Federated Hermes, Inc 10-Q for FY2026 Q3
Federated Hermes, Inc. (FHI)
10-Q
2026-10-30
For: 2026-09-30
View Original
Added on
October 30, 2026
About this 10-Q
Federated Hermes, Inc filed this 10-Q on October 30, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Federated Hermes completed the acquisition of an 80% interest in FCP and renewed its Pittsburgh headquarters lease through 2041, with renewal options through 2051; the renewal increased Right-of-Use Assets, net by $34.6 million and Lease Liabilities by $45.9 million. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $507.33M
- up 8.1% from $469.45M a year earlier
- Net income
- $111.89M
- up 7.5% from net income of $104.13M a year earlier
- Diluted EPS
- $1.50
- up 11.9% from $1.34 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________________
FORM 10-Q
______________________________________________________________________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2026
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number 001-14818
_______________________________________________________________________________________
(Exact name of registrant as specified in its charter)
_______________________________________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(Registrant’s telephone number, including area code) 412 -288-1900
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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 x No o.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| x | Accelerated filer | ☐ | |||||||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||||||||
| Emerging growth company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date: As of October 23, 2026, the Registrant had outstanding 9,000 shares of Class A common stock and 73,921,682 shares of Class B common stock.
| Item 1. | |||||||||||
| Item 2. | |||||||||||
| Item 3. | |||||||||||
| Item 4. | |||||||||||
| Item 1. | |||||||||||
| Item 1A. | |||||||||||
| Item 2. | |||||||||||
| Item 5. | Other Information | ||||||||||
| Item 6. | |||||||||||
FORWARD-LOOKING STATEMENTS
Certain statements in this report on Form 10-Q constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that can cause the actual results, levels of activity, performance or achievements of Federated Hermes, Inc. and its consolidated subsidiaries (collectively, Federated Hermes), or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are typically identified by words or phrases such as “forecast,” “project,” “predict,” “trend,” “approximate,” “potential,” “opportunity,” “believe,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “projection,” “plan,” “assume,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “can,” “may,” and similar expressions. Among other forward-looking statements, such statements include certain statements relating to, or, as applicable, statements concerning management’s assessments, beliefs, expectations, assumptions, judgments, projections or estimates regarding: asset flows, levels, values and mix and their impact; the possibility and potential impact of impairments; business mix; the level, timing, degree and impact of changes in interest rates or gross or net yields; potential exercise of lease renewal options; money market funds’ potential yield advantage in a falling interest rate environment; fee rates and recognition; sources, levels and recognition of revenues, expenses, gains, losses, income and earnings; the level and impact of reimbursements, rebates or assumptions of fund-related expenses and fee waivers for competitive reasons such as to maintain positive or zero net yields (Voluntary Yield-related Fee Waivers), to maintain certain fund expense ratios, to meet regulatory requirements or to meet contractual requirements (collectively, Fee Waivers); whether, under what circumstances and the degree to which Fee Waivers can be implemented; the impact of market volatility, liquidity, geopolitical or other unexpected events, and other market conditions; whether performance fees or carried interest will be earned or clawed back; whether and when capital contributions can be made, the possible availability of insurance and probability of insurance reimbursements or recoveries in connection with indemnification obligations or other claims; the components and level of, and prospect for, distribution-related expenses; guarantee and indemnification obligations; the impact of acquisitions on Federated Hermes’ growth, including expansion into different markets in the United States (U.S.) and the possibility of further acceleration of growth in markets outside the U.S.; fair value assessments and determinations; allocation of acquisition purchase price payments and other consideration; the timing and amount of acquisition-related payment obligations; the timing for exercising certain put or call rights; payment obligations pursuant to employment or incentive and business arrangements; vesting rights and requirements; business and market expansion opportunities; interest and principal payments or expenses; taxes, tax rates, and the impact of tax law changes; borrowing, debt, future cash needs and principal uses of cash, cash flows and liquidity, including the amount and timing of expected future capital expenditures; the amount, timing and impact of investments in planned technology-driven initiatives; the ability to raise additional capital; type, classification and consolidation of investments; uses of treasury stock; Federated Hermes’ product, strategy, and other service (as applicable, offering) and market performance and Federated Hermes’ performance indicators; investor preferences; offering demand, distribution, development and restructuring initiatives and related planning and timing; the effect, and degree of impact, of changes in customer relationships; the outcome and impact of
legal proceedings; regulatory matters and potential deregulation, including the pace, level, focus, scope, timing, impact, effects and other consequences of regulatory matters; dedication of resources; accounting-related assessments, judgements and determinations; compliance, and related legal, compliance and other professional services expenses; and interest rate, concentration, market, currency and other risks and their impact. Any forward-looking statement is inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond Federated Hermes’ control. Among other risks and uncertainties, market conditions can change significantly and impact Federated Hermes’ business and results, including by changing Federated Hermes’ asset flows, levels, and mix, and business mix, which can cause a decline in revenues and net income, result in impairments and change the amount of Fee Waivers incurred by Federated Hermes. The obligation to make purchase price payments in connection with acquisitions is subject to certain adjustments and conditions, and the obligation to make contingent payments is based on net revenue levels, fundraising levels or other financial thresholds, and will be affected by the achievement of such levels or thresholds. The obligation to make additional payments pursuant to employment or incentive arrangements is based on satisfaction of certain conditions set forth in those arrangements or consideration of certain performance measures. Future cash needs, cash flows and uses of cash will be impacted by a variety of factors, including the number and size of any acquisitions, Federated Hermes’ success in developing, structuring and distributing its offerings, potential changes in assets under management (AUM) and/or changes in the terms of distribution and shareholder services contracts with intermediary customers who sell Federated Hermes’ offerings to other customers, and potential increased legal, compliance and other professional services expenses stemming from additional or modified regulation or the dedication of such resources to other initiatives. Federated Hermes’ risks and uncertainties also include liquidity and credit risks in Federated Hermes’ money market funds and revenue risk, which will be affected by yield levels in money market fund offerings, Fee Waivers, changes in fair values of AUM, any additional regulatory reforms, investor preferences and confidence, and the ability of Federated Hermes to collect fees in connection with the management of such offerings. Many of these factors can be more likely to occur as a result of continued scrutiny of the mutual fund industry by domestic or foreign regulators, and any disruption in global financial markets. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither Federated Hermes nor any other person assumes responsibility for the accuracy and completeness, or updating, of such statements in the future. For more information on these items and additional risks that can impact the forward-looking statements, see Item 1A - Risk Factors included in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025.
| Consolidated Balance Sheets | |||||||||||
(dollars in thousands) | |||||||||||
| (unaudited) | |||||||||||
| September 30, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and Cash Equivalents | $ | $ | |||||||||
| Investments—Consolidated Investment Companies | |||||||||||
| Investments—Affiliates and Other | |||||||||||
Receivables, net of reserve of $ | |||||||||||
| Receivables—Affiliates | |||||||||||
| Prepaid Expenses | |||||||||||
| Other Current Assets | |||||||||||
| Total Current Assets | |||||||||||
| Long-Term Assets | |||||||||||
| Goodwill | |||||||||||
Intangible Assets, net of accumulated amortization of $ | |||||||||||
Property and Equipment, net of accumulated depreciation of $ | |||||||||||
| Right-of-Use Assets, net | |||||||||||
| Other Long-Term Assets | |||||||||||
| Total Long-Term Assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES | |||||||||||
| Current Liabilities | |||||||||||
| Accounts Payable and Accrued Expenses | $ | $ | |||||||||
| Accrued Compensation and Benefits | |||||||||||
| Lease Liabilities | |||||||||||
| Other Current Liabilities | |||||||||||
| Total Current Liabilities | |||||||||||
| Long-Term Liabilities | |||||||||||
| Long-Term Debt | |||||||||||
| Long-Term Deferred Tax Liability, net | |||||||||||
| Long-Term Lease Liabilities | |||||||||||
| Other Long-Term Liabilities | |||||||||||
| Total Long-Term Liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Commitments and Contingencies (Note (18)) | |||||||||||
| TEMPORARY EQUITY | |||||||||||
| Redeemable Noncontrolling Interests in Subsidiaries | |||||||||||
| PERMANENT EQUITY | |||||||||||
| Federated Hermes, Inc. Shareholders’ Equity | |||||||||||
| Common Stock: | |||||||||||
Class A, | |||||||||||
Class B, | |||||||||||
| Additional Paid-In Capital | |||||||||||
| Retained Earnings | |||||||||||
Treasury Stock, at Cost, | ( | ( | |||||||||
| Accumulated Other Comprehensive Income (Loss), net of tax | ( | ||||||||||
| Total Permanent Equity | |||||||||||
| Total Liabilities, Temporary Equity and Permanent Equity | $ | $ | |||||||||
4
| Consolidated Statements of Income | ||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
| Investment Advisory Fees, net—Affiliates | $ | $ | $ | $ | ||||||||||||||||||||||
| Investment Advisory Fees, net—Other | ||||||||||||||||||||||||||
| Administrative Service Fees, net—Affiliates | ||||||||||||||||||||||||||
| Other Service Fees, net—Affiliates | ||||||||||||||||||||||||||
| Other Service Fees, net—Other | ||||||||||||||||||||||||||
| Total Revenue | ||||||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||
| Compensation and Related | ||||||||||||||||||||||||||
| Distribution | ||||||||||||||||||||||||||
| Systems and Communications | ||||||||||||||||||||||||||
| Professional Service Fees | ||||||||||||||||||||||||||
| Office and Occupancy | ||||||||||||||||||||||||||
| Advertising and Promotional | ||||||||||||||||||||||||||
| Travel and Related | ||||||||||||||||||||||||||
| Intangible Asset Related | ||||||||||||||||||||||||||
| Other | ( | |||||||||||||||||||||||||
| Total Operating Expenses | ||||||||||||||||||||||||||
| Operating Income | ||||||||||||||||||||||||||
| Nonoperating Income (Expenses) | ||||||||||||||||||||||||||
| Investment Income, net | ||||||||||||||||||||||||||
| Gain (Loss) on Securities, net | ( | |||||||||||||||||||||||||
| Debt Expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other, net | ( | ( | ( | ( | ||||||||||||||||||||||
| Total Nonoperating Income (Expenses), net | ( | |||||||||||||||||||||||||
| Income Before Income Taxes | ||||||||||||||||||||||||||
| Income Tax Provision | ||||||||||||||||||||||||||
| Net Income Including the Noncontrolling Interests in Subsidiaries | ||||||||||||||||||||||||||
| Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries | ( | |||||||||||||||||||||||||
| Net Income | $ | $ | $ | $ | ||||||||||||||||||||||
| Amounts Attributable to Federated Hermes, Inc. | ||||||||||||||||||||||||||
| Earnings Per Common Share—Basic and Diluted | $ | $ | $ | $ | ||||||||||||||||||||||
| Cash Dividends Per Share | $ | $ | $ | $ | ||||||||||||||||||||||
(The accompanying notes are an integral part of these Consolidated Financial Statements.)
5
| Consolidated Statements of Comprehensive Income | ||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Net Income Including the Noncontrolling Interests in Subsidiaries | $ | $ | $ | $ | ||||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | ||||||||||||||||||||||||||
| Permanent Equity | ||||||||||||||||||||||||||
| Foreign Currency Translation Gain (Loss) | ( | ( | ( | |||||||||||||||||||||||
| Temporary Equity | ||||||||||||||||||||||||||
| Foreign Currency Translation Gain (Loss) | ( | ( | ( | |||||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | ( | ( | ( | |||||||||||||||||||||||
| Comprehensive Income Including the Noncontrolling Interests in Subsidiaries | ||||||||||||||||||||||||||
| Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests in Subsidiaries | ( | ( | ||||||||||||||||||||||||
| Comprehensive Income Attributable to Federated Hermes, Inc. | $ | $ | $ | $ | ||||||||||||||||||||||
(The accompanying notes are an integral part of these Consolidated Financial Statements.)
6
| Consolidated Statements of Changes in Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federated Hermes, Inc. Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss), net of tax | Total Permanent Equity | Redeemable Noncontrolling Interests in Subsidiaries/ Temporary Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | 0 | 0 | 0 | 0 | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidation (Deconsolidation) | 0 | 0 | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Award Activity | 0 | ( | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends Declared | 0 | 0 | ( | 0 | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | 0 | 0 | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of Treasury Stock | 0 | 0 | 0 | ( | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Award Activity | ( | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends Declared | 0 | 0 | ( | 0 | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | 0 | 0 | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisition | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of Treasury Stock | 0 | 0 | 0 | ( | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | 0 | 0 | 0 | 0 | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Award Activity | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends Declared | 0 | 0 | ( | 0 | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | 0 | 0 | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisition | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of Treasury Stock | 0 | 0 | 0 | ( | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated Statements of Changes in Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federated Hermes, Inc. Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss), net of tax | Total Permanent Equity | Redeemable Noncontrolling Interests in Subsidiaries/ Temporary Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Award Activity | 0 | ( | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends Declared | 0 | 0 | ( | 0 | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | 0 | 0 | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of Treasury Stock | 0 | 0 | 0 | ( | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Award Activity | ( | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends Declared | 0 | 0 | ( | 0 | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | 0 | 0 | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisition | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of Treasury Stock | 0 | 0 | 0 | ( | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | 0 | 0 | 0 | 0 | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidation (Deconsolidation) | 0 | 0 | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Award Activity | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends Declared | 0 | 0 | ( | 0 | 0 | ( | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | 0 | 0 | 0 | 0 | 0 | 0 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
(The accompanying notes are an integral part of these Consolidated Financial Statements.)
7
| Consolidated Statements of Cash Flows | ||||||||||||||
(dollars in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Nine Months Ended | ||||||||||||||
| September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Operating Activities | ||||||||||||||
| Net Income Including the Noncontrolling Interests in Subsidiaries | $ | $ | ||||||||||||
| Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities | ||||||||||||||
| Depreciation and Amortization | ||||||||||||||
| Share-Based Compensation Expense | ||||||||||||||
| (Gain) Loss on Disposal of Assets | ( | ( | ||||||||||||
| Provision (Benefit) for Deferred Income Taxes | ( | |||||||||||||
| Consolidation/(Deconsolidation) of Other Entities | ( | |||||||||||||
| Net Unrealized (Gain) Loss on Investments | ( | ( | ||||||||||||
| Net Sales (Purchases) of Investments—Consolidated Investment Companies | ( | ( | ||||||||||||
| Other Changes in Assets and Liabilities: | ||||||||||||||
| (Increase) Decrease in Receivables, net | ( | |||||||||||||
| (Increase) Decrease in Prepaid Expenses and Other Assets | ( | |||||||||||||
| Increase (Decrease) in Accounts Payable and Accrued Expenses | ( | ( | ||||||||||||
| Increase (Decrease) in Other Liabilities | ( | |||||||||||||
| Net Cash Provided (Used) by Operating Activities | ||||||||||||||
| Investing Activities | ||||||||||||||
| Purchases of Investments—Affiliates and Other | ( | ( | ||||||||||||
| Cash Paid for Business Acquisitions, Net of Cash Acquired | ( | ( | ||||||||||||
| Proceeds from Redemptions of Investments—Affiliates and Other | ||||||||||||||
| Cash Paid for Property and Equipment | ( | ( | ||||||||||||
| Other Investing Activities | ( | |||||||||||||
| Net Cash Provided (Used) by Investing Activities | ( | ( | ||||||||||||
| Financing Activities | ||||||||||||||
| Dividends Paid | ( | ( | ||||||||||||
| Purchases of Treasury Stock | ( | ( | ||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | ( | ( | ||||||||||||
| Contributions from Noncontrolling Interests in Subsidiaries | ||||||||||||||
| Other Financing Activities | ||||||||||||||
| Net Cash Provided (Used) by Financing Activities | ( | ( | ||||||||||||
| Effect of Exchange Rates on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | ( | |||||||||||||
| Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | ( | ( | ||||||||||||
| Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period | ||||||||||||||
| Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period | ||||||||||||||
| Less: Restricted Cash and Restricted Cash Equivalents Recorded in Other Long-Term Assets | ||||||||||||||
| Cash and Cash Equivalents | $ | $ | ||||||||||||
(The accompanying notes are an integral part of these Consolidated Financial Statements.)
8
| Notes to the Consolidated Financial Statements | ||||||||||||||
| (unaudited) | ||||||||||||||
(1) Basis of Presentation
Federated Hermes, Inc. and its consolidated subsidiaries (collectively, Federated Hermes) provide investment advisory, administrative, distribution and other services to various investment offerings, including sponsored investment companies, collective funds and other funds (Federated Hermes Funds) and separate accounts (which include separately managed accounts, institutional accounts, certain sub-advised funds and other managed offerings, collectively Separate Accounts) in both domestic and international markets. In addition, Federated Hermes markets and provides stewardship, real estate development and renewable energy project development services to various domestic and international companies. The interim consolidated financial statements of Federated Hermes included herein (Consolidated Financial Statements) have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP). In the opinion of management, the financial statements reflect all adjustments that are of a normal recurring nature and necessary for a fair presentation of the results for the interim periods presented.
In preparing the Consolidated Financial Statements, management is required to make estimates and assumptions that affect the amounts reported therein and in the accompanying notes. Actual results may differ from those estimates, and such differences may be material to the Consolidated Financial Statements.
The Consolidated Financial Statements should be read in conjunction with Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025. Certain items reported in previous periods have been reclassified to conform to the current period’s presentation.
(2) Recent Accounting Pronouncements
Recently Issued Accounting Guidance Not Yet Adopted
Expense Disaggregation
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2024-03 Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of income statement expenses. This ASU updates expense disclosures by requiring additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The update is effective for Federated Hermes for the December 31, 2027 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.
Software Costs
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) Significant Accounting Policies
9
(4) Business Combination
Rivington Acquisition
On April 7, 2025, Federated Hermes Limited (FHL) acquired a majority (60 %) equity interest in Rivington Energy (Management) Limited (Rivington), a United Kingdom (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, 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. The following table summarizes the final purchase price allocation determined as of the acquisition date:
| (in millions) | ||||||||
| Cash and Cash Equivalents | $ | |||||||
Goodwill1 | ||||||||
Intangible Assets2 | ||||||||
| Other Assets | ||||||||
| Less: Liabilities Assumed | ( | |||||||
Less: Fair Value of Redeemable Noncontrolling Interest in Subsidiary3 | ( | |||||||
| Total Purchase Price Consideration | $ | |||||||
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 April 9, 2026, Federated Hermes completed the acquisition of an 80 % interest in FCP Fund Manager, L.P. (FCP), a U.S.-based real estate investment manager. The transaction included $216.3 million in cash consideration and Federated Hermes Class B common stock with a fair value of $23.1 million that was issued at closing to the selling parties, as well as opportunities for the selling parties to earn contingent consideration of up to an aggregate of $82.0 million over multiple year periods, based on achieving certain financial thresholds. This transaction aligns with Federated Hermes’ strategy to expand its private markets and alternatives capabilities in the U.S.
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. Federated Hermes has determined that the selling parties’ remaining 20 % interest is temporary equity due to it being redeemable at the option of either Federated Hermes or the selling parties, and therefore is not entirely in Federated Hermes control.
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Federated Hermes has expensed $16.1 million in transaction costs directly attributable to the FCP acquisition. Of this amount, $6.3 million and $3.3 million was expensed in 2026 and 2025, respectively, primarily recorded in Professional Service Fees and $6.5 million was expensed in 2026 in Compensation and Related expense on the Consolidated Statements of Income.
Federated Hermes performed a valuation of the fair value of the FCP acquisition. Due to the timing of the acquisition, the purchase price allocation for all assets and liabilities acquired is preliminary. During the third quarter 2026, Federated Hermes updated its preliminary purchase price allocation primarily due to a change in the allocation of forecasted revenues to certain intangible assets. This resulted in a $31.8 million decrease in an Indefinite-lived Intangible Asset and a corresponding increase to Goodwill with no impact to the Consolidated Statements of Income. Although additional adjustments to the preliminary valuation reflected in the Consolidated Financial Statements as of September 30, 2026 and for the three and nine months then ended are possible, Federated Hermes does not expect material adjustments in the final purchase price allocation.
The following table summarizes the updated preliminary purchase price allocation determined as of the acquisition date:
| (in millions) | ||||||||
| Cash and Cash Equivalents | $ | |||||||
Goodwill1 | ||||||||
Intangible Assets2 | ||||||||
| Other Assets | ||||||||
| Less: Liabilities Assumed | ( | |||||||
Less: Fair Value of Redeemable Noncontrolling Interest in Subsidiary3 | ( | |||||||
| Total Purchase Price Consideration | $ | |||||||
1 The goodwill recognized is attributable to revenue and growth opportunities from real estate funds and the assembled workforce of the FCP business and is deductible for tax purposes.
2 Intangible Assets include $69.0 million made up primarily of customer relationships with a weighted-average useful life of 5.8 years and $2.0 million for an indefinite-lived customer contract, all of which are 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.
