ended June 30, 2015, respectively, as Special Charges incurred related to separation benefits and costs associated with the termination of certain contracts within the Company’s Evercore ISI business, and the finalization of a matter associated with the wind-down of the Company’s U.S. Private Equity business.

Intangible Asset Amortization

Expense associated with the amortization of intangible assets for Investment Banking was $2,862 and $6,077 for the three and six months ended June 30, 2016, respectively, and $2,940 and $5,884 for the three and six months ended June 30, 2015,

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respectively, included within Depreciation and Amortization expense on the Unaudited Condensed Consolidated Statements of Operations. Expense associated with the amortization of intangible assets for Investment Management was $144 and $343 for the three and six months ended June 30, 2016, respectively, and $938 and $1,876 for the three and six months ended June 30, 2015, respectively, included within Depreciation and Amortization expense on the Unaudited Condensed Consolidated Statements of Operations.

Note 5 – Related Parties

Investment Management Revenue includes income from related parties earned from the Company’s private equity funds for portfolio company fees, management fees, expense reimbursements and realized and unrealized gains and losses of private equity fund investments. Total Investment Management revenues from related parties amounted to $6,355 and $8,749 for the three and six months ended June 30, 2016, respectively, and $1,674 and $2,887 for the three and six months ended June 30, 2015, respectively.

Investment Banking Revenue includes advisory fees earned from clients that have a Senior Managing Director as a member of their Board of Directors of $750 and $1,301 for the three and six months ended June 30, 2016, respectively.

Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition includes the long-term portion of loans receivable from certain employees of $15,241 and $6,967 as of June 30, 2016 and December 31, 2015, respectively.

The Company had $16,550 and $22,550 in subordinated borrowings, principally with an executive officer of the Company, as of June 30, 2016 and December 31, 2015, respectively. See Note 10 for further information.

Note 6 – Marketable Securities

The amortized cost and estimated fair value of the Company’s Marketable Securities as of June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016								December 31, 2015
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Investments	$	6,482	$	21	$	3,322	$	3,181	$	6,463	$	10	$	2,523	$	3,950
Debt Securities Carried by EGL	40,402		166		5		40,563		37,404		94		8		37,490
Investment Funds	24,476		530		24		24,982		2,291		155		99		2,347
Total	$	71,360	$	717	$	3,351	$	68,726	$	46,158	$	259	$	2,630	$	43,787

Scheduled maturities of the Company’s available-for-sale debt securities within the Securities Investments portfolio as of June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016				December 31, 2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	101	$	101	$	204	$	204
Due after one year through five years	1,422		1,442		1,537		1,545
Due after five years through 10 years	237		238		—		—
Total	$	1,760	$	1,781	$	1,741	$	1,749

Since the Company has the ability and intent to hold available-for-sale securities until a recovery of fair value is equal to an amount approximating its amortized cost, which may be at maturity, and has not incurred credit losses on its securities, it does not consider such unrealized loss positions to be other-than-temporarily impaired at June 30, 2016.

Securities Investments

Securities Investments include equity and debt securities, which are classified as available-for-sale securities within Marketable Securities on the Unaudited Condensed Consolidated Statements of Financial Condition. These securities are stated at fair value with unrealized gains and losses included in Accumulated Other Comprehensive Income (Loss) and realized gains

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and losses included in earnings. The Company had net realized losses of ($10) and ($21) for the three and six months ended June 30, 2016, respectively, and ($12) and ($23) for the three and six months ended June 30, 2015, respectively.

Debt Securities Carried by EGL

EGL invests in a fixed income portfolio consisting primarily of municipal bonds. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest, on the Unaudited Condensed Consolidated Statements of Operations, as required for broker-dealers in securities. The Company had net realized and unrealized losses of ($175) and ($339) for the three and six months ended June 30, 2016, respectively, and ($187) and ($310) for the three and six months ended June 30, 2015, respectively.

Investment Funds

The Company invests in a portfolio of exchange traded funds and mutual funds as an economic hedge against the Company’s deferred compensation program. See Note 14 for further information. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest, on the Unaudited Condensed Consolidated Statements of Operations. The Company had net realized and unrealized gains (losses) of $534 and $525 for the three and six months ended June 30, 2016, respectively, and ($4) and $156 for the three and six months ended June 30, 2015, respectively.

Note 7 – Financial Instruments Owned and Pledged as Collateral at Fair Value, Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase

The Company, through Evercore Casa de Bolsa, S.A. de C.V. ("ECB"), enters into repurchase agreements with clients seeking overnight money market returns whereby ECB transfers to the clients Mexican government securities in exchange for cash and concurrently agrees to repurchase the securities at a future date for an amount equal to the cash exchanged plus a stipulated premium or interest factor. ECB deploys the cash received from, and acquires the securities deliverable to, clients under these repurchase arrangements by purchasing securities in the open market, which the Company reflects as Financial Instruments Owned and Pledged as Collateral at Fair Value on the Unaudited Condensed Consolidated Statements of Financial Condition, or by entering into reverse repurchase agreements with unrelated third parties. The Company accounts for these repurchase and reverse repurchase agreements as collateralized financing transactions, which are carried at their contract amounts, which approximate fair value given that the contracts mature the following business day. The Company records a liability on its Unaudited Condensed Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase. The Company records as assets on its Unaudited Condensed Consolidated Statements of Financial Condition, Financial Instruments Owned and Pledged as Collateral at Fair Value (where the Company has acquired the securities deliverable to clients under these repurchase arrangements by purchasing securities in the open market) and Securities Purchased Under Agreements to Resell (where the Company has acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties). These Mexican government securities had an estimated average time to maturity of approximately 0.7 years, as of June 30, 2016, and are pledged as collateral against repurchase agreements. Generally, collateral is posted equal to the contract value at inception and is subject to market changes. These repurchase agreements are primarily with institutional customer accounts managed by ECB and permit the counterparty to pledge the securities.

ECB has procedures in place to monitor the daily risk limits for positions taken, as well as the credit risk based on the collateral pledged under these agreements against their contract value from inception to maturity date. The daily risk measure is Value at Risk ("VaR"), which is a statistical measure, at a 98% confidence level, of the potential daily losses from adverse market movements in an ordinary market environment based on a historical simulation using the prior year’s historical data. ECB’s Risk Management Committee (the "Committee") has established a policy to maintain VaR at levels below 0.1% of the value of the portfolio. If at any point in time the threshold is exceeded, ECB personnel are alerted by an automated interface with ECB’s trading systems and begin to make adjustments in the portfolio in order to mitigate the risk and bring the portfolio in compliance. Concurrently, ECB personnel must notify the Committee of the variance and the actions taken to reduce the exposure to loss.

