What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-02-28 · 211 added, 207 removed, 937 unchanged (31% of the section changed)

13 unchanged sentences

Management assessed the effectiveness of Federated Hermes’ internal control over financial reporting as of December 31, 2025, in relation to criteria for effective internal control over financial reporting as described in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

The scope of management’s assessment of the effectiveness of its disclosure controls and procedures did not include the internal controls over financial reporting at Rivington Energy Management Limited (Rivington), which was acquired on April 7, 2025.

Rivington represented less than 1% of both Federated Hermes’ total and net assets as of December 31, 2025 and less than 1% of both Federated Hermes’ total revenue and net income for the year ended December 31, 2025.

This exclusion is consistent with the SEC Staff’s guidance that an assessment of a recently acquired business may be omitted from the scope of management’s assessment of the effectiveness of disclosure controls and procedures that are also part of internal control over financial reporting in the year of acquisition.

Based on this assessment, management concluded that, as of December 31, 2025, Federated Hermes’ internal controls over financial reporting were effective.

32 unchanged sentences

As described in Note 1(j) to the consolidated financial statements, indefinite-lived intangible assets are tested for impairment at the accounting unit level annually, or when indicators of potential impairment exist, to determine whether it is more likely than not that the accounting unit is impaired.

The Company evaluated the FHL indefinite-lived intangible asset for impairment at June 30, 2024 in light of actual results trailing projected results, driven by a combination of lower gross sales and higher redemptions, and recorded an impairment loss as the carrying value exceeded the fair value.

At December 31, 2024, the Company evaluated the FHL indefinite-lived intangible asset for impairment primarily due to higher net redemptions in the quarter ended December 31, 2024, and determined that the fair value exceeded the carrying value.

The Company evaluated the FHL indefinite-lived intangible asset for impairment as of December 31, 2025 using a quantitative approach.

Auditing the Company’s impairment test of the FHL indefinite-lived intangible asset was complex and judgmental due to the significant estimation uncertainty in determining the fair value of this accounting unit.

The significant assumptions used to estimate the fair value included the discount rate and certain assumptions that form the basis of the projected cash flows, such as projected revenue growth rates and projected pre-tax profit margins.

The significant assumptions used to estimate the fair value of this accounting unit included the projected revenue growth rates and projected pre-tax profit margins that form the basis of the projected cash flows, and the discount rate.

These significant assumptions are forward-looking and could be materially affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s impairment testing process for indefinite-lived intangible assets, including controls over management’s review of the significant assumptions described above.

Our audit procedures to test the estimated fair value of the Company’s FHL indefinite-lived intangible asset included, among others, evaluating management’s significant assumptions described above and testing the completeness and accuracy of the underlying data.

With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s valuation methodology and significant assumptions.

Our audit procedures to test the estimated fair value of the Company’s FHL indefinite-lived intangible asset accounting unit included, among others, evaluating management’s significant assumptions described above and testing the completeness and accuracy of the underlying data.

With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s valuation methodology and the significant assumptions described above.

Our procedures included, among others, evaluating the selection of the discount rate by comparing the selected discount rate to the Company’s weighted average cost of capital, testing the objective source information underlying the determination of the discount rate, and comparing management’s discount rate to an independently developed range.

We also compared the significant assumptions to current industry, market and economic data, historical results and other relevant information.

We evaluated management’s ability to accurately project revenues and pre-tax profit margins by comparing actual results to management’s historical forecasts.

Additionally, we performed sensitivity analyses of certain significant assumptions described above to evaluate the changes in the fair value of the FHL indefinite-lived intangible asset that would result from reasonably expected changes in the significant assumptions.

Our procedures also included, among others, comparing the projected revenue growth rates and projected pre-tax profit margins to current industry, market and economic data, historical results, and other relevant information.

We evaluated management’s ability to accurately project revenue growth rates and pre-tax profit margins by comparing actual results to management’s historical forecasts.

Additionally, we performed sensitivity analyses of the significant assumptions described above to evaluate the changes in the fair value of the FHL indefinite-lived intangible asset that would result from reasonably expected changes in these significant assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1996.

Pittsburgh, Pennsylvania

Pittsburgh, PA

February 27, 2026

5 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.

As indicated in the accompanying Management’s Assessment of Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Rivington Energy Management Limited (Rivington), which is included in the 2025 consolidated financial statements of the Company and constituted less than 1% of total and net assets as of December 31, 2025 and less than 1% of revenues and net income for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Rivington.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes, and our report dated February 27, 2026 expressed an unqualified opinion thereon.

16 unchanged sentences

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

Pittsburgh, PA

February 27, 2026

43 unchanged sentences

532,413 503,335

Additional Paid-in Capital from Treasury Stock Transactions 0 2

Retained Earnings 1,531,076 1,256,603

67 unchanged sentences

Distributions to Noncontrolling Interests in Subsidiaries 0 0 0

Acquisition of Remaining Equity of FHL 0 0 0

Retirement of Treasury Stock 0 0 ( 10,000,000 )

Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 0 0

Purchase of Treasury Stock 0 ( 5,318,442 ) 5,318,442

16 unchanged sentences

Distributions to Noncontrolling Interests in Subsidiaries 0 0 0

Business Acquisition 0 0 0

Purchase of Treasury Stock 0 ( 6,192,433 ) 6,192,433

43 unchanged sentences

$ 532,602 $ 0 $ 1,531,076 $ ( 873,214 ) $ 6,484 $ 1,196,948 $ 66,529

0 0 0 ( 134,539 ) 0 ( 134,539 ) 0

$ 503,524 $ 0 $ 1,256,603 $ ( 632,838 ) $ ( 32,083 ) $ 1,095,206 $ 55,514

CONSOLIDATED STATEMENTS OF CASH FLOWS

6 unchanged sentences

Share-Based Compensation Expense 29,130 28,784 33,947

Subsidiary Share-Based Compensation Expense 0 0 707

(Gain) Loss on Disposal of Assets ( 10,300 ) ( 1,552 ) 260

23 unchanged sentences

Cash Paid for Business Acquisitions 0 ( 3,236 ) ( 2,065 )

Proceeds from New Borrowings 0 0 488,300

Payments on Debt 0 0 ( 361,650 )

Other Financing Activities 1,256 1,379 1,274

10 unchanged sentences

$ 11,805 $ 11,592 $ 11,648

$ 11,592 $ 11,648 $ 7,184

(The accompanying notes are an integral part of these Consolidated Financial Statements.)

4 unchanged sentences

Federated Hermes provides investment advisory, administrative, distribution and other services to the Federated Hermes Funds and Separate Accounts in both domestic and international markets.

In addition, Federated Hermes markets and provides stewardship and real estate development services to various domestic and international companies.

In addition, Federated Hermes markets and provides stewardship, real estate development and renewable energy project development services to various domestic and international companies.

For presentation purposes in the Consolidated Financial Statements, the Federated Hermes Funds are considered to be affiliates of Federated Hermes.

2 unchanged sentences

U.S.-domiciled Federated Hermes Funds are generally distributed by a wholly-owned subsidiary registered as a broker/dealer under the 1934 Act and under applicable state laws.

Non-U.S.-domiciled Federated Hermes Funds are generally distributed by subsidiaries and third-party distribution firms which are registered under applicable jurisdictional law.

Non-U.S.-domiciled Federated Hermes Funds are generally distributed by subsidiaries and third-party distribution firms which are registered (as required) under applicable jurisdictional law.

Federated Hermes’ investment offerings are distributed within the U.S.

23 unchanged sentences

Investment advisory, administrative and certain other service fees are generally calculated as a percentage of average net assets of the investment portfolios managed by Federated Hermes.

Based on the nature of the calculation, the revenue for these services is accounted for as variable consideration.

Based on the nature of the calculation, the revenue for

these services is accounted for as variable consideration.

Certain other service fees are earned on fixed-rate contracts which are recorded over the life of the contract as services are performed.

5 unchanged sentences

Performance fees, including carried interest, are received from certain Federated Hermes Funds and Separate Accounts and are dependent upon meeting certain performance hurdles which typically arise from investment management services that began in prior periods.

Revenues related to performance fees, including carried interest, are recognized at a point in time when these hurdles are met.

Because each fee arrangement is unique, contracts are evaluated on an individual basis for each reporting period.

19 unchanged sentences

(e) Principles of Consolidation

Federated Hermes performs an analysis for each Federated Hermes Fund or other entity in which Federated Hermes holds a financial interest to determine if it is a VIE or VRE.