(5) Revenue from Contracts with Customers
The following table presents Federated Hermes’ revenue disaggregated by asset class:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Money Market | $ | $ | $ | $ | |||||||||||||||||||
| Equity | |||||||||||||||||||||||
| Fixed-Income | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | |||||||||||||||||||
The following table presents Federated Hermes’ revenue disaggregated by performance obligation:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Investment Advisory | $ | $ | $ | $ | |||||||||||||||||||
| Administrative Services | |||||||||||||||||||||||
| Distribution | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | |||||||||||||||||||
For the three- and nine-month periods ended September 30, 2026, Federated Hermes recorded performance fees, including carried interest, of $0.7 million and $2.5 million, respectively, which were recorded at a point in time and included in the investment advisory performance obligation. For the three- and nine-month periods ended September 30, 2025, Federated
11
Hermes recorded performance fees, including carried interest, of $3.6 million and $11.0 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:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Federated Hermes Funds | $ | $ | $ | $ | |||||||||||||||||||
| Separate Accounts | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | |||||||||||||||||||
For nearly all revenue, Federated Hermes is not required to disclose certain estimates of revenue expected to be recorded in future periods as a result of applying the following exemptions: (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 certain services, primarily stewardship services, real estate development performance obligations and renewable energy project development obligations at September 30, 2026. 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 to 12 months. Based on existing contracts and the applicable foreign exchange rates as of September 30, 2026, Federated Hermes may recognize future fixed revenue from these services as presented in the following table:
| (in thousands) | ||||||||
| Remainder of 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 and Thereafter | ||||||||
| Total Remaining Unsatisfied Performance Obligations | $ | |||||||
(6) Concentration Risk
(a) Revenue Concentration by Asset Class
The following table presents Federated Hermes’ significant revenue concentration by asset class:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Money Market | % | % | % | % | |||||||||||||||||||
| Equity | % | % | % | % | |||||||||||||||||||
| Fixed-Income | % | % | % | % | |||||||||||||||||||
(b) Revenue Concentration by Investment Offering
The following table presents Federated Hermes’ revenue concentration by investment offering:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Federated Hermes Government Obligations Fund | % | % | % | % | |||||||||||||||||||
| Federated Hermes Prime Cash Obligations Fund | % | % | % | % | |||||||||||||||||||
A significant and prolonged decline in the assets under management (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.
12
(c) Revenue Concentration by Intermediary
Approximately 10 9
(7) Consolidation
The Consolidated Financial Statements include the accounts of Federated Hermes, certain Federated Hermes Funds, carried interest vehicles and other entities in which Federated Hermes holds a controlling financial interest. Federated Hermes is involved with various entities in the normal course of business that may be deemed to be voting rights entities (VREs) or variable interest entities (VIEs). From time to time, Federated Hermes invests in Federated Hermes Funds for general corporate investment purposes or, in the case of newly launched offerings, in order to provide investable cash to establish a performance history. Federated Hermes’ investment in, and/or receivables from, these Federated Hermes Funds represents its maximum exposure to loss. The assets of each consolidated Federated Hermes Fund are restricted for use by that Federated Hermes Fund. Generally, neither creditors of, nor equity investors in, the Federated Hermes Funds have any recourse to Federated Hermes’ general credit. 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 can implement fee waivers, rebates or expense reimbursements for various Federated Hermes Funds for competitive reasons (such as waivers to maintain the yields of certain money market funds at or above zero (Voluntary Yield-related Fee Waivers) or to maintain certain fund expense ratios), to meet regulatory requirements or to meet contractual requirements (collectively, Fee Waivers). For the three and nine months ended September 30, 2026, Fee Waivers totaled $109.3 million and $329.6 million, respectively, of which $81.1 million and $247.0 million, respectively, related to money market funds which meet the scope exception of the consolidation guidance. For the three and nine months ended September 30, 2025, Fee Waivers totaled $112.4 million and $323.7 million, respectively, of which $83.6 million and $241.0 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. In these instances, such capital contributions typically are intended to either offset realized losses or other permanent impairments to a fund’s net asset value (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. Under current money market fund regulations and Securities and Exchange Commission (SEC) guidance, Federated Hermes is required to report these types of capital contributions to U.S. money market mutual funds to the SEC as financial support to the investment company that is being reorganized or liquidated. There were no
In accordance with Federated Hermes’ consolidation accounting policy, Federated Hermes first determines whether the entity being evaluated is a VRE or a VIE. Once this determination is made, Federated Hermes proceeds with its evaluation of whether to consolidate the entity. The disclosures below represent the results of such evaluations as of September 30, 2026 and December 31, 2025.
(a) Consolidated Voting Rights Entities
Although most of the Federated Hermes Funds meet the definition of a VRE, Federated Hermes consolidates VREs only when it is deemed to have control. Consolidated VREs are reported on Federated Hermes’ Consolidated Balance Sheets primarily in Investments—Consolidated Investment Companies and Redeemable Noncontrolling Interests in Subsidiaries.
13
(b) Consolidated Variable Interest Entities
As of the periods ended September 30, 2026 and December 31, 2025, Federated Hermes was deemed to be the primary beneficiary of, and therefore consolidated, certain entities as a result of its controlling financial interest. The following table presents the balances related to the consolidated VIEs that were included on the Consolidated Balance Sheets as well as Federated Hermes’ net interest in the consolidated VIEs for each period presented:
| (in millions) | September 30, 2026 | December 31, 2025 | ||||||||||||
| Cash and Cash Equivalents | $ | $ | ||||||||||||
| Investments—Consolidated Investment Companies | ||||||||||||||
| Receivables—Affiliates | ||||||||||||||
| Other Current Assets | ||||||||||||||
| Other Long-Term Assets | ||||||||||||||
| Less: Liabilities | ( | ( | ||||||||||||
| Less: Redeemable Noncontrolling Interests in Subsidiaries | ( | ( | ||||||||||||
| Federated Hermes’ Net Interest in VIEs | $ | $ | ||||||||||||
Federated Hermes’ net interest in the consolidated VIEs represents the value of Federated Hermes’ economic ownership interest in those VIEs. During the nine months ended September 30, 2026, Federated Hermes consolidated one additional VIE. There was no material impact to the Consolidated Statements of Income as a result of this consolidation. There were no other new consolidations or deconsolidations during the nine months ended September 30, 2026.
As of the periods ended September 30, 2026 and December 31, 2025, 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. At September 30, 2026 these foreign currency forwards had an asset balance of $12.8 million and an offsetting liability balance of $12.8 million, which was recorded net in Other Current Assets on the Consolidated Balance Sheets. At December 31, 2025 these foreign currency forwards had an asset balance of $11.9 million and an offsetting liability balance of $11.9 million, which was recorded net in Other Current Liabilities on the Consolidated Balance Sheets.
(c) Non-Consolidated Variable Interest Entities
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 can potentially be significant to the VIE. Therefore, Federated Hermes is not the primary beneficiary of these VIEs and has not consolidated these entities.
Federated Hermes’ maximum risk of loss related to investments in variable interests in non-consolidated VIEs was $42.4 million and $156.8 million (primarily recorded in Cash and Cash Equivalents on the Consolidated Balance Sheets) at September 30, 2026 and December 31, 2025, respectively, and was entirely related to Federated Hermes Funds. AUM for these non-consolidated Federated Hermes Funds totaled $2.3 billion and $12.3 billion at September 30, 2026 and December 31, 2025, respectively. Of the Receivables—Affiliates at September 30, 2026 and December 31, 2025, $1.3 million and $2.0 million, respectively, was related to non-consolidated VIEs and represented Federated Hermes’ maximum risk of loss from non-consolidated VIE receivables.
(8) Investments
At September 30, 2026 and December 31, 2025, Federated Hermes held investments in non-consolidated fluctuating-value Federated Hermes Funds of $50.2 million and $50.1 million, respectively, primarily in mutual funds which represent equity investments for Federated Hermes, and held investments in Separate Accounts of $6.6 million and $6.2 million at September 30, 2026 and December 31, 2025, respectively, that were included in Investments—Affiliates and Other on the Consolidated Balance Sheets. Federated Hermes’ investments held in Separate Accounts as of September 30, 2026 and December 31, 2025 were primarily composed of stocks of large domestic and foreign companies ($4.4 million and $3.9 million, respectively) and domestic debt securities ($1.6 million and $1.7 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 (7)). All investments held by these consolidated Federated Hermes Funds were included in Investments—Consolidated Investment Companies on Federated Hermes’ Consolidated Balance Sheets.
14
The investments held by consolidated Federated Hermes Funds as of September 30, 2026 and December 31, 2025, were composed of foreign and domestic debt securities ($132.6 million and $73.4 million, respectively), stocks of large foreign and domestic companies ($13.7 million and $7.6 million, respectively), stocks of small and mid-sized domestic and foreign companies ($4.5 million as of December 31, 2025) and mutual funds ($3.5 million as of September 30, 2026).
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:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Investments—Consolidated Investment Companies | ||||||||||||||||||||||||||
| Net Unrealized Gains (Losses) | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Net Realized Gains (Losses)1 | ||||||||||||||||||||||||||
| Net Gains (Losses) on Investments—Consolidated Investment Companies | ( | |||||||||||||||||||||||||
| Investments—Affiliates and Other | ||||||||||||||||||||||||||
| Net Unrealized Gains (Losses) | ( | |||||||||||||||||||||||||
Net Realized Gains (Losses)1 | ||||||||||||||||||||||||||
| Net Gains (Losses) on Investments—Affiliates and Other | ( | |||||||||||||||||||||||||
| Gain (Loss) on Securities, net | $ | ( | $ | $ | $ | |||||||||||||||||||||
1 Realized gains and losses are computed on a specific-identification basis.
(9) Fair Value Measurements
Fair value is the price that would be received to sell an asset or the price that would be paid to transfer a liability as of the measurement date. A fair value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The levels are:
Level 1 – Quoted prices for identical instruments in active markets. Level 1 assets can include equity and debt securities that are traded in an active exchange market, including shares of mutual funds.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 assets and liabilities may include debt and equity securities, purchased loans and over-the-counter derivative contracts whose fair value is determined using a pricing model without significant unobservable market data inputs.
Level 3 – Valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active markets.
NAV Practical Expedient – Investments that calculate NAV per share (or its equivalent) as a practical expedient. These investments have been excluded from the fair value hierarchy.
15
(a) Fair Value Measurements on a Recurring Basis
The following table presents fair value measurements for classes of Federated Hermes’ financial assets and liabilities measured at fair value on a recurring basis:
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Investments—Consolidated Investment Companies | ||||||||||||||||||||||||||||||||
| Investments—Affiliates and Other | ||||||||||||||||||||||||||||||||
Other1 | ||||||||||||||||||||||||||||||||
| Total Financial Assets | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Total Financial Liabilities2 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Investments—Consolidated Investment Companies | ||||||||||||||||||||||||||||||||
| Investments—Affiliates and Other | ||||||||||||||||||||||||||||||||
Other1 | ||||||||||||||||||||||||||||||||
| Total Financial Assets | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Total Financial Liabilities | $ | $ | $ | $ | ||||||||||||||||||||||||||||
1 Amounts primarily consist of deposits.
2 Amount consists of acquisition-related future contingent consideration.
The following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value on a recurring basis. Federated Hermes did not hold any nonfinancial assets or liabilities measured at fair value on a recurring basis at September 30, 2026 or December 31, 2025.
Cash and Cash Equivalents
Cash and Cash Equivalents include investments in money market funds and deposits with banks. Investments in money market funds totaled $338.9 million and $545.4 million at September 30, 2026 and December 31, 2025, respectively. Cash investments in publicly available money market funds are valued under the market approach through the use of quoted market prices in an active market, which is the NAV of the funds, and are classified within Level 1 of the valuation hierarchy.
Investments—Consolidated Investment Companies
Investments—Consolidated Investment Companies represent securities held by consolidated Federated Hermes Funds. For publicly traded securities available in an active market, the fair value of these securities is classified as Level 1 when the fair value is based on quoted market prices. The fair values of certain securities held by consolidated Federated Hermes Funds 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.
Investments—Affiliates and Other
Investments—Affiliates and Other primarily represent investments in fluctuating-value Federated Hermes Funds, as well as investments held in Separate Accounts. For investments in fluctuating-value Federated Hermes Funds that are publicly available, the securities are valued under the market approach through the use of quoted market prices available in an active market, which is the NAV of the funds, and are classified within Level 1 of the valuation hierarchy. For publicly traded securities available in an active market, the fair value of these securities is classified as Level 1 when the fair value is based on quoted market prices. 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.
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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 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. As of September 30, 2026, acquisition-related future consideration liabilities of $18.1 million and $23.4 million were recorded in Other Current Liabilities and Other Long-Term Liabilities, respectively, on the Consolidated Balance Sheets and are primarily related to the FCP acquisition. Management estimated the fair value of future consideration payments using an income approach valuation methodology with unobservable data inputs (Level 3) including revenue and fundraising forecasts and discount rates ranging from 13 % to 16 % with a weighted average of 16 %.
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, 2025 | $ | |||||||
| Acquisition | ||||||||
| Changes in Fair Value | ||||||||
Balance at September 30, 2026 | $ | |||||||
Investments using Practical Expedients
For investments in mutual funds that are not publicly available but for which the NAV is calculated monthly and for which there are redemption restrictions, the investments are valued using NAV as a practical expedient and are excluded from the fair value hierarchy. These investments totaled $22.0
(b) Fair Value Measurements on a Nonrecurring Basis
Federated Hermes did not hold any assets or liabilities measured at fair value on a nonrecurring basis at September 30, 2026 and December 31, 2025.
(c) Fair Value Measurements of Other Financial Instruments
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.
(10) Intangible Assets, including Goodwill
Intangible Assets, net at September 30, 2026 increased $53.6 million from December 31, 2025 primarily due to intangible assets recorded in connection with the FCP acquisition ($71.0 million), partially offset by a decrease due to amortization expense ($14.7 million).
Goodwill at September 30, 2026 increased $262.2 million from December 31, 2025 primarily due to $265.0 million of goodwill recorded in connection with the FCP acquisition.
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(11) Debt
Unsecured Senior Notes
On March 17, 2022, Federated Hermes entered into a Note Purchase Agreement (Note Purchase Agreement) by and among Federated Hermes and the purchasers of certain unsecured senior notes in the aggregate amount of $350 million ($350 million Notes), at a fixed interest rate of 3.29 % per annum, payable semiannually in arrears in March and September in each year of the agreement. Citigroup Global Markets Inc. 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. The Note Purchase Agreement is recorded, net of unamortized issuance costs, in Long-Term Debt on the Consolidated Balance Sheets and was $348.6 million and $348.4 million at September 30, 2026 and December 31, 2025, respectively.
The entire principal amount of the $350 million Notes will become due March 17, 2032, subject to certain prepayment requirements under limited conditions. Federated Hermes can elect to prepay the $350 million Notes under certain limited circumstances including with a make-whole amount if prepaid without the consent of the holders of the $350 million Notes. The Note Purchase Agreement does not feature a facility for the further issuance 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 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 nine-month period ended September 30, 2026. See the Liquidity and Capital Resources section of Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
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 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.
Revolving Credit Facility
On May 1, 2026, Federated Hermes entered into an unsecured Fifth Amended and Restated Credit Agreement by and among Federated Hermes, certain of its subsidiaries as guarantors party thereto, a syndicate of nine banks as Lenders party thereto, PNC Bank, National Association as administrative agent, PNC Capital Markets LLC as sole bookrunner and joint lead arranger, Citigroup Global Markets, Inc. as joint lead arranger, Citibank, N.A. as syndication agent, and State Street Bank and Trust Company, The Huntington National Bank and The Toronto-Dominion Bank, New York Branch, as documentation agents (Credit Agreement). The Credit Agreement amended and restated Federated Hermes’ Fourth Amended and Restated Credit Agreement, which was entered into on July 30, 2021. The Credit Agreement consists of a $350 million revolving credit facility with an additional $225 million available via an optional increase (or accordion) feature. Borrowings under the Credit Agreement may be used for general corporate purposes including, without limitation, stock repurchases, dividend payments (including any special dividend payments), and acquisitions.
As of September 30, 2026, the interest on borrowings from the revolving credit facility is calculated at either a term Secured Overnight Financing Rate (SOFR) or a base rate, in each case plus a margin based on applicable debt ratings (i.e., rating of Federated Hermes’ senior unsecured long-term debt or long-term counterparty credit by Moody’s Investor Service, Inc., Standard & Poor’s Ratings Services, or Fitch Ratings Inc.). The borrowings under the revolving credit facility may include up to $50 million for which interest is calculated at the daily SOFR plus a spread unless a base rate option is elected (Swing Line).
The Credit Agreement, which expires on May 1, 2031, has no principal payment schedule, but instead requires that any outstanding principal be repaid by the expiration date. Federated Hermes, however, can elect to make discretionary principal payments. There was no activity on the Credit Agreement during the nine months ended September 30, 2026.
As of September 30, 2026 and December 31, 2025, there were no 0.10 % per annum on the daily unused portion of each Lender’s
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commitment. As of September 30, 2026, Federated Hermes has $350 million available for borrowings under the revolving credit facility and an additional $225 million available via its optional accordion feature.
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 nine months ended September 30, 2026. See the Liquidity and Capital Resources section of Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
The Credit Agreement also has certain stated events of default and cross default provisions which would permit the lenders/counterparties to accelerate the repayment of debt outstanding if not cured within the applicable grace periods. The events of default generally include breaches of contract, failure to make required loan payments, insolvency, cessation of business, notice of lien or assessment, and other proceedings, whether voluntary or involuntary, that would require the repayment of amounts borrowed. The Credit Agreement also requires certain subsidiaries to enter into a Fourth Amended and Restated Continuing Agreement of Guaranty and Suretyship to guarantee payment of all obligations incurred through the Credit Agreement.
(12) Share-Based Compensation
During the nine months ended September 30, 2026, Federated Hermes awarded 318,347 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 restricted stock, which was granted on the bonus payment date and issued out of treasury, generally vests over a three-year period. Federated Hermes also awarded 85,000 shares of restricted Class B common stock under this same plan that generally vest over a ten-year period. Federated Hermes awarded 22,636 shares of restricted Class B common stock under the Federated Hermes U.K. Sub-Plan that generally vest over a five-year period.
During the year ended December 31, 2025, 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, which was granted on the bonus payment date and issued out of treasury, generally vests over a three-year period. Federated Hermes also awarded 349,000 shares of restricted Class B common stock under this same plan that generally vest over a ten-year period. In addition, Federated Hermes awarded 69,500 shares of restricted Class B common stock under the Federated Hermes U.K. Sub-Plan that generally vest over a five-year period.
(13) Equity
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 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 September 30, 2026. 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 the 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 nine months ended September 30, 2026, Federated Hermes repurchased approximately 3.3 million shares of its Class B common stock for $182.3 million, nearly all of which were repurchased in the open market. At September 30, 2026, approximately 1.4 million shares remained available to be repurchased under this share repurchase program.
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The following table presents the activity for the Class B common stock and Treasury stock for the three and nine months ended September 30, 2026 and 2025. Class A shares have been excluded as there was no activity during these same periods.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Class B Shares | ||||||||||||||||||||||||||
| Beginning Balance | ||||||||||||||||||||||||||
| Stock Award Activity | ||||||||||||||||||||||||||
| Purchase of Treasury Stock | ( | ( | ( | ( | ||||||||||||||||||||||
| Business Acquisition | ||||||||||||||||||||||||||
| Ending Balance | ||||||||||||||||||||||||||
| Treasury Shares | ||||||||||||||||||||||||||
| Beginning Balance | ||||||||||||||||||||||||||
| Stock Award Activity | ( | ( | ( | |||||||||||||||||||||||
| Purchase of Treasury Stock | ||||||||||||||||||||||||||
| Business Acquisition | ( | |||||||||||||||||||||||||
| Ending Balance | ||||||||||||||||||||||||||
(14) Earnings Per Share Attributable to Federated Hermes, Inc. Shareholders
The following table sets forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Federated Hermes:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in thousands, except per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Numerator | ||||||||||||||||||||||||||
| Net Income Attributable to Federated Hermes, Inc. | $ | $ | $ | $ | ||||||||||||||||||||||
Less: Total Net Income Available to Participating Unvested Restricted Shareholders1 | ( | ( | ( | ( | ||||||||||||||||||||||
| Total Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted | $ | $ | $ | $ | ||||||||||||||||||||||
| Denominator | ||||||||||||||||||||||||||
Basic Weighted-Average Federated Hermes Common Stock2 | ||||||||||||||||||||||||||
| Dilutive Impact from Non-forfeitable Restricted Stock | ||||||||||||||||||||||||||
Diluted Weighted-Average Federated Hermes Common Stock2 | ||||||||||||||||||||||||||
| Earnings Per Share | ||||||||||||||||||||||||||
Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted2 | $ | $ | $ | $ | ||||||||||||||||||||||
1 Includes dividends paid on unvested restricted Federated Hermes Class B common stock and their proportionate share of undistributed earnings attributable to Federated Hermes shareholders.
2 Federated Hermes common stock excludes unvested restricted stock which are deemed participating securities in accordance with the two-class method of computing earnings per share, except for circumstances where shares vest upon retirement and the employee has reached retirement age.
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(15) Leases
On September 25, 2026, Federated Hermes renewed its material operating lease related to its corporate headquarters in Pittsburgh, Pennsylvania. The renewed lease expires in 2041 and has renewal options for additional periods through 2051. The lease includes provisions for leasehold improvement incentives, rent escalation and certain penalties for early termination. The renewal resulted in non-cash increases of $34.6 million and $45.9 million to Right-of-Use Assets, net and Lease Liabilities, respectively, and $11.3 million of leasehold improvement incentive, primarily recorded in Other Long-Term Assets. These values recognized do not include the consideration of any renewal options, as they are not yet reasonably certain to be exercised.