In addition to monitoring VaR, ECB periodically performs discrete stress tests to assure that the level of potential losses that would arise from extreme market movements that may not be anticipated by VaR measures are within acceptable levels.

As of June 30, 2016 and December 31, 2015, a summary of the Company’s assets, liabilities and collateral received or pledged related to these transactions was as follows:

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	June 30, 2016						December 31, 2015
	Asset (Liability) Balance			Market Value of Collateral Received or (Pledged)			Asset (Liability) Balance			Market Value of Collateral Received or (Pledged)
Assets
Financial Instruments Owned and Pledged as Collateral at Fair Value	$	12,297					$	41,742
Securities Purchased Under Agreements to Resell	21,989			$	21,992		2,191			$	2,192
Total Assets	$	34,286					$	43,933
Liabilities
Securities Sold Under Agreements to Repurchase	$	(34,288	)	$	(34,286	)	$	(44,000	)	$	(44,063	)

Note 8 – Investments

The Company’s investments reported on the Unaudited Condensed Consolidated Statements of Financial Condition consist of investments in private equity partnerships, Trilantic Capital Partners ("Trilantic") and other investments in unconsolidated affiliated companies. The Company’s investments are relatively high-risk and illiquid assets.

The Company’s investments in private equity partnerships consist of investment interests in private equity funds which are voting interest entities. Realized and unrealized gains and losses on the private equity investments are included within Investment Management Revenue, as the Company considers this activity integral to its Private Equity business.

The Company also has investments in G5 Holdings S.A. ("G5 ǀ Evercore"), ABS Investment Management, LLC ("ABS") and Atalanta Sosnoff Capital, LLC ("Atalanta Sosnoff"), which are voting interest entities. The Company’s share of earnings (losses) on its investments in G5 ǀ Evercore, ABS and Atalanta Sosnoff (after its deconsolidation on December 31, 2015) are included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.

Investments in Private Equity

Private Equity Funds

The Company’s investments related to private equity partnerships and associated entities include investments in Evercore Capital Partners II, L.P. ("ECP II"), Discovery Americas I, L.P. (the "Discovery Fund"), Evercore Mexico Capital Partners II, L.P. ("EMCP II"), Evercore Mexico Capital Partners III, L.P. ("EMCP III"), CSI Capital, L.P. ("CSI Capital"), Trilantic Capital Partners Associates IV, L.P. ("Trilantic IV") and Trilantic Capital Partners V, L.P. ("Trilantic V"). Portfolio holdings of the private equity funds are carried at fair value. Accordingly, the Company reflects its pro rata share of the unrealized gains and losses occurring from changes in fair value. Additionally, the Company reflects its pro rata share of realized gains, losses and carried interest associated with any investment realizations.

On December 31, 2014, ECP II was terminated. The Company's investment at June 30, 2016 of $959 is comprised of its remaining interest in the general partner, including $818 in cash, $61 in a seller note and $80 in securities.

In 2013, the Company held a fourth and final closing on EMCP III, a private equity fund focused on middle market investments in Mexico. The total subscribed capital commitments of $201,000 included a capital commitment of $10,750 by the general partner of EMCP III, Evercore Mexico Partners III ("EMP III"), of which $1,000 relates to the Company and $9,750 relates to noncontrolling interest holders. At June 30, 2016, unfunded commitments of EMP III were $3,675, including $300 due from the Company.

A summary of the Company’s investment in the private equity funds as of June 30, 2016 and December 31, 2015 was as follows:

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	June 30, 2016		December 31, 2015
ECP II	$	959	$	983
Discovery Fund	7,394		6,632
EMCP II	6,086		6,091
EMCP III	544		5,786
CSI Capital	—		35
Trilantic IV	3,505		2,829
Trilantic V	5,039		4,117
Total Private Equity Funds	$	23,527	$	26,473

Net realized and unrealized gains on private equity fund investments were $4,764 and $6,131 for the three and six months ended June 30, 2016, respectively, and $1,815 and $1,326 for the three and six months ended June 30, 2015, respectively. During the six months ended June 30, 2015, ECP II, EMCP II, CSI Capital and Trilantic IV made distributions of $3,000, $3,194, $2,750 and $1,650, respectively. In the event the funds perform poorly, the Company may be obligated to repay certain carried interest previously distributed. As of June 30, 2016, there was no previously distributed carried interest that was subject to repayment.

General Partners of Private Equity Funds which are VIEs

The Company has concluded that Evercore Partners II, L.L.C. ("EP II L.L.C."), the general partner of ECP II, is a VIE pursuant to ASC 810. The Company owned 8%-9% of the carried interest earned by the general partner of ECP II. The Company's assessment of the design of EP II L.L.C. resulted in the determination that the Company is not acting as an agent for other members of the general partner and is a passive holder of interests in the fund, evidenced by the fact that the Company is a non-voting, non-managing member of the general partner and, therefore, has no authority in directing the management operations of the general partner. Furthermore, the Company does not have the obligation to absorb significant losses or the right to receive benefits that could potentially have a significant impact to EP II L.L.C. Accordingly, the Company has concluded that it is not the primary beneficiary of EP II L.L.C. and has not consolidated EP II L.L.C. in the Company's unaudited condensed consolidated financial statements.

In 2013, EMP III amended and restated its Limited Partnership Agreement and admitted certain limited partners, which are related parties of the Company. The Company viewed this modification as a reconsideration event under ASC 810-10, "Noncontrolling Interest in Consolidated Financial Statements - an amendment of ARB No. 51," and concluded that EMP III is a VIE and that the Company is the primary beneficiary of this VIE. Specifically, the Company's general partner interests in EMP III provides the Company with the ability to make decisions that significantly impact the economic performance of EMP III, while the limited partners do not possess substantive participating rights over EMP III. The Company's assessment of the primary beneficiary of EMP III included assessing which parties have the power to significantly impact the economic performance of EMP III and the obligation to absorb losses, which could be potentially significant to EMP III, or the right to receive benefits from EMP III that could be potentially significant. The Company had previously consolidated EMP III as a voting interest entity; accordingly, consolidating as a VIE had no impact on the assets and liabilities of the Company. The Company consolidated EMP III assets of $6,572 and liabilities of $83 at June 30, 2016 and assets of $6,030 and liabilities of $164 at December 31, 2015, in the Company's Unaudited Condensed Consolidated Statements of Financial Condition. The assets retained by EMP III are for the benefit of the interest holders of EMP III and the liabilities are generally non-recourse to the Company.

Glisco Transaction

On July 19, 2016, the Company and the principals of its Mexican Private Equity business entered into an agreement to transfer ownership of its Mexican Private Equity business and related entities to Glisco Partners Inc. ("Glisco"), which will assume all responsibility for the management of the existing funds EMCP II and EMCP III. These principals will cease to be employed by the Company following this transaction. An SMD of the Company will continue to serve on the Investment Committee for the funds.