Factors considered in this analysis include, but are not limited to, whether (1) it is a legal entity, (2) a scope exception applies, (3) a variable interest exists and (4) shareholders have the power to direct the activities that most significantly impact the economic performance, as well as the equity ownership, and any related party or de facto agent implications of Federated Hermes’ involvement with the entity.

Federated Hermes performs an analysis for each Federated Hermes Fund or other entity in which Federated Hermes holds a financial interest to determine if it is a VIE or a voting rights entity (VRE).

Factors considered in this analysis include, but are not limited to, whether:

(1) it is a legal entity;

(2) a scope exception applies;

(3) a variable interest exists;

and (4) shareholders have the power to direct the activities that most significantly impact the economic performance, as well as the equity ownership, and any related party or de facto agent implications of Federated Hermes’ involvement with the entity.

Entities that are determined to be VIEs are consolidated if Federated Hermes is deemed to be the primary beneficiary.

3 unchanged sentences

Consolidation of Variable Interest Entities

Federated Hermes has a controlling financial interest in a VIE and is, therefore, deemed to be the primary beneficiary of a VIE if it has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Financial information for certain entities, whose primary purpose is to collect and distribute carried interest paid by foreign

private equity and infrastructure funds (carried interest vehicles), is not available timely and is therefore consolidated on a one quarter lag, adjusted for any known material carried interest revenue and compensation transactions occurring through the balance sheet date.

Federated Hermes has a controlling financial interest in a VIE and is, therefore, deemed to be the primary beneficiary of a VIE if it has:

(1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance;

and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Financial information for certain entities, whose primary purpose is to collect and distribute carried interest paid by foreign private equity and infrastructure funds (carried interest vehicles), is not available timely and is therefore consolidated on a one quarter lag, adjusted for any known material carried interest revenue and compensation transactions occurring through the balance sheet date.

Consolidation of Voting Rights Entities

28 unchanged sentences

The primary asset acquired in previous asset acquisitions has been the rights to manage fund assets.

The rights to manage fund assets is an intangible asset valued using the excess earnings method, under the income approach, which estimates

fair value by quantifying the amount of discounted cash flows generated by the asset.

The rights to manage fund assets is an intangible asset valued using the excess earnings method, under the income approach, which estimates fair value by quantifying the amount of discounted cash flows generated by the asset.

No goodwill is recognized in an asset acquisition.

16 unchanged sentences

and (7) in the case of a trade name valuation, a royalty rate.

In addition, from time to time, pursuant to agreements entered into in connection with certain business combinations and asset acquisitions, Federated Hermes can be required to make future consideration payments if certain contingencies are met.

In connection with certain business combinations, Federated Hermes records a liability representing the estimated fair value of future consideration payments as of the acquisition date.

The liability is subsequently re-measured at fair value on a recurring basis with changes in fair value recorded in earnings.

(j) Goodwill and Intangible Assets

22 unchanged sentences

Management periodically evaluates the remaining useful lives and carrying values of the intangible assets to determine whether events and circumstances indicate that a change in the useful life or impairment in value may have occurred.

Indicators of a

potential impairment monitored by management include a significant decline in the level of managed assets, changes to contractual provisions underlying certain intangible assets and significant reductions in underlying operating cash flows.

Indicators of a potential impairment monitored by management include a significant decline in the level of managed assets, changes to contractual provisions underlying certain intangible assets and significant reductions in underlying operating cash flows.

Should there be an indication of a change in the useful life or impairment in value of the finite-lived intangible assets, Federated Hermes compares the carrying value of the asset to the projected undiscounted cash flows expected to be generated from the underlying asset over its remaining useful life to determine whether impairment has occurred.

27 unchanged sentences

(1) not to separate lease components from non-lease components for all asset classes and (2) to apply the short-term lease exception, which does not require the capitalization of leases with terms of 12 months or less.

Rent expense is recorded on a straight-line basis over the lease term, beginning on the earlier of the effective date of the lease or

the date Federated Hermes obtains control of the asset.

Rent expense is recorded on a straight-line basis over the lease term, beginning on the earlier of the effective date of the lease or the date Federated Hermes obtains control of the asset.

The lease term may include options to extend the lease when they are reasonably certain of being exercised.

14 unchanged sentences

These noncontrolling interests are classified as Redeemable Noncontrolling Interests in Subsidiaries in the Temporary Equity section of the Consolidated Balance Sheets.

In the case of Rivington, noncontrolling interests are subject to put and call option rights.

These put and call rights are redeemable at the option of either the noncontrolling party or Federated Hermes at future predetermined dates, and therefore, are not entirely within Federated Hermes’ control.

The subsidiary’s net income or loss and related dividends are allocated to Federated Hermes and the noncontrolling interest holder based on their relative ownership percentages.

The noncontrolling interests’ carrying value is adjusted on a quarterly basis to the higher of the carrying value less redemption value adjustments or redemption value, as of the balance sheet date, through a corresponding adjustment to retained earnings.

In the case of consolidated investment companies, the noncontrolling interests represent equity which is redeemable or convertible for cash at the option of the equity holder.

In the case of FHL, prior to Federated Hermes acquiring the remaining shares of FHL in 2022, the noncontrolling interests primarily represented equity which was subject to put and call rights under a long-term incentive plan and award agreements with current and former employees, redeemable at the option of either the noncontrolling party or Federated Hermes at future predetermined dates, and therefore, not entirely within Federated Hermes’ control.

The subsidiary’s net income or loss and related dividends were allocated to Federated Hermes and the noncontrolling interest holder based on their relative ownership percentages.

The noncontrolling interests carrying value was adjusted on a quarterly basis to the higher of the carrying value or redemption value (fair value), as of the balance sheet date, through a corresponding adjustment to retained earnings.

Management previously used an independent valuation expert to assist in estimating the redemption value (fair value) using three methodologies:

(1) the discounted cash flow methodology under the income approach;

(2) the guideline public company methodology under the market approach;

and (3) the guideline public transaction methodology under the market approach.

The estimated redemption value was derived from equally weighting the result of each of the three methodologies.

The estimation of the redemption value included significant assumptions concerning:

(1) projected AUM;

(2) projected revenue growth rates;

(3) projected pre-tax profit margins;

(4) tax rates;

and (5) discount rates.

(p) Treasury Stock

5 unchanged sentences

(r) Foreign Currency Translation

The balance sheets of certain foreign subsidiaries of Federated Hermes, certain consolidated foreign-denominated investment offerings and all other foreign-denominated cash or investment balances are translated at the current exchange rate as of the end of the reporting period and the related income or loss is translated at the average exchange rate in effect during the period.

Net exchange gains and losses resulting from these translations are excluded from income and are recorded in Accumulated Other

Comprehensive Income (Loss), net of tax on the Consolidated Balance Sheets.

The balance sheets of certain foreign subsidiaries of Federated Hermes, certain consolidated foreign-denominated investment offerings and all other foreign-denominated cash or investment balances are translated at the current exchange rate as of the end of the reporting period and the related statements of income are translated at the average exchange rate in effect during the period.

Net exchange gains and losses resulting from these translations are excluded from income and are recorded in Accumulated Other Comprehensive Income (Loss), net of tax on the Consolidated Balance Sheets.

Foreign currency transaction gains and losses are reflected in Operating Expenses – Other on the Consolidated Statements of Income.

8 unchanged sentences

Excess tax benefits and/or additional tax expense (including tax benefits from dividends paid on unvested restricted stock awards) are recognized in the Income Tax Provision in the Consolidated Statements of Income.

Effective July 2, 2018, Federated Hermes established a non-public subsidiary share-based compensation plan for certain employees of FHL.

The subsidiary granted equity awards in the form of restricte d nonpublic subsidiary stock to certain members of the subsidiary’s management and other key employees.

The grant date fair value of the awards was recognized as Compensation and Related expense in the Consolidated Statements of Income on a straight-line basis over the requisite service period of the awards and was adjusted for actual forfeitures as they occurred, with a corresponding adjustment to Redeemable Noncontrolling Interests in Subsidiaries in the Consolidated Balance Sheets.

On March 14, 2022, Federated Hermes acquired the remaining shares of FHL.

See Note (13) for additional information.

(t) Advertising Costs

10 unchanged sentences

subsidiaries would not be subject to a withholding tax.

