HR Block 2014 Annual Report Download - page 48

40 2014 Form 10-K | H&R Block, Inc.
DEPOSITS – The following table shows HRB Bank's average deposit balances and the average rate paid on those
deposits for fiscal years 2014, 2013 and 2012:
(dollars in 000s)
Year ended April 30, 2014 2013 2012
Average
Balance Average Rate Average Balance Average Rate Average Balance Average Rate
Money market and savings $ 274,633 0.47% $ 331,819 0.59% $ 306,053 0.71%
Interest-bearing checking
accounts 8,881 0.08% 12,027 0.17% 14,871 0.27%
IRAs 310,103 0.20% 322,078 0.91% 334,022 1.00%
Certificates of deposit 14,006 1.31% 69,444 1.08% 50,647 2.33%
607,623 0.35% 735,368 0.77% 705,593 0.95%
Non-interest-bearing deposits 362,806 330,727 320,566
$ 970,429 $ 1,066,095 $ 1,026,159
RATIOS – The following table shows certain of HRB Bank's key ratios for fiscal years 2014, 2013 and 2012:
Year ended April 30, 2014 2013 2012
Return on average assets 3.2% 3.0% 3.1%
Net return on equity 9.7% 10.2% 10.0%
Equity to assets ratio 41.3% 33.9% 34.8%
SHORT-TERM BORROWINGS – We had no short-term borrowings outstanding from the FHLB as of April 30, 2014,
2013 or 2012, and did not borrow from the FHLB during fiscal year 2014 or 2013. During fiscal year 2012, the maximum
amount of FHLB advances outstanding during fiscal year 2012 was $25.0 million, with average borrowings of $23.8
million at an average interest rate of 2.41%.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
GENERAL – We have a formal investment policy that strives to minimize the market risk exposure of our cash equivalents
and AFS securities, which are primarily affected by credit quality and movements in interest rates. The guidelines in
our investment policy focus on managing liquidity and preserving principal and earnings.
Our AFS securities consist primarily of mortgage-backed securities held to meet the regulatory requirements of
HRB Bank.
Our cash equivalents are primarily held for liquidity purposes and are comprised of high quality, short-term
investments, including money market funds. Because our cash and cash equivalents have a relatively short maturity,
our portfolio's market value is relatively insensitive to interest rate changes.
As our short-term borrowings are generally seasonal, interest rate risk typically increases through our third fiscal
quarter and declines to zero by fiscal year-end. While the market value of short-term borrowings is relatively insensitive
to interest rate changes, interest expense on short-term borrowings will increase and decrease with changes in the
underlying short-term interest rates.
Our long-term debt as of April 30, 2014, consists primarily of fixed-rate Senior Notes; therefore, a change in interest
rates would have no impact on consolidated pretax earnings until these notes mature or are refinanced. The fixed-
rate interest payable on our Senior Notes is subject to adjustment based upon our credit ratings. We had no balance
outstanding under the 2012 CLOC as of April 30, 2014. See Item 8, note 10 to the consolidated financial statements.
Under criteria published by the OCC, HRB Bank's overall interest rate risk exposure at March 31, 2014, our most
recent Call Report filing with the OCC, was characterized as "minimal." We actively manage our interest rate risk
positions. As interest rates change, we adjust our strategy and mix of assets and liabilities to optimize our position.