As consideration for this transaction, the Company will receive a fixed percentage of the management fees earned by Glisco for a period of up to ten years, as well as a portion of the carried interest in the next two successor funds. The Company will commit to invest capital in those successor funds consistent with the level of carried interest it owns and will retain its

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carried interest and its capital interests in the existing funds. In conjunction with this transaction, the Company entered into a transition services agreement to provide operational support to Glisco for a period of up to 18 months.

Completion of this transaction, which is subject to consent by the Limited Partner Advisory Committee of the funds and regulatory approval in Mexico, is expected to occur before the end of 2016.

Following this transaction, the Company will cease to have a general partner’s interest in and will deconsolidate Evercore Mexico Partners II and III (the General Partners of EMCP II and EMCP III) and related subsidiaries. Going forward the Company will maintain a limited partner’s interest in the general partners of the funds.

In addition, the Company will maintain a limited partner’s interest and record an investment in Glisco Manager Holdings LP, from which the Company will receive its portion of the management fees earned by Glisco. The Company’s investment in Glisco Manager Holdings LP will be accounted for as a cost method investment.

As of June 30, 2016, the Company recorded $6,849 of Assets Held for Sale, comprised primarily of $5,847 of investments related to the interest held by the noncontrolling interest holders of EMP III and $906 of cash. The Company also recorded $1,510 of Liabilities Held for Sale, comprised primarily of accrued compensation and benefits and accounts payable, related to the entities to be transferred. Noncontrolling interest of $6,126 is also recorded as of June 30, 2016 related to the entities to be transferred.

Investment in Trilantic Capital Partners and Others

In 2010, the Company made a limited partnership investment in Trilantic in exchange for 500 Class A limited partnership units of Evercore LP ("Class A LP Units") having a fair value of $16,090. This investment gave the Company the right to invest in Trilantic’s current and future private equity funds, beginning with Trilantic Fund IV. The Company accounts for this investment under the cost method, subject to impairment. The Company allocates the cost of this investment to its investments in current and future Trilantic funds, as the Company satisfies the capital calls of these funds. The Company bases this allocation on its expectation of Trilantic’s future fundraising ability and performance. During the six months ended June 30, 2016, $537 and $33 of this investment was allocated to Trilantic Fund V and IV, respectively. During 2015, $636 and $8 of this investment was allocated to Trilantic Fund V and IV, respectively. During 2014, $689 of this investment was allocated to Trilantic Fund V. During 2013, $825 and $29 of this investment was allocated to Trilantic Fund V and Trilantic Fund IV, respectively. From 2010 to 2012, $1,091 of this investment was allocated to Trilantic Fund IV. This investment had a balance of $12,242 and $12,812 as of June 30, 2016 and December 31, 2015, respectively. The Company has a $5,000 commitment to invest in Trilantic Fund V, of which $2,550 was unfunded at June 30, 2016. The Company and Trilantic anticipate that the Company will participate in the successor funds to Trilantic Fund V. The Company further anticipates that participation in the successor fund will be at approximately $12,000.

In the second quarter of 2015, the Company received an equity security in a private company with a fair value of $1,079 in exchange for advisory services. This investment is accounted for on the cost basis.

Equity Method Investments

A summary of the Company’s other investments accounted for under the equity method of accounting as of June 30, 2016 and December 31, 2015 was as follows:



	June 30, 2016		December 31, 2015
G5 ǀ Evercore	$	24,665	$	20,730
ABS	37,890		41,567
Atalanta Sosnoff	23,387		23,990
Total	$	85,942	$	86,287

G5 ǀ Evercore

In 2010, the Company made an investment accounted for under the equity method of accounting in G5 ǀ Evercore. At June 30, 2016, the Company’s economic ownership interest in G5 ǀ Evercore was 49%. This investment resulted in earnings of $277 and $29 for the three and six months ended June 30, 2016, respectively, and $708 and $651 for the three and six months ended June 30, 2015, respectively, included within Income from Equity Method Investments on the Unaudited Condensed

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EVERCORE PARTNERS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

Consolidated Statements of Operations. In addition, the investment is subject to currency translation from Brazilian Real to the U.S. Dollar.

ABS

In 2011, the Company made an investment accounted for under the equity method of accounting in ABS. At June 30, 2016, the Company’s economic ownership interest in ABS was 45%. This investment resulted in earnings of $1,244 and $2,574 for the three and six months ended June 30, 2016, respectively, and $1,290 and $2,454 for the three and six months ended June 30, 2015, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.

Atalanta Sosnoff

On December 31, 2015, the Company amended the Operating Agreement with Atalanta Sosnoff and deconsolidated its assets and liabilities and accounted for its interest in Atalanta Sosnoff under the equity method of accounting from that date forward. The carrying amount of the investment of $23,990, at December 31, 2015, represented its fair value on that date. At June 30, 2016, the Company’s economic ownership interest in Atalanta Sosnoff was 49%. This investment resulted in earnings of $143 and $348 for the three and six months ended June 30, 2016, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.

Other

The Company allocates the purchase price of its equity method investments, in part, to the inherent finite-lived identifiable intangible assets of the investees. The Company’s share of the earnings of the investees has been reduced by the amortization of these identifiable intangible assets inherent in the investments of $884 and $1,764 for the three and six months ended June 30, 2016, respectively, and $621 and $1,242 for the three and six months ended June 30, 2015, respectively.

Note 9 – Fair Value Measurements

ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820") establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily-available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by ASC 820, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. The estimated fair values of the Corporate Bonds, Municipal Bonds, Other Debt Securities and Securities Investments held at June 30, 2016 and December 31, 2015 are based on quoted market prices provided by external pricing services.

Level III – Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation.

The following table presents the categorization of investments and certain other financial assets measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015:

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(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)



	June 30, 2016
	Level I		Level II		Level III		Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)	$	—	$	44,381	$	—	$	44,381
Securities Investments (1)	4,399		1,781		—		6,180
Investment Funds	24,982		—		—		24,982
Financial Instruments Owned and Pledged as Collateral at Fair Value	12,297		—		—		12,297
Total Assets Measured At Fair Value	$	41,678	$	46,162	$	—	$	87,840

	December 31, 2015
	Level I		Level II		Level III		Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)	$	—	$	44,144	$	—	$	44,144
Securities Investments (1)	5,200		1,749		—		6,949
Investment Funds	2,347		—		—		2,347
Financial Instruments Owned and Pledged as Collateral at Fair Value	41,742		—		—		41,742
Total Assets Measured At Fair Value	$	49,289	$	45,893	$	—	$	95,182


(1)	Includes $6,817 and $9,653 of treasury bills, municipal bonds and commercial paper classified within Cash and Cash Equivalents on the Unaudited Condensed Consolidated Statements of Financial Condition as of June 30, 2016 and December 31, 2015, respectively.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

The Company had no transfers between fair value levels during the six months ended June 30, 2016 or the year ended December 31, 2015.

