Regulatory Capital Requirements Of HRB Bank

12 Months Ended

Apr. 30, 2014

Banking and Thrift [Abstract]

Regulatory Capital Requirements Of HRB Bank

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. In July 2013, the federal banking agencies issued final rules to implement changes, which would increase capital requirements for federal savings banks, including HRB Bank. HRB Bank files its regulatory Call Report 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, 2014, HRB Bank's leverage ratio was 41.3%.

As of March 31, 2014, our most recent Call Report filing, 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, 2014 that management believes have caused a change in HRB Bank's capital 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, 2014:
Total risk-based capital ratio (1)	$	563,899	168.5	%	$	26,771	8.0	%		$	33,464	10.0	%
Tier 1 risk-based capital ratio (2)	559,572		167.2	%	N/A		N/A			20,079		6.0	%
Tier 1 capital ratio (leverage) (3)	559,572		32.1	%	209,041		12.0	%	(5)	87,101		5.0	%
Tangible equity ratio (4)	559,572		32.1	%	26,130		1.5	%		N/A		N/A
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

⁽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 may make capital contributions to HRB Bank to help HRB Bank meet its capital requirements. Block Financial made no such capital contributions in fiscal year 2014 or 2013, but contributed $400.0 million during fiscal year 2012.

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 2014 or 2013. HRB Bank received regulatory approval and subsequently paid cash dividends and returned capital of $400.0 million during fiscal year 2012. As of April 30, 2014, HRB Bank had total equity of $585.0 million.