(16) Accumulated Other Comprehensive Income (Loss) Attributable to Federated Hermes, Inc. Shareholders
Accumulated Other Comprehensive Income (Loss), net of tax attributable to Federated Hermes shareholders resulted from foreign currency translation gain (loss):
| (in thousands) | |||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | ||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss) | ( | ||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | ( | |||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | ( | |||||||||||||||||||||||||||
| Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | ||||||||||||||||||||||||||||
(17) Redeemable Noncontrolling Interests in Subsidiaries
The following table presents the changes in Redeemable Noncontrolling Interests in Subsidiaries:
| (in thousands) | Consolidated Investment Companies | Other Entities | Total | |||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | |||||||||||||||||
| Net Income (Loss) | ( | ( | ||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | ( | ( | ( | |||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | ||||||||||||||||||||
| Consolidation/(Deconsolidation) | ( | ( | ||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | ( | ( | ( | |||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | |||||||||||||||||
| Net Income (Loss) | ||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | ( | ( | ||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | ||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | ( | ( | ( | |||||||||||||||||
| Business Acquisition | ||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | |||||||||||||||||
| Net Income (Loss) | ( | ( | ||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | ( | ( | ( | |||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | ( | |||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | ( | ( | ( | |||||||||||||||||
| Business Acquisition | ( | ( | ||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | |||||||||||||||||
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| (in thousands) | Consolidated Investment Companies | Other Entities | Total | |||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||||||||||
| Net Income (Loss) | ||||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | ||||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | ||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | ( | ( | ( | |||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | |||||||||||||||||
| Net Income (Loss) | ( | |||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | ||||||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | ||||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | ( | ( | ( | |||||||||||||||||
| Business Acquisition | ||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | |||||||||||||||||
| Net Income (Loss) | ( | |||||||||||||||||||
| Other Comprehensive Income (Loss), net of tax | ( | ( | ( | |||||||||||||||||
| Subscriptions—Redeemable Noncontrolling Interest Holders | ||||||||||||||||||||
| Consolidation/(Deconsolidation) | ( | ( | ||||||||||||||||||
| Distributions to Noncontrolling Interests in Subsidiaries | ( | ( | ( | |||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | |||||||||||||||||
(18) Commitments and Contingencies
(a) Contractual
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. See Note (9) for additional information regarding these payments.
(b) Guarantees and Indemnifications
On an intercompany basis, various subsidiaries of Federated Hermes guarantee certain financial obligations of Federated Hermes, Inc., and of other consolidated subsidiaries, and Federated Hermes, Inc. guarantees certain financial and performance-related obligations of various wholly-owned subsidiaries. Federated Hermes or its subsidiaries also can guarantee the obligations of certain offerings, such as direct lending funds, as a condition to making seed or other investments in them.
In addition, in the normal course of business, Federated Hermes has entered into contracts that provide a variety of indemnifications. Typically, obligations to indemnify third parties arise in the context of contracts entered into by Federated Hermes, under which Federated Hermes agrees to hold the other party harmless against losses arising out of the contract, provided the other party’s actions are not deemed to have breached an agreed-upon standard of care. In each of these circumstances, payment by Federated Hermes is contingent on the other party making a claim for indemnity, subject to Federated Hermes’ right to challenge the claim. Further, Federated Hermes’ obligations under these agreements can be limited in terms of time and/or amount. 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 September 30, 2026, management does not believe that a material loss related to any of these matters is reasonably possible.
(c) Legal Proceedings
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
22
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 $115 million as of September 30, 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 $44 million as of September 30, 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. On April 30, 2026, HGPE and General Partner filed their defense in this matter. 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 September 30, 2026, Federated Hermes does not believe that a material loss related to any of these claims is reasonably possible.
(d) Other
During the first quarter of 2023, an administrative error was identified related to a failure to register certain shares of a Federated Hermes closed-end tender fund. Federated Hermes has incurred costs totaling $23.5 million as of September 30, 2026 related to correcting this issue, of which $17.9 million represents a settlement with affected shareholders that was paid during the second quarter of 2023. 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 September 30, 2026. 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.
(19) Income Taxes
The income tax provision was $41.2 million for the three-month period ended September 30, 2026, as compared to $34.2 million for the same period in 2025. The increase in the income tax provision was primarily due to increased U.S. pre-tax income in 2026. The effective tax rate was 27.1 % for the three-month period ended September 30, 2026, as compared to 24.4 % for the same period in 2025. The increase in the effective tax rate was primarily due to (1) research and development credits recognized in the three months ended September 30, 2025 (1.1 %) and (2) a valuation allowance on foreign deferred tax assets and increased foreign losses in the three-month period ended September 30, 2026 as compared to the same period in 2025 (0.9 %).
The income tax provision was $112.2 million for the nine-month period ended September 30, 2026, as compared to $100.5 million for the same period in 2025. The increase in the income tax provision was primarily due to increased U.S. pre-tax income in 2026. The effective tax rate was 26.4 % for the nine-month period ended September 30, 2026, as compared to 24.7 % for the same period in 2025. The increase in the effective tax rate was primarily due to a valuation allowance on foreign deferred tax assets and increased foreign losses in the nine months ended September 30, 2026 as compared to the same period in 2025.
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(20) Segment and Geographic Information
Federated Hermes operates in one operating segment, the investment management business. Federated Hermes’ Chief Executive Officer (CEO) is the chief operating decision maker (CODM). The CODM utilizes a consolidated approach to allocate resources and assess performance.
The CODM assesses performance and decides how to allocate resources based on revenue and net income as reported on the Consolidated Statements of Income. 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 determining funding of significant technology projects.
Federated Hermes’ revenue from U.S. and non-U.S. operations were as follows for each period presented:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Domestic | $ | $ | $ | $ | ||||||||||||||||||||||
Foreign1 | ||||||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
1 This represents revenue earned by non-U.S. domiciled subsidiaries, primarily in the U.K.
Federated Hermes’ Right-of-Use Assets, net and Property and Equipment, net for U.S. and non-U.S. operations were as follows:
| (in thousands) | September 30, 2026 | December 31, 2025 | ||||||||||||
| U.S. | $ | $ | ||||||||||||
Non-U.S.1 | ||||||||||||||
Total Right-of-Use Assets, net and Property and Equipment, net1 | $ | $ | ||||||||||||
1 This represents net assets of non-U.S. domiciled subsidiaries, primarily in the U.K.
(21) Subsequent Events
On October 29, 2026, the board of directors declared a $0.38
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| Part I, Item 2. Management's Discussion and Analysis | |||||
of Financial Condition and Results of Operations (unaudited) | |||||
The discussion and analysis below should be read in conjunction with the Consolidated Financial Statements appearing elsewhere in this report. Management has presumed that the readers of this interim financial information have read or have access to Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025.
General
Federated Hermes is a global leader in active investing with $884.4 billion in managed assets as of September 30, 2026. The majority of Federated Hermes’ revenue is derived from advising Federated Hermes Funds and Separate Accounts in domestic and international public and private markets. Federated Hermes also derives revenue from providing administrative and other fund-related services (including distribution and shareholder servicing) as well as stewardship, real estate development and renewable energy project development services.
Investment advisory fees, administrative service fees and certain fees for other services, such as distribution and shareholder service fees, are contract-based and are generally calculated as a percentage of the average net assets of managed investment portfolios. Federated Hermes’ revenue is primarily dependent upon factors that affect the value of managed/serviced assets, including market conditions and the ability to attract and retain assets. Generally, managed assets in Federated Hermes’ public market investment products and strategies (together with other offered services, as applicable, offerings) can be redeemed or withdrawn at any time with no advance notice requirement, while managed assets in Federated Hermes’ private market investment offerings are subject to restrictions on withdrawals. Fee rates for Federated Hermes’ services generally vary by asset and service type and can vary based on changes in asset levels. Generally, advisory fees charged for services provided to multi-asset and equity offerings are higher than advisory fees charged to alternative/private markets and fixed-income offerings, which in turn are higher than advisory fees charged to money market offerings. Likewise, Federated Hermes Funds typically have higher advisory fees than Separate Accounts. Similarly, revenue is also dependent upon the relative composition of average AUM across both asset and offering types. Federated Hermes can implement Fee Waivers such as Voluntary Yield-related Fee Waivers, to maintain certain fund expense ratios, to meet regulatory requirements or to meet contractual requirements. Since Federated Hermes’ public market offerings are largely distributed and serviced through financial intermediary customers, Federated Hermes makes payments, out of its reasonable profits and other resources, to the financial intermediary customers that sell these offerings. These payments are generally calculated as a percentage of net assets attributable to the applicable financial intermediary and represent the vast majority of Distribution expense on the Consolidated Statements of Income. Certain components of Distribution expense can vary depending upon the asset type, distribution channel and/or the size of the customer relationship. Federated Hermes generally pays out a larger portion of the revenue earned from managed assets in money market and multi-asset funds than the revenue earned from managed assets in fixed-income, equity and alternative/private markets funds.
Federated Hermes’ most significant operating expenses are Compensation and Related expense and Distribution expense. Compensation and Related expense includes base salary and wages, incentive compensation and other employee expenses, including payroll taxes and benefits. Incentive compensation, which includes share-based compensation, can vary depending on various factors including, but not limited to, the overall results of operations of Federated Hermes, investment management performance and sales performance.
The discussion and analysis of Federated Hermes’ financial condition and results of operations are based on Federated Hermes’ Consolidated Financial Statements. Federated Hermes operates in one operating segment, the investment management business. Management analyzes all expected revenue and expenses and considers market demands in determining an overall fee structure for services provided and in evaluating the addition of new business. Federated Hermes’ growth and profitability are dependent upon its ability to attract and retain AUM and upon the profitability of those assets, which is impacted, in part, by Fee Waivers. Fees for mutual fund-related services are ultimately subject to the approval of the independent directors or trustees of the mutual funds and, as required by law, fund shareholders. Management believes that meaningful indicators of Federated Hermes’ financial performance include AUM, gross and net offering sales, total revenue and net income, both in total and per diluted share.
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Business Developments
Business Combination
On April 9, 2026, Federated Hermes completed the acquisition of an 80% interest in FCP. See Note (4) to the Consolidated Financial Statements for additional information.
Lease Renewal
On September 25, 2026, Federated Hermes renewed its material operating lease related to its corporate headquarters in Pittsburgh, Pennsylvania. The renewed lease expires in 2041 and has renewal options for additional periods through 2051. The lease includes provisions for leasehold improvement incentives, rent escalation and certain penalties for early termination. The renewal resulted in non-cash increases of $34.6 million and $45.9 million to Right-of-Use Assets, net and Lease Liabilities, respectively, and $11.3 million of leasehold improvement incentive, primarily recorded in Other Long-Term Assets. These values recognized do not include the consideration of any renewal options, as they are not yet reasonably certain to be exercised.
Current Regulatory Developments
The business and regulatory environment in which Federated Hermes operates globally remains complex, uncertain and subject to change. Federated Hermes and its investment management business are subject to extensive regulation, both within and outside of the U.S., including various laws, rules and regulations globally that impose restrictions, limitations, registration, reporting and disclosure requirements on its business, and add complexity to its global compliance operations. For example, Federated Hermes and its offerings are subject to various: (1) federal securities laws, such as the Securities Act of 1933 (1933 Act), the Securities Exchange Act of 1934 (Exchange Act), the Investment Company Act of 1940 (1940 Act), and the Investment Advisers Act of 1940 (Advisers Act); (2) state laws regarding fraud and registration; and (3) regulations or other rules promulgated by various regulatory authorities, or other authorities. These regulatory requirements, and other regulatory developments, continue to impact the investment management industry generally and will continue to impact, to various degrees, Federated Hermes’ business, results of operations, financial condition, cash flows and stock price (collectively, Financial Condition).
Please see Federated Hermes’ prior public filings, including the discussions under Part I, Item 2 – Management’s Discussion and Analysis – Business Developments – Current Regulatory Developments, in Federated Hermes’ Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2026 (First Quarter 2026 Form 10-Q) and June 30, 2026 (Second Quarter 2026 Form 10-Q), and Part I, Item 1 – Business – Regulatory Matters, in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025 (2025 Annual Report), for an overview of Federated Hermes’ regulatory environment and related regulatory developments and requirements for periods prior to June 30, 2026 and December 31, 2025, respectively.
Regulatory Developments – Domestic
The primary regulator in the U.S. for Federated Hermes and its offerings is the SEC. U.S. regulatory matters addressed in Federated Hermes’ 2025 Annual Report, First Quarter 2026 Form 10-Q and Second Quarter 2026 Form 10-Q included, among others: (1) the regulatory impact resulting from the current Presidential administration, which has redirected the SEC away from expansive regulation and aggressive enforcement to emphasizing deregulation, capital formation and back-to-basics investor protection; (2) SEC enforcement trends and examination priorities, including a comprehensive overhaul of the SEC’s enforcement manual and Wells Notice process; (3) the Financial Stability Oversight Council’s (FSOC) priorities for 2026; (4) the Financial Industry Regulatory Authority’s (FINRA) regulatory operations programs; (5) SEC proposed amendments to Form N-PORT and the Names Rule compliance dates; (6) scrutiny of governance, environmental and social initiatives, including state laws governing proxy advisory services; (7) the FSOC’s proposed interpretive guidance on systemically important financial institution (SIFI) designations; (8) the Department of Labor’s (DOL) proposed rules establishing a safe harbor framework for the inclusion of alternative assets in 401(k) plans; (9) the SEC’s proposed Regulation E-Delivery; (10) the SEC’s 2026 Reg. Flex Agenda; (11) the U.S. Supreme Court’s decision in FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd.; (12) various SEC proposals to rescind or streamline disclosure requirements, including climate-related disclosure rules, filer status and executive compensation disclosure, the registered offering process for closed-end funds (CEFs) and business development companies (BDCs), and optional semiannual reporting; (13) proposed amendments to Form PF; and (14) certain other specific regulatory developments involving the SEC, the DOL, and other regulators.
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Key regulatory developments and requirements in the U.S. since June 30, 2026, that can significantly impact or relate to Federated Hermes’ business and offerings include, among others, the following. Unless otherwise noted, Federated Hermes is evaluating the impact of the matters described on its business and offerings.
SEC Releases 2027 Examination Priorities. On October 23, 2026, the SEC Division of Examinations released its Fiscal Year 2027 Examination Priorities, identifying areas expected to receive heightened examination focus. Key priorities relevant to investment advisers and registered funds include fiduciary duties, conflicts of interest, compliance programs, retail investor protection, private funds and private credit strategies, cybersecurity and operational resiliency, protection of customer information, and the use of emerging technologies, including artificial intelligence. While the priorities do not create new legal requirements, they provide insight into the Division's current areas of regulatory focus.
SEC Proposes Amendments to the Rule 17a-7 Cross Trading Rule. On October 9, 2026, the SEC proposed amendments to 1940 Act Rule 17a-7, the cross-trading rule, under the 1940 Act to: (1) expand the scope of securities eligible for cross trades (which are transactions between a registered investment company and certain affiliates, such as affiliated funds) to include most fixed income securities; (2) modernize the rule’s conditions, including those related to pricing and oversight of cross trades; and (3) require aggregated reporting and recordkeeping for related trading activity. The public comment period ends on December 14, 2026.
SEC Proposes Custody Rule Amendments for Investment Advisers and Investment Companies. On October 1, 2026, the SEC proposed amendments to the custody requirements applicable to registered investment advisors and registered investment companies. While the proposal addresses the custody of crypto assets, it also would modernize certain existing custody requirements and address longstanding interpretive and operational issues under the Advisers Act and 1940 Act custody frameworks. The proposal would permit, subject to specified conditions, investment advisors and registered investment companies to self-custody certain crypto assets when a qualified custodian is unavailable and would modernize requirements for investment companies using broker-dealers as custodians. The proposal also would address certain non-crypto custody matters applicable to investment advisors, including standing letters of authorization, inadvertent custody, the authorized trading exception, segregation of client cash and bank deposits, and financial statement audit provisions. The proposed amendments include various conditions and safeguards that could require investment advisors and funds to modify their administrative, operational and compliance practices. The public comment period ends on December 7, 2026.
Interval Fund Modernization and Multiple Share Classes. On September 30, 2026, the SEC proposed amendments to modernize the regulatory framework for interval funds and expand the ability of registered CEFs and BDCs to use multiple share-class structures. Among other changes, the proposal would amend 1940 Act Rule 23c-3 to permit extended deferral of an interval fund’s first repurchase offer, more frequent discretionary repurchases, monthly periodic intervals and, subject to specified conditions, the deduction of deferred sales loads from repurchase proceeds. The proposal also would simplify certain repurchase procedures and replace the rule’s existing liquidity requirements with a principles-based liquidity approach. In addition, the proposal would permit regulated CEFs to use multiple share-class structures and enter into arrangements for the payment of asset-based distribution and service fees; update certain prospectus and reporting requirements; require enhanced expense disclosures for regulated CEFs; and rescind certain existing exemptive orders relating to interval funds and multiple share-class arrangements. The public comment period ends on December 4, 2026.
Investment Advisor Performance-Based Compensation Modernization. On September 30, 2026, the SEC proposed amendments that would expand the ability of investment advisors to receive performance-based compensation from registered management investment companies and BDCs. Under the proposal, such compensation could not exceed 20% of a regulated fund’s net gains over a specified period, the regulated fund would be required to satisfy specified fund-governance standards, and the fund’s board, including a majority of its independent directors, would be required to determine that the compensation arrangement is in the best interests of the fund and its shareholders and make specified findings regarding the arrangement. The proposal also would amend certain registration and reporting forms to require disclosure of performance-based compensation and revise the definition of “qualified client” to include investors meeting the definition of “accredited investor” under Regulation D, while removing the definition’s separate net-worth and assets-under-management tests. The public comment period ends on December 7, 2026.
SEC Proposes Proxy Solicitation Modernization Reforms. On September 16, 2026, the SEC proposed amendments intended to modernize and simplify the federal proxy solicitation rules to reflect changes in technology and market practices. Among other changes, the proposal would eliminate the requirement that registrants deliver annual reports to security holders in connection with proxy solicitations, eliminate the delivery deadline for documents incorporated by reference into proxy statements, eliminate the requirement and ability to file notices of certain exempt solicitations, and shorten from 20 business days to five business days the minimum period for conducting broker searches in advance of record dates. The SEC stated that the
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amendments are intended to simplify compliance and update requirements that have not kept pace with current shareholder communication practices. The public comment period will end on November 20, 2026.
SEC Proposes Rescission of Shareholder Proposal Rule and Amendments to Proxy Voting Rules. On September 16, 2026, the SEC proposed rescinding Exchange Act Rule 14a-8, which governs when public companies must include shareholder proposals in their proxy materials, on the grounds that the rule exceeds the SEC’s statutory authority and that matters concerning shareholder proposals are more appropriately governed by state law and company governing documents. The SEC also proposed amendments to Rule 14a-4(c) that would expand the circumstances in which companies may exercise discretionary voting authority over shareholder proposals presented at a meeting but not included in company proxy materials, while permitting shareholders to prevent the exercise of such authority with respect to their shares. If adopted, the rescission would represent a significant change to the current federal shareholder proposal framework and leave the treatment and inclusion of shareholder proposals principally to applicable state corporate law and company governing documents. The public comment period ends on November 20, 2026.
SEC Proposes to Rescind Pay-to-Play Rules. On September 3, 2026, the SEC proposed rescinding Rule 206(4)-5 under the Advisers Act, commonly known as the “pay-to-play rule,” and the related recordkeeping requirements. The SEC stated that, after more than 15 years of administering the rule, it believes the rule is overly prescriptive, burdensome, and has produced unintended consequences, while existing fiduciary, antifraud, and compliance requirements would continue to address potential pay-to-play concerns. The public comment period ends on November 9, 2026, and the current rule remains in effect unless and until a final rescission is adopted.
SEC Proposes Amendments to Transfer Agent Rules. On September 1, 2026, the SEC proposed updates to the rules and forms that apply to registered transfer agents. The proposal would, among other things: (1) amend the registration and annual reporting requirements for transfer agents, including the questions and instructions on Forms TA-1 and TA-2; (2) modernize the rules to reflect how transfer agents carry out their activities in light of technological advancements, including the use of electronic and blockchain-based recordkeeping and uncertificated securities; (3) establish new requirements related to turnaround, risk management, and inactive security holders; and (4) introduce two new rules addressing compliance and restrictive legends for registered transfer agents. The public comment period ends on November 3, 2026.
SEC and Commodity Futures Trade Commission (CFTC) Further Extend Form PF Compliance Date. On August 31, 2026, the SEC and the CFTC jointly published a final rule further extending the compliance date for the comprehensive February 2024 amendments to Form PF (the confidential reporting form for certain SEC-registered investment advisors to private funds, including those also registered with the CFTC as a commodity pool operator or commodity trading advisor) from October 1, 2026 to July 1, 2027, effective September 3, 2026. This is the fourth extension of the compliance date for the 2024 Form PF amendments and follows the SEC’s and CFTC’s April 20, 2026 proposal to eliminate filing requirements for smaller advisors, raise reporting thresholds for large hedge fund advisors, and streamline or eliminate a range of other Form PF reporting requirements adopted in 2024. The SEC and CFTC stated that the extension is intended to allow Form PF filers to avoid the cost of implementing reporting changes that may be substantially revised or eliminated once the SEC and CFTC act on the pending April 2026 proposal, and to provide the SEC and CFTC additional time to fully consider the comments received on that proposal, which closed on June 23, 2026. Until the new compliance date, Form PF filers, including certain of Federated Hermes’ private fund advisory subsidiaries, may continue to file the version of Form PF in effect prior to the 2024 amendments.
SEC Proposes Regulation Crypto Assets. On August 18, 2026, the SEC proposed Regulation Crypto Assets, which would create the SEC’s first tailored securities-offering regime for certain investment contracts involving crypto assets (“covered investment contracts”). As proposed, Regulation Crypto Assets would create two new exemptions from 1933 Act registration for offerings of covered investment contracts – a “startup exemption” permitting offerings of up to $5 million over a four-year period, and a “fundraising exemption” permitting offerings of up to $75 million during each 12-month period – each conditioned on principles-based disclosure and, for the larger exemption, financial statements and ongoing reporting. The proposal addresses only the offering side of the crypto regulatory framework, leaving questions of trading and exchange regulation, as well as custody matters subsequently addressed in the SEC’s October 2026 crypto asset custody proposal discussed above, to separate SEC rulemakings. The public comment period ended on October 20, 2026.
