Restricted Stock and RSUs

On July 6, 2021, the Company adopted the 2021 Incentive Award Plan, which became effective on July 20, 2021, under which 6,600,000 shares of the Company’s Class A common stock were reserved for issuance. As of September 30, 2021, 4,436,674 were still available for future grants. In connection with the IPO, the Company granted 2,146,826 shares of Class A restricted stock and 16,500 restricted stock units (“RSUs”) associated with Class A common stock. Approximately one-third of such restricted stock and RSUs granted vest on the third, fourth and fifth anniversaries of the grant date.

The fair value of the restricted stock and RSUs is based upon our stock price at grant date and is expensed over the vesting period. We classify both restricted stock and RSUs as equity instruments. Compensation expense is included in salaries and employee benefits in the statement of income, with the corresponding increase included in additional paid-in capital. If the recipient leaves prior

to vesting of the restricted stock or RSUs, the awards are forfeited. During both the three and nine months ended September 30, 2021, the Company reversed $0.3 million of share-based compensation related to restricted stock and RSU forfeitures.

Restricted stock is Class A common stock with certain restrictions that relate to trading and carry the possibility of forfeiture. Holders of restricted stock have full voting rights and receive dividend equivalents during the vesting period. In addition, holders of restricted stock can make an election to be subject to income tax on the grant date rather than the vesting date. RSUs represent rights to one share of common stock for each unit. Holders of RSUs receive dividend equivalents during the vesting period but do not have voting rights.

At September 30, 2021, the aggregate unrecognized compensation cost for all unvested restricted stock and RSU awards was $32.9 million, which is expected to be recognized over a weighted-average period of 3.2 years.

Profits Interests

The Operating Company issued profits interests in the Operating Company and certain Fund Managers in 2019, 2020, and 2021 to certain members of management to participate in the growth of the Operating Company and the respective Fund Managers. A holding company was formed for each of the Fund Managers to hold these profits interests. The holding company’s ownership equates to 5% to 40% of the related Fund Managers above a certain income and valuation threshold. The Operating Company issued two types of profits interests: (i) award shares and (ii) anti-dilutive shares. The fair value of these awards was determined using a Monte Carlo Valuation model. Each of the awards has an earnings threshold for distributions and equity appreciation. The grant date fair value of the profits interests awards are expensed over the vesting period. The award shares are subject to graded vesting with one-third vesting on the third, fourth and fifth anniversaries of the grant date. The Operating Company also issued anti-dilutive awards to active partners. Since the anti-dilutive awards were fully vested, the Company recorded 100% of the fair value as share-based compensation in the year the anti-dilutive shares were granted, which represents $13.6 million, for the nine months ended September 30, 2021.

If the recipient leaves after the awards vest, the Company has the option to repurchase the shares at fair value. If the recipient leaves prior to vesting, the awards are forfeited. The Company reversed share-based compensation expense related to forfeitures of $0.3 million for both the three and nine months ended September 30, 2021.

At September 30, 2021, the aggregate unrecognized compensation cost for all unvested profits interests awards was $11.3 million, which is expected to be recognized over a weighted-average period of 3.0 years.