During the fourth quarter of 2015, the Company determined that the fair value of the goodwill in its Institutional Asset Management reporting unit was $66,200. The fair value of the reporting unit was estimated by utilizing both a market multiple approach and a discounted cash flow methodology based on the adjusted cash flows from operations. Goodwill is measured at fair value on a non-recurring basis as a Level III asset.

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EVERCORE PARTNERS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

The carrying amount and estimated fair value of the Company’s financial instrument assets and liabilities, which are not measured at fair value on the Unaudited Condensed Consolidated Statements of Financial Condition, are listed in the tables below.



			June 30, 2016
	Carrying		Estimated Fair Value
	Amount		Level I		Level II		Level III		Total
Financial Assets:
Cash and Cash Equivalents	$	240,453	$	240,453	$	—	$	—	$	240,453
Securities Purchased Under Agreements to Resell	21,989		—		21,989		—		21,989
Accounts Receivable	189,003		—		189,003		—		189,003
Receivable from Employees and Related Parties	18,033		—		18,033		—		18,033
Assets Segregated for Bank Regulatory Requirements	10,200		10,200		—		—		10,200
Closely-held Equity Security	1,079		—		—		1,079		1,079
Loans Receivable	3,500		—		3,560		—		3,560
Financial Liabilities:
Accounts Payable and Accrued Expenses	$	34,507	$	—	$	34,507	$	—	$	34,507
Securities Sold Under Agreements to Repurchase	34,288		—		34,288		—		34,288
Payable to Employees and Related Parties	31,995		—		31,995		—		31,995
Notes Payable	167,976		—		175,459		—		175,459
Subordinated Borrowings	16,550		—		16,925		—		16,925

			December 31, 2015
	Carrying		Estimated Fair Value
	Amount		Level I		Level II		Level III		Total
Financial Assets:
Cash and Cash Equivalents	$	439,111	$	439,111	$	—	$	—	$	439,111
Securities Purchased Under Agreements to Resell	2,191		—		2,191		—		2,191
Accounts Receivable	175,497		—		175,497		—		175,497
Receivable from Employees and Related Parties	21,189		—		21,189		—		21,189
Assets Segregated for Bank Regulatory Requirements	10,200		10,200		—		—		10,200
Closely-held Equity Security	1,079		—		—		1,079		1,079
Loans Receivable	3,500		—		3,666		—		3,666
Financial Liabilities:
Accounts Payable and Accrued Expenses	$	43,878	$	—	$	43,878	$	—	$	43,878
Securities Sold Under Agreements to Repurchase	44,000		—		44,000		—		44,000
Payable to Employees and Related Parties	28,392		—		28,392		—		28,392
Notes Payable	119,250		—		120,373		—		120,373
Subordinated Borrowings	22,550		—		23,076		—		23,076

The following methods and assumptions were used to estimate the fair value of these financial assets and liabilities:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

The fair value of the Company’s Closely-held Equity Security is based on recent comparable market transactions executed by the issuer.

The fair value of the Company’s Loans Receivable, Notes Payable and Subordinated Borrowings is estimated based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments.

The carrying amounts reported on the Unaudited Condensed Consolidated Statements of Financial Condition for Cash and Cash Equivalents, Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, Accounts Receivable, Receivable from Employees and Related Parties, Accounts Payable and Accrued Expenses, Payable to Employees and Related Parties, Assets Segregated for Bank Regulatory Requirements approximate fair value due to the short-term nature of these items.

Note 10 – Notes Payable and Subordinated Borrowings

On March 30, 2016, the Company issued an aggregate of $170,000 of senior notes, including: $38,000 aggregate principal amount of its 4.88% Series A senior notes due 2021 (the "Series A Notes"), $67,000 aggregate principal amount of its 5.23% Series B senior notes due 2023 (the "Series B Notes"), $48,000 aggregate principal amount of its 5.48% Series C senior notes due 2026 (the "Series C Notes") and $17,000 aggregate principal amount of its 5.58% Series D senior notes due 2028 (the "Series D Notes" and together with the Series A Notes, the Series B Notes and the Series C Notes, the "Private Placement Notes"), pursuant to a note purchase agreement (the "Note Purchase Agreement") dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933.

Interest on the Private Placement Notes is payable semi-annually and the Private Placement Notes are guaranteed by certain of the Company's material domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the Private Placement Notes (without regard to Series), in an amount not less than 5% of the aggregate principal amount of the Private Placement Notes then outstanding at 100% of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the Private Placement Notes plus accrued and unpaid interest to the prepayment date. The Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default.

The Company used $120,000 of the net proceeds from the Private Placement Notes to repay outstanding borrowings under the senior credit facility with Mizuho Bank, Ltd. ("Mizuho") on March 30, 2016 and will use the remaining net proceeds for general corporate purposes.

Notes Payable is comprised of the following as of June 30, 2016:



Note	Maturity Date	Effective Annual Interest Rate		Carrying Value as of June 30, 2016 (a)
Evercore Partners Inc. 4.88% Series A Senior Notes	3/30/2021	5.16	%	$	37,555
Evercore Partners Inc. 5.23% Series B Senior Notes	3/30/2023	5.44	%	66,203
Evercore Partners Inc. 5.48% Series C Senior Notes	3/30/2026	5.64	%	47,423
Evercore Partners Inc. 5.58% Series D Senior Notes	3/30/2028	5.72	%	16,795
Total				$	167,976

(a) Carrying value has been adjusted to reflect the presentation of debt issuance costs as a direct reduction from the related liability.

The Company has subordinated borrowings, principally with an executive officer of the Company, due on October 31, 2019. These borrowings have a coupon of 5.5%, payable semi-annually. In April 2016, the Company repaid $6,000 of the original borrowings pursuant to a separate agreement. The Company had $16,550 and $22,550 in subordinated borrowings pursuant to these agreements as of June 30, 2016 and December 31, 2015, respectively.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

Note 11 – Evercore Partners Inc. Stockholders’ Equity

Dividends – The Company’s Board of Directors declared on July 26, 2016, a quarterly cash dividend of $0.31 per share, to the holders of record of Class A common stock ("Class A Shares") as of August 26, 2016, which will be paid on September 9, 2016. During the six months ended June 30, 2016, the Company declared and paid dividends of $0.62 per share, totaling $24,395.

Treasury Stock – During the six months ended June 30, 2016, the Company purchased 969 Class A Shares primarily from employees at values ranging from $44.67 to $54.68 per share (at an average cost per share of $45.99), primarily for the net settlement of stock-based compensation awards, and 2,388 net Class A Shares at market values ranging from $44.59 to $52.74 per share (at an average cost per share of $48.21) pursuant to the Company’s share repurchase program. The result of these purchases was an increase in Treasury Stock of $159,779 on the Company’s Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2016.