Additionally, Federated Hermes has elected to account for taxes related to temporary basis differences expected to reverse as Global Intangible Low-Taxed Income (GILTI) as tax expense in the period incurred, rather than factoring it into the measurement of deferred taxes.

Additionally, Federated Hermes has elected to account for taxes related to temporary basis differences expected to reverse as Net Controlled Foreign Corporation Tested Income as tax expense in the period incurred, rather than factoring it into the measurement of deferred taxes.

(v) Earnings Per Share

3 unchanged sentences

(w) Business Segments

Business or operating segments are defined as a component of an enterprise that engages in activities from which it could earn revenue and incur expenses for which discrete financial information is available and is regularly evaluated by Federated Hermes’ CEO, who is the chief operating decision maker (CODM), in deciding how to allocate resources and assess performance.

Federated Hermes operates in one operating segment, the investment management business, which is primarily conducted within the U.S.

2 unchanged sentences

Recently Adopted Accounting Guidance

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU updates reportable segment disclosures by expanding the frequency and extent of segment disclosures.

The update was adopted for Federated Hermes’ December 31, 2024 Form 10-K.

The adoption did not have a material impact on Federated Hermes’ disclosures.

Recently Issued Accounting Guidance Not Yet Adopted

In December 2023, the FASB issued ASU No.

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No.

2023-09, Income Taxes (Topic 740):

1 unchanged sentence

This ASU updates income tax disclosures by requiring annual disclosures of disaggregated information, based on meeting a quantitative threshold, about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

The update is effective for Federated Hermes for the December 31, 2025 Form 10-K, with early adoption permitted, and allows for either the prospective or retrospective adoption method.

Management is currently evaluating this ASU to determine its impact on Federated Hermes’ disclosures.

Management does not plan to early adopt this update and will elect the retrospective transition method.

The update was adopted retrospectively for Federated Hermes’ December 31, 2025 Form 10-K.

The adoption did not have a material impact on Federated Hermes’ disclosures.

Recently Issued Accounting Guidance Not Yet Adopted

In November 2024, the FASB issued ASU No.

4 unchanged sentences

Management is currently evaluating this ASU to determine its impact on Federated Hermes’ disclosures.

In September 2025, the FASB issued ASU No.

2025-06 Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software.

This ASU amends certain aspects of the accounting for and disclosure of software costs under Accounting Standards Codification (ASC) 350-40 Intangibles—Goodwill and Other—Internal-Use Software by removing references to software development phases for cost capitalization and specifying the disclosures required under ASC 360-10 Property, Plant, and Equipment.

The update is effective for Federated Hermes for the March 31, 2028 Form 10-Q with early adoption permitted, and allows for the retrospective, modified retrospective or prospective adoption methods.

Management is currently evaluating this ASU to determine its impact on Federated Hermes’ Consolidated Financial Statements.

(3) Business Combination

Rivington Acquisition

On April 7, 2025, FHL acquired a majority ( 60 %) equity interest in Rivington, a U.K.-based renewable energy project development business, from its founding shareholders (Sellers).

The acquisition provides an opportunity to further accelerate Federated Hermes’ growth in markets outside of the U.S.

The share purchase agreement provided for an upfront cash payment of £ 23.6 million ($ 30.0 million) for the majority ( 60 %) equity interest in Rivington.

The upfront cash payment included £ 12.9 million ($ 16.4 million) paid to Rivington for newly issued shares principally to provide funds for growth capital and debt repayment.

The share purchase agreement also provides for a series of contingent purchase price payments, which can total as much as £ 10.7 million ($ 13.6 million) in the aggregate, with an estimated fair value as of the acquisition date of £ 2.1 million ($ 2.7 million), based on meeting certain revenue thresholds over the next three years .

The share purchase agreement and other related transaction documents contain certain negotiated warranties, covenants and other terms customary for similar transactions in the U.K.

FHL and Sellers entered into an arrangement pursuant to the Shareholders’ Agreement relating to Rivington Energy (Management) Limited, which grants FHL the right to exercise a call option to acquire Sellers’ remaining 40 % interest in Rivington at fair value between January 1, 2026 and December 31, 2033 and grants Sellers a right to exercise a put option to sell their remaining interest in Rivington to FHL at fair value between January 1, 2029 and December 31, 2033.

Federated Hermes has determined that Sellers’ remaining 40 % interest is temporary equity due to it being redeemable at the option of either FHL or Sellers, and therefore is not entirely in Federated Hermes’ control.

Federated Hermes performed a valuation of the fair value of the Rivington acquisition.

As of December 31, 2025, the purchase price allocation for all assets and liabilities acquired is still preliminary.

Although adjustments to the preliminary valuation

reflected in the Consolidated Financial Statements as of December 31, 2025 are possible, Federated Hermes does not expect material adjustments in the final purchase price allocation.

During the fourth quarter 2025, Federated Hermes updated its preliminary purchase price allocation.

There was no material impact to the Consolidated Financial Statements as a result of this update.

The following table summarizes the updated preliminary purchase price allocation determined as of the acquisition date:

(in millions)

Cash and Cash Equivalents $ 17.8

Intangible Assets 2

Other Assets 5.9

Liabilities Assumed ( 9.4 )

Fair Value of Redeemable Noncontrolling Interest in Subsidiary 3

Total Purchase Price Consideration $ 32.7

1 The goodwill recognized is attributable to enhanced revenue and growth opportunities from future projects and the assembled workforce of the Rivington business and is not deductible for tax purposes.

2 Intangible Assets are made up of customer contracts with an estimated useful life of 8.5 years and is recorded in Intangible Assets, net on the Consolidated Balance Sheets.

3 The fair value of the noncontrolling interest was determined utilizing the market approach and consideration of the overall business enterprise value.

FCP Acquisition

On October 23, 2025, Federated Hermes entered into an agreement to acquire a majority interest in FCP, a U.S.-based real estate investment manager.

Federated Hermes will pay up to $ 331.0 million in aggregate purchase price, subject to a potential post-closing purchase price adjustment, for an 80 % interest in FCP.

The aggregate purchase price includes $ 215.8 million in cash consideration and $ 23.2 million in Federated Hermes Class B common stock that will be paid and issued at closing, as well as opportunities to earn contingent consideration of up to an aggregate of $ 92.0 million over multiple year periods, based on achieving certain financial thresholds.

The agreement has been approved by Federated Hermes’ board of directors and the executive management of FCP and is subject to approval of regulatory authorities in the U.S.

The transaction also is subject to satisfaction of other agreed-upon conditions, and is expected to be completed during the second quarter 2026.

Beginning after the fifth anniversary of the closing, Federated Hermes will have certain call option rights to require the selling parties to sell their interests in FCP to Federated Hermes, and the selling parties will have certain put option rights to require Federated Hermes to acquire their interests in FCP from the selling parties.

(4) Revenue from Contracts with Customers

13 unchanged sentences

Total Revenue $ 1,800,663 $ 1,632,093 $ 1,609,574

During the years ended December 31, 2025, 2024 and 2023, Federated Hermes recorded performance fees, including carried interest, of $ 12.5 million, $ 11.5 million and $ 65.4 million, respectively, which were recorded at a point in time and included in the investment advisory performance obligation.

The following table presents Federated Hermes’ revenue disaggregated by offering type:

6 unchanged sentences

(1) contract terms are short-term in nature (i.e., expected duration of one year or less due to termination provisions) and (2) the expected variable consideration would be allocated entirely to future service periods.

Federated Hermes expects to recognize revenue in the future related to the unsatisfied portion of the stewardship services and real estate development performance obligations at December 31, 2024.

Federated Hermes expects to recognize revenue in the future related to the unsatisfied portion of certain services, primarily stewardship services, real estate development performance obligations and renewable energy project development obligations at December 31, 2025.

Generally, contracts are billed in arrears on a quarterly basis and have a three-year duration, after which the customer can terminate the agreement with notice, generally from three to 12 months.

1 unchanged sentence

(in thousands)

2026 $ 10,443

2029 and Thereafter 224

9 unchanged sentences

Fixed-Income Assets 11 % 12 % 12 %

The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets in 2024, as compared to the same period in 2023, was primarily the result of an increase in money market revenue due to higher average money market assets.

The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets in 2023, as compared to the same period in 2022, was primarily the result of increased money market revenue primarily due to the elimination of Voluntary Yield-related Fee Waivers and higher average money market assets in 2023.

