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Regulatory Requirements | 12 Months Ended
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Apr. 30, 2011
Regulatory Requirements |
Regulatory Requirements |
NOTE 20: REGULATORY REQUIREMENTS |
HRB Bank and the Company are subject to various regulatory requirements, including capital guidelines for HRB Bank, 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. HRB Bank files its regulatory Thrift Financial Report (TFR) 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. In addition to these minimum ratio requirements, HRB Bank is required to continually maintain a 12.0% minimum leverage ratio. As of April 30, 2011, HRB Bank's leverage ratio was 30.8%. As of March 31, 2011, our most recent TFR filing with the Office of Thrift Supervision (OTS), 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 are no conditions or events since March 31, 2011 that management believes have changed HRB Bank's category. The following table sets forth HRB Bank's regulatory capital requirements, as calculated in its TFR:
(dollars in 000s) |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | To Be Well Capitalized |  |  |  |
|  |  |  |  |  |  |  | For Capital Adequacy |  |  | Under Prompt Corrective |  |  |  |
|  | Actual |  |  | Purposes |  |  | Action Provisions |  |  |  |
|  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  |  |
As of March 31, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total risk-based capital ratio (1) |  | $ | 405,000 |  |  |  | 92.5% |  |  | $ | 35,019 |  |  |  | 8.0% |  |  | $ | 43,773 |  |  |  | 10.0% |  |  |  |  |
Tier 1 risk-based capital ratio (2) |  | $ | 399,187 |  |  |  | 91.2% |  |  |  | N/A |  |  |  | N/A |  |  | $ | 26,264 |  |  |  | 6.0% |  |  |  |  |
Tier 1 capital ratio (leverage) (3) |  | $ | 399,187 |  |  |  | 22.8% |  |  | $ | 209,758 |  |  |  | 12.0% |  |  | $ | 87,399 |  |  |  | 5.0% |  |  |  |  |
Tangible equity ratio (4) |  | $ | 399,187 |  |  |  | 22.8% |  |  | $ | 26,220 |  |  |  | 1.5% |  |  |  | N/A |  |  |  | N/A |  |  |  |  |
As of March 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total risk-based capital ratio (1) |  | $ | 420,401 |  |  |  | 75.7% |  |  | $ | 44,436 |  |  |  | 8.0% |  |  | $ | 55,545 |  |  |  | 10.0% |  |  |  |  |
Tier 1 risk-based capital ratio (2) |  | $ | 413,074 |  |  |  | 74.4% |  |  |  | N/A |  |  |  | N/A |  |  | $ | 33,327 |  |  |  | 6.0% |  |  |  |  |
Tier 1 capital ratio (leverage) (3) |  | $ | 413,074 |  |  |  | 24.9% |  |  | $ | 199,272 |  |  |  | 12.0% |  |  | $ | 83,030 |  |  |  | 5.0% |  |  |  |  |
Tangible equity ratio (4) |  | $ | 413,074 |  |  |  | 24.9% |  |  | $ | 24,909 |  |  |  | 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.
Block Financial LLC (BFC) typically makes capital contributions to HRB Bank to help it meet its capital requirements. BFC made capital contributions to HRB Bank of $235.0 million during fiscal years 2011 and 2010, and $245.0 million during fiscal year 2009. HRB Bank received approval from the OTS during fiscal year 2011 to pay cash and non-cash dividends. The dividend payments were subject to HRB Bank maintaining a leverage capital ratio of 12% immediately after payment and on a continual basis. HRB Bank paid dividends and returned of capital of $262.5 million during fiscal year 2011, comprised of $37.5 million in REO properties and loans and $225.0 million in cash.

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- Definition The entire disclosure for banks, savings institutions, and credit unions, for regulatory capital requirements imposed by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) or for any state imposed capital requirements, as applicable. The disclosure may include (1) a description of regulatory capital requirements (a) for capital adequacy purposes and (b) established by the prompt corrective action provisions of Section 38 of the Federal Depository Insurance Act; (2) the actual or possible material effects of noncompliance with such requirements; (3) whether the entity is in compliance with the regulatory capital requirements including (a) required and actual ratios and amounts of Tier 1 leverage, Tier 1 risk-based, and total risk-based capital, tangible capital (for savings institutions), and Tier 3 capital for market risk (for certain banks and bank holding companies), (b) factors that may significantly affect capital adequacy; (4) the prompt corrective action category in which the entity was classified as of its most recent notification; (5) whether management believes any conditions or events since notification have changed the entity's category. Also may include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1G -URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958577-112826 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958570-112826 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958568-112826 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1E -URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958574-112826 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1H -URI http://asc.fasb.org/extlink&oid=6918689&loc=d3e65071-112826 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Audit and Accounting Guide (AAG) -Number AAG-DEP -Chapter 17 -Paragraph 15, 16, 17 -IssueDate 2006-05-01 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1C -URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958572-112826 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1F -URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958575-112826 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1D -URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958573-112826 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958569-112826 + Details
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