LP Units – During the six months ended June 30, 2016, 232 LP Units were exchanged for Class A Shares, resulting in an increase to Common Stock and Additional Paid-In-Capital of $2 and $6,190, respectively, on the Company’s Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2016.

Accumulated Other Comprehensive Income (Loss) – As of June 30, 2016, Accumulated Other Comprehensive Income (Loss) on the Company’s Unaudited Condensed Consolidated Statement of Financial Condition includes an accumulated Unrealized Gain (Loss) on Marketable Securities and Investments, net, and a Foreign Currency Translation Adjustment Gain (Loss), net, of ($5,213) and ($36,833), respectively.

Note 12 – Noncontrolling Interest

Noncontrolling Interest recorded in the unaudited condensed consolidated financial statements of the Company relates to a 14% interest in Evercore LP, a 38% interest in Evercore Wealth Management ("EWM"), a 39% interest in Evercore Private Capital Advisory L.P. ("PCA"), a 34% equity interest in Atalanta Sosnoff (through December 31, 2015, the date it was deconsolidated), a 28% interest in ECB (through January 29, 2016, the date all of the noncontrolling interest was repurchased by the Company) and other private equity partnerships. The Noncontrolling Interests for Evercore LP, EWM and PCA have rights, in certain circumstances, to convert into Class A Shares.

Changes in Noncontrolling Interest for the six months ended June 30, 2016 and 2015 were as follows:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)



	For the Six Months Ended June 30,
	2016			2015
Beginning balance	$	202,664		$	160,952

Comprehensive income (loss):
Net Income Attributable to Noncontrolling Interest	11,866			7,215
Other comprehensive income (loss)	(1,848		)	(681		)
Total comprehensive income	10,018			6,534

Evercore LP Units Purchased or Converted into Class A Shares	(6,192		)	(3,793		)
Amortization and Vesting of LP Units/Interests	52,498			43,400

Other Items:
Distributions to Noncontrolling Interests	(17,193		)	(10,291		)
Issuance of Noncontrolling Interest	885			307
Purchase of Noncontrolling Interest	(5,225		)	—
Other, net	(281		)	—
Total other items	(21,814		)	(9,984		)

Ending balance	$	237,174		$	197,109

Other Comprehensive Income - Other comprehensive income (loss) attributed to Noncontrolling Interest includes Unrealized Gain (Loss) on Marketable Securities and Investments, net, of $370 and ($367) for the three and six months ended June 30, 2016, respectively, and ($131) and ($327) for the three and six months ended June 30, 2015, respectively, and Foreign Currency Translation Adjustment Gain (Loss), net, of ($1,097) and ($1,481) for the three and six months ended June 30, 2016, respectively, and $327 and ($354) for the three and six months ended June 30, 2015, respectively.

Atalanta Sosnoff - On December 31, 2015, the Company deconsolidated the assets and liabilities of Atalanta Sosnoff, as well as its related redeemable noncontrolling interests.

Interests Purchased - On January 29, 2016, the Company purchased, at fair value, all of the noncontrolling interest in ECB for $6,482.

EMP III - On July 19, 2016, the Company and the principals of its Mexican Private Equity business entered into an agreement to transfer ownership of its Mexican Private Equity business and related entities to Glisco. Upon the closing of this transaction, which is anticipated by the end of 2016, the Company will deconsolidate the noncontrolling interest in EMP III. See Note 8 for further information.

Note 13 – Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders

The calculations of basic and diluted net income per share attributable to Evercore Partners Inc. common shareholders for the three and six months ended June 30, 2016 and 2015 are described and presented below.

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(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015
Basic Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
Numerator:
Net income attributable to Evercore Partners Inc. common shareholders	$	24,087	$	10,764	$	29,405	$	15,064
Denominator:
Weighted average Class A Shares outstanding, including vested restricted stock units ("RSUs")	39,249		36,445		39,435		36,584
Basic net income per share attributable to Evercore Partners Inc. common shareholders	$	0.61	$	0.30	$	0.75	$	0.41
Diluted Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
Numerator:
Net income attributable to Evercore Partners Inc. common shareholders	$	24,087	$	10,764	$	29,405	$	15,064
Noncontrolling interest related to the assumed exchange of LP Units for Class A Shares	(a)		(a)		(a)		(a)
Associated corporate taxes related to the assumed elimination of Noncontrolling Interest described above	(a)		(a)		(a)		(a)
Diluted net income attributable to Evercore Partners Inc. common shareholders	$	24,087	$	10,764	$	29,405	$	15,064
Denominator:
Weighted average Class A Shares outstanding, including vested RSUs	39,249		36,445		39,435		36,584
Assumed exchange of LP Units for Class A Shares	(a)		(a)		(a)		(a)
Additional shares of the Company's common stock assumed to be issued pursuant to non-vested RSUs and deferred consideration, as calculated using the Treasury Stock Method	1,569		1,804		1,728		2,029
Shares that are contingently issuable (b)	2,785		813		3,098		768
Assumed conversion of Warrants issued (c)	—		3,103		—		3,098
Diluted weighted average Class A Shares outstanding	43,603		42,165		44,261		42,479
Diluted net income per share attributable to Evercore Partners Inc. common shareholders	$	0.55	$	0.26	$	0.66	$	0.35

(a)

The Company has outstanding LP Units in its subsidiary, Evercore LP, which give the holders the right to receive Class A Shares upon exchange on a one-for-one basis. During the three and six months ended June 30, 2016 and 2015, the LP Units were antidilutive and consequently the effect of their exchange into Class A Shares has been excluded from the calculation of diluted net income per share attributable to Evercore Partners Inc. common shareholders. The units that would have been included in the denominator of the computation of diluted net income per share attributable to Evercore Partners Inc. common shareholders if the effect would have been dilutive were 6,499 and 6,456 for the three and six months ended June 30, 2016, respectively, and 6,712 and 6,752 for the three and six months ended June 30, 2015, respectively. The adjustment to the numerator, diluted net income attributable to Class A common shareholders, if the effect would have been dilutive, would have been $3,952 and $5,263 for the three and six months ended June 30, 2016, respectively, and $2,132 and $2,815

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

for the three and six months ended June 30, 2015, respectively. In computing this adjustment, the Company assumes that all vested Class A LP Units and all Class E limited partnership units of Evercore LP ("Class E LP Units") are converted into Class A Shares, that all earnings attributable to those shares are attributed to Evercore Partners Inc. and, that it has adopted a conventional corporate tax structure and is taxed as a C Corporation in the U.S. at prevailing corporate tax rates. The Company does not anticipate that the LP Units will result in a dilutive computation in future periods.

