NOTE 7. FINANCIAL INSTRUMENTS

Available-For-Sale Debt Securities - In connection with certain services provided by our payroll operations, we collect funds from our clients’ accounts in advance of paying client obligations. These funds held for clients are segregated and invested in accordance with our investment policy, which requires all investments carry an investment grade rating at the time of initial investment. These investments, primarily consisting of corporate and municipal bonds, are classified as available-for-sale and are included in the “Funds held for clients” line item on the accompanying unaudited Condensed Consolidated Balance Sheets. The par value of these investments totaled $43.8 million and $45.0 million at September 30, 2026 and December 31, 2025, respectively, and these investments have maturity or callable dates ranging from December 2026 through March 2031.

At September 30, 2026, unrealized losses on the securities were not material and have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value. The bond issuers continue to make timely principal and interest payments.

The following table summarizes activities related to these investments for the nine months ended September 30, 2026 and the year ended December 31, 2025 (in thousands):

 

		Nine Months Ended  September 30, 2026				Year Ended  December 31, 2025
Fair value at beginning of period		$	45,004			$	40,999
Purchases			6,250				43,375
Redemptions			(1,500)				(5,096)
Maturities			(5,965)				(34,595)
Change in bond premium			22				11
Fair market value adjustment			(1,068)				310
Fair value at end of period		$	42,743			$	45,004

 

In addition to the debt securities discussed above, we also held other depository assets in the amount of $0.2 million and $0.5 million at September 30, 2026 and December 31, 2025, respectively. Those depository assets are classified as Level 1 in the fair value hierarchy.

- We utilize interest rate swaps to manage interest rate risk exposure associated with our floating-rate debt under the 2024 Credit Facilities, or the forecasted acquisition of such liability. We do not purchase or hold any derivative instruments for trading or speculative purposes. Refer to Note 7, Financial Instruments, to the consolidated financial statements contained in our Annual Report on Form for the year ended December 31, 2025, as amended, for further discussion on our interest rate swaps.

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying unaudited Condensed Consolidated Balance Sheets at September 30, 2026 and December 31, 2025 (amounts in thousands, except percentages):

 

		September 30, 2026
		Notional Amount				Fixed Rate				Expiration				Fair Value				Balance Sheet Location
Interest rate swap		$	30,000				1.186	%			12/14/2026			$	172			Other current asset
Interest rate swap		$	100,000				3.850	%			7/14/2027			$	390			Other current asset
Interest rate swap		$	20,000				2.450	%			8/14/2027			$	338			Other current asset
Interest rate swap		$	25,000				3.669	%			4/14/2028			$	344			Other non-current asset
Interest rate swap		$	25,000				4.488	%			10/14/2028			$	77			Other non-current asset
Interest rate swap		$	50,000				3.703	%			3/14/2030			$	1,594			Other non-current asset
Interest rate swap		$	50,000				3.503	%			4/14/2030			$	1,958			Other non-current asset
Interest rate swap		$	50,000				3.658	%			7/14/2030			$	1,814			Other non-current asset
Interest rate swap		$	50,000				3.680	%			7/15/2030			$	1,774			Other non-current asset

 

		December 31, 2025
		Notional Amount				Fixed Rate				Expiration				Fair Value				Balance Sheet Location
Interest rate swap		$	100,000				4.047	%			7/14/2026			$	(269	)		Other current liability
Interest rate swap		$	30,000				1.186	%			12/14/2026			$	628			Other current asset
Interest rate swap		$	100,000				3.850	%			7/14/2027			$	(838	)		Other non-current liability
Interest rate swap		$	20,000				2.450	%			8/14/2027			$	263			Other non-current asset
Interest rate swap		$	25,000				3.669	%			4/14/2028			$	(228	)		Other non-current liability
Interest rate swap		$	25,000				4.488	%			10/14/2028			$	(805	)		Other non-current liability
Interest rate swap		$	50,000				3.703	%			3/14/2030			$	(708	)		Other non-current liability
Interest rate swap		$	50,000				3.503	%			4/14/2030			$	(327	)		Other non-current liability
Interest rate swap		$	50,000				3.658	%			7/14/2030			$	(637	)		Other non-current liability
Interest rate swap		$	50,000				3.680	%			7/15/2030			$	(681	)		Other non-current liability

Refer to Note , Fair Value Measurements, for additional disclosures regarding fair value measurements.

The following table summarizes the effects of the interest rate swaps on the accompanying Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2026 and 2025 (in thousands):