Note 9. Financial Instruments

Bonds

We held corporate and municipal bonds with par values totaling $51.5 million and $49.5 million at September 30, 2018 and December 31, 2017, respectively. All bonds are investment grade and are classified as available-for-sale. These bonds have maturity or callable dates ranging from October 2018 through November 2023, and are included in “Funds held for clients – current” in the accompanying Consolidated Balance Sheets based on our intent and ability to sell these investments at any time under favorable conditions. The following table summarizes our bond activity for the nine months ended September 30, 2018 and the twelve months ended December 31, 2017 (in thousands):

	Nine Months Ended			Twelve Months Ended
	September 30, 2018			December 31, 2017
Fair value at beginning of period	$	51,101		$	44,573
Purchases		10,745			15,546
Redemptions		(1,331	)		(940	)
Maturities		(7,370	)		(7,845	)
Decrease in bond premium		(219	)		(160	)
Fair market value adjustment		(538	)		(73	)
Fair value at end of period	$	52,388		$	51,101

Interest Rate Swaps

We do not purchase or hold any derivative instruments for trading or speculative purposes. We utilize interest rate swaps to manage interest rate risk exposure associated with our floating-rate debt under the credit facility. Under these interest rate swap contracts, we receive cash flows from counterparties at variable rates based on the London Interbank Offered Rate (“LIBOR”) and pay the counterparties a fixed rate. See our Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion on our interest rate swaps.

During the second quarter of 2018, we entered into an additional interest rate swap with a notional value of $15 million at a fixed interest rate of 2.64% maturing in 5 years.

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying Consolidated Balance Sheets at September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018
	Notional		Fair
	Amount		Value		Balance Sheet Location
Interest rate swaps	$	70,000	$	2,089	Other non-current assets
Interest rate swaps	$	15,000	$	21	Other current assets

	December 31, 2017
	Notional		Fair
	Amount		Value		Balance Sheet Location
Interest rate swaps	$	55,000	$	1,055	Other non-current assets
Interest rate swaps	$	15,000	$	76	Other current assets

Under the terms of the interest rate swaps, we pay interest at a fixed rate of interest plus applicable margin as stated in the agreement, and receive interest that varies with the one-month LIBOR. The notional value, fixed rate of interest and expiration date of each interest rate swap as of September 30, 2018 is (i) $15 million – 1.155% -November 2018, (ii) $25 million – 1.300% - October 2020, (iii) $10 million – 1.120% - February 2021, (iv) $20 million – 1.770% - May 2022, and (v) $15 million – 2.64% - June 2023. Refer to Note 10, Fair Value Measurements, for additional disclosures regarding fair value measurements.

The following table summarizes the effects of the interest rate swaps on the accompanying Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Gain Recognized in AOCL, net of tax				(Loss) Gain Reclassified from AOCL into Expense
	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2018		2017		2018			2017
Interest rate swap	$	123	$	11	$	(104	)	$	20

	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018			2017
Interest rate swap	$	749	$	82	$	(229	)	$	120