(b)

At June 30, 2016 and 2015, the Company has outstanding Class G and H limited partnership interests of Evercore LP ("Class G and H LP Interests") which are contingently exchangeable into Class E LP Units, and ultimately Class A Shares, as they are subject to certain performance thresholds being achieved. See Note 14 for a further discussion. For the purposes of calculating diluted net income per share attributable to Evercore Partners Inc. common shareholders, the Company’s Class G and H LP Interests will be included in diluted weighted average Class A Shares outstanding as of the beginning of the period in which all necessary performance conditions have been satisfied. If all necessary performance conditions have not been satisfied by the end of the period, the number of shares that will be included in diluted weighted average Class A Shares outstanding will be based on the number of shares that would be issuable if the end of the reporting period were the end of the performance period. The interests that were assumed to be converted to an equal number of Class A Shares for purposes of computing diluted EPS were 2,785 and 3,098 for the three and six months ended June 30, 2016, respectively, and 813 and 768 for the three and six months ended June 30, 2015, respectively.


(c)	In November 2015, Mizuho exercised in full its outstanding Warrants to purchase 5,455 Class A Shares, of which the Company repurchased 2,355 shares.

The shares of Class B common stock have no right to receive dividends or a distribution on liquidation or winding up of the Company. The shares of Class B common stock do not share in the earnings of the Company and no earnings are allocable to such class. Accordingly, basic and diluted net income per share of Class B common stock have not been presented.

Note 14 – Share-Based and Other Deferred Compensation

Equity Grants

During the six months ended June 30, 2016, the Company granted employees 2,920 RSUs that are Service-based Awards. Service-based Awards granted during the six months ended June 30, 2016 had grant date fair values of $44.67 to $50.81 per share. During the six months ended June 30, 2016, 2,205 Service-based Awards vested and 54 Service-based Awards were forfeited.

Compensation expense related to Service-based Awards was $28,516 and $57,278 for the three and six months ended June 30, 2016, respectively, and $27,465 and $54,960 for the three and six months ended June 30, 2015, respectively.

During the second quarter of 2016, the Company's stockholders approved the Amended and Restated 2016 Evercore Partners Inc. Stock Incentive Plan. The amended plan, among other things, authorizes an additional 10,000 shares of the Company's Class A Shares.

Deferred Cash Program

The Company's deferred compensation program provides participants the ability to elect to receive a portion of their deferred compensation in cash, which is indexed to a notional investment portfolio and vests ratably over four years and requires payment upon vesting. During the first quarter of 2016, the Company granted $38,647 of deferred cash awards pursuant to the deferred compensation program. Compensation expense related to this deferred compensation program was $4,557 and $7,117 for the three and six months ended June 30, 2016, respectively, and $448 and $1,008 for the three and six months ended June 30, 2015, respectively.

Acquisition-related LP Units

Equities business - In conjunction with the acquisition of the operating businesses of International Strategy & Investment ("ISI") in 2014, the Company issued Evercore LP units and interests which have been treated as compensation, including 710 vested Class E LP Units and an allocation of the value, attributed to post-combination service, of 710 Class E LP Units that were unvested and vest ratably on October 31, 2015, 2016 and 2017 and become exchangeable once vested, subject to continued employment with the Company. The units will become exchangeable into Class A common shares of the Company subject to certain liquidated damages and continued employment provisions. Compensation expense related to Class E LP Units

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

was $4,937 and $10,550 for the three and six months ended June 30, 2016, respectively, and $4,893 and $9,961 for the three and six months ended June 30, 2015, respectively.

The Company also issued 538 vested and 540 unvested Class G LP Interests, which vest ratably on February 15, 2016, 2017 and 2018, and 2,044 vested and 2,051 unvested Class H LP Interests, which will vest ratably on February 15, 2018, 2019 and 2020. The Company’s vested Class G and Class H LP Interests will become exchangeable into Class A common shares of the Company subject to the achievement of certain performance targets. The Company’s vested Class G LP Interests become exchangeable in February 2016, 2017 and 2018 if certain earnings before interest and taxes, excluding underwriting, ("Management Basis EBIT") margin thresholds within a range of 12% to 16%, are achieved for the calendar year preceding the date the interests become exchangeable. The Company’s vested Class H LP Interests will become exchangeable in February 2018, 2019 and 2020 if certain average Management Basis EBIT and Management Basis EBIT margin thresholds, within ranges of $8,000 to $48,000 and 7% to 17%, respectively, are achieved for the three calendar years preceding the date the interests become exchangeable. In the event of death, disability or termination of employment without cause, unvested Class G and H LP Interests will be canceled or may vest based on determination of expected performance, based on a decision by Management.

In February 2016, 371 Class G LP Interests achieved their performance targets and were converted to the same number of Class E LP Units.

Based on Evercore ISI’s results for 2015 and for the first six months of 2016, the Company determined that the achievement of certain of the remaining performance thresholds for the remaining Class G and H LP Interests was probable at June 30, 2016. This determination assumes Management Basis EBIT margin of 16.2% and annual Management Basis EBIT of $38,820 being achieved over the remaining performance period for Evercore ISI which would result in 3,767 Class G and H LP Interests vesting and becoming exchangeable into Class E LP Units. For the six months ended June 30, 2015, the Company had determined that the achievement of certain of the remaining performance thresholds for the Class G and H LP Interests was probable and assumed a Management Basis EBIT margin of 15% and annual Management Basis EBIT of $32,800 being achieved over the performance period for Evercore ISI. Accordingly, $15,698 and $41,750 of expense was recorded for the three and six months ended June 30, 2016, respectively, and $13,170 and $33,313 of expense was recorded for the three and six months ended June 30, 2015, respectively, for the Class G and H LP Interests.

Assuming the maximum thresholds for the Class G and H LP Interests were considered probable of achievement at June 30, 2016, an additional $21,606 of expense would have been incurred in the second quarter ended June 30, 2016 and the remaining expense to be accrued over the future vesting period extending from July 1, 2016 to February 15, 2020 would be $141,922. In that circumstance, the total number of Class G and H LP Interests that would vest and become exchangeable to Class E LP Units would be 4,957. Conversely, the life to date actual accrued expense related to unvested Class G and H LP Interests as of June 30, 2016 was $83,486, which will be reversed if the actual performance falls below, or is deemed probable of falling below, the minimum thresholds prior to vesting.

Other Acquisition Related

Lexicon - Compensation expense related to The Lexicon Partnership LLP ("Lexicon") Acquisition-related Awards and deferred cash consideration was $622 and $330, respectively, for the three months ended June 30, 2015, and $1,237 and $301, respectively, for the six months ended June 30, 2015.

