Regulatory Capital Requirements Of HRB Bank

12 Months Ended

Apr. 30, 2013

Banking and Thrift [Abstract]

Regulatory Capital Requirements Of HRB Bank

REGULATORY CAPITAL REQUIREMENTS

HRB Bank is subject to capital guidelines administered by federal banking agencies. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on HRB Bank and our consolidated financial statements. All savings associations are subject to the capital adequacy guidelines and the regulatory framework for prompt corrective action. HRB Bank must meet specific capital guidelines that involve quantitative measures of HRB Bank's assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. HRB Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. On August 30, 2012, the OCC published in the Federal Register a formal notice of proposed rulemaking, which would increase capital requirements for federal savings banks, including HRB Bank. These proposed rules have been delayed to an unspecified date. HRB Bank files its regulatory Call Report with the OCC on a calendar quarter basis.

Quantitative measures established by regulation to ensure capital adequacy require HRB Bank to maintain minimum amounts and ratios of tangible equity, total risk-based capital and Tier 1 capital, as set forth in the table below. As of April 30, 2013, HRB Bank’s leverage ratio was 33.9%.

As of March 31, 2013, our most recent Call Report filing with the OCC, HRB Bank was a “well capitalized” institution under the prompt corrective action provisions of the FDIC. The five capital categories are: (1) “well capitalized” (total risk-based capital ratio of 10%, Tier 1 Risk-based capital ratio of 6% and leverage ratio of 5%); (2) “adequately capitalized;” (3) “undercapitalized;” (4) “significantly undercapitalized;” and (5) “critically undercapitalized.” There have been no conditions or events since March 31, 2013 that management believes have caused a change in HRB Bank’s category.

The following table sets forth HRB Bank's regulatory capital requirements calculated in its Call Report, as filed with the Federal Financial Institutions Examination Council (FFIEC):

(dollars in 000s)
	Actual				Minimum Capital Requirement					Minimum to be Well Capitalized
	Amount		Ratio		Amount		Ratio			Amount		Ratio
As of March 31, 2013:
Total risk-based capital ratio (1)	$	506,734	131.6	%	$	30,806	8.0	%		$	38,508	10.0	%
Tier 1 risk-based capital ratio (2)	501,731		130.3	%	N/A		N/A			23,105		6.0	%
Tier 1 capital ratio (leverage) (3)	501,731		25.5	%	236,315		12.0	%	(5)	98,464		5.0	%
Tangible equity ratio (4)	501,731		25.5	%	29,539		1.5	%		N/A		N/A
As of March 31, 2012:
Total risk-based capital ratio (1)	$	458,860	120.3	%	$	30,513	8.0	%		$	38,141	10.0	%
Tier 1 risk-based capital ratio (2)	453,800		119.0	%	N/A		N/A			22,885		6.0	%
Tier 1 capital ratio (leverage) (3)	453,800		29.4	%	185,252		12.0	%	(5)	77,188		5.0	%
Tangible equity ratio (4)	453,800		29.4	%	23,157		1.5	%		N/A		N/A

⁽¹⁾  Total risk-based capital divided by risk-weighted assets.

⁽²⁾  Tier 1 (core) capital less deduction for low-level recourse and residual interest divided by risk-weighted assets.

⁽³⁾  Tier 1 (core) capital divided by adjusted total assets.

⁽⁴⁾  Tangible capital divided by tangible assets.

⁽⁵⁾  Effective April 5, 2012, the minimum capital requirement was changed to 4% by the OCC, although HRB Bank plans to maintain a minimum of 12.0% leverage capital at the end of each calendar quarter.

Block Financial typically makes capital contributions to HRB Bank to help HRB Bank meet its capital requirements. Block Financial made no such capital contributions in fiscal year 2013, but contributed $400.0 million and $235.0 million during fiscal years 2012 and 2011, respectively.

A return of capital or dividend paid by HRB Bank must be approved by the OCC and the Federal Reserve. HRB Bank did not pay any dividends during fiscal year 2013. HRB Bank received regulatory approval and subsequently paid cash dividends and returned capital of $400.0 million and $262.5 million during fiscal years 2012 and 2011, respectively. At April 30, 2013, HRB Bank had total equity of $512.4 million.