Regulatory Capital Requirements Of HRB Bank

12 Months Ended

Apr. 30, 2015

Banking and Thrift [Abstract]

Regulatory Capital Requirements Of HRB Bank

H&R Block, Inc. and HRB Bank are 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 and savings and loan holding companies (SLHCs) are subject to the capital adequacy guidelines and the regulatory framework for prompt corrective action. We must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. Our 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 increased capital requirements for federal savings banks and SLHCs. We file our regulatory reports 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, 2015, HRB Bank's leverage ratio was 33.0%.

As of March 31, 2015, 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 8%; Common equity tier 1 risk-based capital ratio of 6.5% 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, 2015 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, 2015:
Total risk-based capital ratio (1)	$	654,053	236.0	%	$	22,173	8.0	%	$	27,716	10.0	%
Tier 1 risk-based capital ratio (2)	650,487		234.7	%	16,630		6.0	%	22,173		8.0	%
Common Equity Tier 1 risk-based capital ratio (3)	650,487		234.7	%	12,472		4.5	%	18,016		6.5	%
Tier 1 capital ratio (leverage) (4) (5)	650,487		34.7	%	74,953		4.0	%	93,692		5.0	%
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) (5)	559,572		32.1	%	209,041		12.0	%	87,101		5.0	%
Tangible equity ratio (4)	559,572		32.1	%	26,130		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⁾  Total Common Equity Tier 1 capital divided by risk-weighted assets.

⁽⁴⁾  Tier 1 (core) capital less deduction for low-level recourse and residual interest divided by average assets.

⁽⁵⁾  In prior periods, this ratio was calculated using total assets at quarter end in the denominator in accordance with regulatory capital rules at that point in time. This ratio is now calculated using current quarter average assets in the denominator in accordance with current regulatory capital rules.

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 years 2015, 2014 or 2013.

A return of capital or dividend paid by HRB Bank must be approved by the OCC and the Federal Reserve. HRB Bank received regulatory approval and subsequently paid cash dividends and returned capital of $250.0 million during fiscal year 2015. HRB Bank did not pay any dividends during fiscal years 2014 or 2013. As of April 30, 2015, HRB Bank had total equity of $412.0 million.

As of March 31, 2015, our most recent FR Y-9C filing with the Federal Reserve, H&R Block, Inc. met the minimum required capital ratios. There have been no conditions or events since March 31, 2015 that management believes have caused a change in our regulatory compliance.

The following table sets forth H&R Block Inc.'s regulatory capital requirements calculated in its FR Y-9C report, as filed with the Federal Reserve:

(dollars in 000s)
	Actual				Minimum Capital Requirement
	Amount		Ratio		Amount		Ratio
As of March 31, 2015:
Total risk-based capital ratio (1)	$	1,059,040	62.0	%	$	136,713	8.0	%
Tier 1 risk-based capital ratio (2)	1,037,423		60.7	%	102,535		6.0	%
Common Equity Tier 1 risk-based capital ratio (3)	1,037,423		60.7	%	76,901		4.5	%
Tier 1 capital ratio (leverage) (4)	1,037,423		28.3	%	146,839		4.0	%

⁽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⁾  Total Common Equity Tier 1 capital divided by risk-weighted assets.

⁽⁴⁾  Tier 1 (core) capital less deduction for low-level recourse and residual interest divided by average assets.

H&R Block, Inc., H&R Block Group, Inc. and Block Financial (our Holding Companies) are SLHCs because they control HRB Bank. By consummating the P&A Transaction, our Holding Companies would cease to be SLHCs and would no longer be subject to regulation by the Board of Governors of the Federal Reserve System (Federal Reserve) as SLHCs or to the regulatory capital requirements applicable to SLHCs.