Long-term Incentive Plan

The Company's Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers of the Company, who exceed defined benchmark results over a four-year performance period beginning January 1, 2013. These awards will be paid, in cash or Class A Shares, at the Company's discretion, in the two years following the performance period, to Senior Managing Directors employed by the Company at the time of payment. These awards are subject to retirement eligibility requirements. The Company periodically assesses the probability of the benchmarks being achieved and expenses the probable payout over the requisite service period of the award. The compensation expense related to these awards was $3,739 and $7,478 for the three and six months ended June 30, 2016, respectively, and $1,530 and $3,043 for the three and six months ended June 30, 2015, respectively.

Employee Loans Receivable

Periodically, the Company provides new and existing employees with cash payments in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to five years. Generally, the

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

terms of these awards include a requirement of either full or partial repayment of these awards based on the terms of their employment agreements with the Company. In circumstances where the employee meets the Company's minimum credit standards, the Company amortizes these awards to compensation expense over the relevant service period which is generally the period they are subject to forfeiture. Compensation expense related to these awards was $5,699 and $10,531 for the three and six months ended June 30, 2016, respectively, and $4,371 and $8,951 for the three and six months ended June 30, 2015, respectively. The remaining unamortized amount of these awards was $30,509 as of June 30, 2016.

Separation Benefits

The Company granted separation benefits to certain employees, resulting in expense included in Employee Compensation and Benefits of approximately $1,195 and $3,223 for the three and six months ended June 30, 2016, respectively, and $2,188 and $3,795 for the three and six months ended June 30, 2015, respectively. In conjunction with these arrangements, the Company distributed cash payments of $623 and $1,762 for the three and six months ended June 30, 2016, respectively, and $321 and $1,531 for the three and six months ended June 30, 2015, respectively. The Company also granted separation benefits to certain employees, resulting in expense included in Special Charges of approximately ($102) and $1,863 for the three and six months ended June 30, 2015, respectively. In conjunction with these arrangements, the Company distributed cash payments of $487 for the three and six months ended June 30, 2015. See Note 4 for further information.

Note 15 – Commitments and Contingencies

For a further discussion of the Company's commitments, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

Operating Leases – The Company leases office space under non-cancelable lease agreements, which expire on various dates through 2025. The Company reflects lease expense over the lease terms on a straight-line basis. Occupancy lease agreements, in addition to base rentals, generally are subject to escalation provisions based on certain costs incurred by the landlord. Occupancy and Equipment Rental on the Unaudited Condensed Consolidated Statements of Operations includes occupancy rental expense relating to operating leases of $7,769 and $15,753 for the three and six months ended June 30, 2016, respectively, and $8,488 and $17,359 for the three and six months ended June 30, 2015, respectively.

Private Equity – As of June 30, 2016, the Company had unfunded commitments for capital contributions of $5,132 to private equity funds. These commitments will be funded as required through the end of each private equity fund’s investment period, subject to certain conditions. Such commitments are satisfied in cash and are generally required to be made as investment opportunities are consummated by the private equity funds.

Under the terms of the acquisition agreement for Protego, the Company is obligated to pay the partners that sold Protego 90% of the return proceeds and performance fees received from Protego's investment in the general partner of the Discovery Fund. Beginning in 2014, the Company received distributions from Discovery Americas Associated L.P., the general partner of the Discovery Fund. Accordingly, as of June 30, 2016, the Company recorded Goodwill of $9,653 pursuant to this agreement. The carrying value of the Company's investment in the Discovery Fund is $7,394 at June 30, 2016. See Note 8 for further information.

Lines of Credit

On June 26, 2015, Evercore Partners Services East L.L.C. ("East"), a wholly-owned subsidiary of the Company, increased its line of credit from First Republic Bank to an aggregate principal amount of up to $75,000, to be used for working capital and other corporate activities, including, but not limited to, the repurchase of the Company's stock from time to time. This facility is secured by (i) cash and cash equivalents of East held in a designated account with First Republic Bank, (ii) certain of East's intercompany receivables and (iii) third party accounts receivable of EGL. Drawings under this facility bear interest at the prime rate. The facility was renewed on June 26, 2015 and the maturity date was extended to June 27, 2016. On January 15, 2016, the line of credit from First Republic Bank was decreased to an aggregate principal amount of up to $50,000. In addition, the agreement was modified to impose similar quarterly financial covenants as the Company agreed to in the senior credit facility with Mizuho executed in November 2015, including (i) a Minimum Consolidated Tangible Net Worth, (ii) a Minimum Unencumbered Liquid Asset Ratio and (iii) a Maximum Consolidated Leverage Ratio. On January 27, 2016, the Company drew down $50,000 on this facility. The Company repaid and terminated its line of credit with First Republic Bank on June 23, 2016.

On June 24, 2016, East entered into a loan agreement with PNC Bank, National Association ("PNC") for a revolving credit facility in an aggregate principal amount of up to $30,000, to be used for working capital and other corporate activities. This facility is secured by East's accounts receivable and the proceeds therefrom, as well as certain assets of EGL's, including

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(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

certain of EGL's accounts receivable. In addition, the agreement contains certain reporting covenants as well as certain debt covenants that prohibit East and the Company from incurring other indebtedness subject to specified exceptions. Drawings under this facility bear interest at the prime rate. The facility matures on June 23, 2017, subject to an extension agreed to between East and PNC. There have been no monies drawn on this facility as of June 30, 2016.

Other Commitments

During the first quarter of 2015, in conjunction with the Company entering into a strategic alliance with Luminis Partners ("Luminis"), the Company committed to loan Luminis $5,500. The Company paid Luminis $3,500 pursuant to the loan agreement during the six months ended June 30, 2015, which is included within Other Assets on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2016, with the remaining $2,000 due from the Company on demand. The Company may acquire a 20% interest in Luminis in 2017.

In addition, the Company enters into commitments to pay contingent consideration related to certain of its acquisitions. At June 30, 2016, the Company had a remaining commitment for contingent consideration related to its acquisition of Protego in 2006, as well as commitments related to its acquisition of a boutique advisory business in 2014 and its acquisition of Kuna & Co. KG in July 2015.

Contingencies

In the normal course of business, from time to time the Company and its affiliates are involved in judicial or regulatory proceedings, arbitration or mediation concerning matters arising in connection with the conduct of its businesses, including contractual and employment matters. In addition, Mexican, United Kingdom, Hong Kong, Singapore, Canadian and United States government agencies and self-regulatory organizations, as well as state securities commissions in the United States, conduct periodic examinations and initiate administrative proceedings regarding the Company’s business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, investment advisor, or its directors, officers or employees. In view of the inherent difficulty of determining whether any loss in connection with such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot estimate the amount of such loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC 450, "Contingencies" when warranted. Once established, such provisions are adjusted when there is more information available or when an event occurs requiring a change.

