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Mortgage Loans Held For Investment And Related Assets | 6 Months Ended
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Oct. 31, 2012
Mortgage Loans Held For Investment And Related Assets [Abstract] |
Mortgage Loans Held For Investment And Related Assets | 4. Mortgage Loans Held for Investment and Related Assets The composition of our mortgage loan portfolio as of October 31, 2012 and April 30, 2012 is as follows:
|  |  |  |  |  |  |  |  |  | (dollars in 000s)
As of |  |  | October 31, 2012 |  |  | April 30, 2012
|  |  | Amount |  | % of Total |  |  | Amount |  | % of Total
Adjustable-rate loans |  | $ | 210,610 |  | 55% |  | $ | 238,442 |  | 56%
Fixed-rate loans |  |  | 175,257 |  | 45% |  |  | 190,870 |  | 44%
|  |  | 385,867 |  | 100% |  |  | 429,312 |  | 100%
Unamortized deferred fees and costs |  |  | 3,108 |  |  |  |  | 3,429 |  |
Less: Allowance for loan losses |  |  | (18,125) |  |  |  |  | (26,540) |  |
|  | $ | 370,850 |  |  |  | $ | 406,201 |  |
Our loan loss allowance as a percent of mortgage loans was 4.7% at October 31, 2012, compared to 6.2% at April 30, 2012. Activity in the allowance for loan losses for the six months ended October 31, 2012 and 2011 is as follows:
|  |  |  |  | (in 000s)
Six months ended October 31, |  | 2012 |  |  | 2011
Balance, beginning of the period | $ | 26,540 |  | $ | 92,087
Provision |  | 6,750 |  |  | 12,750
Recoveries |  | 2,291 |  |  | 88
Charge-offs |  | (17,456) |  |  | (13,546)
Balance, end of the period | $ | 18,125 |  | $ | 91,379
Our allowance decreased significantly from the prior year primarily due to a change in the fourth quarter of fiscal year 2012, whereby we now charge-off loans 180 days past due to the value of the collateral less costs to sell. This change did not have a significant impact on our provision recorded during the six months ended October 31, 2012. 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 |  | October 31, 2012 |  |  | April 30, 2012
|  | Portfolio Balance |  |  | Related Allowance |  |  | Portfolio Balance |  |  | Related Allowance
Pooled | $ | 229,761 |  | $ | 6,892 |  | $ | 248,772 |  | $ | 9,237
Impaired: |  |  |  |  |  |  |  |  |  |  |
Individually (TDRs) |  | 63,602 |  |  | 5,972 |  |  | 71,949 |  |  | 7,752
Individually |  | 92,504 |  |  | 5,261 |  |  | 108,591 |  |  | 9,551
| $ | 385,867 |  | $ | 18,125 |  | $ | 429,312 |  | $ | 26,540
Our portfolio includes loans originated by Sand Canyon Corporation, previously known as Option One Mortgage Corporation, and its subsidiaries (SCC) and purchased by H&R Block Bank (HRB Bank), which constitute 57% of the total loan portfolio at October 31, 2012. We have experienced higher rates of delinquency and believe that we have greater exposure to loss with respect to this segment of our loan portfolio. Our remaining loan portfolio totaled $164.8 million at October 31, 2012 and is characteristic of a prime loan portfolio, and we believe therefore subject to a lower loss exposure. Detail of our mortgage loans held for investment and the related allowance at October 31, 2012 is as follows:
|  |  |  |  |  |  |  |  | (dollars in 000s)
|  | Outstanding |  |  | Loan Loss Allowance |  | % 30+ Days
|  | Principal Balance |  |  | Amount |  | % of Principal |  | Past Due
Purchased from SCC | $ | 221,064 |  | $ | 14,152 |  | 6.4% |  | 33.9%
All other |  | 164,803 |  |  | 3,973 |  | 2.4% |  | 8.7%
| $ | 385,867 |  | $ | 18,125 |  | 4.7% |  | 23.1%
Credit quality indicators at October 31, 2012 include the following:
|  |  |  |  |  |  |  | (in 000s)
Credit Quality Indicators |  | Purchased from SCC |  | All Other |  | Total Portfolio
Occupancy status: |  |  |  |  |  |  |  |
Owner occupied | $ | 161,298 |  | $ | 105,584 |  | $ | 266,882
Non-owner occupied |  | 59,766 |  |  | 59,219 |  |  | 118,985
| $ | 221,064 |  | $ | 164,803 |  | $ | 385,867
Documentation level: |  |  |  |  |  |  |  |
Full documentation | $ | 72,086 |  | $ | 120,286 |  | $ | 192,372
Limited documentation |  | 7,003 |  |  | 17,240 |  |  | 24,243
Stated income |  | 122,577 |  |  | 16,814 |  |  | 139,391
No documentation |  | 19,398 |  |  | 10,463 |  |  | 29,861
| $ | 221,064 |  | $ | 164,803 |  | $ | 385,867
Internal risk rating: |  |  |  |  |  |  |  |
High | $ | 72,880 |  | $ | - |  | $ | 72,880
Medium |  | 148,184 |  |  | - |  |  | 148,184
