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NOTE 4: MARKETABLE SECURITIES AVAILABLE-FOR-SALE
The amortized cost and fair value of securities classified as available-for-sale held at April 30, 2010 and 2009 are
summarized below:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(1)
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(1)
Fair
Value
As of April 30, 2010 2009
(in 000s)
Mortgage-backed securities $ 23,026 $ 39 $ (49) $ 23,016 $ 27,466 $ 25 $ (698) $ 26,793
Municipal bonds 8,442 459 – 8,901 9,560 491 (4) 10,047
Trust preferred security 1,854 – (1,823) 31 3,454 – (3,162) 292
$ 33,322 $ 498 $ (1,872) $ 31,948 $ 40,480 $ 516 $ (3,864) $ 37,132
(1)
At April 30, 2010, investments with a cost of $15.7 million and gross unrealized losses of $1.9 million had been in continuous loss
position for more than twelve months. At April 30, 2009, investments with a cost of $30.3 million and gross unrealized losses of
$3.9 million had been in continuous loss position for more than twelve months.
Proceeds from the sales of AFS securities were $2.1 million, $8.3 million and $13.9 million during fiscal years
2010, 2009 and 2008, respectively. We recorded no gross realized gains or losses on those sales during fiscal year
2010. Gross realized gains on those sales during fiscal years 2009 and 2008 were $0.7 million and $0.4 million,
respectively; gross realized losses were $1.3 million and $0.1 million, respectively. During fiscal years 2010, 2009
and 2008, we recorded other-than-temporary impairments of AFS securities totaling $1.6 million, $1.5 million and
$0.4 million, respectively, as a result of an assessment that it was probable we would not collect all amounts due or
an assessment that we would not be able to hold the investments until potential recovery of market value.
Contractual maturities of AFS debt securities at April 30, 2010, occur at varying dates over the next two to
27 years, and are set forth in the table below.
Cost Basis Fair Value
(in 000s)
Maturing in:
Two to five years $ 4,091 $ 4,311
Five to ten years 4,351 4,590
Beyond 24,880 23,047
$ 33,322 $ 31,948
HRB Bank is required to maintain a restricted investment in FHLB stock for borrowing availability. The cost of
this investment, $6.0 million, represents its redemption value, as these investments do not have a ready market.
NOTE 5: MORTGAGE LOANS HELD FOR INVESTMENT AND RELATED ASSETS
The composition of our mortgage loan portfolio as of April 30, 2010 and 2009 is as follows:
As of April 30, Amount % of Total Amount % of Total
2010 2009
(dollars in 000s)
Adjustable-rate loans $ 411,122 60% $ 534,943 65%
Fixed-rate loans 272,562 40% 286,894 35%
683,684 100% 821,837 100%
Unamortized deferred fees and costs 5,256 7,135
Less: Allowance for loan losses (93,535) (84,073)
$ 595,405 $ 744,899
Activity in the allowance for loan losses for the years ended April 30, 2010 and 2009 is as follows:
Year Ended April 30, 2010 2009 2008
(in 000s)
Balance at beginning of the year $ 84,073 $ 45,401 $ 3,448
Provision 47,750 63,897 42,004
Recoveries 88 54 999
Charge-offs (38,376) (25,279) (1,050)
Balance at end of the year $ 93,535 $ 84,073 $45,401
48 H&R BLOCK 2010 Form 10K