Electronic Delivery Rule Proposal. On July 16, 2026, the SEC proposed Regulation E-Delivery, a new rule that would: (1) expand the ability of issuers, market intermediaries, and others to use electronic delivery to satisfy requirements to deliver required regulatory information under the federal securities laws; (2) provide requirements and conditions for delivering regulatory information electronically to investors and others without first obtaining their affirmative consent; and (3) generally supersede the SEC’s decades-old, guidance-based e-delivery approach, which the SEC traces to a 1995 interpretive release. Under the proposal, investors would retain the ability to request paper delivery, and, if a recipient requests a paper copy of
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information during a specified period, it is required to be retained under the federal securities laws and an issuer would generally have to send a paper copy, free of charge, within three business days of the request. To facilitate this new e-delivery approach, the SEC also proposed to: (1) rescind 1940 Act Rule 30e-3, (which provides alternative means for registered investment companies to satisfy shareholder report transmission requirements); and (2) amend current rules addressing the dissemination of proxy materials and tender offer materials. Federated Hermes submitted a comment letter supporting the modernization of the delivery-method rulebook applicable across the SEC’s regulated entities and encouraging the SEC to consider certain clarifications to the proposal. The public comment period ended on September 21, 2026.
State Actions and Litigation Relating to Proxy Advisory Firms. As previously disclosed, several states have enacted laws regulating proxy advisory firms with respect to certain proxy voting recommendations, and the two largest proxy advisory firms have challenged several of these laws on First Amendment and other grounds. During the 2026 legislative sessions, Tennessee, Oklahoma, Indiana, Kentucky and Kansas enacted proxy advisor disclosure laws, while more than a dozen states considered legislation regulating proxy advisory firms. Tennessee’s H.B. 2476, which became effective July 1, 2026, imposes certain requirements relating to proxy advisory services provided to state and local government investment programs and pension plans. Since June 30, 2026, federal courts have issued preliminary injunctions preventing the Kansas and Indiana proxy advisor disclosure laws from taking effect, following a similar preliminary injunction previously issued with respect to a Texas law; litigation challenging these laws remains pending. Litigation challenging Kentucky’s proxy advisor disclosure law also remains pending. In August 2026, one of the two largest proxy advisory firms filed a federal lawsuit seeking to enjoin Oklahoma’s H.B. 4429 before its November 1, 2026 effective date, asserting, among other things, that the law violates the First Amendment by imposing additional requirements when proxy advice differs from company management’s recommendation. Separately, state Attorneys General have continued to pursue consumer protection and other claims relating to proxy advisory firms, including through actions brought by multiple states against the largest proxy advisory firms.
Regulatory Developments – International
Outside the U.S., the primary regulators of Federated Hermes and its offerings include the United Kingdom (U.K.) Financial Conduct Authority (FCA), the Central Bank of Ireland (CBI), the Luxembourg Commission de Surveillance du Secteur Financier, the Cayman Islands Monetary Authority, the Monetary Authority of Singapore and the Australian Securities and Investments Commission. Federated Hermes and its offerings are subject to various non-U.S. regulatory requirements and may be impacted by regulatory developments by or involving those primary regulators, as well as, among others, the European Commission, European Securities and Markets Authority (ESMA), Bank of England (BoE), His Majesty’s Treasury (HM Treasury), Financial Stability Board (FSB), and the International Organization of Securities Commissions (IOSCO). Non-U.S. regulatory matters addressed in Federated Hermes’ 2025 Annual Report and its First and Second Quarter 2026 Forms 10-Q included, among others: (1) U.K. reform of the Alternative Investment Fund Managers Directive (AIFMD) regime and related reporting and remuneration requirements; (2) EU and U.K. liquidity risk management requirements for open-ended funds; (3) U.K. and EU money market fund reform; (4) EU and U.K. sustainability requirements for asset managers, investment offerings and corporations, including the Sustainable Finance Disclosure Regulation (SFDR), Corporate Sustainability Reporting Directive (CSRD) and related U.K. sustainability disclosure requirements; (5) EU and U.K. anti-money laundering requirements; (6) EU reforms relating to the Savings and Investments Union and Retail Investment Strategy; (7) EU transaction reporting reforms and EU reforms relating to the European Market Infrastructure Regulation (EMIR) and other transaction reporting requirements; (8) the transition to T+1 settlement in the U.K. and EU; (9) EU regulation of governance, environmental and social ratings; (10) CBI and other Irish regulatory developments relating to Undertakings for Collective Investment in Transferable Securities (UCITS) and alternative investment funds, including implementation of AIFMD II and the amended UCITS Directive; (11) reform of the U.K. Senior Managers and Certification Regime (SMCR) and short selling regime; (12) U.K. and EU reforms relating to investment fund dealing, tokenization and retail investment products; and (13) other regulatory developments affecting Federated Hermes’ non-U.S. investment management business and offerings.
Key regulatory developments outside the U.S. since June 30, 2026 that can significantly impact or relate to Federated Hermes’ business and offerings include, among others, the following. Unless otherwise noted, Federated Hermes is evaluating the impact of the matters described on its business and offerings.
U.K. Reform of AIFMD Regime, and Reform of Reporting and Remuneration Requirements for U.K. Asset Managers (including Alternative Investment Fund Managers (AIFMs)). On July 14, 2026, HM Treasury and the FCA published a draft statutory instrument (the draft Alternative Investment Fund Managers Regulations 2026, which would replace the existing AIFM legislation and move most firm-facing requirements into FCA rules) and consultation papers setting out proposals for a new U.K. regulatory framework for AIFMs. The new AIFM requirements would be mostly set out in a new Alternative Investment Funds sourcebook (ALTS), which is the subject of consultation paper CP 26/28. There would be a three-tier classification system for AIFMs (based on NAV) with proportionate requirements for each tier. It is also proposed to introduce
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a new framework for Fund Reporting for Asset Management Entities (to be known as FRAME) in consultation paper CP 26/26 (which would replace the existing fund reporting requirements with a single framework calibrated to fund type, size and activity), and revised remuneration requirements for solo-regulated firms that would be less prescriptive and more principles-based in consultation paper CP 26/27 (which would replace the existing AIFM, UCITS and Markets in Financial Instruments Directive Prudential Requirements remuneration codes with a single code). Since June 30, 2026, the FCA has extended the deadline for responses to the principal consultation paper on the new AIFM regulatory framework and the discussion chapter on prudential reforms to October 22, 2026 (CP 26/28) and separately extended the deadline for its FRAME reporting proposals (CP 26/26) to October 22, 2026. The original response deadlines for CP 26/28 and CP 26/26 were October 14, 2026 and September 22, 2026, respectively. The consultation period for CP 26/27 closed on September 16, 2026, the deadline for responses on the other discussion chapters in CP 26/28 was September 18, 2026, and HM Treasury’s deadline for technical comments on its draft statutory instrument was October 14, 2026. Final Handbook rules are expected in 2027, with the new regime anticipated to take effect in 2028.
U.K. Money Market Fund Reform Update. On September 4, 2026, the FCA published Quarterly Consultation CP 26/32, which included reforms intended to facilitate the integration of money market fund reporting within the FRAME proposals discussed above. The FCA stated that the proposed changes are intended to ensure a proportionate approach that allows for effective monitoring of financial stability risks. Under the proposals, U.K. money market funds and non-U.K. money market funds that are marketed in the U.K. would be required to submit essential and enhanced reporting on a quarterly basis. This would replace the current quarterly reporting obligations for U.K. money market funds. In addition, the FCA proposes to replace daily reporting of NAV calculations (currently applicable to U.K. money market funds) with weekly reporting of a limited number of metrics, including data on NAV, liquidity buffers and other metrics such as money market fund maturity metrics and net flows to support timely oversight. The consultation period for CP 26/32 closed on October 12, 2026. In addition, the FCA confirmed that it intends for the new money market fund rules and guidance to take effect on the same timetable as the U.K. Government’s planned repeal of the existing U.K. Money Market Funds Regulation, with the Government expecting to introduce implementing legislation in Parliament by the end of 2026.
U.K. Liquidity Risk Management Reforms. On August 13, 2026, the FCA published Policy Statement PS 26/17 (following consultation paper CP 25/38, which closed on February 23, 2026), which sets out final rules and guidance on enhancing liquidity risk management requirements for authorized fund managers of U.K. UCITS schemes and non-UCITS retail schemes. Among other changes, the final rules refine requirements for assessing asset liquidity and the anti-dilution tools available to fund managers. In particular, authorized fund managers must have an anti-dilution mechanism available for use, although the FCA did not adopt fixed triggers for when it must be used, and the FCA introduced new guidance on liquidity stress testing. The rules do not apply to U.K. money market funds on the basis that the requirements for U.K. money market funds are being consulted on separately as part of the broader U.K. money market fund reforms discussed above. The final rules and guidance take effect on February 1, 2027, with transitional provisions for certain requirements applying until August 1, 2027. The FCA has stated its intention to consult separately on the wider liquidity tools for authorized funds investing in illiquid assets (such as daily-dealing property funds).
U.K. Consumer Duty Requirements. The Consumer Duty refers to certain FCA rules that aim to ensure firms providing financial services in the U.K. deliver good outcomes to retail customers. On June 29, 2026, the FCA published consultation paper CP 26/23, which proposes targeted amendments to some of the existing FCA rules and guidance. The proposals include (amongst other matters) changes to clarify how the Consumer Duty should apply to firms across a distribution chain, including when firms may rely on information provided by, or actions taken by, other firms in the chain, and changes to remove non-U.K. customers from the scope of the Consumer Duty (subject to limited exceptions, such as pre-paid funeral plans and certain U.K. pension-related activities). The consultation closed on September 18, 2026. The FCA expects to publish final rules in a policy statement in the first quarter of 2027. In addition, the FCA continues to conduct reviews to assess whether firms are adequately complying with the Consumer Duty. On July 10, 2026 the FCA published its findings and expectations regarding the products and services outcome under the Consumer Duty, and, on July 27, 2026, the FCA published its findings and guidance for firms’ approaches to monitoring consumer outcomes, in each case identifying examples of good and poor practice.
EU Sustainability Requirements for Asset Managers and Investment Offerings. As previously disclosed, the European Commission published its proposed overhaul of the Sustainable Finance Disclosure Regulation (SFDR 2.0) on November 20, 2025. On May 4, 2026 the European Parliament published a draft report suggesting certain changes to the European Commission proposal. The Council of the EU reached an agreement regarding its negotiating position on June 24, 2026. On September 10, 2026, the European Parliament’s Economic and Monetary Affairs Committee (ECON) announced that it had reached a broad compromise on the proposal for a regulation amending SFDR 2.0, and on September 15, 2026, a revised report was published to show ECON’s amendments against the European Commission’s initial proposals. The positions of the Council
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of the EU and European Parliament broadly align on retaining the European Commission’s proposed transition from the current Article 6, 8 and 9 disclosure framework to three voluntary product categories - sustainable, transition and ESG basics (under proposed new Articles 9, 7 and 8, respectively), each generally requiring that at least 70% of a product’s assets be invested in accordance with the category’s criteria. Areas of disagreement remain regarding the criteria for those categories (in particular the treatment of fossil fuel-related investments in the transition category), and the length of the implementation period. Regarding next steps, trilogue negotiations among the Commission, Council and Parliament are expected to commence shortly, with the co-legislators targeting political agreement by the end of 2026.
EU Regulation of Governance, Environmental, and Social Ratings. The EU’s regulation of governance, environmental and social rating providers began applying on July 2, 2026 (Regulation (EU) 2024/3005), with ESMA acting as the direct supervisor of ESG rating providers operating in the EU. ESG rating providers operating in the EU prior to that date are required to notify ESMA by August 2, 2026, and must apply for authorization within four months of the regulation’s application date (that is, by November 2, 2026). During the third quarter of 2026, the European Commission published regulatory technical standards (RTS) regarding the implementation of governance, environmental and social ratings in the EU. These include the RTS published on July 28, 2026 on the separation of governance, environmental and social rating providers’ business lines, and on the disclosure requirements (Commission Delegated Regulations (EU) 2026/872 and 2026/871, respectively, which entered into force on August 17, 2026). A further RTS was published on July 30, 2026 regarding supervisory fees, fines and penalties for breaches (Commission Delegated Regulations (EU) 2026/910 and 2026/904, which entered into force on July 31, 2026 and August 19, 2026, respectively). On September 1, 2026, the European Commission also published an RTS specifying the information to be included in applications for authorization or recognition as a governance, environmental and social rating provider (Commission Delegated Regulation (EU) 2026/1119).
EU Sustainability Requirements for Corporations. The CSRD imposes requirements in the EU on the disclosure of sustainability reports by in-scope companies, as previously disclosed. The detailed reporting requirements are set out in European Sustainability Reporting Standards (ESRS). On July 3, 2026, the European Commission adopted revised ESRS as part of the EU’s simplification of CSRD. The revised ESRS are designed to reduce administrative burdens for EU businesses by (amongst other matters) introducing additional flexibility measures and new exemptions and reducing the mandatory datapoints by more than 60% (and total datapoints by more than 70%). In addition, the European Commission has adopted voluntary sustainability reporting standards for certain small companies not subject to the CSRD (Commission Delegated Regulation (EU) 2026/1560, which entered into force on September 24, 2026). The adopted Delegated Act was transmitted to the European Parliament and the Council for a two-month scrutiny period, which ended without objection, and was published in the Official Journal of the EU on September 21, 2026 as Commission Delegated Regulation (EU) 2026/1563. The Commission Delegated Regulation will enter into force on November 10, 2026, and apply to financial years beginning on or after January 1, 2027, with optional early application for financial year 2026. The voluntary reporting standard is intended to facilitate reporting by companies that are not themselves subject to mandatory reporting under CSRD, but may be in value chains with counterparties that are subject to CSRD and that require sustainability information. The voluntary standard also includes a “value chain cap” intended to limit the information that CSRD-reporting companies may require from smaller value chain counterparties to what the voluntary standard covers. The European Financial Reporting Advisory Group is consulting on a draft digital (XBRL) taxonomy for the revised ESRS until November 11, 2026.
CBI Reform of Authorized Funds Framework (including UCITS and AIFMs). On July 10, 2026, the CBI published its final package of updates to the Irish UCITS domestic framework following its consultation on revised Central Bank UCITS Regulations (Consultation Paper 161, published on September 9, 2025), intended in part to align the Irish framework with AIFMD II/UCITS VI and incorporate existing guidance. The final package repeals and replaces the 2019 Central Bank UCITS Regulations (which came into effect without a transitional period) and includes changes relating to, among other matters, performance fees, liquidity management and redemption gates (including a new framework for liquidity management tools aligned with Directive (EU) 2024/927). The CBI also published updated guidance on performance fees for UCITS and certain retail investor AIFs. In the final rules, the CBI removed certain provisions included in its proposal, including a standalone swing pricing provision, a proposed 10% threshold before a redemption gate could be imposed, and a proposed 10-basis-point deviation limit for non-money market fund UCITS.
EU T+1 Settlement. In the EU, preparations for the T+1 settlement cycle transition (scheduled to take effect on October 11, 2027) are ongoing. On July 6, 2026, the European Commission adopted legislation to supplement the EU Central Securities Depositories Regulation (CSDR), notably the delegated regulations which amend: (1) the RTS on settlement discipline and (2) the RTS on central securities depositaries providing information to regulators. In addition, ESMA published a statement on July 20, 2026, which sets out key deadlines and action points that firms should follow when preparing for the EU T+1 settlement cycle. The statement noted that firms should consider applicable requirements in combination with recommendations
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from the EU T+1 industry committee, and it was noted that the first T+1 deadline is scheduled for December 7, 2026, for requirements relating to allocations and confirmations. ESMA also consulted on revised CSDR guidelines on standardized procedures and messaging protocols for allocations and confirmations (the consultation period closed on July 7, 2026), with final guidelines expected in October 2026 and proposed to apply from December 7, 2026.
U.K. Financial Services and Markets Bill 2026-27 Advances Through Parliament. The Financial Services and Markets Bill 2026-27 is proposed legislation that will make certain changes to the U.K. financial services regulatory framework. The proposals include changes to the U.K. SMCR that will provide greater flexibility to the FCA to simplify the regime applicable to individuals working for financial services businesses (including by removing the Certification Regime from legislation so that it can be recast in regulator rules). The proposals also include abolishing the Payment Systems Regulator and transitioning its remaining functions to the FCA. The Financial Services and Markets Bill 2026-27 would also, among other matters, bring appointed representatives within the scope of the SMCR and the compulsory jurisdiction of the Financial Ombudsman Service and consolidate anti-money laundering supervision of professional firms within the FCA. The Financial Services and Markets Bill 2026-27, which was introduced in the House of Lords on May 19, 2026, received its third reading in the House of Lords on September 15, 2026, and has moved to the House of Commons (where it received its first reading on the same day) for further consideration.
U.K. SMCR Conduct Rule Reform Update. FCA reforms to the SMCR are continuing to progress. Targeted measures began to take effect in stages during the second and third quarters of 2026. The final rules for the first phase of SMCR reforms (published in FCA Policy Statement PS 26/6 on April 22, 2026) mostly took effect on April 24, 2026 or July 10, 2026 (the latter date including the increased financial thresholds for classification as an enhanced SMCR firm and the updating of the related application forms), with reforms to introduce the non-financial misconduct rules taking effect on September 1, 2026. The phase one reforms also introduced targeted measures intended to simplify the SMCR, such as: (1) extending the criminal record check validity from three to six months and making such checks no longer required for certain internal or intragroup moves; (2) giving firms up to six months to notify the FCA of changes related to their statement of responsibilities and management responsibilities maps; (3) removing certain certification functions; and (4) shortening the period for providing regulatory references from six to four weeks. Phase-two reforms, including removal of the certification regime from primary legislation, remain dependent on enactment of the Financial Services and Markets Bill 2026-27, discussed above. The FCA has indicated that it expects to consult on the phase-two reforms later in 2026.
U.K. Transaction Reporting Reform Update. On August 3, 2026, the FCA published Policy Statement PS 26/15, confirming final rules simplifying the U.K. Markets in Financial Instruments Regulation (MiFIR) transaction reporting regime. Among other changes, the final rules reduce the number of transaction reporting fields from 65 to 52, remove certain instruments (such as foreign exchange derivatives) from the reporting requirements and reduce the default back-reporting period from five to three years. The new regime takes effect on April 3, 2028, although the FCA is applying a flexible supervisory approach to certain requirements beginning August 3, 2026. The FCA estimates that the changes will reduce firms’ reporting costs by more than £100 million annually, and expects to consult on a draft reporting schema, validation rules and guidelines beginning in October 2026. Collective portfolio management investment firms, including U.K. UCITS management companies and AIFMs, generally remain outside the U.K. MiFIR transaction-reporting firm definition, with their reporting requirements being considered separately through the FCA’s FRAME consultation.
EU Transaction Reporting Simplification and EU EMIR III. On July 2, 2026, ESMA published its Final Report on the Call for Evidence regarding simplification of financial transaction reporting. ESMA concluded that a transition toward a “report once” framework represents the preferred approach to simplifying reporting across MiFIR, EMIR and Securities Financing Transactions Regulation (SFTR), under which transaction data would be reported through a common modular structure and reused across supervisory authorities, which ESMA estimates could deliver annual net cost savings of up to EUR 1 billion but would require targeted legislative amendments to MiFIR, EMIR and SFTR. On July 14, 2026, the European Commission adopted a delegated regulation amending the EMIR clearing threshold RTS (reflecting the revised clearing threshold regime under EMIR III, which is based primarily on uncleared over-the-counter (OTC) derivative positions), which will enter into force on the twentieth day after its publication in the Official Journal of the EU unless the European Parliament or the Council objects, and on July 31, 2026, the European Supervisory Authorities published a joint report on a draft RTS amending EMIR initial margin requirements, which would extend the current exemption from exchanging initial margin for counterparties below the EUR 8 billion aggregate average notional amount threshold to their existing uncleared OTC derivative contracts and which has been submitted to the European Commission for endorsement. ESMA has indicated that it will engage with EU institutions regarding its recommendations as next steps toward implementation.
U.K. Short Selling Regime. The FCA finalized rules replacing the U.K.’s prior short selling regime based on assimilated EU law with bespoke FCA rules in a new Short Selling Rules sourcebook (published in Policy Statement PS 26/5 on April 16,
32
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of Financial Condition and Results of Operations (unaudited) | ||||||||
2026). The first phase of the new regime became effective on July 13, 2026, including the new framework for aggregated net short position disclosures (under which the FCA publishes anonymous aggregate net short positions by company based on notifications at a 0.2% threshold, replacing individual public disclosures at 0.5%) and removal of U.K. sovereign debt and sovereign credit default swaps from certain ordinary reporting and short-selling restrictions. A second phase introducing a bulk position-reporting submission facility is scheduled to take effect on November 30, 2026.
