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Other service revenues increased $36.4 million due to revenues earned from our H&R Block Prepaid Emerald
MasterCard»program, coupled with positive sweep account rate variances and higher underwriting fees.
Net interest income on banking activities totaled $24.0 million for fiscal year 2007. The following table
summarizes the key drivers of net interest income on banking activities for fiscal year 2007:
Average Balance
Average Rate
Earned (Paid)
(dollars in 000s)
Mortgage loans held for investment $ 746,387 6.80%
Other investments $ 117,350 5.25%
Deposits $ 700,707 (4.59)%
Total expenses increased $5.7 million, or 1.8%. Cost of services increased $7.1 million, or 3.8%, primarily due to
the expenses of HRB Bank, which opened May 1, 2006.
Pretax income for Consumer Financial Services for fiscal year 2007 was $19.8 million compared to the fiscal
year 2006 loss of $32.8 million. HRB Bank contributed pretax earnings of $23.1 million in fiscal year 2007, while
HRBFA improved its pretax loss to $3.3 million compared to $32.8 million in fiscal year 2006.
DISCONTINUED OPERATIONS
Discontinued operations includes OOMC and its subsidiary, HRBMC, mortgage businesses historically engaged in
the origination and acquisition of non-prime and prime mortgage loans, the sale and securitization of mortgage
loans and residual interests, and the servicing of non-prime loans. Also included are the results of three smaller
lines of business previously reported in our Business Services segment. Our tax operations in the United Kingdom
previously reported in our Tax Services segment were included in fiscal years 2007 and 2006. Operating results
presented below are net of eliminations of intercompany activities.
On April 30, 2008, OOMC sold its loan servicing assets to an affiliate of WL Ross pursuant to a previously
announced agreement dated March 17, 2008. At January 31, 2008 we had an impairment relating to the estimated
loss upon disposition of OOMC equal to $304.9 million, including $193.4 million recorded in fiscal year 2007. OOMC
incurred an actual loss upon sale of the servicing assets of $233.3 million. Impairments were reversed in the fourth
quarter, resulting in net impairments for fiscal year 2008 totaling $39.9 million. As OOMC is a wholly-owned
subsidiary, earnings and losses recognized at OOMC are reflected in our consolidated financial statements. See
additional discussion in Item 8, note 19. The sale is subject to certain post-closing adjustments.
Year Ended April 30, 2008 2007 2006
Discontinued Operations – Operating Statistics (in 000s)
VOLUME OF LOANS ORIGINATED:
Wholesale (non-prime) $ 3,568,822 $ 24,342,779 $ 36,028,794
Retail:
Non-prime 97,471 1,588,944 3,260,071
Prime 382,737 1,141,744 1,490,898
$ 4,049,030 $ 27,073,467 $ 40,779,763
LOAN SALES:
Third-party buyers, net of repurchases $ 4,182,530 $ 26,295,714 $ 40,272,225
HRB Bank, net of repurchases (137,307) 1,181,498 –
$ 4,045,223 $ 27,477,212 $ 40,272,225
30 H&R BLOCK 2008 Form 10K