(b) Revenue Concentration by Investment Fund Strategy

The following table presents Federated Hermes’ revenue concentration by investment fund strategy over the last three years:

The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets in 2025 and 2024, as compared to the same period in 2024 and 2023, respectively, was primarily the result of an increase in money market revenue due to higher average money market assets.

(b) Revenue Concentration by Investment Offering

The following table presents Federated Hermes’ revenue concentration by investment offering over the last three years:

2025 2024 2023

Federated Government Obligations Fund 16 % 15 % 14 %

Federated Strategic Value Dividend strategy 1

1 Strategy includes Federated Hermes Funds and Separate Accounts.

A significant and prolonged decline in the AUM in these fund strategies could have a material adverse effect on Federated Hermes’ future revenues and, to a lesser extent, net income, due to a related reduction in distribution expenses associated with these fund strategies.

Federated Prime Cash Obligation Fund 11 % 9 % 6 %

A significant and prolonged decline in the AUM in these offerings can have a material adverse effect on Federated Hermes’ future revenues and, to a lesser extent, net income, due to a related reduction in distribution expenses associated with these offerings.

Approximately 10 % of Federated Hermes’ total revenue for 2024, and 11 % for both 2023 and 2022, was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary.

Significant negative changes in Federated Hermes’ relationship with this intermediary could have a material adverse effect on Federated Hermes’ future revenues and, to a lesser extent, net income due to a related reduction in distribution expenses associated with this intermediary.

Approximately 9 %, 10 % and 11 % of Federated Hermes’ total revenue for 2025, 2024 and 2023, was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary.

Significant negative changes in Federated Hermes’ relationship with this intermediary can have a material adverse effect on Federated Hermes’ future revenues and, to a lesser extent, net income due to a related reduction in distribution expenses associated with this intermediary.

(6) Consolidation

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Given that the entities consolidated by Federated Hermes generally follow investment company accounting, which prescribes fair-value accounting, a deconsolidation generally does not result in the recognition of gains or losses for Federated Hermes.

In the ordinary course of business, Federated Hermes could implement fee waivers, rebates or expense reimbursements for various Federated Hermes Funds for competitive reasons (such as Voluntary Yield-related Fee Waivers or to maintain certain fund expense ratios/yields), to meet regulatory requirements or to meet contractual requirements (collectively, Fee Waivers).

In the ordinary course of business, Federated Hermes can implement Fee Waivers.

For the years ended December 31, 2025, 2024 and 2023, Fee Waivers totaled $ 437.4 million, $ 428.0 million and $ 504.5 million, respectively, of which $ 325.9 million, $ 319.5 million and $ 389.3 million, respectively, related to money market funds which meet the scope exception of the consolidation guidance.

Like other sponsors of investment companies, Federated Hermes in the ordinary course of business could make capital contributions to certain affiliated money market Federated Hermes Funds in connection with the reorganization of such funds into certain other affiliated money market Federated Hermes Funds or in connection with the liquidation of money market Federated Hermes Funds.

Federated Hermes Funds.

In these instances, such capital contributions typically are intended to either offset realized losses or other permanent impairments to a fund’s NAV, increase the market-based NAV per share of the fund’s portfolio that is being reorganized to equal the market-based NAV per share of the acquiring fund or to bear a portion of expenses relating to a fund liquidation.

1 unchanged sentence

money market mutual funds to the SEC as financial support to the investment company that is being reorganized or liquidated.

There were no contributions for the years ended December 31, 2024, 2023 or 2022.

There were no such contributions for the years ended December 31, 2025, 2024 or 2023.

In accordance with Federated Hermes’ consolidation accounting policy, Federated Hermes first determines whether the entity being evaluated is a VRE or a VIE.

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Investments—Consolidated Investment Companies 81.0 77.8

Receivables—Affiliates and Other 0.2 4.7

Receivables—Affiliates 0.1 0.2

Other Current Assets 0.5 1.2

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Liabilities ( 13.1 ) ( 8.8 )

Accumulated Other Comprehensive Income (Loss), net of tax 0.0 0.6

Redeemable Noncontrolling Interests in Subsidiaries ( 44.0 ) ( 54.4 )

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Federated Hermes’ net interest in the consolidated VIEs represents the value of Federated Hermes’ economic ownership interest in those VIEs.

At December 31, 2024, a Federated Hermes consolidated VIE held foreign currency forwards, which are subject to a master netting agreement, entered into as part of the consolidated VIE’s strategy.

These foreign currency forwards had a $ 35.7 million asset balance and an offsetting $ 35.6 million liability balance which is recorded as a net amount of $ 0.1 million in Other Current Assets on the Consolidated Balance Sheets.

As of December 31, 2023, this VIE was not consolidated;

therefore, comparative information is not applicable.

At December 31, 2025 and 2024, a Federated Hermes consolidated VIE held foreign currency forwards, which are subject to a master netting agreement, entered into as part of the consolidated VIE’s strategy.

These foreign currency forwards had asset balances of $ 11.9 million and $ 35.7 million, recorded net of liability balances of $ 11.9 million and $ 35.6 million, respectively, in Other Current Liabilities and Other Current Assets, respectively, on the Consolidated Balance Sheets.

During the year ended December 31, 2025, Federated Hermes consolidated and/or deconsolidated various VIEs due to changes in its ownership in these VIEs.

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Federated Hermes’ involvement with certain Federated Hermes Funds that are deemed to be VIEs includes serving as investment manager, or, at times, holding a minority interest or both.

Federated Hermes’ variable interest is not deemed to absorb losses or receive benefits that could potentially be significant to the VIE.

Federated Hermes’ variable interest is not deemed to absorb losses or receive benefits that can potentially be significant to the VIE.

Therefore, Federated Hermes is not the primary beneficiary of these VIEs and has not consolidated these entities.

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AUM for these non-consolidated Federated Hermes Funds totaled $ 12.3 billion and $ 10.0 billion at December 31, 2025 and 2024, respectively.

Of the Receivables—Affiliates at December 31, 2024 and 2023, $ 1.7 million and $ 1.1 million, respectively, related to non-consolidated VIEs and represented Federated Hermes’ maximum risk of loss from non-consolidated VIE receivables.

Of the Receivables—Affiliates at December 31, 2025 and 2024, $ 2.0 million and $ 1.7 million, respectively, was related to non-consolidated VIEs and represented Federated Hermes’ maximum risk of loss from non-consolidated VIE receivables.

(7) Investments

At December 31, 2024 and 2023, Federated Hermes held investments in non-consolidated fluctuating-value Federated Hermes Funds of $ 48.0 million and $ 99.5 million, respectively, primarily in mutual funds which represent equity investments for Federated Hermes, and held investments in Separate Accounts of $ 6.2 million and $ 7.5 million at December 31, 2024 and 2023, respectively, that were included in Investments—Affiliates and Other on the Consolidated Balance Sheets.

Federated Hermes’ investments held in Separate Accounts as of December 31, 2024 and 2023, were primarily composed of stocks of large

domestic and foreign companies ($ 2.8 million and $ 3.4 million, respectively) and domestic debt securities ($ 1.8 million and $ 2.4 million, respectively).

At December 31, 2025 and 2024, Federated Hermes held investments in non-consolidated fluctuating-value Federated Hermes Funds of $ 50.1 million and $ 48.0 million, respectively, primarily in mutual funds which represent equity investments for Federated Hermes, and held investments in Separate Accounts of $ 6.2 million at both December 31, 2025 and 2024 that were included in Investments—Affiliates and Other on the Consolidated Balance Sheets.

Federated Hermes’ investments held in Separate Accounts as of December 31, 2025 and 2024 were primarily composed of stocks of large domestic and foreign companies ($ 3.9 million and $ 2.8 million, respectively) and domestic debt securities ($ 1.7 million and $ 1.8 million, respectively).

Federated Hermes consolidates certain Federated Hermes Funds into its Consolidated Financial Statements as a result of its controlling financial interest in these Federated Hermes Funds (see Note (6)).

All investments held by these consolidated Federated Hermes Funds were included in Investments—Consolidated Investment Companies on Federated Hermes’ Consolidated Balance Sheets.

The investments held by consolidated Federated Hermes Funds as of December 31, 2024 and 2023, were primarily composed of foreign and domestic debt securities ($ 70.4 million and $ 59.1 million, respectively), stocks of large foreign and domestic companies ($ 7.4 million and $ 4.9 million, respectively) and stocks of small and mid-sized domestic and foreign companies ($ 4.7 million and $ 4.2 million, respectively).