Low |  | - |  |  | 164,803 |  |  | 164,803
| $ | 221,064 |  | $ | 164,803 |  | $ | 385,867
Loans given our internal risk rating of “high” were originated by SCC, and generally ha d no documentation or we re based on stated income. Loans given our internal risk rating of “medium” were generally full documentation or based on stated income, with loan-to-value ratios at origination of more than 80%, and were made to borrowers with credit scores below 700 at origination. Loans given our internal risk rating of “low” were generally full documentation, with loan-to-value ratios at origination of less than 80% and were made to borrowers with credit scores greater than 700 at origination. 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 58% of our mortgage loan portfolio consists of loans to borrowers located in the states of Florida, California, New York and Wisconsin. Detail of the aging of the mortgage loans in our portfolio as of October 31, 2012 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 | $ | 21,741 |  | $ | 3,313 |  | $ | 69,812 |  | $ | 94,866 |  | $ | 126,198 |  | $ | 221,064
All other |  | 6,566 |  |  | 900 |  |  | 13,375 |  |  | 20,841 |  |  | 143,962 |  |  | 164,803
| $ | 28,307 |  | $ | 4,213 |  | $ | 83,187 |  | $ | 115,707 |  | $ | 270,160 |  | $ | 385,867
(1) We do not accrue interest on loans past due 90 days or more. Information related to our non-accrual loans is as follows:
|  |  |  |  | (in 000s)
As of |  | October 31, 2012 |  |  | April 30, 2012
Loans: |  |  |  |  |
Purchased from SCC | $ | 75,414 |  | $ | 88,347
Other |  | 16,427 |  |  | 16,626
|  | 91,841 |  |  | 104,973
TDRs: |  |  |  |  |
Purchased from SCC |  | 3,776 |  |  | 3,166
Other |  | 506 |  |  | 1,270
|  | 4,282 |  |  | 4,436
Total non-accrual loans | $ | 96,123 |  | $ | 109,409
Information related to impaired loans is as follows:
|  |  |  |  |  |  |  |  |  |  | (in 000s)
|  | Balance |  |  | Balance With |  |  | Total |  |  | Related
|  | With Allowance |  |  | No Allowance |  |  | Impaired Loans |  |  | Allowance
As of October 31, 2012: |  |  |  |  |  |  |  |  |  |  |
Purchased from SCC | $ | 40,142 |  | $ | 90,516 |  | $ | 130,658 |  | $ | 7,992
Other |  | 7,951 |  |  | 17,497 |  |  | 25,448 |  |  | 3,241
| $ | 48,093 |  | $ | 108,013 |  | $ | 156,106 |  | $ | 11,233
As of April 30, 2012: |  |  |  |  |  |  |  |  |  |  |
Purchased from SCC | $ | 56,128 |  | $ | 97,591 |  | $ | 153,719 |  | $ | 14,917
Other |  | 7,137 |  |  | 19,684 |  |  | 26,821 |  |  | 2,386
| $ | 63,265 |  | $ | 117,275 |  | $ | 180,540 |  | $ | 17,303
Information related to the allowance for impaired loans is as follows:
|  |  |  |  | (in 000s)
As of |  | October 31, 2012 |  |  | April 30, 2012
Portion of total allowance for loan losses allocated |  |  |  |  |
to impaired loans and TDR loans: |  |  |  |  |
Based on collateral value method | $ | 5,261 |  | $ | 9,551
Based on discounted cash flow method |  | 5,972 |  |  | 7,752
| $ | 11,233 |  | $ | 17,303
Information related to activities of our non-performing assets is as follows:
|  |  |  |  | (in 000s)
Six months ended October 31, |  | 2012 |  |  | 2011
Average impaired loans: |  |  |  |  |
Purchased from SCC | $ | 141,521 |  | $ | 226,880
All other |  | 26,343 |  |  | 35,525
| $ | 167,864 |  | $ | 262,405
Interest income on impaired loans: |  |  |  |  |
Purchased from SCC | $ | 1,992 |  | $ | 3,076
All other |  | 158 |  |  | 238
| $ | 2,150 |  | $ | 3,314
Interest income on impaired loans recognized on |  |  |  |  |
a cash basis on non-accrual status: |  |  |  |  |
Purchased from SCC | $ | 1,956 |  | $ | 2,973
All other |  | 145 |  |  | 224
| $ | 2,101 |  | $ | 3,197
Activity related to our real estate owned (REO) is as follows:
|  |  |  |  | (in 000s)
Six months ended October 31, |  | 2012 |  |  | 2011
Balance, beginning of the period | $ | 14,972 |  | $ | 19,532
Additions |  | 5,312 |  |  | 4,438
Sales |  | (5,189) |  |  | (6,303)
Writedowns |  | (1,278) |  |  | (1,706)
Balance, end of the period | $ | 13,817 |  | $ | 15,961

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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 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 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 SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph c -Subparagraph Schedule IV -Article 5 + Details
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