U.K. and EU Anti-Money Laundering (AML) and Financial Crime. HM Treasury’s Money Laundering and Terrorist Financing (Amendment) Regulations 2026 (S.I. 2026/621, made on June 9, 2026) amend the U.K.’s existing AML framework, including customer due diligence requirements for crypto asset businesses and high-risk jurisdictions and a new due diligence regime for pooled accounts. Most provisions of these regulations came into force on June 30, 2026, with certain crypto-related change-in-control provisions scheduled to take effect from October 25, 2027, and new enhanced due diligence requirements for crypto asset correspondent relationships scheduled to take effect from February 1, 2027. In addition, on July 27, 2026, the FCA published its findings on financial crime controls at asset management and alternative firms, highlighting good practices and areas of improvement that firms should be aware of. The FCA emphasized that firms which face higher financial crime risks must establish frameworks and appropriate controls to mitigate these risks. Separately, in the EU, the Authority for Anti-Money Laundering and Countering the Financing of Terrorism has continued its consultation and standard-setting activities, including launching a survey of national Central Contact Points on August 6, 2026 (which closed on September 15, 2026) and consulting on draft guidelines on ongoing monitoring of business relationships. The consultation closed on September 3, 2026, with final guidelines expected in the fourth quarter 2026.
FCA Requirements on U.K. Equity IPO Information Flows and other Regulatory Developments. On August 5, 2026, the FCA published Policy Statement PS 26/16, finalizing reforms relating to information flows in connection with U.K. equity initial public offerings, including by removing the seven-day waiting period before connected research may be published and the requirement that syndicate banks share the same information with unconnected analysts as with their own research analysts, with effect from publication. Separately, on August 7, 2026, the FCA issued a statement raising concerns regarding risks associated with certain unregulated lenders, custody providers, money brokers and financial leasing companies (Annex 1 firms), in particular the potential for those firms to facilitate financial crime and their reliance on parent company controls. The FCA also sent an information request to approximately 900 Annex 1 firms and is closely scrutinizing applications to register as an Annex 1 firm. The FCA also announced that its authorization window for crypto-asset activities (including qualifying staking) opened on September 30, 2026 and will remain open until February 28, 2027 for firms seeking to rely on transitional provisions, ahead of the U.K.’s broader crypto-asset regulatory regime becoming effective on October 25, 2027.
European Single Access Point (ESAP) Implementation. On July 10, 2026, ESMA began collecting information from national competent authorities and officially appointed mechanisms (which act as collection bodies that forward information and metadata submitted by reporting entities) as part of the phased implementation of the European Single Access Point, a centralized EU platform intended to provide public access to financial and sustainability-related information filed by companies and financial market participants. The first phase covers information required under the Transparency Directive, the Prospectus Regulation and the Short Selling Regulation. Public accessibility is required to begin by July 2027, with further categories of information phased in from January 2028 and January 2030.
Current Regulatory Developments– Potential Impacts
Federated Hermes has monitored, reviewed, assessed and implemented changes in response to, and will continue to monitor, review, assess and implement changes in response to, regulatory developments and requirements, as applicable, and their impact on its business, offerings and Financial Condition. Federated Hermes actively participates, either individually or with industry trade groups (such as the Investment Company Institute), in the public comment process regarding regulatory developments that can significantly impact Federated Hermes’ business, offerings and Financial Condition. Regulatory developments and regulatory requirements also are subject to legal challenges in court, and Federated Hermes considers initiating, participating in or supporting such legal challenges when management deems it necessary or appropriate. Federated Hermes also continues to monitor and assess the impact of the interest rate environment (whether increasing or decreasing), and any instability in the banking sector and financial markets, on asset values and money market fund and other fund asset flows, and related asset mixes, as well as the degree to which these factors impact Federated Hermes’ institutional prime and municipal (or tax-exempt) money market business and Federated Hermes’ Financial Condition.
The difficulty in, and cost of, complying with applicable regulatory developments and regulatory requirements increases with the number, complexity and differing (and potentially conflicting) requirements of new or amended regulatory requirements, among other factors. In addition to the impact on Federated Hermes’ AUM, revenues, operating income and other aspects of Federated Hermes’ business, Federated Hermes’ regulatory, offering development and restructuring, and other efforts in
33
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
response to regulatory developments and regulatory requirements, including the internal and external resources dedicated to such efforts, have had, and can continue to have, on a cumulative basis, a material impact on Federated Hermes’ expenses and, in turn, Financial Condition.
As of September 30, 2026, given the regulatory environment and the possibility of future additional regulatory developments, requirements and oversight, Federated Hermes is unable to fully assess either: (1) whether, or the degree to which, any continuing efforts or potential options being evaluated in connection with modified or new regulatory developments and regulatory requirements ultimately will be successful; or (2) the degree of impact that such regulatory developments and requirements, and Federated Hermes’ efforts related thereto, may have on its Financial Condition. The degree of impact of regulatory developments and regulatory requirements on Federated Hermes’ Financial Condition can vary, including in a material way, and is uncertain.
Asset Highlights
Managed Assets at Period End
| September 30, | Percent Change | |||||||||||||||||||
| (in millions) | 2026 | 2025 | ||||||||||||||||||
| By Asset Class | ||||||||||||||||||||
Equity1 | $ | 110,539 | $ | 94,656 | 17 | % | ||||||||||||||
| Fixed-Income | 99,399 | 101,813 | (2) | |||||||||||||||||
| Alternative / Private Markets | 21,734 | 19,024 | 14 | |||||||||||||||||
Multi-Asset1 | 2,855 | 2,940 | (3) | |||||||||||||||||
| Total Long-Term Assets | 234,527 | 218,433 | 7 | |||||||||||||||||
| Money Market | 649,883 | 652,767 | 0 | |||||||||||||||||
| Total Managed Assets | $ | 884,410 | $ | 871,200 | 2 | % | ||||||||||||||
| By Offering Type | ||||||||||||||||||||
| Funds: | ||||||||||||||||||||
| Equity | $ | 63,106 | $ | 54,110 | 17 | % | ||||||||||||||
| Fixed-Income | 44,969 | 46,478 | (3) | |||||||||||||||||
| Alternative / Private Markets | 15,079 | 11,814 | 28 | |||||||||||||||||
| Multi-Asset | 2,849 | 2,813 | 1 | |||||||||||||||||
| Total Long-Term Assets | 126,003 | 115,215 | 9 | |||||||||||||||||
| Money Market | 486,270 | 492,701 | (1) | |||||||||||||||||
| Total Fund Assets | 612,273 | 607,916 | 1 | |||||||||||||||||
| Separate Accounts: | ||||||||||||||||||||
Equity1 | 47,433 | 40,546 | 17 | |||||||||||||||||
| Fixed-Income | 54,430 | 55,335 | (2) | |||||||||||||||||
| Alternative / Private Markets | 6,655 | 7,210 | (8) | |||||||||||||||||
Multi-Asset1 | 6 | 127 | (95) | |||||||||||||||||
| Total Long-Term Assets | 108,524 | 103,218 | 5 | |||||||||||||||||
| Money Market | 163,613 | 160,066 | 2 | |||||||||||||||||
| Total Separate Account Assets | 272,137 | 263,284 | 3 | |||||||||||||||||
| Total Managed Assets | $ | 884,410 | $ | 871,200 | 2 | % | ||||||||||||||
1) A Separate Account was reclassified from Multi-Asset to Equity effective October 1, 2025.
34
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Average Managed Assets
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
| September 30, | Percent Change | September 30, | Percent Change | |||||||||||||||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| By Asset Class | ||||||||||||||||||||||||||||||||||||||
Equity1 | $ | 112,104 | $ | 92,436 | 21 | % | $ | 107,057 | $ | 86,035 | 24 | % | ||||||||||||||||||||||||||
| Fixed-Income | 100,137 | 99,206 | 1 | 100,392 | 98,977 | 1 | ||||||||||||||||||||||||||||||||
| Alternative / Private Markets | 22,000 | 19,862 | 11 | 21,197 | 19,642 | 8 | ||||||||||||||||||||||||||||||||
Multi-Asset1 | 2,928 | 2,895 | 1 | 2,895 | 2,858 | 1 | ||||||||||||||||||||||||||||||||
| Total Long-Term Assets | 237,169 | 214,399 | 11 | 231,541 | 207,512 | 12 | ||||||||||||||||||||||||||||||||
| Money Market | 660,526 | 645,092 | 2 | 676,220 | 639,154 | 6 | ||||||||||||||||||||||||||||||||
| Total Average Managed Assets | $ | 897,695 | $ | 859,491 | 4 | % | $ | 907,761 | $ | 846,666 | 7 | % | ||||||||||||||||||||||||||
| By Offering Type | ||||||||||||||||||||||||||||||||||||||
| Funds: | ||||||||||||||||||||||||||||||||||||||
| Equity | $ | 64,370 | $ | 51,828 | 24 | % | $ | 60,763 | $ | 47,684 | 27 | % | ||||||||||||||||||||||||||
| Fixed-Income | 46,043 | 45,743 | 1 | 45,989 | 45,477 | 1 | ||||||||||||||||||||||||||||||||
| Alternative / Private Markets | 15,198 | 12,347 | 23 | 14,235 | 12,109 | 18 | ||||||||||||||||||||||||||||||||
| Multi-Asset | 2,923 | 2,770 | 6 | 2,890 | 2,733 | 6 | ||||||||||||||||||||||||||||||||
| Total Long-Term Assets | 128,534 | 112,688 | 14 | 123,877 | 108,003 | 15 | ||||||||||||||||||||||||||||||||
| Money Market | 491,758 | 482,237 | 2 | 499,283 | 469,549 | 6 | ||||||||||||||||||||||||||||||||
| Total Average Fund Assets | 620,292 | 594,925 | 4 | 623,160 | 577,552 | 8 | ||||||||||||||||||||||||||||||||
| Separate Accounts: | ||||||||||||||||||||||||||||||||||||||
Equity1 | 47,734 | 40,608 | 18 | 46,294 | 38,351 | 21 | ||||||||||||||||||||||||||||||||
| Fixed-Income | 54,094 | 53,463 | 1 | 54,403 | 53,500 | 2 | ||||||||||||||||||||||||||||||||
| Alternative / Private Markets | 6,802 | 7,515 | (9) | 6,962 | 7,533 | (8) | ||||||||||||||||||||||||||||||||
Multi-Asset1 | 5 | 125 | (96) | 5 | 125 | (96) | ||||||||||||||||||||||||||||||||
| Total Long-Term Assets | 108,635 | 101,711 | 7 | 107,664 | 99,509 | 8 | ||||||||||||||||||||||||||||||||
| Money Market | 168,768 | 162,855 | 4 | 176,937 | 169,605 | 4 | ||||||||||||||||||||||||||||||||
| Total Average Separate Account Assets | 277,403 | 264,566 | 5 | 284,601 | 269,114 | 6 | ||||||||||||||||||||||||||||||||
| Total Average Managed Assets | $ | 897,695 | $ | 859,491 | 4 | % | $ | 907,761 | $ | 846,666 | 7 | % | ||||||||||||||||||||||||||
1) A Separate Account was reclassified from Multi-Asset to Equity effective October 1, 2025.
35
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Changes in Equity Fund and Separate Account Assets
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Equity Funds | ||||||||||||||||||||||||||
| Beginning Assets | $ | 64,069 | $ | 49,359 | $ | 54,988 | $ | 43,752 | ||||||||||||||||||
| Sales | 4,333 | 4,797 | 15,631 | 14,276 | ||||||||||||||||||||||
| Redemptions | (4,322) | (3,386) | (12,963) | (11,224) | ||||||||||||||||||||||
| Net Sales (Redemptions) | 11 | 1,411 | 2,668 | 3,052 | ||||||||||||||||||||||
| Net Exchanges | 1 | 154 | (24) | 47 | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (53) | (82) | (279) | 823 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (922) | 3,268 | 5,753 | 6,436 | ||||||||||||||||||||||
| Ending Assets | $ | 63,106 | $ | 54,110 | $ | 63,106 | $ | 54,110 | ||||||||||||||||||
| Equity Separate Accounts | ||||||||||||||||||||||||||
| Beginning Assets | $ | 45,521 | $ | 39,635 | $ | 42,910 | $ | 35,671 | ||||||||||||||||||
Sales3 | 4,194 | 2,048 | 11,049 | 7,942 | ||||||||||||||||||||||
Redemptions3 | (2,302) | (3,589) | (10,741) | (7,924) | ||||||||||||||||||||||
Net Sales (Redemptions)3 | 1,892 | (1,541) | 308 | 18 | ||||||||||||||||||||||
| Net Exchanges | 0 | 0 | 20 | (7) | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (28) | (3) | (126) | 869 | ||||||||||||||||||||||
Market Gains and (Losses)2 | 48 | 2,455 | 4,321 | 3,995 | ||||||||||||||||||||||
| Ending Assets | $ | 47,433 | $ | 40,546 | $ | 47,433 | $ | 40,546 | ||||||||||||||||||
| Total Equity | ||||||||||||||||||||||||||
| Beginning Assets | $ | 109,590 | $ | 88,994 | $ | 97,898 | $ | 79,423 | ||||||||||||||||||
Sales3 | 8,527 | 6,845 | 26,680 | 22,218 | ||||||||||||||||||||||
Redemptions3 | (6,624) | (6,975) | (23,704) | (19,148) | ||||||||||||||||||||||
Net Sales (Redemptions)3 | 1,903 | (130) | 2,976 | 3,070 | ||||||||||||||||||||||
| Net Exchanges | 1 | 154 | (4) | 40 | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (81) | (85) | (405) | 1,692 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (874) | 5,723 | 10,074 | 10,431 | ||||||||||||||||||||||
| Ending Assets | $ | 110,539 | $ | 94,656 | $ | 110,539 | $ | 94,656 | ||||||||||||||||||
1 Reflects the impact of translating non-U.S. Dollar (USD) denominated AUM into USD for reporting purposes.
2 Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
3 For Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
36
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Changes in Fixed-Income Fund and Separate Account Assets
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Fixed-Income Funds | ||||||||||||||||||||||||||
| Beginning Assets | $ | 46,189 | $ | 45,415 | $ | 45,973 | $ | 45,550 | ||||||||||||||||||
| Sales | 3,841 | 3,556 | 11,693 | 10,272 | ||||||||||||||||||||||
| Redemptions | (4,040) | (3,090) | (12,027) | (11,618) | ||||||||||||||||||||||
| Net Sales (Redemptions) | (199) | 466 | (334) | (1,346) | ||||||||||||||||||||||
| Net Exchanges | (7) | (134) | (12) | (24) | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (13) | (18) | (42) | 153 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (1,001) | 749 | (616) | 2,145 | ||||||||||||||||||||||
| Ending Assets | $ | 44,969 | $ | 46,478 | $ | 44,969 | $ | 46,478 | ||||||||||||||||||
| Fixed-Income Separate Accounts | ||||||||||||||||||||||||||
| Beginning Assets | $ | 54,298 | $ | 53,272 | $ | 54,154 | $ | 52,509 | ||||||||||||||||||
Sales3 | 3,244 | 3,989 | 9,006 | 8,484 | ||||||||||||||||||||||
Redemptions3 | (2,345) | (2,797) | (8,571) | (8,209) | ||||||||||||||||||||||
Net Sales (Redemptions)3 | 899 | 1,192 | 435 | 275 | ||||||||||||||||||||||
| Net Exchanges | 0 | 0 | 0 | (4) | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (7) | (4) | (30) | 118 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (760) | 875 | (129) | 2,437 | ||||||||||||||||||||||
| Ending Assets | $ | 54,430 | $ | 55,335 | $ | 54,430 | $ | 55,335 | ||||||||||||||||||
| Total Fixed-Income | ||||||||||||||||||||||||||
| Beginning Assets | $ | 100,487 | $ | 98,687 | $ | 100,127 | $ | 98,059 | ||||||||||||||||||
Sales3 | 7,085 | 7,545 | 20,699 | 18,756 | ||||||||||||||||||||||
Redemptions3 | (6,385) | (5,887) | (20,598) | (19,827) | ||||||||||||||||||||||
Net Sales (Redemptions)3 | 700 | 1,658 | 101 | (1,071) | ||||||||||||||||||||||
| Net Exchanges | (7) | (134) | (12) | (28) | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (20) | (22) | (72) | 271 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (1,761) | 1,624 | (745) | 4,582 | ||||||||||||||||||||||
| Ending Assets | $ | 99,399 | $ | 101,813 | $ | 99,399 | $ | 101,813 | ||||||||||||||||||
1 Reflects the impact of translating non-USD denominated AUM into USD for reporting purposes.
2 Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
3 For Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
37
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Changes in Alternative / Private Markets Fund and Separate Account Assets
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Alternative / Private Markets Funds | ||||||||||||||||||||||||||
| Beginning Assets | $ | 14,918 | $ | 12,905 | $ | 12,085 | $ | 11,501 | ||||||||||||||||||
| Sales | 489 | 620 | 1,674 | 2,350 | ||||||||||||||||||||||
| Redemptions | (566) | (1,786) | (1,545) | (3,127) | ||||||||||||||||||||||
| Net Sales (Redemptions) | (77) | (1,166) | 129 | (777) | ||||||||||||||||||||||
| Net Exchanges | 1 | 0 | 9 | 0 | ||||||||||||||||||||||
| Acquisitions/(Dispositions) | 0 | 0 | 2,788 | 109 | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (7) | (194) | (154) | 728 | ||||||||||||||||||||||
Market Gains and (Losses)2 | 244 | 269 | 222 | 253 | ||||||||||||||||||||||
| Ending Assets | $ | 15,079 | $ | 11,814 | $ | 15,079 | $ | 11,814 | ||||||||||||||||||
| Alternative / Private Markets Separate Accounts | ||||||||||||||||||||||||||
| Beginning Assets | $ | 6,729 | $ | 7,833 | $ | 7,016 | $ | 7,363 | ||||||||||||||||||
Sales3 | 73 | 50 | 167 | 187 | ||||||||||||||||||||||
Redemptions3 | (135) | (505) | (705) | (739) | ||||||||||||||||||||||
Net Sales (Redemptions)3 | (62) | (455) | (538) | (552) | ||||||||||||||||||||||
| Acquisitions/(Dispositions) | 0 | 0 | 449 | 0 | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (4) | (147) | (106) | 554 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (8) | (21) | (166) | (155) | ||||||||||||||||||||||
| Ending Assets | $ | 6,655 | $ | 7,210 | $ | 6,655 | $ | 7,210 | ||||||||||||||||||
| Total Alternative / Private Markets | ||||||||||||||||||||||||||
| Beginning Assets | $ | 21,647 | $ | 20,738 | $ | 19,101 | $ | 18,864 | ||||||||||||||||||
Sales3 | 562 | 670 | 1,841 | 2,537 | ||||||||||||||||||||||
Redemptions3 | (701) | (2,291) | (2,250) | (3,866) | ||||||||||||||||||||||
Net Sales (Redemptions)3 | (139) | (1,621) | (409) | (1,329) | ||||||||||||||||||||||
| Net Exchanges | 1 | 0 | 9 | 0 | ||||||||||||||||||||||
| Acquisitions/(Dispositions) | 0 | 0 | 3,237 | 109 | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (11) | (341) | (260) | 1,282 | ||||||||||||||||||||||
Market Gains and (Losses)2 | 236 | 248 | 56 | 98 | ||||||||||||||||||||||
| Ending Assets | $ | 21,734 | $ | 19,024 | $ | 21,734 | $ | 19,024 | ||||||||||||||||||