The investments held by consolidated Federated Hermes Funds as of December 31, 2025 and 2024, were composed of foreign and domestic debt securities ($ 73.4 million and $ 70.4 million, respectively), stocks of large foreign and domestic companies ($ 7.6 million and $ 7.4 million, respectively) and stocks of small and mid-sized domestic and foreign companies ($ 4.5 million and $ 4.7 million, respectively).

The following table presents gains and losses recognized in Gain (Loss) on Securities, net on the Consolidated Statements of Income in connection with Federated Hermes’ investments:

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$ 0 $ 2,819 $ 353 $ 3,172

1 Amounts primarily consist of security and other deposits and restricted cash for 2024 and 2023 and derivative assets for 2023.

2 Amounts primarily consist of derivative liabilities for 2024 and acquisition-related future contingent consideration liabilities for 2023.

1 Amounts primarily consist of deposits and restricted cash.

2 Amounts primarily consist of derivative liabilities.

The following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value on a recurring basis.

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The fair values of certain securities, which are determined by third-party pricing services and utilize observable market inputs of comparable investments are classified within Level 2 of the valuation hierarchy.

Acquisition-related future contingent consideration liabilities

From time to time, pursuant to agreements entered into in connection with certain business combinations and asset acquisitions, Federated Hermes could be required to make future consideration payments if certain contingencies are met.

In connection with certain business combinations, Federated Hermes records a liability representing the estimated fair value of future consideration payments as of the acquisition date.

The liability is subsequently re-measured at fair value on a recurring basis with changes in fair value recorded in earnings.

As of December 31, 2024, acquisition-related future consideration liabilities of $ 0.4 million were primarily related to a business combination made in 2022 and were recorded in Other Long-Term Liabilities on the Consolidated Balance Sheets.

Management estimated the fair value of future consideration payments based primarily upon expected future cash flows using an income approach valuation methodology with unobservable market data inputs (Level 3).

The following table presents a reconciliation of the beginning and ending balances for Federated Hermes’ liability for future consideration payments related to these business combinations:

(in thousands)

Balance at December 31, 2023

Changes in Fair Value ( 4,037 )

Contingent Consideration Payments ( 3,236 )

Balance at December 31, 2024

Investments using Practical Expedients

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The fair value of Federated Hermes’ debt is estimated by management using observable market data (Level 2).

Based on this fair value estimate, the carrying value of debt appearing on the Consolidated Balance Sheets approximates fair value, net of unamortized issuance costs in the amount of $ 1.9 million.

(8) Derivatives

Federated Hermes enters into foreign currency forward transactions in order to hedge against foreign exchange rate fluctuations related to FHL, a British Pound Sterling-denominated subsidiary.

None of these forwards have been designated as hedging instruments for accounting purposes.

As of December 31, 2024, Federated Hermes held foreign currency forwards with a combined notional amount of £ 92.6 million with expiration dates ranging from March 2025 through September 2025.

Federated Hermes recorded $ 2.8 million in Accounts Payable and Accrued Expenses on the Consolidated Balance Sheets, which represented the fair value of these derivative instruments as of December 31, 2024.

As of December 31, 2023, Federated Hermes held foreign currency forwards expiring from March 2024 through September 2024 with two counterparties.

For foreign currency forwards with a notional amount of £ 28.8 million, Federated Hermes recorded $ 1.6 million in Receivables, net on the Consolidated Balance Sheets, which represented the fair value as of December 31, 2023.

For foreign currency forwards with a combined notional amount of £ 55.5 million, Federated Hermes recorded $ 0.3 million in Other Current Liabilities on the Consolidated Balance Sheets, which represented the fair value as of December 31, 2023.

For the years ended December 31, 2024 and 2023 Federated Hermes recorded a $ 2.5 million and $ 3.4 million realized gain, respectively, to Operating Expenses – Other on the Consolidated Statements of Income for foreign currency forward transactions.

Based on this fair value estimate, the carrying value of debt appearing on the Consolidated Balance Sheets approximates fair value.

(9) Intangible Assets

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Indefinite-lived intangible assets are recorded in Intangible Assets, net on the Consolidated Balance Sheets and include rights to manage fund assets ($ 244.3 million and $ 237.4 million at December 31, 2025 and 2024, respectively) and trade names ($ 52.9 million and $ 49.2 million at December 31, 2025 and 2024, respectively).

The decrease in indefinite-lived intangible assets at December 31, 2024 as compared to December 31, 2023 is primarily a result of a $ 66.3 million non-cash impairment of an indefinite-lived intangible asset recognized at June 30, 2024.

The increase in indefinite-lived intangible assets at December 31, 2025 as compared to December 31, 2024 was due to an increase in the value of intangible assets denominated in a foreign currency as a result of foreign exchange rate fluctuations.

Due to actual results trailing projected results, driven by a combination of lower gross sales and higher redemptions for the quarter ended June 30, 2024, management concluded that an indicator of potential impairment existed for the indefinite-lived intangible asset related to the FHL right to manage public fund assets acquired in connection with the 2018 FHL acquisition.

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The non-cash impairment was recorded in Operating Expenses – Intangible Asset Related on the Consolidated Statements of Income.

There were no other impairments during the year ended December 31, 2024.

The uncertainty caused by the coronavirus pandemic resulted in management determining that an indicator of potential impairment existed beginning in the first quarter 2020 for the FHL right to manage public fund assets acquired in connection with the 2018 FHL acquisition.

Management used an income-based approach to valuation, the discounted cash flow method, to value the asset.

As a result of continued increases in market interest rates and a decrease in near-term projected cash flows, a discounted cash flow analysis was prepared as of December 31, 2022 and resulted in a non-cash impairment charge of $ 31.5 million recorded in Operating Expenses – Intangible Asset Related on the Consolidated Statements of Income.

There were no other impairments during the year ended December 31, 2023.

There were no other impairments during the year ended December 31, 2024 and no impairments during the years ended December 31, 2025 and 2023.

(b) Finite-lived intangible assets

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Amortization expense for finite-lived intangible assets was $ 13.7 million, $ 13.0 million and $ 13.9 million in 2025, 2024 and 2023, respectively, and was recorded in Operating Expenses – Intangible Asset Related on the Consolidated Statements of Income.

Expected aggregate annual amortization expense for finite-lived intangible assets in each of the five succeeding years assuming no new acquisitions or impairments is shown in the table below:

Expected aggregate annual amortization expense for finite-lived intangible assets in each of the five succeeding years assuming no new acquisitions, impairments or changes in foreign exchange rates is shown in the table below:

(in thousands)

2026 $ 10,165

Goodwill at December 31, 2024 decreased $ 2.3 million from December 31, 2023 primarily as a result of foreign exchange rate fluctuations on goodwill denominated in a foreign currency.

Goodwill at December 31, 2025 increased $ 47.3 million from December 31, 2024 primarily as a result of the Rivington acquisition ($ 35.6 million) and foreign exchange rate fluctuations on goodwill denominated in a foreign currency ($ 12.0 million).

(10) Property and Equipment

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Depreciation expense was $ 8.3 million, $ 9.1 million and $ 13.0 million for the years ended December 31, 2025, 2024 and 2023, respectively, and was recorded in Operating Expenses – Office and Occupancy on the Consolidated Statements of Income.

Certain implementation costs related to software hosting arrangements that are service contracts are capitalized and amortized using the straight-line method over the term of the software license.

At December 31, 2025 and 2024, $ 2.8 million and $ 3.2 million, respectively, are included in Prepaid Expenses and $ 16.9 million and $ 10.9 million, respectively, in Other Long-Term Assets on the Consolidated Balance Sheets.

Unsecured Senior Notes

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and PNC Capital Markets LLC acted as lead placement agents in relation to the $ 350 million Notes and certain subsidiaries of Federated Hermes are guarantors of the obligations owed under the Note Purchase Agreement.

As of December 31, 2024, $ 348.1 million, net of unamortized issuance costs in the amount of $ 1.9 million, was recorded in Long-Term Debt on the Consolidated Balance Sheets.

The Note Purchase Agreement is recorded, net of unamortized issuance costs, in Long-Term Debt on the Consolidated Balance Sheets and was $ 348.4 million and $ 348.1 million at December 31, 2025 and 2024, respectively.

