HireQuest, Inc. Fair Value Disclosure
Note 6 – Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable, the line of credit and all other current assets and liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the amortized cost basis as adjusted by an allowance for credit losses as we believe the stated interest rates reflects the prevailing market rates given our unique collateral position and the scarce capital resources willing to finance a franchise. The fair value of the term loan payable approximates its carrying value because current rates for similar borrowings do not have a material impact.
| December 31, 2024 | ||||||||||||||||
| (in thousands) | Total fair value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Cash | $ | 2,219 | $ | 2,219 | $ | - | $ | - | ||||||||
| Notes receivable | 7,830 | - | 7,830 | - | ||||||||||||
| Accounts receivable | 42,348 | - | 42,348 | - | ||||||||||||
| Total assets at fair value | $ | 52,397 | $ | 2,219 | $ | 50,178 | $ | - | ||||||||
| Term loan payable | $ | 88 | $ | - | $ | 88 | $ | - | ||||||||
| Line of credit | 6,829 | - | 6,829 | - | ||||||||||||
| Total liabilities at fair value | $ | 6,917 | $ | - | $ | 6,917 | $ | - | ||||||||
| December 31, 2023 | ||||||||||||||||
| (in thousands) | Total fair value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Cash | $ | 1,342 | $ | 1,342 | $ | - | $ | - | ||||||||
| Notes receivable | 9,622 | - | 9,622 | - | ||||||||||||
| Accounts receivable | 44,394 | - | 44,394 | - | ||||||||||||
| Total assets at fair value | $ | 55,358 | $ | 1,342 | $ | 54,016 | $ | - | ||||||||
| Term loan payable | $ | 646 | $ | - | $ | 646 | $ | - | ||||||||
| Line of credit | 14,119 | - | 14,119 | - | ||||||||||||
| Total liabilities at fair value | $ | 14,765 | $ | - | $ | 14,765 | $ | - | ||||||||
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.