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Mortgage Loans Held For Investment And Related Assets | 3 Months Ended
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Jul. 31, 2011
Mortgage Loans Held For Investment And Related Assets |
Mortgage Loans Held For Investment And Related Assets | 5. Mortgage Loans Held for Investment and Related Assets The composition of our mortgage loan portfolio as of July 31, 2011 and April 30, 2011 is as follows:
|  |  |  |  |  |  |  |  | (dollars in 000s) |
As of |  | July 31, 2011 |  |  | April 30, 2011 |
|  | Amount |  | % of Total |  |  | Amount |  | % of Total |
Adjustable-rate loans | $ | 320,539 |  | 58 | % | $ | 333,828 |  | 58 | %
Fixed-rate loans |  | 233,452 |  | 42 | % |  | 239,146 |  | 42 | %
|  | 553,991 |  | 100 | % |  | 572,974 |  | 100 | %
Unamortized deferred fees and costs |  | 3,975 |  |  |  |  | 4,121 |  |  |
Less: Allowance for loan losses |  | (91,303 | ) |  |  |  | (92,087 | ) |  |
| $ | 466,663 |  |  |  | $ | 485,008 |  |  |
Our loan loss allowance as a percent of mortgage loans was 16.5% at July 31, 2011, compared to 16.1% at April 30, 2011. Activity in the allowance for loan losses for the three months ended July 31, 2011 and 2010 is as follows:
|  |  |  |  |  |  | (in 000s)
Three months ended July 31, |  | 2011 |  |  | 2010 |  |
Balance, beginning of the period | $ | 92,087 |  | $ | 93,535 |  |
Provision |  | 5,625 |  |  | 8,000 |  |
Recoveries |  | 49 |  |  | 33 |  |
Charge-offs |  | (6,458 | ) |  | (13,172 | ) |
Balance, end of the period | $ | 91,303 |  | $ | 88,396 |  |
When determining our allowance for loan losses, we evaluate loans less than 60 days past due on a pooled basis, while loans we consider impaired, including those loans more than 60 days past due or modified as troubled debt restructurings (TDRs), are evaluated individually. The balance of these loans and the related allowance is as follows:
|  |  |  |  |  |  |  | (in 000s)
As of |  | July 31, 2011 |  |  |  | April 30, 2011 |
| Portfolio Balance Related Allowance |  | Portfolio Balance Related Allowance
Pooled (less than 60 days past due) | $ | 290,762 | $ | 10,914 | $ | 304,325 | $ | 11,238
Impaired: |  |  |  |  |  |  |  |
Individually (TDRs) |  | 95,417 |  | 9,499 |  | 106,328 |  | 11,056
Individually (60 days or more past due) | 167,812 |  | 70,890 |  | 162,321 |  | 69,793
| $ | 553,991 | $ | 91,303 | $ | 572,974 | $ | 92,087
Our portfolio includes loans originated by Sand Canyon Corporation (SCC) and purchased by H&R Block Bank (HRB Bank) which constitute 63% of the total loan portfolio at July 31, 2011. We have experienced higher rates of delinquency and have greater exposure to loss with respect to this segment of our loan portfolio. Our remaining loan portfolio totaled $207.3 million and is characteristic of a prime loan portfolio, and we believe subject to a lower loss exposure. Detail of our mortgage loans held for investment and the related allowance at July 31, 2011 is as follows: (dollars in 000s)
|  | Outstanding |  | Loan Loss Allowance |  | % 30 | + Days
|  | Principal Balance |  | Amount | % of Principal |  | Past Due |
Purchased from SCC | $ | 346,695 | $ | 80,640 | 23.3 | % | 44.8 | %
All other |  | 207,296 |  | 10,663 | 5.1 | % | 12.4 | %
| $ | 553,991 | $ | 91,303 | 16.5 | % | 32.7 | %
Credit quality indicators at July 31, 2011 include the following:
|  |  |  |  |  | (in 000s)
Credit Quality Indicators |  | Purchased from SCC |  | All Other |  | Total Portfolio
Occupancy status: |  |  |  |  |  |
Owner occupied | $ | 244,259 | $ | 132,132 | $ | 376,391
Non-owner occupied |  | 102,436 |  | 75,164 |  | 177,600
| $ | 346,695 | $ | 207,296 | $ | 553,991
Documentation level: |  |  |  |  |  |
Full documentation | $ | 105,547 | $ | 150,972 | $ | 256,519
Limited documentation |  | 10,447 |  | 22,411 |  | 32,858
Stated income |  | 198,898 |  | 21,168 |  | 220,066
No documentation |  | 31,803 |  | 12,745 |  | 44,548
| $ | 346,695 | $ | 207,296 | $ | 553,991
Internal risk rating: |  |  |  |  |  |
High | $ | 143,931 | $ | 357 | $ | 144,288
Medium |  | 202,764 |  | - |  | 202,764
Low |  | - |  | 206,939 |  | 206,939
| $ | 346,695 | $ | 207,296 | $ | 553,991
Loans given our internal risk rating of "high" are generally originated by SCC, have no documentation or are stated income and are non-owner occupied. Loans given our internal risk rating of "medium" are generally full documentation or stated income, with loan-to-value at origination of more than 80% and have credit scores at origination below 700. Loans given our internal risk rating of "low" are generally full documentation, with loan-to-value at origination of less than 80% and have credit scores greater than 700. Our mortgage loans held for investment include concentrations of loans to borrowers in certain states, which may result in increased exposure to loss as a result of changes in real estate values and underlying economic or market conditions related to a particular geographical location. Approximately 52% of our mortgage loan portfolio consists of loans to borrowers located in the states of Florida, California and New York. Detail of the aging of the mortgage loans in our portfolio that are past due as of July 31, 2011 is as follows:
|  |  |  |  |  |  |  |  |  |  |  |  | (in 000s)
|  | Less than 60 |  | 60 – 89 | Days |  | 90+ Days |  | Total |  |  |  |
|  | Days Past Due |  | Past Due |  |  | Past Due (1) |  | Past Due |  | Current |  | Total
Purchased from SCC | $ | 35,960 | $ | 8,886 |  | $ | 133,767 | $ | 178,613 | $ | 168,082 | $ | 346,695
All other |  | 10,470 |  | 1,735 |  |  | 20,479 |  | 32,684 |  | 174,612 |  | 207,296
| $ | 46,430 | $ | 10,621 |  | $ | 154,246 | $ | 211,297 | $ | 342,694 | $ | 553,991
(1) No loans past due 90 days or more are still accruing interest Information related to our non-accrual loans is as follows:
|  |  |  | (in 000s)
As of |  | July 31, 2011 |  | April 30, 2011
Loans: |  |  |  |
Purchased from SCC | $ | 138,277 | $ | 143,358
Other |  | 22,964 |  | 14,106
|  | 161,241 |  | 157,464
TDRs: |  |  |  |
Purchased from SCC |  | 3,767 |  | 2,849
Other |  | 178 |  | 329
|  | 3,945 |  | 3,178
Total non-accrual loans | $ | 165,186 | $ | 160,642
Information related to impaired loans is as follows:
|  |  |  |  |  |  |  | (in 000s) |
|  | Portfolio Balance |  |  | Portfolio Balance |  |  | Total |  |  |  |
|  | With Allowance |  |  | With No Allowance |  |  | Portfolio Balance |  |  | Related Allowance |
As of July 31, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchased from SCC |  | $ | 180,494 |  |  | $ | 47,081 |  |  | $ | 227,575 |  |  | $ | 70,964 |
Other |  |  | 27,954 |  |  |  | 7,700 |  |  |  | 35,654 |  |  |  | 9,425 |
|  | $ | 208,448 |  |  | $ | 54,781 |  |  | $ | 263,229 |  |  | $ | 80,389 |
As of April 30, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchased from SCC (1) |  | $ | 180,387 |  |  | $ | 51,674 |  |  | $ | 232,061 |  |  | $ | 71,733 |
Other (1) |  |  | 29,027 |  |  |  | 7,561 |  |  |  | 36,588 |  |  |  | 9,116 |
|  | $ | 209,414 |  |  | $ | 59,235 |  |  | $ | 268,649 |  |  | $ | 80,849 |
(1) |  | Classification of amounts as of April 30, 2011 have been restated to conform to the current period presentation.
Information related to the allowance for impaired loans is as follows:
|  |  |  | (in 000s)
As of |  | July 31, 2011 |  | April 30, 2011
Portion of total allowance for loan losses allocated |  |  |  |
to impaired loans and TDR loans: |  |  |  |
Based on collateral value method | $ | 70,890 | $ | 69,794
Based on discounted cash flow method |  | 9,499 |  | 11,055
| $ | 80,389 | $ | 80,849
Information related to activities of our non-performing assets is as follows:
|  | (in 000s) |
Three Months Ended July 31, |  | 2011 |  |  | 2010 |
Average impaired loans: |  |  |  |  |  |  |  |
Purchased from SCC |  | $ | 230,150 |  |  |  |  |
All other |  |  | 36,477 |  |  |  |  |
|  | $ | 266,627 |  |  | $ | 303,767 |
Interest income on impaired loans: |  |  |  |  |  |  |  |
Purchased from SCC |  | $ | 1,556 |  |  |  |  |
All other |  |  | 119 |  |  |  |  |
|  | $ | 1,675 |  |  | $ | 1,749 |
Interest income on impaired loans recognized on a cash basis on non-accrual status: |  |  |  |  |  |  |  |
Purchased from SCC |  | $ | 1,498 |  |  |  |  |
All other |  |  | 114 |  |  |  |  |
|  | $ | 1,612 |  |  | $ | 1,636 |
Our real estate owned includes loans accounted for as in-substance foreclosures of $7.2 million and $7.7 million at July 31, 2011 and April 30, 2011, respectively. Activity related to our real estate owned is as follows:
|  |  |  |  |  |  | (in 000s)
Three months ended July 31, |  | 2011 |  |  | 2010 |  |
Balance, beginning of the period | $ | 19,532 |  | $ | 29,252 |  |
Additions |  | 1,573 |  |  | 6,527 |  |
Sales |  | (3,722 | ) |  | (8,827 | ) |
Writedowns |  | (793 | ) |  | (643 | ) |
Balance, end of the period | $ | 16,590 |  | $ | 26,309 |  |

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- Definition The entire disclosure for mortgage loans on real estate, this includes the supplemental information pertaining to each mortgage loan receivable that equals or exceeds three percent of the carrying amount of mortgages. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 948 -SubTopic 310 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-29) -URI http://asc.fasb.org/extlink&oid=6589523&loc=d3e617274-123014 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph c -Subparagraph Schedule IV -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 29 -Article 12 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 10 -Section S99 -Paragraph 6 -Subparagraph (SX 210.5-04.(c) Schedule IV) -URI http://asc.fasb.org/extlink&oid=6882300&loc=d3e5864-122674 + Details
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