T he entire principal amount of the $ 350 million Notes will become due March 17, 2032, subject to certain prepayment requirements under limited conditions.

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The Note Purchase Agreement does not feature a facility for the further i ssuance of additional notes or borrowing of any other amounts and there is no commitment fee payable in connection with the $ 350 million Notes.

The Note Purchase Agreement includes representations and warranties, affirmative and negative financial covenants, including interest coverage ratio covenant and leverage ratio covenant reporting requirements, other non-financial covenants and other customary terms and conditions.

The Note Purchase Agreement includes representations and warranties, affirmative and negative financial covenants, including an interest coverage ratio covenant and a leverage ratio covenant, reporting requirements, other non-financial covenants and other customary terms and conditions.

Federated Hermes was in compliance with all of its covenants at and during the period ended December 31, 2025.

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The Note Purchase Agreement includes certain stated events of default and cross default provisions which would permit the lenders/counterparties to accelerate the repayment of the $ 350 million Notes if not cured within the applicable grace periods.

The events of default generally include breaches of contract, failure to make required payments, insolvency, certain material

misrepresentations and other proceedings, whether voluntary or involuntary, that would require repayment of the $ 350 million Notes prior to their stated date of maturity.

Any such accelerated amounts would accrue interest at a default rate and could include an additional make-whole amount upon repayment.

The events of default generally include breaches of contract, failure to make required payments, insolvency, certain material misrepresentations and other proceedings, whether voluntary or involuntary, that would require repayment of the $ 350 million Notes prior to their stated date of maturity.

Any such accelerated amounts would accrue interest at a default rate and can include an additional make-whole amount upon repayment.

The $ 350 million Notes rank without preference or priority in relation to other unsecured and senior indebtedness of Federated Hermes.

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Effective July 1, 2023, Federated Hermes began using SOFR as a replacement to LIBOR in order to calculate interest on borrowings, if any, as permitted by the Credit Agreement.

This is only a change to the rate index used for future borrowings under the Credit Agreement due to the discontinuance of LIBOR in the market and is not an amendment to the Credit Agreement.

This was only a change to the rate index used for future borrowings under the Credit Agreement due to the discontinuance of LIBOR in the market and was not an amendment to the Credit Agreement.

The Credit Agreement, which expires on July 30, 2026, has no principal payment schedule, but instead requires that any outstanding principal be repaid by the expiration date.

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The Credit Agreement includes representations and warranties, affirmative and negative financial covenants, including an interest coverage ratio covenant and a leverage ratio covenant, reporting requirements, other non-financial covenants and other customary terms and conditions.

Federated Hermes was in compliance with all covenants at and during the year ended December 31, 2024.

Federated Hermes was in compliance with all covenants at and during the year ended

December 31, 2025.

See the Liquidity and Capital Resources section of Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations (unaudited) for additional information.

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(13) Share-Based Compensation

(a) Restricted Stock

Federated Hermes’ long-term stock-incentive compensation is provided under the Stock Incentive Plan (the Plan), as amended and subsequently approved by shareholders from time to time.

Federated Hermes’ long-term stock-incentive compensation is provided under the Stock Incentive Plan, as amended and subsequently approved by shareholders from time to time.

Share-based awards are granted to reward Federated Hermes’ employees and non-management directors who have contributed to the success of Federated Hermes and to provide incentive to increase their efforts on behalf of Federated Hermes.

Since the Plan’s inception, a total of 36.1 million shares of Class B common stock have been authorized for granting share-based awards in the form of restricted stock, stock options or other share-based awards.

As of December 31, 2024, 3.1 million shares are available under the Plan.

Share-based compensation expense was $ 28.8 million, $ 33.9 million and $ 34.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Since the Stock Incentive Plan’s inception, a total of 36.1 million shares of Class B common stock have been authorized for granting share-based awards in the form of restricted stock, stock options or other share-based awards.

As of December 31, 2025, 2.3 million shares are available under the Stock Incentive Plan.

Share-based compensation expense recognized in Operating Expenses – Compensation and Related was $ 29.1 million, $ 28.8 million and $ 33.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The associated tax benefits recorded in connection with share-based compensation expense were $ 7.0 million, $ 7.0 million and $ 8.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

At December 31, 2024, the maximum remaining unrecognized compensation expense related to share-based awards approximated $ 89 million which is expected to be recognized over a weighted-average period of approximately six years .

At December 31, 2025, the maximum remaining unrecognized compensation expense related to share-based awards approximated $ 92 million which is expected to be recognized over a weighted-average period of approximately seven years .

Federated Hermes’ restricted stock awards represent shares of Federated Hermes Class B common stock that may be sold by the awardee only once restrictions lapse, as dictated by the terms of the award.

The awards are generally subject to graded vesting schedules that vary in length from three to ten years with a portion of the award vesting each year, as dictated by the terms of the award.

For an award with a ten-year vesting period, the restrictions on the vested portion of the award typically lapse on the award’s fifth- and tenth-year anniversaries.

For an award with a five-year vesting period, the restrictions on the vested portion of the award typically lapse on the award’s six-, seventh- and eighth-year anniversaries.

The awards are generally subject to graded vesting schedules that vary in length from three to ten years with a portion of the award vesting on specified anniversaries, as dictated by the terms of the award.

The restrictions on the vested portion of an award typically lapse on specified anniversary dates of an award (e.g., for U.S.

employees, the award’s fifth- and tenth-year anniversaries, and for non-U.S.

employees, generally, for awards prior to November 2025, the award’s sixth, seventh and eighth anniversaries which extend beyond the five-year vesting period in an effort to continue to align the employees’ and Federated Hermes’ interests during the restriction period and for awards effective November 2025 or later, the award’s fifth anniversary).

Certain restricted stock awards granted pursuant to a key employee bonus program have a three-year graded vesting schedule with restrictions lapsing at each vesting date.

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3,481,619 $ 34.43

1 During 2024, Federated Hermes awarded 93,500 shares of restricted Class B common stock under the UK Sub-Plan that generally vest over a five-year period.

Federated Hermes awarded 378,107 shares of restricted Class B common stock in connection with a bonus program in which certain key employees received a portion of their bonus in the form of restricted stock under the Plan.

1 During 2025, Federated Hermes awarded 69,500 shares of restricted Class B common stock under the U.K.

Sub-Plan that generally vest over a five-year period.

Federated Hermes awarded 394,020 shares of restricted Class B common stock in connection with a bonus program in which certain key employees received a portion of their bonus in the form of restricted stock under the Stock Incentive Plan.

This bonus restricted stock generally vests over a three-year period.

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The total fair value of restricted stock vested during 2025, 2024 and 2023 was $ 37.9 million, $ 36.0 million and $ 49.5 million, respectively.

(b) Subsidiary Stock Plan

Effective July 2, 2018, Federated Hermes established a non-public subsidiary share-based compensation plan for certain employees of FHL.

These awards, which were subject to continued-service vesting requirements, vested over a period of three to five years .

The award holders had a right to exercise a put option to sell shares to Federated Hermes at fair value and Federated Hermes had a right to exercise a call option to acquire shares at fair value.

Federated Hermes recognized compensation expense for this plan of $ 0.7 million in Operating Expenses – Compensation and Related on the Consolidated Statements of Income for the year ended December 31, 2022.

No compensation expense for this plan was recognized for the years ended December 31, 2024 or 2023.

On March 14, 2022, Federated Hermes acquired the remaining shares of FHL.

Federated Hermes granted 1,183,066 shares of restricted Federated Hermes Class B common stock pursuant to award agreements to certain FHL employees in exchange for their beneficial interests in awards of restricted FHL shares held on March 14, 2022.

These shares of Federated Hermes Class B common stock were reserved for issuance under the Plan.

Federated Hermes also issued a combined 318,807 shares of treasury Federated Hermes Class B common stock to the trustee of a non-U.S.

domiciled employee benefit trust, and a non-U.S.

resident former FHL employee, in exchange for beneficial interests in the FHL shares held by them on March 14, 2022.

The Federated Hermes shares held by the employee benefit trust were used for restricted stock awards for FHL management and key employees.

As of December 31, 2024, no shares remain in the employee benefit trust.

(14) Common Stock

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(b) Treasury Stock

In December 2021, the board of directors authorized a share repurchase program with no stated expiration date that allowed the repurchase of up to 7.5 million shares of Class B common stock.

This program was fulfilled in September 2022.