1 Reflects the impact of translating non-USD denominated AUM into USD for reporting purposes.
2 Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
3 For Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
38
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Changes in Multi-Asset Fund and Separate Account Assets
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Multi-Asset Funds | ||||||||||||||||||||||||||
| Beginning Assets | $ | 2,935 | $ | 2,730 | $ | 2,850 | $ | 2,764 | ||||||||||||||||||
| Sales | 44 | 45 | 143 | 152 | ||||||||||||||||||||||
| Redemptions | (85) | (87) | (281) | (309) | ||||||||||||||||||||||
| Net Sales (Redemptions) | (41) | (42) | (138) | (157) | ||||||||||||||||||||||
| Net Exchanges | 0 | (3) | 1 | (3) | ||||||||||||||||||||||
Market Gains and (Losses)1 | (45) | 128 | 136 | 209 | ||||||||||||||||||||||
| Ending Assets | $ | 2,849 | $ | 2,813 | $ | 2,849 | $ | 2,813 | ||||||||||||||||||
| Multi-Asset Separate Accounts | ||||||||||||||||||||||||||
| Beginning Assets | $ | 4 | $ | 126 | $ | 4 | $ | 119 | ||||||||||||||||||
Sales2 | 1 | 0 | 1 | 0 | ||||||||||||||||||||||
Redemptions2 | 0 | (5) | 0 | (25) | ||||||||||||||||||||||
Net Sales (Redemptions)2 | 1 | (5) | 1 | (25) | ||||||||||||||||||||||
Market Gains and (Losses)1 | 1 | 6 | 1 | 33 | ||||||||||||||||||||||
| Ending Assets | $ | 6 | $ | 127 | $ | 6 | $ | 127 | ||||||||||||||||||
| Total Multi-Asset | ||||||||||||||||||||||||||
| Beginning Assets | $ | 2,939 | $ | 2,856 | $ | 2,854 | $ | 2,883 | ||||||||||||||||||
| Sales | 45 | 45 | 144 | 152 | ||||||||||||||||||||||
Redemptions2 | (85) | (92) | (281) | (334) | ||||||||||||||||||||||
Net Sales (Redemptions)2 | (40) | (47) | (137) | (182) | ||||||||||||||||||||||
| Net Exchanges | 0 | (3) | 1 | (3) | ||||||||||||||||||||||
Market Gains and (Losses)1 | (44) | 134 | 137 | 242 | ||||||||||||||||||||||
| Ending Assets | $ | 2,855 | $ | 2,940 | $ | 2,855 | $ | 2,940 | ||||||||||||||||||
1 Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
2 For Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
39
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Changes in Total Long-Term Fund and Separate Account Assets
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Total Long-Term Funds | ||||||||||||||||||||||||||
| Beginning Assets | $ | 128,111 | $ | 110,409 | $ | 115,896 | $ | 103,567 | ||||||||||||||||||
| Sales | 8,707 | 9,018 | 29,141 | 27,050 | ||||||||||||||||||||||
| Redemptions | (9,013) | (8,349) | (26,816) | (26,278) | ||||||||||||||||||||||
| Net Sales (Redemptions) | (306) | 669 | 2,325 | 772 | ||||||||||||||||||||||
| Net Exchanges | (5) | 17 | (26) | 20 | ||||||||||||||||||||||
| Acquisitions/(Dispositions) | 0 | 0 | 2,788 | 109 | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (73) | (294) | (475) | 1,704 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (1,724) | 4,414 | 5,495 | 9,043 | ||||||||||||||||||||||
| Ending Assets | $ | 126,003 | $ | 115,215 | $ | 126,003 | $ | 115,215 | ||||||||||||||||||
| Total Long-Term Separate Accounts | ||||||||||||||||||||||||||
| Beginning Assets | $ | 106,552 | $ | 100,866 | $ | 104,084 | $ | 95,662 | ||||||||||||||||||
Sales3 | 7,512 | 6,087 | 20,223 | 16,613 | ||||||||||||||||||||||
Redemptions3 | (4,782) | (6,896) | (20,017) | (16,897) | ||||||||||||||||||||||
Net Sales (Redemptions)3 | 2,730 | (809) | 206 | (284) | ||||||||||||||||||||||
| Net Exchanges | 0 | 0 | 20 | (11) | ||||||||||||||||||||||
| Acquisitions/(Dispositions) | 0 | 0 | 449 | 0 | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (39) | (154) | (262) | 1,541 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (719) | 3,315 | 4,027 | 6,310 | ||||||||||||||||||||||
| Ending Assets | $ | 108,524 | $ | 103,218 | $ | 108,524 | $ | 103,218 | ||||||||||||||||||
| Total Long-Term | ||||||||||||||||||||||||||
| Beginning Assets | $ | 234,663 | $ | 211,275 | $ | 219,980 | $ | 199,229 | ||||||||||||||||||
Sales3 | 16,219 | 15,105 | 49,364 | 43,663 | ||||||||||||||||||||||
Redemptions3 | (13,795) | (15,245) | (46,833) | (43,175) | ||||||||||||||||||||||
Net Sales (Redemptions)3 | 2,424 | (140) | 2,531 | 488 | ||||||||||||||||||||||
| Net Exchanges | (5) | 17 | (6) | 9 | ||||||||||||||||||||||
| Acquisitions/(Dispositions) | 0 | 0 | 3,237 | 109 | ||||||||||||||||||||||
Impact of Foreign Exchange1 | (112) | (448) | (737) | 3,245 | ||||||||||||||||||||||
Market Gains and (Losses)2 | (2,443) | 7,729 | 9,522 | 15,353 | ||||||||||||||||||||||
| Ending Assets | $ | 234,527 | $ | 218,433 | $ | 234,527 | $ | 218,433 | ||||||||||||||||||
1 Reflects the impact of translating non-USD denominated AUM into USD for reporting purposes.
2 Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
3 For Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
40
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Changes in Federated Hermes’ average asset mix period-over-period across both asset classes and offering types have a direct impact on Federated Hermes’ operating income. Asset mix impacts Federated Hermes’ total revenue due to the difference in the fee rates earned on each asset class and offering type per invested dollar and certain components of distribution expense can vary depending upon the asset class, distribution channel and/or the size of the customer relationship. The following table presents the relative composition of average managed assets and the percent of total revenue derived from each asset class and offering type for the periods presented:
| Percent of Total Average Managed Assets | Percent of Total Revenue | |||||||||||||||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | |||||||||||||||||||||||
| By Asset Class | ||||||||||||||||||||||||||
| Money Market | 75 | % | 76 | % | 51 | % | 53 | % | ||||||||||||||||||
| Equity | 12 | % | 10 | % | 31 | % | 28 | % | ||||||||||||||||||
| Fixed-Income | 11 | % | 12 | % | 10 | % | 11 | % | ||||||||||||||||||
| Alternative / Private Markets | 2 | % | 2 | % | 6 | % | 5 | % | ||||||||||||||||||
| Multi-Asset | 0 | % | 0 | % | 1 | % | 1 | % | ||||||||||||||||||
| Other | — | — | 1 | % | 2 | % | ||||||||||||||||||||
| By Offering Type | ||||||||||||||||||||||||||
| Funds: | ||||||||||||||||||||||||||
| Money Market | 55 | % | 56 | % | 48 | % | 50 | % | ||||||||||||||||||
| Equity | 7 | % | 5 | % | 24 | % | 22 | % | ||||||||||||||||||
| Fixed-Income | 5 | % | 6 | % | 7 | % | 8 | % | ||||||||||||||||||
| Alternative / Private Markets | 1 | % | 1 | % | 5 | % | 3 | % | ||||||||||||||||||
| Multi-Asset | 0 | % | 0 | % | 1 | % | 1 | % | ||||||||||||||||||
| Separate Accounts: | ||||||||||||||||||||||||||
| Money Market | 20 | % | 20 | % | 3 | % | 3 | % | ||||||||||||||||||
| Equity | 5 | % | 5 | % | 7 | % | 6 | % | ||||||||||||||||||
| Fixed-Income | 6 | % | 6 | % | 3 | % | 3 | % | ||||||||||||||||||
| Alternative / Private Markets | 1 | % | 1 | % | 1 | % | 2 | % | ||||||||||||||||||
| Multi-Asset | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||||||||
| Other | — | — | 1 | % | 2 | % | ||||||||||||||||||||
Total managed assets represent the total AUM at a point in time, while total average managed assets represent the average balance of AUM during a period of time. Because substantially all revenue and certain components of distribution expense are generally calculated daily based on AUM, changes in average managed assets are typically a key indicator of changes in revenue earned and asset-based expenses incurred during the same period.
Total average managed assets increased 4% and 7% for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in 2025. As of September 30, 2026, total managed assets increased 2% from September 30, 2025. Average money market assets increased 2% and 6% for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in 2025. Period-end money market assets remained flat at September 30, 2026, as compared to September 30, 2025. The Federal Reserve raised the federal funds rate by 0.25% to a range of 3.75% to 4.00% on September 16, 2026, and U.S. money market fund industry assets were at $7.9 trillion. Throughout most of the third quarter of 2026, money market funds continued to offer a yield advantage, as compared to some securities in the direct market especially overnight securities and those with floating rates. Average equity assets increased 21% and 24% for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in 2025. Period-end equity assets increased 17% at September 30, 2026, as compared to September 30, 2025, primarily due to market appreciation and, to a lesser extent, net sales. The S&P 500 rose 2.0% during the third quarter of 2026 and provided a total return of 11.8% for the nine months ended September 30, 2026. Average fixed-income assets increased 1% for both the three and nine months ended September 30, 2026, as compared to the same periods in 2025. Period-end fixed-income assets decreased 2% at September 30, 2026, as compared to September 30, 2025, primarily due to net redemptions. After ending the second quarter of 2026 at 4.44%, yields on the 10-Year
41
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Treasury Note generally rose throughout the third quarter of 2026 before reaching 5.29% on September 30, 2026. Average alternative/private markets assets increased 11% and 8% for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in 2025. Period-end alternative/private markets assets increased 14% at September 30, 2026, as compared to September 30, 2025, primarily due to the FCP acquisition.
Results of Operations
Revenue. Revenue increased $37.9 million for the three-month period ended September 30, 2026, as compared to the same period in 2025, primarily due to (1) an increase in equity revenue of $26.5 million due to an increase in average equity assets and (2) a $14.3 million increase due to the FCP acquisition.
Revenue increased $171.2 million for the nine-month period ended September 30, 2026, as compared to the same period in 2025, primarily due to (1) an increase in equity revenue of $85.1 million due to an increase in average equity assets, (2) an increase in money market revenue of $63.2 million due to an increase in average money market assets and (3) a $28.2 million increase due to the FCP acquisition.
For the nine-month periods ended September 30, 2026 and 2025, Federated Hermes’ ratio of revenue to average managed assets was 0.22% and 0.21%, respectively. The increase in the rate was primarily due to an increase in revenue from higher average equity assets and a change in the mix of asset classes of money market assets during the first nine months of 2026 compared to the same period in 2025.
Operating Expenses. Total Operating Expenses for the three-month period ended September 30, 2026 increased $14.0 million, as compared to the same period in 2025. Distribution expense increased $8.5 million primarily due to higher average money market fund assets. Compensation and Related expense increased $7.1 million primarily due to the FCP acquisition.
Total Operating Expenses for the nine-month period ended September 30, 2026 increased $137.0 million, as compared to the same period in 2025. Distribution expense increased $57.5 million primarily due to higher average money market fund assets. Compensation and Related expense increased $34.6 million primarily due to (1) an increase of $11.9 million due to the FCP acquisition, (2) higher incentive compensation ($7.5 million) and (3) FCP-acquisition-related compensation ($6.5 million). Other expense increased $25.2 million primarily due to (1) a value added tax (VAT) refund received in 2025 related to amended VAT filings in the U.K. ($12.9 million) and (2) fluctuations in foreign currency exchange rates ($9.4 million). Professional Service Fees increased $9.0 million primarily due to fees incurred as a result of the FCP acquisition ($4.3 million) and an increase in costs related to global technology projects ($3.4 million). Systems and Communications increased $4.8 million primarily due to an increase in global technology projects. Intangible Asset Related expense increased $4.5 million primarily due to amortization of intangibles from the FCP acquisition.
Nonoperating Income (Expenses). Nonoperating Income (Expenses), net decreased $12.1 million for the three-month period ended September 30, 2026, as compared to the same period in 2025. The decrease is primarily due to (1) a $10.0 million decrease in Gain (Loss) on Securities, net from a decrease in the market value of investments in the three-month period ended September 30, 2026 compared to an increase in the market value of investments during the same period in 2025 and (2) a $2.1 million decrease in Investment Income, net primarily due to lower investment yields related to decreases in the federal funds target rate.
Nonoperating Income (Expenses), net decreased $15.5 million for the nine-month period ended September 30, 2026, as compared to the same period in 2025. The decrease is primarily due to (1) a decrease of $11.2 million in Gain (Loss) on Securities, net primarily due to the 2025 deconsolidation of two VIEs based on Federated Hermes’ ownership level and (2) a decrease of $4.4 million in Investment Income, net primarily due to lower investment yields related to decreases in the federal funds target rate.
Income Taxes. The income tax provision was $41.2 million for the three-month period ended September 30, 2026, as compared to $34.2 million for the same period in 2025. The increase in the income tax provision was primarily due to increased U.S. pre-tax income in 2026. The effective tax rate was 27.1% for the three-month period ended September 30, 2026, as compared to 24.4% for the same period in 2025. The increase in the effective tax rate was primarily due to (1) research and development credits recognized in the three months ended September 30, 2025 (1.1%) and (2) a valuation allowance on foreign deferred tax assets and increased foreign losses in the three-month period ended September 30, 2026 as compared to the same period in 2025 (0.9%).
The income tax provision was $112.2 million for the nine-month period ended September 30, 2026, as compared to $100.5 million for the same period in 2025. The increase in the income tax provision was primarily due to increased U.S. pre-tax income in 2026. The effective tax rate was 26.4% for the nine-month period ended September 30, 2026, as compared to 24.7%
42
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
for the same period in 2025. The increase in the effective tax rate was primarily due to a valuation allowance on foreign deferred tax assets and increased foreign losses in the nine months ended September 30, 2026 as compared to the same period in 2025.
Pillar Two legislation has been enacted in certain jurisdictions in which Federated Hermes operates. The legislation was effective for the year beginning January 1, 2024. Federated Hermes is in scope of the enacted legislation and has performed an assessment of its potential exposure to Pillar Two income taxes based on the most recent tax filings, country-by-country report and financial statements for the constituent entities of Federated Hermes. Based on the assessment, for fiscal years 2026, 2025 and 2024, Federated Hermes expects to be able to rely on the transitional safe harbor for each of the jurisdictions in which it operates. As a result, Federated Hermes does not expect a material exposure to Pillar Two income taxes in those jurisdictions. This assessment will continue to be monitored and updated as additional guidance and/or legislation is released.
Net Income Attributable to Federated Hermes, Inc. Net income increased $7.8 million for the three-month period ended September 30, 2026, as compared to the same period in 2025, primarily as a result of the changes in revenues, expenses, nonoperating income (expenses) and income taxes noted above. Diluted earnings per share for the three-month period ended September 30, 2026 increased $0.16, as compared to the same period in 2025, due to increased net income ($0.10) and a decrease in the shares outstanding resulting from share repurchases ($0.06).
Net income increased $16.3 million for the nine-month period ended September 30, 2026, as compared to the same period in 2025, primarily as a result of the changes in revenues, expenses, nonoperating income (expenses) and income taxes noted above. Diluted earnings per share for the nine-month period ended September 30, 2026 increased $0.40, as compared to the same period in 2025, due to increased net income ($0.20) and a decrease in shares outstanding resulting from share repurchases ($0.20).
Liquidity and Capital Resources
Liquid Assets. At September 30, 2026, liquid assets, net of noncontrolling interests, consisting of cash and cash equivalents, investments and receivables, totaled $601.6 million, as compared to $769.4 million at December 31, 2025. The change in liquid assets is discussed below.
At September 30, 2026, Federated Hermes’ liquid assets included investments in certain money market and fluctuating-value Federated Hermes Funds that may have direct and/or indirect exposures to international sovereign debt and currency risks. Federated Hermes continues to actively monitor its investment portfolios to manage sovereign debt and currency risks with respect to certain European countries, China and certain other countries subject to economic sanctions. Federated Hermes’ experienced portfolio managers and analysts work to evaluate credit risk through quantitative and fundamental analysis. Further, regarding international exposure, certain money market funds (representing approximately $346 million in AUM) that meet the requirements of Rule 2a-7 under the 1940 Act (Rule 2a-7) or operate in accordance with requirements similar to those in Rule 2a-7, include holdings with indirect short-term exposures invested primarily in high-quality international bank names that are subject to Federated Hermes’ credit analysis process.
Cash Provided by Operating Activities. Net cash provided by operating activities totaled $243.9 million for the nine months ended September 30, 2026, as compared to $136.1 million for the same period in 2025. The increase in cash provided was primarily due to (1) an increase in cash received related to the $171.2 million increase in revenue previously discussed and (2) an increase of $80.1 million in cash due to a decrease in net purchases of trading securities for the nine months ended September 30, 2026 as compared to the same period in 2025. These were partially offset by (1) an increase in cash paid related to the $57.5 million increase in Distribution expense previously discussed, (2) an increase of $25.3 million in cash paid in taxes for the nine months ended September 30, 2026 as compared to the same period in 2025 and (3) an increase of $19.4 million in cash paid for incentive compensation for the nine months ended September 30, 2026 as compared to the same period in 2025.
Cash Used by Investing Activities. During the nine-month period ended September 30, 2026, net cash used by investing activities was $227.2 million due primarily to (1) cash paid for the FCP acquisition, net of cash acquired (see Note (4) to the Consolidated Financial Statements for additional information on the FCP acquisition), (2) cash paid for property and equipment ($20.0 million) and (3) $8.9 million paid for purchases of Investments—Affiliates and Other. These increases in cash paid were partially offset by $15.0 million in cash received from redemptions of Investments—Affiliates and Other.
Cash Used by Financing Activities. During the nine-month period ended September 30, 2026, net cash used by financing activities was $224.2 million due primarily to (1) $186.1 million of treasury stock purchases, (2) $83.1 million or $1.10 per share of dividends paid to holders of Federated Hermes common shares and (3) $26.5 million of distributions to noncontrolling
43
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
interests in subsidiaries. These were partially offset by $71.2 million of contributions from noncontrolling interests in subsidiaries.
Borrowings. On March 17, 2022, pursuant to the Note Purchase Agreement, Federated Hermes issued $350 million Notes at a fixed interest rate of 3.29% per annum, payable semiannually in arrears in March and September in each year of the agreement. The entire principal amount of the $350 million Notes will become due March 17, 2032. Citigroup Global Markets Inc. 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 September 30, 2026, the outstanding balance of the $350 million Notes, net of unamortized issuance costs in the amount of $1.4 million, was $348.6 million and was recorded in Long-Term Debt on the Consolidated Balance Sheets. The proceeds were, or will be, used to supplement cash flow from operations, to fund share repurchases and potential acquisitions, to pay down outstanding debt and for other general corporate purposes. See Note (11) to the Consolidated Financial Statements for additional information on the Note Purchase Agreement.
As of September 30, 2026, Federated Hermes’ Credit Agreement consists of a $350 million revolving credit facility with an additional $225 million available via an optional increase (or accordion) feature. Borrowings under the Credit Agreement may be used for general corporate purposes including cash payments related to acquisitions, dividends, investments and share repurchases. As of September 30, 2026, Federated Hermes had $350 million available to borrow under the revolving credit facility and an additional $225 million available via its optional accordion feature. See Note (11) to the Consolidated Financial Statements for additional information on the Credit Agreement.
Both the Note Purchase Agreement and Credit Agreement include an interest coverage ratio covenant (consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) to consolidated interest expense) and a leverage ratio covenant (consolidated debt to consolidated EBITDA) as well as other customary terms and conditions. Federated Hermes was in compliance with all of its covenants, including its interest coverage and leverage ratios at and during the nine months ended September 30, 2026. An interest coverage ratio of at least 4 to 1 is required for both the Note Purchase Agreement and the Credit Agreement and, as of September 30, 2026, Federated Hermes’ interest coverage ratio was 53 to 1. A leverage ratio of no more than 3 to 1 is required for the Note Purchase Agreement and no more than 3.25 to 1 is required for the Credit Agreement. As of September 30, 2026, Federated Hermes’ leverage ratio was 0.54 to 1.
Both the Note Purchase Agreement and the Credit Agreement have certain stated events of default and cross default provisions which would permit the lenders/counterparties to accelerate the repayment of debt outstanding if not cured within the applicable grace periods. The events of default generally include breaches of contract, failure to make required loan payments, insolvency, cessation of business, notice of lien or assessment, and other proceedings, whether voluntary or involuntary, that would require the repayment of amounts borrowed.
Future Cash Needs. Management expects that principal uses of cash will include funding business acquisitions and global expansion, funding distribution expenditures, paying incentive and base compensation, paying shareholder dividends, paying debt obligations, paying taxes, repurchasing company stock, developing and seeding new offerings, modifying existing offerings and relationships and maintaining regulatory liquidity and capital requirements. In addition, Federated Hermes expects to invest approximately $333 million (including the allocation of approximately $226 million in existing technology-related overhead, primarily the compensation expense of existing employees, and an external spend of approximately $107 million) over the next three years to support a number of planned technology-driven initiatives. Any number of factors may cause Federated Hermes’ future cash needs to increase. As a result of the highly regulated nature of the investment management business, management anticipates that aggregate expenditures for compliance and investment management personnel, compliance systems and technology and related professional and consulting fees can continue to increase.
On October 29, 2026, the board of directors declared a $0.38 per share dividend to Federated Hermes’ Class A and Class B common stock shareholders of record as of November 6, 2026 to be paid on November 13, 2026.
After evaluating Federated Hermes’ existing liquid assets, expected continuing cash flow from operations, its borrowing capacity under the Credit Agreement and its ability to obtain additional financing arrangements and issue debt or stock, management believes it will have sufficient liquidity to meet both its short-term and reasonably foreseeable long-term cash needs.
44
| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
Financial Position
The following discussion summarizes significant changes in assets and liabilities that are not discussed elsewhere in Management’s Discussion and Analysis of Financial Condition and Results of Operations. See Note (4) to the Consolidated Financial Statements for additional information on the FCP acquisition.
Investments—Consolidated Investment Companies at September 30, 2026 increased $64.3 million from December 31, 2025 primarily due to 1) the consolidation of two VREs and a VIE in the first nine months of 2026 ($39.7 million) and 2) net purchases on existing consolidated offerings ($29.8 million), partially offset by the deconsolidation of a VRE ($4.5 million) during the same period.
Receivables, net at September 30, 2026 increased $26.5 million from December 31, 2025 primarily due to 1) the reclassification of the insurance reimbursement receivable (see Note (18)) from a long-term receivable to a short-term receivable ($15.9 million) and 2) an increase in receivables in connection with the FCP acquisition ($6.0 million).
Other Current Assets at September 30, 2026 decreased $10.3 million from December 31, 2025 primarily due to a decrease in fixed-asset deposits as a result of a long-lived asset being placed into service.
Goodwill at September 30, 2026 increased $262.2 million from December 31, 2025 primarily due to the FCP acquisition.
Intangible Assets, net at September 30, 2026 increased $53.6 million from December 31, 2025 primarily due to the FCP acquisition.
Property and Equipment, net of accumulated depreciation at September 30, 2026 increased $24.3 million from December 31, 2025 primarily due to a long-lived asset being placed into service.
Accrued Compensation and Benefits at September 30, 2026 decreased $29.3 million from December 31, 2025 primarily due to the 2025 accrued annual incentive compensation being paid in the first quarter of 2026 ($149.2 million), partially offset by 2026 incentive compensation accruals recorded at September 30, 2026 ($115.8 million).
Other Current Liabilities and Other Long-Term Liabilities at September 30, 2026 increased $16.6 million and $18.8 million, respectively, from December 31, 2025 primarily due to estimated contingent payments in connection with the FCP acquisition. See Note (9) to the Consolidated Financial Statements for additional information.