In January 2015, Donna Marie Coburn filed a proposed class action complaint against Evercore Trust Company ("ETC") in the U.S. District Court for the District of Columbia, in which she purported to represent a class of participants in the J.C. Penney Corporation Inc. Savings, Profit-Sharing and Stock Ownership Plan (the "Plan") whose participant accounts held J.C. Penney stock at any time between May 15, 2012 and the present. The complaint alleged that ETC breached its fiduciary duties under the Employee Retirement Income Security Act by causing the Plan to invest in J.C. Penney stock during that period and claimed that the Plan suffered losses of approximately $300 million due to declines in J.C. Penney stock. ETC believes that it has meritorious defenses against the plaintiff’s claims and intends to vigorously defend the action. ETC is indemnified by J.C. Penney, and ultimately the Plan, for reasonable attorneys’ fees and other legal expenses, which would be refunded should ETC not prevail. On April 13, 2015, ETC moved to dismiss the complaint for failure to state a claim upon which relief may be granted, and on February 17, 2016, the district court granted ETC’s motion to dismiss. On March 15, 2016, plaintiff noticed an appeal of the district court’s decision. Briefing in the appeal is scheduled to be complete on September 9, 2016, and the case is scheduled to be argued to the court of appeals on October 13, 2016.

Note 16 – Regulatory Authorities

EGL is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Under the Alternative Net Capital Requirement, EGL's minimum net capital requirement is $250. EGL’s regulatory net capital as of June 30, 2016 and December 31, 2015 was $70,081 and $79,019, respectively, which exceeded the minimum net capital requirement by $69,831 and $78,769, respectively.

On December 31, 2015, the operations of International Strategy & Investment Group L.L.C. were transferred to EGL.

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(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

Certain other non-U.S. subsidiaries are subject to various securities and banking regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries are in excess of their local capital adequacy requirements at June 30, 2016.

ETC, which is limited to fiduciary activities, is regulated by the Office of the Comptroller of the Currency ("OCC") and is a member bank of the Federal Reserve System. The Company, Evercore LP and ETC are subject to written agreements with the OCC that, among other things, require the Company and Evercore LP to (1) maintain at least $5,000 in Tier 1 capital in ETC (or such other amount as the OCC may require), (2) maintain liquid assets in ETC in an amount at least equal to the greater of $3,500 or 90 days coverage of ETC’s operating expenses and (3) provide at least $10,000 of certain collateral held in a segregated account at a third-party depository institution. The collateral is included in Assets Segregated for Bank Regulatory Requirements on the Unaudited Condensed Consolidated Statements of Financial Condition. The Company was in compliance with the aforementioned agreements as of June 30, 2016.

Note 17 – Income Taxes

The Company's Provision for Income Taxes was $30,676 and $40,410 for the three and six months ended June 30, 2016, respectively, and $16,723 and $22,935 for the three and six months ended June 30, 2015, respectively. The effective tax rate was 48% and 49% for the three and six months ended June 30, 2016, respectively, and 51% for the three and six months ended June 30, 2015. The effective tax rate for 2016 and 2015 reflects the effect of certain nondeductible expenses, including expenses related to Class E LP Units and Class G and H LP Interests as well as the noncontrolling interest associated with LP Units and other adjustments.

The Company reported an increase in deferred tax assets of $290 associated with changes in Unrealized Gain (Loss) on Marketable Securities and an increase of $4,549 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the six months ended June 30, 2016. The Company reported an increase in deferred tax assets of $461 associated with changes in Unrealized Gain (Loss) on Marketable Securities and an increase of $1,220 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the six months ended June 30, 2015.

As of June 30, 2016, the Company had no unrecognized tax benefits.

The Company classifies interest relating to tax matters and tax penalties as a component of income tax expense in its Unaudited Condensed Consolidated Statements of Operations.

Note 18 – Segment Operating Results

Business Segments – The Company’s business results are categorized into the following two segments: Investment Banking and Investment Management. Investment Banking includes providing advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, as well as services related to securities underwriting, private fund placement services and commissions for agency-based equity trading services and equity research. Investment Management includes advising third-party investors in the Institutional Asset Management, Wealth Management and Private Equity sectors. On December 31, 2015, the Company deconsolidated the assets and liabilities of Atalanta Sosnoff, which was in the Investment Management segment, and accounted for its interest as an equity method investment from that date forward.

The Company’s segment information for the three and six months ended June 30, 2016 and 2015 is prepared using the following methodology:


•	Revenue, expenses and income (loss) from equity method investments directly associated with each segment are included in determining pre-tax income.


•	Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other performance and time-based factors.


•	Segment assets are based on those directly associated with each segment, or for certain assets shared across segments; those assets are allocated based on the most relevant measures applicable, including headcount and other factors.


•	Investment gains and losses, interest income and interest expense are allocated between the segments based on the segment in which the underlying asset or liability is held.

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(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)

Each segment’s Operating Expenses include: a) employee compensation and benefits expenses that are incurred directly in support of the segment and b) non-compensation expenses, which include expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, facilities management and senior management activities.

Other Expenses include the following:


•	Amortization of LP Units/Interests and Certain Other Awards - Includes amortization costs associated with the vesting of Class E LP Units and Class G and H LP Interests issued in conjunction with the acquisition of ISI and certain other related awards.


•	Other Acquisition Related Compensation Charges - Includes compensation charges in 2015 associated with deferred consideration, retention awards and related compensation for Lexicon employees.


•	Special Charges - Includes expenses in 2015 primarily related to separation benefits and costs associated with the termination of certain contracts within the Company’s Evercore ISI business, as well as the finalization of a matter associated with the wind-down of the Company’s U.S. Private Equity business.


•	Acquisition and Transition Costs - Includes costs incurred in connection with acquisitions and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services, as well as the reversal of a provision for certain settlements in 2016 previously established in the fourth quarter of 2015.


•	Fair Value of Contingent Consideration - Includes expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company’s acquisitions.


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

The Company evaluates segment results based on net revenues and pre-tax income, both including and excluding the impact of the Other Expenses.

No client accounted for more than 10% of the Company's consolidated Net Revenues for the three and six months ended June 30, 2016.

The following information presents each segment’s contribution.

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(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015
Investment Banking
Net Revenues (1)	$	328,157	$	244,377	$	567,870	$	460,957
Operating Expenses	246,916		194,271		439,180		365,635
Other Expenses (2)	23,404		22,802		58,432		55,037
Operating Income	57,837		27,304		70,258		40,285
Income from Equity Method Investments	290		803		18		766
Pre-Tax Income	$	58,127	$	28,107	$	70,276	$	41,051
Identifiable Segment Assets	$	964,009	$	848,750	$	964,009	$	848,750
Investment Management
Net Revenues (1)	$	22,499	$	23,719	$	40,499