In June 2022, the board of directors authorized a share repurchase program with no stated expiration date that allowed the repurchase of up to 5.0 million shares of Class B common stock.

In October 2023, the board of directors authorized a share repurchase program with no stated expiration date that allowed the repurchase of up to 5.0 million shares of Class B common stock.

This program was fulfilled in March 2025.

In October 2024, the board of directors authorized a share repurchase program with no stated expiration date that allowed the repurchase of up to 5.0 million shares of Class B common stock.

This program was fulfilled in December 2025.

In October 2023, the board of directors authorized a share repurchase program with no stated expiration date that allows the repurchase of up to 5.0 million shares of Class B common stock.

In October 2024, the board of directors authorized an additional share repurchase program with no stated expiration date that allows the repurchase of up to 5.0 million shares of Class B common stock.

No other programs existed as of December 31, 2024.

The programs authorize executive management to determine the timing and the amount of shares for each purchase.

In July 2025, the board of directors authorized an additional share repurchase program with no stated expiration date that allows the repurchase of up to 5.0 million shares of Class B common stock.

No other program existed as of December 31, 2025.

The program authorizes executive management to determine the timing and the amount of shares for each purchase.

The repurchased stock is to be held in treasury for employee share-based compensation plans, potential acquisitions and other corporate activities, unless Federated Hermes’ board of directors subsequently determines to retire the repurchased stock and restore the shares to authorized but unissued status (rather than holding the shares in treasury).

During the year ended December 31, 2025, Federated Hermes repurchased 6.2 million shares of its Class B common stock for $ 263.4 million, nearly all of which were repurchased in the open market.

At December 31, 2024, 5.7 million shares remained available to be repurchased under these share repurchase programs.

In July 2022, Federated Hermes’ board of directors authorized the retirement of 10.0 million treasury shares which restored these shares to authorized but unissued status.

Federated Hermes recorded a $ 313.8 million reduction to Treasury Stock and a $ 42.7 million reduction to Class B common stock.

The difference was recorded as a reduction to Retained Earnings and Additional Paid-In Capital from Treasury Stock Transactions.

There was no impact to total equity as a result of this non-cash transaction.

At December 31, 2025, 4.6 million shares remained available to be repurchased under this share repurchase program.

(15) Income Taxes

Federated Hermes files a consolidated federal income tax return.

Financial statement tax expense is determined under the liability method.

Income Tax Provision consisted of the following expense/(benefit) components for the years ended December 31:

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Total $ 133,431 $ 113,179 $ 106,551

The reconciliation between the statutory income tax rate and the effective tax rate consisted of the following for the years ended December 31:

The components of income before income taxes consisted of the following for the years ended December 31:

(in thousands) 2025 2024 2023

$ 575,627 $ 502,997 $ 449,420

Expected Federal Statutory Income Tax Rate 21.0 % 21.0 % 21.0 %

Increase/(Decrease):

State and Local Income Taxes, net of Federal Benefit 3.2 2.4 2.9

Foreign Income Taxes 4.3 2.0 ( 1.8 )

Non-Deductible Executive Compensation 1.1 1.0 1.2

( 28,101 ) ( 121,388 ) ( 38,088 )

Income Before Income Taxes $ 547,526 $ 381,609 $ 411,332

The reconciliation between income tax expense/(benefit) and the statutory income tax rate consisted of the following for the years ended December 31:

(dollars in thousands) 2025 2024 2023

Amount Percent Amount Percent Amount Percent

Federal Statutory Tax Rate $ 114,980 21.0 % $ 80,138 21.0 % $ 86,380 21.0 %

State and Local Income Taxes, Net of Federal Income Tax Effect 1

12,836 2.4 11,814 3.1 9,491 2.3

Foreign Tax Effects

Statutory tax rate difference between U.K.

( 1,194 ) ( 0.2 ) ( 4,851 ) ( 1.3 ) ( 1,391 ) ( 0.3 )

Other Nontaxable or Nondeductible Items ( 1,454 ) ( 0.3 ) 1,746 0.5 2,969 0.7

Nontaxable dividend income ( 4,378 ) ( 0.8 ) ( 8,051 ) ( 2.1 ) ( 1,248 ) ( 0.3 )

Net Valuation Allowance 12,021 2.2 26,550 7.0 7,731 1.9

Other Foreign Jurisdictions ( 26 ) 0.0 846 0.2 147 0.0

Effects of Cross-Border Tax Laws

Subpart F and Foreign-Derived Deduction Eligible Income 1,724 0.3 2,100 0.6 1,282 0.3

Research & Development Tax Credit ( 1,986 ) ( 0.4 ) 0 0.0 0 0.0

Nontaxable or Nondeductible Items

Executive Compensation Disallowance 4,596 0.9 4,256 1.1 3,920 1.0

Other ( 1,698 ) ( 0.3 ) ( 1,410 ) ( 0.4 ) ( 1,055 ) ( 0.3 )

Changes in Unrecognized Tax Benefits 636 0.1 14 0.0 ( 432 ) ( 0.1 )

Other Adjustments ( 2,626 ) ( 0.5 ) 27 0.0 ( 1,243 ) ( 0.3 )

Effective Tax Rate $ 133,431 24.4 % $ 113,179 29.7 % $ 106,551 25.9 %

The effective tax rate for 2024 increased to 29.7 % as compared to the effective tax rate for 2023 of 25.9 % prim arily due to a valuation allowance on foreign deferred tax assets and the impairment of an indefinite-lived intangible asset ( 2.3 %), and a state tax law change and a state deferred tax adjustment ( 0.8 %).

1 State taxes in New York and local tax in New York City made up the majority (greater than 50 percent) of the tax effect in this category in 2025 and 2024 and New York, New York City and California in 2023.

The effective tax rate for 2025 decreased to 24.4 % as compared to the effective tax rate for 2024 of 29.7 % prim arily due to the impact in 2024 of a valuation allowance on foreign deferred tax assets and the impairment of an indefinite-lived intangible asset.

Income taxes paid (net of refunds) consisted of the following for the years ended December 31:

(in thousands) 2025 2024 2023

Federal $ 109,200 $ 110,400 $ 93,300

State 15,347 15,213 14,107

Foreign 95 209 626

Total Taxes Paid $ 124,642 $ 125,822 $ 108,033

is the only jurisdiction which exceeds the quantitative threshold of 5% of the total income taxes paid (net of refunds received).

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities consisted of the following at December 31:

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The valuation allowances were recorded due to management’s belief that it is more likely than not that Federated Hermes will not realize the full benefit of these net operating losses.

For the deferred tax asset, net of valuation allowance related to foreign net operating losses, management believes that it is more likely than not that it will realize the benefit of these net operating losses based on projections of future taxable income for the entities to which these relate.

For the deferred tax asset, net of valuation allowance related to foreign net operating losses, management has relied on future reversals of temporary taxable differences to support the realizable portion of the deferred tax asset.

Federated Hermes’ remaining deferred tax assets as of December 31, 2025 and 2024 primarily related to lease liabilities reported pursuant to ASC 842 and U.S.

compensation-related expenses that have been recognized for book purposes but are not yet deductible for tax purposes.

Management believes that it is more likely than not that Federated Hermes will receive the full benefit of these deferred tax assets due to the expectation that Federated Hermes will generate taxable income well in excess of these amounts in the years they become deductible.

compensation and related expenses that have been recognized for book purposes but are not yet deductible for tax purposes.

Management believes that it is more likely than not that Federated Hermes will receive the

full benefit of these deferred tax assets due to the expectation that Federated Hermes will generate taxable income greater than these amounts in the years they become deductible.

Federated Hermes and its subsidiaries file annual income tax returns in the U.S.

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state and local jurisdictions, and in certain foreign jurisdictions.

Based upon its review of these filings, there were no material unrecognized tax benefits as of December 31, 2024 or 2023.

Therefore, there were no material changes during 2024, and no reasonable possibility of a significant increase or decrease in unrecognized tax benefits within the next twelve months.

Federated Hermes’ U.S.

federal tax returns for tax years 2022 to 2025 remain open to examination, while filings in its major state tax jurisdictions from tax years 2021 to 2025 generally remain open to examination.

Federated Hermes’ balance of unrecognized tax benefits, excluding interest and penalties, at December 31, 2025, 2024 and 2023 was $ 1.6 million, $ 1.0 million and $ 0.9 million, respectively.

(16) Earnings Per Share Attributable to Federated Hermes, Inc.