Legal Proceedings
Federated Hermes has claims asserted against it from time to time. See Note (18) to the Consolidated Financial Statements for additional information.
Recent Accounting Pronouncements
For a list of new accounting standards applicable to Federated Hermes, see Note (2) to the Consolidated Financial Statements.
Critical Accounting Policies
Federated Hermes’ Consolidated Financial Statements have been prepared in accordance with GAAP. In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Management continually evaluates the accounting policies and estimates it uses to prepare the Consolidated Financial Statements. In general, management’s estimates are based on historical experience, information from third-party professionals and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results can differ from those estimates made by management and those differences may be material.
Of the significant accounting policies described in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025, management believes that certain indefinite-lived intangible assets included in its Goodwill and Intangible Assets policy involves a higher degree of judgment and complexity. See Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section Critical Accounting Policies for a complete discussion of this policy.
As of December 31, 2025, due to a decrease in projected cash flows, primarily driven by a decrease in projected revenue, management concluded that an indicator of potential impairment existed for the indefinite-lived intangible asset related to the
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| Management's Discussion and Analysis (continued) | ||||||||
of Financial Condition and Results of Operations (unaudited) | ||||||||
FHL right to manage public fund assets, which had a carrying value of £72.2 million ($97.3 million). The discounted cash flow method resulted in no impairment at December 31, 2025, as the estimated fair value of this intangible asset exceeded the carrying value.
During the quarter ended September 30, 2026, management did not identify any indicators for potential impairment of the indefinite-lived intangible asset related to the FHL right to manage public fund assets.
Market volatility and other events related to geopolitical or other unexpected events in the future can further reduce the AUM, revenues and earnings associated with Federated Hermes’ indefinite-lived intangible assets and can result in subsequent impairment tests being based upon updated assumptions and future cash flow projections, which can result in an impairment. For additional information on risks related to geopolitical or other unexpected events, see Item 1A - Risk Factors included in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025.
Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2026, there were no material changes to Federated Hermes’ exposures to market risk that would require an update to the disclosures provided in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025.
Part I, Item 4. Controls and Procedures
(a)Federated Hermes carried out an evaluation, under the supervision and with the participation of management, including Federated Hermes’ President and CEO and Chief Financial Officer, of the effectiveness of Federated Hermes’ disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2026. Federated Hermes completed the FCP acquisition during the three months ended June 30, 2026. As such, the scope of Federated Hermes’ assessment of the effectiveness of its disclosure controls and procedures did not include the internal controls over financial reporting at FCP. FCP represented less than 1% of both Federated Hermes’ total and net assets as of September 30, 2026 and less than 3% and 4% of Federated Hermes’ total revenue and net income, respectively, for the three months ended September 30, 2026. 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 Federated Hermes’ 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 upon that evaluation, the President and CEO and the Chief Financial Officer concluded that Federated Hermes’ disclosure controls and procedures were effective at September 30, 2026.
(b)There has been no change in Federated Hermes’ internal control over financial reporting that occurred during the quarter ended September 30, 2026 that has materially affected, or is reasonably likely to materially affect, Federated Hermes’ internal control over financial reporting.
Part II, Item 1. Legal Proceedings
Information regarding this Item is contained in Note (18) to the Consolidated Financial Statements.
Part II, Item 1A. Risk Factors
There are no material changes to the risk factors included in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025.
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Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) not applicable.
(b) not applicable.
(c) The following table summarizes stock repurchases under Federated Hermes’ share repurchase program during the third quarter 2026.
| Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1 | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs1 | |||||||||||||||||||||||
July2 | 257,713 | $ | 54.86 | 249,955 | 2,096,667 | |||||||||||||||||||||
August2 | 394,849 | 57.99 | 354,624 | 1,742,043 | ||||||||||||||||||||||
September2 | 339,750 | 59.93 | 335,000 | 1,407,043 | ||||||||||||||||||||||
| Total | 992,312 | $ | 57.84 | 939,579 | 1,407,043 | |||||||||||||||||||||
1 In July 2025, 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. No other program existed as of September 30, 2026. See Note (13) to the Consolidated Financial Statements for additional information.
2 In July, August, and September 2026, 7,758, 40,225 and 4,750 shares, respectively, of Class B common stock with a weighted-average price per share of $0.00, $3.00 and $3.00, respectively, were repurchased as a result of employee-forfeited restricted stock.
Part II, Item 5. Other Information
INSIDER TRADING ARRANGEMENTS
While certain officers have elected in advance to satisfy tax obligations arising from the vesting of awards of periodic and bonus restricted Federated Hermes Class B common stock through the sale of sufficient shares of such stock necessary to satisfy such tax obligations in the open-market, no director or officer adopted terminated
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Part II, Item 6. Exhibits
The following exhibits required to be filed or furnished by Item 601 of Regulation S-K are filed or furnished herewith and incorporated by reference herein:
Exhibit 10.1 Amendment No. 12 to Federated Hermes Tower Lease dated September 24, 2026 (filed herewith)
Exhibit 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Exhibit 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Exhibit 32 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
Exhibit 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH Inline XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Federated Hermes, Inc. | ||||||||||||||||||||
| (Registrant) | ||||||||||||||||||||
| Date | October 30, 2026 | By: | /s/ J. Christopher Donahue | |||||||||||||||||
| J. Christopher Donahue | ||||||||||||||||||||
| President and Chief Executive Officer | ||||||||||||||||||||
| Date | October 30, 2026 | By: | /s/ Thomas R. Donahue | |||||||||||||||||
| Thomas R. Donahue | ||||||||||||||||||||
| Chief Financial Officer | ||||||||||||||||||||
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Exhibit 10.1
TWELFTH AMENDMENT TO AGREEMENT OF LEASE
THIS TWELFTH AMENDMENT TO AGREEMENT OF LEASE (this “Twelfth Amendment”) is made and entered into as of the 24th day of September, 2026, by and between LIBERTY CENTER LLC, a Pennsylvania limited liability company (as successor in interest to SPUS8 Liberty Center, LP, a Delaware limited partnership, “Landlord”), and FEDERATED HERMES, INC., a Pennsylvania corporation formerly known as Federated Investors, Inc. (“Tenant”), with reference to the following:
R E C I T A L S
A.Landlord and Tenant are parties to an Agreement of Lease for certain premises in the Federated Hermes Tower dated January 1, 1993 (the “Original Lease”), as amended by an Amendment to Agreement of Lease dated May 1, 1995 (the “Amendment”), a First Amendment to Agreement of Lease dated November 2, 1995 (the “First Amendment”), a Second Amendment to Agreement of Lease dated September 19, 1996 (the “Second Amendment”), a Third Amendment to Agreement of Lease dated February 10, 1999 (the “Third Amendment”), a Fourth Amendment to Agreement of Lease dated June 30, 2000 (the “Fourth Amendment”), a Fifth Amendment to Agreement of Lease dated November 10, 2000 (the “Fifth Amendment”), a Sixth Amendment to Agreement of Lease dated December 31, 2003 (the “Sixth Amendment”), a Seventh Amendment to Agreement of Lease dated August 15, 2007 (the “Seventh Amendment”), an Eighth Amendment to Agreement of Lease dated September 9, 2011 (the “Eighth Amendment”), a Ninth Amendment to Agreement of Lease dated September 9, 2016 (the “Ninth Amendment”), a Tenth Amendment to Agreement of Lease dated February 21, 2020 (the “Tenth Amendment”), and an Eleventh Amendment to Agreement of Lease dated February 21, 2023 (the “Eleventh Amendment” and collectively, the “Existing Lease”).
B.The Existing Lease will expire by its terms on December 31, 2030.
C.Landlord and Tenant desire to amend the Existing Lease for purposes of, among other matters: (i) extending the Initial Term of the Existing Lease by ten (10) years and six (6) months for the period from January 1, 2031 to June 30, 2041; (ii) providing for new Basic Rent during the aforesaid extension of the Initial Term; (iii) establishing new Base Year designations for the aforesaid extension of the Initial Term, and establishing a new Base Year for the first Renewal Term and second Renewal Term if Tenant exercises its options to renew the Lease; (iv) providing for Tenant’s surrender of that portion of the Premises consisting of the entire sixteenth (16th) floor of the Building, which contains 20,518 Square Feet effective as of April 1, 2028, with the result that the Premises shall thereafter contain 235,149 Square Feet; (v) recalculating Tenant’s Share following the surrender of the 16th floor; (vi) granting Tenant an additional tenant improvement and refurbishment allowance in respect of the 235,149 Square Feet; and (vii) modifying certain other terms of the Existing Lease, all in accordance with the terms and provisions hereof.
D.The Existing Lease, as amended by this Twelfth Amendment, is hereinafter referred to as the “Lease”, and all references in the Existing Lease to the “Lease” are deemed to mean the Existing Lease as amended by this Twelfth Amendment, as the same may be further amended.
NOW THEREFORE, in consideration of the foregoing Recitals (which are incorporated herein by this reference), for the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows with the intent to be legally bound:
A G R E E M E N T
1.Defined Terms. Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Existing Lease.
2.Condition of the Premises. Tenant acknowledges that: (a) it has been occupying and continues to occupy the Premises; (b) it is familiar with the condition of the Premises; (c) subject in all respects to Landlord’s obligation to remit the Additional Tenant Improvement and Refurbishment Allowance to Tenant in accordance with the express terms of Section 6 below, Tenant accepts the Premises in its “as-is, where-is and with all faults” condition without improvement or allowance; and (d) Landlord has made no representation or warranty regarding the condition of the Premises or the suitability thereof for Tenant’s business.
3.Extension of Initial Term. The parties hereto acknowledge and agree that the expiration date of the Initial Term is currently December 31, 2030. By this Twelfth Amendment, the Initial Term of the Existing Lease is hereby extended from January 1, 2031 through June 30, 2041. For the avoidance of doubt, in Section 7 of the Eighth Amendment, the term “Initial Term” shall refer to the Initial Term as extended by this Twelfth Amendment and the terms “Renewal Options” and “Renewal Terms” shall be tied to the Initial Term as extended by this Twelfth Amendment.
4.Relinquishment of the 16th Floor; Tenant’s Share.
(a)Effective as of April 1, 2028 (the “Relinquishment Date”), Tenant shall relinquish and surrender to Landlord all of Tenant’s right, title and interest in and to the sixteenth (16th) floor of the Building, containing 20,518 Square Feet (the “Surrendered Premises”), and the Lease shall terminate with respect to the Surrendered Premises as of the Relinquishment Date as fully and completely as if the Relinquishment Date were the originally scheduled expiration date of the Term with respect to the Surrendered Premises. From and after the Relinquishment Date, the Premises will consist of 235,149 Square Feet, being a portion of the fourth (4th) and eighth (8th) floors of the Building, and all of the seventeenth (17th) through twenty-seventh (27th) floors of the Building.
(b)On or before the Relinquishment Date, Tenant shall vacate and deliver exclusive possession of the Surrendered Premises to Landlord in the condition required under the Lease upon the expiration or earlier termination of the Term, free and clear of all occupants and personal property of Tenant and any party claiming by, through or under Tenant, and otherwise in accordance with all surrender obligations set forth in the Lease (including, without limitation, with Tenant having removed the internal staircase connecting the 16th and 17th floors of the Building, and all affected areas restored in accordance with the terms of the Lease). From and after the Relinquishment Date, Tenant shall have no further right to use or occupy, and no right,
2 | ||||||||
title or interest in or to, the Surrendered Premises, and Landlord shall be free to enter upon, alter, demolish, combine, separately demise, lease or otherwise use or dispose of the Surrendered Premises without notice to or consent of Tenant. Except with respect to those obligations that expressly survive the expiration or earlier termination of the Lease, Tenant’s obligations under the Lease with respect to the Surrendered Premises shall cease as of the Relinquishment Date; provided, however, that Tenant shall remain liable for all obligations arising with respect to the Surrendered Premises prior to the Relinquishment Date. The Lease (as amended by this Twelfth Amendment) shall remain in full force and effect with respect to the balance of the Premises retained by Tenant.
(c)Landlord and Tenant acknowledge and agree that, from and after the Relinquishment Date, “Tenant’s Share” (as defined in Paragraph 1.1(www) of the Existing Lease) with respect to the Premises shall be 45.77%.
5.Basic Rent. The Basic Rent payable by Tenant for the Premises shall remain unchanged for the remainder of calendar year 2026 (in the amount of $29.72 per Square Foot), but the Basic Rent payable by Tenant for the Premises (as the same shall be reduced effective April 1, 2028) for the period from January 1, 2027 through June 30, 2041 shall be as follows (all per square foot amounts have been rounded to the penny and the Basic Rent payable by Tenant shall be the monthly payment amounts set forth below):
(a)For the period beginning on January 1, 2027 and ending on June 30, 2027, Tenant shall pay to Landlord Basic Rent in the amount of Twenty-Nine and 72/100 Dollars ($29.72) per Square Foot per year, being the sum of Three Million Seven Hundred Ninety-Nine Thousand Two Hundred Eleven and 64/100 Dollars ($3,799,211.64) for such six-month period, payable at the rate of Six Hundred Thirty-Three Thousand Two Hundred One and 94/100 Dollars ($633,201.94) per month.
(b)For the period beginning on July 1, 2027 and ending on March 31, 2028, Tenant shall pay to Landlord Basic Rent in the amount of Thirty and 17/100 Dollars ($30.17) per Square Foot per year, being the sum of Five Million Seven Hundred Eighty-Five Thousand One Hundred Five and 05/100 Dollars ($5,785,105.05) for such nine-month period, payable at the rate of Six Hundred Forty-Two Thousand Seven Hundred Eighty-Nine and 45/100 Dollars ($642,789.45) per month.
(c)For the period beginning on April 1, 2028 and ending on June 30, 2028, Tenant shall pay to Landlord Basic Rent in the amount of Thirty and 17/100 Dollars ($30.17) per Square Foot per year, being the sum of One Million Seven Hundred Seventy-Three Thousand Six Hundred Eleven and 34/100 Dollars ($1,773,611.34) for such three-month period, payable at the rate of Five Hundred Ninety-One Thousand Two Hundred Three and 78/100 Dollars ($591,203.78) per month.
(d)For the period beginning on July 1, 2028 and ending on June 30, 2029, Tenant shall pay to Landlord Basic Rent in the amount of Thirty and 62/100 Dollars ($30.62) per Square Foot per year, being the sum of Seven Million One Hundred Ninety-Nine Thousand
3 | ||||||||
Eight Hundred Fifty-Nine and 60/100 Dollars ($7,199,859.60) for such 12-month period, payable at the rate of Five Hundred Ninety-Nine Thousand Nine Hundred Eighty-Eight and 30/100 Dollars ($599,988.30) per month.
(e)For the period beginning on July 1, 2029 and ending on June 30, 2030, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-One and 08/100 Dollars ($31.08) per Square Foot per year, being the sum of Seven Million Three Hundred Seven Thousand Eight Hundred Fifty-Seven and 44/100 Dollars ($7,307,857.44) for such 12-month period, payable at the rate of Six Hundred Eight Thousand Nine Hundred Eighty-Eight and 12/100 Dollars ($608,988.12) per month.
(f)For the period beginning on July 1, 2030 and ending on June 30, 2031, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-One and 54/100 Dollars ($31.54) per Square Foot per year, being the sum of Seven Million Four Hundred Seventeen Thousand Four Hundred Seventy-Five and 28/100 Dollars ($7,417,475.28) for such 12-month period, payable at the rate of Six Hundred Eighteen Thousand One Hundred Twenty-Two and 94/100 Dollars ($618,122.94) per month.
(g)For the period beginning on July 1, 2031 and ending on June 30, 2032, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Two and 02/100 Dollars ($32.02) per Square Foot per year, being the sum of Seven Million Five Hundred Twenty-Eight Thousand Seven Hundred Thirty-Seven and 48/100 Dollars ($7,528,737.48) for such 12-month period, payable at the rate of Six Hundred Twenty-Seven Thousand Three Hundred Ninety-Four and 79/100 Dollars ($627,394.79) per month.
(h)For the period beginning on July 1, 2032 and ending on June 30, 2033, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Two and 50/100 Dollars ($32.50) per Square Foot per year, being the sum of Seven Million Six Hundred Forty-One Thousand Six Hundred Sixty-Eight and 52/100 Dollars ($7,641,668.52) for such 12-month period, payable at the rate of Six Hundred Thirty-Six Thousand Eight Hundred Five and 71/100 Dollars ($636,805.71) per month.
(i)For the period beginning on July 1, 2033 and ending on June 30, 2034, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Two and 98/100 Dollars ($32.98) per Square Foot per year, being the sum of Seven Million Seven Hundred Fifty-Six Thousand Two Hundred Ninety-Three and 60/100 Dollars ($7,756,293.60) for such 12-month period, payable at the rate of Six Hundred Forty-Six Thousand Three Hundred Fifty-Seven and 80/100 Dollars ($646,357.80) per month.
(j)For the period beginning on July 1, 2034 and ending on June 30, 2035, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Three and 48/100 Dollars ($33.48) per Square Foot per year, being the sum of Seven Million Eight Hundred Seventy-Two Thousand Six Hundred Thirty-Seven and 92/100 Dollars ($7,872,637.92) for such 12-month period, payable at the rate of Six Hundred Fifty-Six Thousand Fifty-Three and 16/100 Dollars ($656,053.16) per month.
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(k)For the period beginning on July 1, 2035 and ending on June 30, 2036, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Three and 98/100 Dollars ($33.98) per Square Foot per year, being the sum of Seven Million Nine Hundred Ninety Thousand Seven Hundred Twenty-Seven and 52/100 Dollars ($7,990,727.52) for such 12-month period, payable at the rate of Six Hundred Sixty-Five Thousand Eight Hundred Ninety-Three and 96/100 Dollars ($665,893.96) per month.
(l)For the period beginning on July 1, 2036 and ending on June 30, 2037, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Four and 49/100 Dollars ($34.49) per Square Foot per year, being the sum of Eight Million One Hundred Ten Thousand Five Hundred Eighty-Eight and 44/100 Dollars ($8,110,588.44) for such 12-month period, payable at the rate of Six Hundred Seventy-Five Thousand Eight Hundred Eighty-Two and 37/100 Dollars ($675,882.37) per month.
(m)For the period beginning on July 1, 2037 and ending on June 30, 2038, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Five and 01/100 Dollars ($35.01) per Square Foot per year, being the sum of Eight Million Two Hundred Thirty-Two Thousand Two Hundred Forty-Seven and 32/100 Dollars ($8,232,247.32) for such 12-month period, payable at the rate of Six Hundred Eighty-Six Thousand Twenty and 61/100 Dollars ($686,020.61) per month.
(n)For the period beginning on July 1, 2038 and ending on June 30, 2039, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Five and 53/100 Dollars ($35.53) per Square Foot per year, being the sum of Eight Million Three Hundred Fifty-Five Thousand Seven Hundred Thirty and 92/100 Dollars ($8,355,730.92) for such 12-month period, payable at the rate of Six Hundred Ninety-Six Thousand Three Hundred Ten and 91/100 Dollars ($696,310.91) per month.
(o)For the period beginning on July 1, 2039 and ending on June 30, 2040, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Six and 07/100 Dollars ($36.07) per Square Foot per year, being the sum of Eight Million Four Hundred Eighty-One Thousand Sixty-Six and 96/100 Dollars ($8,481,066.96) for such 12-month period, payable at the rate of Seven Hundred Six Thousand Seven Hundred Fifty-Five and 58/100 Dollars ($706,755.58) per month.
(p)For the period beginning on July 1, 2040 and ending on June 30, 2041, Tenant shall pay to Landlord Basic Rent in the amount of Thirty-Six and 61/100 Dollars ($36.61) per Square Foot per year, being the sum of Eight Million Six Hundred Eight Thousand Two Hundred Eighty-Two and 92/100 Dollars ($8,608,282.92) for such 12-month period, payable at the rate of Seven Hundred Seventeen Thousand Three Hundred Fifty-Six and 91/100 Dollars ($717,356.91) per month.
6.Additional Tenant Improvement and Refurbishment Allowance. Landlord and Tenant agree that, as of the date this Twelfth Amendment is fully executed, Tenant shall be
5 | ||||||||
entitled to an additional tenant improvement and refurbishment allowance in the amount of Eleven Million Two Hundred Eighty-Seven Thousand One Hundred Fifty-Two and 00/100 Dollars ($11,287,152.00) (the “Additional Tenant Improvement and Refurbishment Allowance”). Any portion of the Additional Tenant Improvement and Refurbishment Allowance which is not requested for disbursement by Tenant on or before June 30, 2035 shall be deemed to be waived by Tenant, and Landlord shall have no further obligation to pay or credit any such remaining Additional Tenant Improvement and Refurbishment Allowance to Tenant, subject to Section 6(b)(ii) below. The Additional Tenant Improvement and Refurbishment Allowance will be paid and/or credited to Tenant in the following manner:
(a)On or before October 1 of each calendar year beginning with the calendar year 2026 and continuing until the earlier to occur of (x) the date upon which all $11,287,152.00 of the Additional Tenant Improvement and Refurbishment Allowance has been paid to Tenant and (y) October 1, 2034 (in respect of calendar year 2035), Tenant will notify Landlord, in writing, of Tenant’s proposed annual spending plan of the Additional Tenant Improvement and Refurbishment Allowance for the following calendar year. Tenant’s proposed annual spending plan shall set forth the maximum amount of the Additional Tenant Improvement and Refurbishment Allowance to be drawn by Tenant with respect to the following calendar year, provided that Tenant acknowledges and agrees that in no event shall it ever be permitted to draw or receive more than $2,821,788.00 during any 12-month period (“Maximum Annual TIA Draw”). Landlord acknowledges that Tenant’s proposed spending plan is not subject to Landlord’s approval, and Tenant acknowledges that all alterations and improvements shall comply with Article 7 of the Existing Lease. Tenant’s proposed annual spending plan is subject to final approval and implementation by Tenant’s management and, after October 1 of each year, such proposed annual spending plan may change in scope (but any such change in scope delivered after October 1 will not increase the amount of the Maximum Annual TIA Draw), be delayed, or be cancelled by Tenant at any time thereafter.