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( 18,140 ) ( 11,605 ) ( 13,981 )

Total Net Income Attributable to Federated Hermes Common Stock

Total Net Income Attributable to Federated Hermes Common Stock – Basic and Diluted

$ 385,159 $ 256,709 $ 284,999

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Federated Hermes may enter into, modify or terminate certain leases in accordance with the lease agreements.

During the years ended December 31, 2024, 2023 and 2022, these transactions resulted in non-cash increases of $ 20.0 million, $ 20.3 million and $ 3.3 million, respectively, to Right-of-Use Assets, net and Lease Liabilities (both current and long-term) on the Consolidated Balance Sheets.

During the year ended December 31, 2025, these transactions resulted in non-cash increases of $ 3.4 million, $ 3.0 million and $ 6.4 million to Right-of-Use Assets, net, Other Long-Term Assets and Lease Liabilities, respectively, on the Consolidated Balance Sheets.

During the years ended December 31, 2024 and 2023, these transactions resulted in non-cash increases of $ 20.0 million and $ 20.3 million, respectively, to Right-of-Use Assets, net and Lease Liabilities (both current and long-term) on the Consolidated Balance Sheets.

During the years ended December 31, 2025, 2024 and 2023, Federated Hermes recorded $ 19.8 million, $ 19.2 million and $ 19.5 million, respectively, in operating lease costs to Operating Expenses – Office and Occupancy on the Consolidated Statements of Income.

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The following table presents the changes in Redeemable Noncontrolling Interests in Subsidiaries:

(in thousands) Consolidated Investment Companies FHL and other entities

(in thousands) Consolidated Investment Companies Other Entities Total

Balance at January 1, 2023 $ 50,317 $ 11,504 $ 61,821

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Consolidation/(Deconsolidation) ( 75,225 ) 0 ( 75,225 )

Stock Award Activity 0 707 707

Distributions to Noncontrolling Interests in Subsidiaries ( 38,517 ) ( 1,443 ) ( 39,960 )

Acquisition of Remaining Equity of FHL 0 ( 37,805 ) ( 37,805 )

Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL 0 14,221 14,221

Balance at December 31, 2023 $ 14,341 $ 11,504 $ 25,845

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Distributions to Noncontrolling Interests in Subsidiaries ( 32,386 ) ( 3,028 ) ( 35,414 )

Business Acquisition 0 23,592 23,592

Balance at December 31, 2025 $ 36,633 $ 29,896 $ 66,529

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(a) Contractual

From time to time, pursuant to agreements entered into in connection with certain business combinations and asset acquisitions, Federated Hermes is obligated to make future payments under various agreements to which it is a party.

See Note (7) for additional information regarding these payments.

From time to time, pursuant to agreements entered into in connection with certain transactions, Federated Hermes is obligated to make future payments under various agreements to which it is a party.

(b) Guarantees and Indemnifications

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It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of Federated Hermes’ obligations and the unique facts and circumstances involved in each particular agreement.

As of December 31, 2024, management does not believe that a material loss related to

any of these matters is reasonably possible.

As of December 31, 2025, management does not believe that a material loss related to any of these matters is reasonably possible.

Like other companies, Federated Hermes has claims asserted and threatened against it in the ordinary course of business.

On January 5, 2026, Hermes GPE LLP (HGPE), a wholly-owned subsidiary of Federated Hermes, Inc.

based in London, England, acknowledged service of “Particulars of Claim” served on it and Hermes Infrastructure II GP LLP (General Partner) in the High Court of Justice, Business and Property Courts of England and Wales, Chancery Division (Court), on December 19, 2025 by Aberdeen City Council as the administering authority of the Aberdeen City Council Pension Fund (also known as the North East Scotland Pension Fund) (Plaintiff).

Without alleging specified damages, Plaintiff had taken initial steps to institute legal proceedings against HGPE and General Partner by filing a Claim Form with the Court on August 5, 2025.

HGPE sponsors and serves as investment manager to the Hermes Infrastructure Fund II (the Fund).

General Partner serves as the general partner of the Fund.

In 2019, the Fund made an approximately £ 90 million initial (approximately £ 104 million in total) investment in a group of companies holding a portfolio of five onshore wind farms in Sweden known as the “Ventus Portfolio.” According to Plaintiff’s Particulars of Claim, Plaintiff is asserting derivative claims on behalf of the Fund’s General Partner against HGPE for professional negligence and breach of the Fund’s limited partnership agreement in connection with the Fund’s investment in the Ventus Portfolio, which declined in value since 2019.

According to Plaintiff’s Particulars of Claim, Plaintiff also is asserting direct claims against General Partner for breach of duty under the Fund’s limited partnership agreement in failing to oversee and hold HGPE to the terms of its appointment as manager of the Fund in connection with the Fund’s investment in the Ventus Portfolio.

The Plaintiff alleges that HGPE was negligent in making the 2019 investment in the Ventus Portfolio.

The Plaintiff’s derivative claim, which is based on the Fund’s entire investment in the Ventus Portfolio, seeks approximately £ 87 million of the alleged diminished value of the Ventus Portfolio (approximately $ 118 million as of February 23, 2026) and other unquantified damages.

The Plaintiff’s direct claims against General Partner based on the size of its individual investment in the Fund seek approximately 38.1 % of the approximately £ 87 million of the alleged diminished value of the Ventus Portfolio (approximately $ 45 million as of February 23, 2026).

Federated Hermes, HGPE and General Partner deny Plaintiff’s allegations, believe the claims are without merit, and intend to vigorously defend against such claims.

General Partner does not believe that HGPE is liable to the Fund.

Based on information currently available, Federated Hermes does not believe that the outcome of this matter will have a material adverse effect on its consolidated financial position, results of operations, or cash flows given, among other reasons, the lack of merit to Plaintiff’s allegations and claims.

Out of an abundance of caution, a claim has been filed with Federated Hermes’ insurers under its insurance policy for the appropriate policy period.

In addition, like other companies, Federated Hermes has other claims asserted and threatened against it in the ordinary course of business.

As of December 31, 2025, Federated Hermes does not believe that a material loss related to any of these claims is reasonably possible.

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Management believes an insurance reimbursement of $ 15.9 million is probable based on the contractual terms of the insurance policies.

Accordingly, $ 15.9 million has been recorded to Receivables, net at December 31, 2024.

However, the insurance claim is now the subject of litigation with two of Federated Hermes’ insurance carriers.

Changes to these estimates, which are contingent upon resolution of the insurance claim with the applicable insurers, could be materially different from the amount Federated Hermes has recorded.

In connection with the restructuring of an infrastructure fund, Federated Hermes purchased certain limited partners’ rights to receive future carried interest at fair value, which was calculated by a third-party, for $ 9.8 million and was included in Operating Expenses – Other in the second quarter 2023.

Due to the restructuring, an existing clawback risk on previously earned carried interest was removed.

The purchase of these carried interest rights and related legal and professional fees and other costs are not deductible for tax purposes.

An additional $ 5.1 million and $ 3.1 million in consideration was recorded in Operating Expenses – Other in the second half of 2023 and in 2024, respectively.

An agreement with the last limited partner was finalized in January 2025.

Accordingly, $ 15.9 million has been recorded to Other Long-Term Assets at December 31, 2025.

The insurance claim is now the subject of litigation with two of Federated Hermes’ insurance carriers.

Changes to these estimates, which are contingent upon resolution of the insurance claim with the applicable insurers, can be materially different from the amount Federated Hermes has recorded.

(21) Segment and Geographic Information

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The measure of segment assets is reported on the Consolidated Balance Sheets as Total Assets.

The CODM uses revenue and net income in making key operating decisions, including approvals for business acquisitions, high-level compensation decisions, determination of shareholder dividends, including special dividends, repurchasing company stock, developing and seeding new offerings, modifying existing offerings and determination of funding of significant technology projects.

Federated Hermes’ revenues from U.S.

Federated Hermes’ revenue from U.S.

operations were as follows for the years ended December 31:

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1 This represents revenue earned by non-U.S.

domiciled subsidiaries, primarily in the UK.

domiciled subsidiaries, primarily in the U.K.

Federated Hermes’ Right-of-Use Assets, net and Property and Equipment, net for U.S.

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1 This represents net assets of non-U.S.

domiciled subsidiaries, primarily in the UK.

domiciled subsidiaries, primarily in the U.K.

(22) Subsequent Events

3 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data