(b)Subject to the terms and conditions of this Section 6(b), Tenant may use the Additional Tenant Improvement and Refurbishment Allowance at its discretion for the improvement and refurbishment of any portion of the Premises located on the fourth (4th) floor of the Building, the eighth (8th) floor of the Building, or the seventeenth (17th) through twenty-seventh (27th) floors of the Building (including properly capitalizable sales taxes and costs of delivering and installing improvements, furniture, fixtures, and equipment); provided, however, that Tenant may apply up to forty percent (40%) of the Additional Tenant Improvement and Refurbishment Allowance toward the actual, documented costs incurred by Tenant in connection with the purchase and installation of furniture, fixtures, and equipment for use in the Premises, it being the intent of the parties that at least sixty percent (60%) of the Additional Tenant Improvement and Refurbishment Allowance be used to offset costs of improvements to the Premises that become part of the real property. Notwithstanding anything herein to the contrary, (x) Landlord shall be deemed the owner of all improvements, furniture, fixtures, and equipment paid for with the Additional Tenant Improvement and Refurbishment Allowance (“Allowance Property”) for all purposes (including, without limitation, for tax purposes), (y) Tenant shall have no right to sell, assign, transfer, pledge, encumber or otherwise dispose of any Allowance Property and shall not remove any Allowance Property from the Premises without Landlord’s
6 | ||||||||
prior written consent, and (z) Tenant shall be permitted to use all Allowance Property throughout the Term. Except as otherwise expressly set forth in the Existing Lease or any SNDA in effect from time to time, no portion of the Additional Tenant Improvement and Refurbishment Allowance may be applied as a credit against payment of Basic Rent. With respect to any unused portion of the Maximum Annual TIA Draw (i.e., sums included by Tenant in its proposed annual spending plan for a calendar year which were not actually used by Tenant during such calendar year):
(i) if Tenant did not undertake the improvements and refurbishments to which such amounts were to be allocated, then such unused amounts may be carried forward by Tenant, and may be requested for disbursement by Tenant at any time through June 30, 2035, pursuant to an annual spending plan; and
(ii) if Tenant has undertaken the improvements and refurbishments to which such amounts were allocated but has not yet received and/or paid the invoices relating to such work, Tenant may draw such amounts from Landlord in the subsequent calendar year, including without limitation calendar year 2036.
(c)Landlord shall pay directly to Tenant the actual annual Additional Tenant Improvement and Refurbishment Allowance expended (but in no event greater than the Maximum Annual TIA Draw) within forty-five (45) days following Landlord’s receipt of paid invoices and unconditional lien waivers from all contractors performing any of Tenant’s work in the Premises. If the actual improvement and refurbishment expenditures by Tenant in any calendar year exceed the applicable Maximum Annual TIA Draw, then Tenant shall be responsible for payment of such excess expenditures but shall have the right to be reimbursed for such amounts in subsequent calendar years (i) as may be set forth in the Tenant’s annual spending plan for such year(s), (ii) to the extent of remaining available amounts of the Additional Tenant Improvement and Refurbishment Allowance, and (iii) subject in all respects to any such draw being capped by the Maximum Annual TIA Draw.
(d)If Tenant exercises its right to terminate the Existing Lease pursuant to Section 10 of the Sixth Amendment effective after the date of this Twelfth Amendment and prior to June 30, 2041, Tenant shall reimburse Landlord for the unamortized portion of the Additional Tenant Improvement and Refurbishment Allowance to the extent paid by Landlord to Tenant. For purposes of determining such amortization, the parties shall assume that the full amount of the Additional Tenant Improvement and Refurbishment Allowance was disbursed on September 1, 2026 and that Tenant is amortizing the full amount of the Additional Tenant Improvement at the rate of 5% per annum over the period beginning on September 1, 2026 and ending on June 30, 2041. The unamortized amounts of the Additional Tenant Improvement and Refurbishment Allowance that have been disbursed by Landlord to Tenant prior to the effective date of such termination shall be equal to the aggregate amount of the Additional Tenant Improvement and Refurbishment Allowance actually disbursed by Landlord to Tenant less the aggregate amount of principal amortized as of the effective date of such termination. For example, if Tenant has received the sum of $3,000,000 as the Additional Tenant Improvement and Refurbishment Allowance and Tenant subsequently terminates the Lease pursuant to Section 10 of the Sixth
7 | ||||||||
Amendment with such termination being effective as of August 31, 2029, then Tenant would owe to Landlord the remaining unamortized amount of $1,337,381 (being the $3,000,000 Additional Tenant Improvement and Refurbishment Allowance actually received by Tenant less the total of the amortized principal sum of $1,662,619 shown on Exhibit A attached to this Twelfth Amendment). Such reimbursement by Tenant shall occur by no later than the expiration date of the Term as determined by the exercise of the foregoing termination right. Landlord agrees that within sixty (60) days following the end of any calendar year in which amounts of the Additional Tenant Improvement and Refurbishment Allowance are disbursed to Tenant, Landlord shall prepare and deliver to Tenant an annual statement reflecting the prior year’s disbursements of the Additional Tenant Improvement and Refurbishment Allowance and the total aggregate disbursements of the Additional Tenant Improvement and Refurbishment Allowance during the Initial Term as extended hereby. Tenant acknowledges and agrees that in no event shall Tenant be entitled to any credit or otherwise have any claim against Landlord with respect to (x) any negative amortization amounts for the Additional Tenant Improvement and Refurbishment Allowance which Tenant has not actually received, or (y) amounts of the Additional Tenant Improvement and Refurbishment Allowance that shall not have been properly requested by Tenant under and pursuant to this Section 6 to be disbursed by Landlord prior to the effective date of a termination of this Lease by Tenant.
(e)If Tenant exercises its right to terminate the Existing Lease pursuant to Section 10 of the Sixth Amendment effective on or after July 1, 2041 during a Renewal Term, Tenant shall not be obligated to make any reimbursement to Landlord under Section 10 of the Sixth Amendment or Section 6(d) above.
(f)Notwithstanding anything to the contrary contained in the Lease or in any prior amendment, modification, supplement, or other agreement relating thereto, Landlord shall have no further obligation to provide Tenant with any tenant improvement allowance, refurbishment allowance, additional tenant improvement allowance, additional tenant improvement and refurbishment allowance, or other similar allowance or contribution, except for the Additional Tenant Improvement and Refurbishment Allowance expressly provided for in this Twelfth Amendment. Tenant acknowledges and agrees that all tenant improvement, refurbishment, and similar allowances or contributions provided for under the Lease or any prior amendment thereto have either been fully funded, applied, exhausted, waived, or otherwise satisfied, and Tenant hereby waives and releases any right to claim any remaining or unused portion thereof. For purposes of this Twelfth Amendment, the term “Additional Tenant Improvement and Refurbishment Allowance” shall mean solely the allowance expressly provided for in this Twelfth Amendment. The parties acknowledge that the same or a substantially similar defined term may have been used in one or more prior amendments to the Lease; however, notwithstanding such prior usage, the definition and use of “Additional Tenant Improvement and Refurbishment Allowance” in this Twelfth Amendment shall supersede and replace any prior definition or use of such term, and no amount payable under any prior amendment shall be included in, added to, or otherwise carried forward as part of the Additional Tenant Improvement and Refurbishment Allowance provided hereunder. Notwithstanding the foregoing provisions of this Section 6(f) or any other provision of this Twelfth Amendment to the contrary, Landlord acknowledges and agrees that (i) Tenant’s right under Section 2.4 of the
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Lease to lease Available Space remains in full force and effect, and (ii) Tenant’s right under Section 6.5 of the Original Lease, as amended and restated in its entirety by Section 10 of the Ninth Amendment, to receive a Tenant Finish Allowance with respect to the lease of Expansion Space remains in full force and effect.
(g)Landlord and Tenant intend that, for federal, state and local income-tax purposes: (i) Landlord shall be treated as the sole owner of all Allowance Property; (ii) all amounts disbursed from the Additional Tenant Improvement and Refurbishment Allowance for Allowance Property shall, to the extent permitted by applicable law, be included in Landlord’s tax basis in the applicable Allowance Property; (iii) Landlord shall be entitled to all depreciation, amortization, cost-recovery deductions and other tax benefits attributable to the Allowance Property; and (iv) Tenant shall not claim any ownership interest, tax basis, depreciation or amortization deduction, credit, expense deduction under Section 179 of the Internal Revenue Code, additional first-year depreciation under Section 168(k) of the Internal Revenue Code, or any other cost-recovery benefit with respect to any Allowance Property. Landlord and Tenant shall report the acquisition, ownership and use of the Allowance Property consistently with this Section and shall not take any position on a tax return or in any administrative or judicial proceeding inconsistent with such treatment unless required by a final determination within the meaning of Section 1313(a) of the Internal Revenue Code. If and to the extent Section 110 of the Internal Revenue Code is applicable to the Lease (as amended hereby), Landlord and Tenant expressly agree that (1) the portion of the Additional Tenant Improvement and Refurbishment Allowance used to construct or improve qualified long-term real property is provided for the purpose of constructing or improving qualified long-term real property for use in Tenant’s trade or business at the Premises, (2) such qualified long-term real property shall revert to and be treated as owned by Landlord upon the expiration or earlier termination of this Lease, and (3) Landlord and Tenant shall comply with the applicable reporting requirements of Section 110 of the Internal Revenue Code and Treasury Regulation Section 1.110-1. Nothing in this Section 6(g) shall cause furniture, equipment or other Internal Revenue Code Section 1245 property to be treated as qualified long-term real property, and nothing in this Section 6(g) shall dictate the accounting treatment of Tenant’s financial statements that are issued in accordance with Generally Accepted Accounting Principals.
7.Base Year. Effective as of July 1, 2026 and for the rest of the Initial Term, the Base Year shall be 2027. If Tenant exercises its first Renewal Option under Section 2.3 of the Existing Lease for the period from July 1, 2041 through June 30, 2046, the Base Year shall be 2041. If Tenant exercises its second Renewal Option under Section 2.3 of the Existing Lease for the period from July 1, 2046 through June 30, 2051, the Base Year shall be 2046. Landlord acknowledges and agrees that the provisions of Section 7(a)(iii) of the Sixth Amendment, Section 7(a)(iv) of the Sixth Amendment, as amended and restated in Section 11 of the Ninth Amendment, and Section 7(a)(v) of the Sixth Amendment each remain in full force and effect.
8.Right to Reduce the Size of the Premises on the Exercise of Options to Renew. Section 2.5 of the Existing Lease and Section 9 of the Sixth Amendment (as most recently set forth in Section 7 of the Eighth Amendment) are hereby deleted in their entirety and replaced by the following:
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In the event that Tenant exercises its Renewal Option for either the first Renewal Term or for both the first and second Renewal Terms, Tenant shall have the right to reduce the size of the Premises by surrendering the portion of the 8th Floor which is part of the Premises (containing 11,279 Square Feet) (said space being sometimes hereinafter referred to as the “Reduction Space”), in each case such space reduction to be effective upon the expiration date of the Initial Term or the first Renewal Term, as applicable (the “Surrender Date”). Tenant shall exercise its right of space reduction by written notice delivered to Landlord concurrently with the delivery of the Tenant’s Final Notice of its exercise of a Renewal Option, but in no event shall Tenant's notice of space reduction be given to Landlord later than twelve (12) months prior to the expiration of the Initial Term or the first Renewal Term, as applicable. If Tenant’s notice of space reduction is given in a timely manner, Tenant shall vacate and surrender possession of the Reduction Space, in broom clean condition, on the Surrender Date, and the Existing Lease will be amended to reflect the surrender of such Reduction Space as of the Surrender Date, including without limitation the reduction in Tenant’s Share. If Tenant's space reduction notice is not delivered in a timely manner as provided above with respect to a Renewal Option, then Tenant's right to surrender the Surrender Space in connection with such Renewal Option shall lapse and become null and void and of no further force and effect with respect to such Renewal Option only.
9.Armed Security Personnel; Governmental Coordination.
(a)Subject to the terms and conditions of this Section, Landlord acknowledges and agrees that Tenant may, at Tenant’s sole cost and expense, engage and maintain a qualified armed security officer to be stationed in the main lobby of the Building twenty-four (24) hours per day, seven (7) day per week (the “Security Officer”). The Security Officer shall at all times be employed or engaged by Tenant or by a reputable third-party security contractor engaged by Tenant, and shall not be deemed an employee, agent, contractor or representative of Landlord for any purpose.
(b)Tenant’s engagement and use of the Security Officer shall be subject to the following conditions: (i) the Security Officer and any security contractor employing the Security Officer shall at all times possess all licenses, permits, certifications and other governmental approvals required by applicable laws; (ii) the Security Officer shall comply with all applicable laws, Building rules and regulations, and reasonable security and operational requirements established by Landlord from time to time; (iii) Tenant shall be solely responsible for all costs and expenses associated with the Security Officer and the applicable security contractor, including all compensation, benefits, equipment, insurance, licensing and other costs; (iv) the Security Officer shall not unreasonably interfere with the operation, management, use or enjoyment of the Building or the Building’s common areas by Landlord or other tenants, occupants or invitees; (v) Tenant shall cause the Security Officer and the applicable security contractor to maintain such insurance coverages and limits as Landlord may reasonably require,
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with Landlord, Landlord’s property manager, and such other parties reasonably designated by Landlord named as additional insured parties; and (vi) Landlord shall have the right, upon reasonable advance notice to Tenant, to require the removal or replacement of any Security Officer whose conduct Landlord reasonably determines presents a safety concern, materially interferes with Building operations, violates applicable Laws or Building rules and regulations, or otherwise presents a material risk of liability to Landlord or the Building; provided, however, that Landlord shall not unreasonably exercise such right.
(c)Landlord’s review of, consent to or acquiescence in Tenant’s engagement or use of any Security Officer shall not constitute any representation, warranty or guaranty by Landlord concerning the qualifications, effectiveness or performance of such Security Officer or security contractor.
(d)Tenant shall indemnify, defend and hold harmless Landlord and Landlord’s members, partners, property manager, agents and representatives from and against any and all claims, liabilities, damages, losses, costs and expenses, including reasonable attorneys’ fees, arising out of or relating to the acts or omissions of the Security Officer or the security contractor engaged by Tenant, except to the extent finally determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of Landlord.
(e)Landlord shall use commercially reasonable efforts to communicate and coordinate, as reasonably appropriate, with the City of Pittsburgh, Allegheny County, and other applicable governmental and law-enforcement authorities regarding policing and public-safety conditions affecting the Building and the exterior areas immediately surrounding the Building. Notwithstanding the foregoing, Landlord shall have no obligation to cause any governmental or law-enforcement authority to provide any particular level, frequency or type of police or security presence or services, and Landlord makes no representation, warranty or guaranty concerning the availability, response time or effectiveness of any governmental or law-enforcement services. Nothing contained herein shall be construed as imposing upon Landlord any duty to provide security services or to ensure the safety or security of Tenant or any of Tenant’s employees, agents, contractors, visitors, guests or invitees.
10.Parking. Landlord acknowledges and agrees that during the Extended Term, Tenant shall continue to have the right to use the parking pass known as the “99 Parking Card” (or a functional equivalent procured from the operator of the Parking Garage) in connection with parking by Tenant’s clients or guests in the Parking Garage.
11.Lobby Renovations. Landlord covenants and agrees that it will complete, at its sole cost and expense, certain renovations to the Building lobby, elevator lobby and common areas of the Building’s retail corridor, all as generally depicted in the conceptual plans dated March 27, 2026 prepared by Desmone Architects (a copy of which is attached hereto as Exhibit B, the “Conceptual Plans”) no later than December 31, 2027. Notwithstanding anything herein to the contrary, the parties acknowledge that Landlord shall be permitted to make changes to the Conceptual Plans as required in Landlord’s commercially reasonable discretion, provided that
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such changes do not materially alter the quality of the renovations depicted in the Conceptual Plans.
12.Lender Consent; SNDA. This Twelfth Amendment and the rights and obligations of the parties hereunder shall not become effective until Tenant and Landlord shall have received the written consent of Dollar Bank, Federal Savings Bank, as Mortgagee, or its successor Mortgagee (“Lender”), to this Twelfth Amendment and Tenant and Lender shall have entered into a Subordination, Non-Disturbance and Attornment Agreement (“SNDA”) on terms reasonably acceptable to Tenant, and Landlord agrees to use commercially reasonable efforts to obtain such consent and SNDA as soon as possible following the mutual execution and delivery of this Twelfth Amendment.
13.Brokers. Landlord hereby warrants to Tenant that, other than CBRE (“Landlord’s Broker”), no real estate broker has or will represent Landlord in this transaction. Tenant hereby warrants to Landlord that, other than Newmark and Avison Young (collectively, “Tenant’s Brokers”), no real estate broker has or will represent Tenant in this transaction. Landlord and Tenant shall indemnify each other against and hold the other harmless from all liabilities, claims, and expenses (including reasonable attorneys’ fees) arising out of the breach of their respective warranty. Landlord shall compensate Landlord’s Broker pursuant to a separate agreement between Landlord and Landlord’s Broker. Landlord’s Broker shall compensate Tenant’s Brokers pursuant to a separate agreement among Landlord’s Broker and Tenant’s Brokers.
14.Tenant’s Estoppel. Tenant hereby certifies and acknowledges that, as of the date of this Twelfth Amendment: (a) to Tenant’s knowledge, Landlord is not in default in any respect under the Lease; (b) Tenant does not have any defenses to its obligations under the Lease; (c) there are no offsets against the Basic Rent or any amount payable by Tenant under the Lease; (d) except as provided in the Existing Lease, Landlord is not holding any security deposit or other form of security in connection with the Lease; and (e) there are no outstanding improvements or allowances required to be constructed or paid by Landlord in connection with the Lease.
15.Confidentiality of Terms. Landlord and Tenant covenant and agree to maintain the terms of this Twelfth Amendment and all documents produced in connection therewith as strictly confidential. In no event shall Landlord or Tenant disclose or publish such information to any third parties except: (a) either party may disclose the terms of this Twelfth Amendment to its lenders, accountants, attorneys, employees or tax advisors to whom disclosure is necessary, provided that such individuals are advised of the confidentiality provisions hereof; or (b) as may be agreed upon in writing by the other party. Notwithstanding the foregoing, (i) Landlord, with Tenant’s prior written consent as to both form and content, may generate an announcement regarding Tenant’s extension of the Existing Lease without divulging any specifics of this Twelfth Amendment, and (ii) this Section 15 shall not apply to Tenant to the extent that Tenant is required by law to disclose this Twelfth Amendment and/or to include a copy of this Twelfth Amendment with a report filed by Tenant with the United States Securities and Exchange Commission.
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16.Miscellaneous. The laws of the Commonwealth of Pennsylvania shall govern the validity, performance and enforcement of this Twelfth Amendment. Landlord and Tenant hereby ratify and confirm their respective rights and obligations under the Lease. Except as specifically herein amended, the Lease is and shall remain in full force and effect according to the terms thereof. In the event of any conflict between the terms of the Lease and the terms of this Twelfth Amendment, the terms of this Twelfth Amendment shall control. The headings to sections of this Twelfth Amendment are for convenient reference only and shall not be used in interpreting this Twelfth Amendment. This Twelfth Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. Delivery of an electronically executed signature page hereof by electronic transmission (including, without limitation, via emailed .pdf or DocuSign) shall specifically be deemed as effective as delivery of a manually executed signature page hereof.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, this Twelfth Amendment has been duly executed by the parties hereto as of the date first above written.
LANDLORD: LIBERTY CENTER LLC, a Pennsylvania limited liability company By: /s/ Cheskel Brach___ Name: Cheskel Brach Title: Manager TENANT: FEDERATED HERMES, INC., a Pennsylvania corporation By: /s/ Richard A. Novak Name: Richard A. Novak Title: Vice President | |||||
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EXHIBIT A
Amortization Schedule
[See attached.]
EXHIBIT B
Conceptual Plans for Lobby Renovations
[See attached.]
EXHIBIT 31.1
CERTIFICATIONS
I, J. Christopher Donahue, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Federated Hermes, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date | October 30, 2026 | By: | /s/ J. Christopher Donahue | ||||||||||||||
| J. Christopher Donahue | |||||||||||||||||
| President and Chief Executive Officer | |||||||||||||||||
EXHIBIT 31.2
CERTIFICATIONS
I, Thomas R. Donahue, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Federated Hermes, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date | October 30, 2026 | By: | /s/ Thomas R. Donahue | ||||||||||||||
| Thomas R. Donahue | |||||||||||||||||
| Chief Financial Officer | |||||||||||||||||
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Federated Hermes, Inc. (the "Company") on Form 10‑Q for the quarterly period ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date | October 30, 2026 | By: | /s/ J. Christopher Donahue | ||||||||||||||
| J. Christopher Donahue | |||||||||||||||||
| President and Chief Executive Officer | |||||||||||||||||
| Date | October 30, 2026 | By: | /s/ Thomas R. Donahue | ||||||||||||||
| Thomas R. Donahue | |||||||||||||||||
| Chief Financial Officer | |||||||||||||||||