HR Block 2011 Annual Report Download - page 44

DEPOSITS –The following table shows HRB Bank’s average deposit balances and the average rate paid on those
deposits for fiscal years 2011, 2010 and 2009:
Average
Balance
Average
Rate
Average
Balance
Average
Rate
Average
Balance
Average
Rate
Year Ended April 30, 2011 2010 2009
(dollars in 000s)
Money market and savings $ 279,162 0.81% $ 400,920 0.50% $ 467,864 1.37%
Interest-bearing checking accounts 10,782 0.87% 13,677 0.61% 13,579 2.25%
IRAs 353,902 1.01% 377,973 1.02% 289,814 1.27%
Certificates of deposit 186,742 1.36% 227,094 1.86% 91,815 3.98%
830,588 1.02% 1,019,664 1.00% 863,072 1.63%
Non-interest-bearing deposits 310,781 233,717 212,607
$ 1,141,369 $ 1,253,381 $ 1,075,679
RATIOS –The following table shows certain of HRB Bank’s key ratios for fiscal years 2011, 2010 and 2009:
Year Ended April 30, 2011 2010 2009
Pretax return on assets 2.36% 2.12% (1.03)%
Net return on equity 5.43% 21.04% (6.67)%
Equity to assets ratio 30.81% 28.83% 12.44%
During fiscal year 2009, HRB Bank shared the revenues and expenses of the H&R Block Prepaid MasterCard»
program with an affiliate, and as a result, transferred revenues and expenses of $49.4 million and $13.4 million,
respectively, to this affiliate. During fiscal year 2010, the agreement with the affiliate was terminated and HRB
Bank now retains the revenues and expenses of the program.
SHORT-TERM BORROWINGS –The following table shows HRB Bank’s short-term borrowings for fiscal years
2011, 2010 and 2009:
Balance Rate Balance Rate Balance Rate
Year Ended April 30, 2011 2010 2009
(dollars in 000s)
Ending balance of FHLB advances $ 25,000 2.36% $ 50,000 1.92% $ 25,000 1.76%
Average balance of FHLB advances 72,534 2.10% 98,767 2.07% 103,885 4.92%
The maximum amount of FHLB advances outstanding during fiscal years 2011, 2010 and 2009 was $75.0 million,
$100.0 million and $129.0 million, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
See Item 8, note 1 to our consolidated financial statements for a discussion of recently issued accounting
pronouncements.
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 available-for-sale (AFS) securities, which are primarily affected by credit quality and movements
in interest rates. These guidelines focus on managing liquidity and preserving principal and earnings.
Our cash equivalents are primarily held for liquidity purposes and are comprised of high quality, short-term
investments, including qualified 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 at April 30, 2011, consists primarily of fixed-rate Senior Notes; therefore, a change in interest rates
would have no impact on consolidated pretax earnings. See Item 8, note 11 to our consolidated financial statements.
HRB BANK –At April 30, 2011, residential mortgage loans held for investment consisted of 42% fixed-rate loans
and 58% adjustable-rate loans. These loans are sensitive to changes in interest rates as well as expected
prepayment levels. As interest rates increase, fixed-rate residential mortgages tend to exhibit lower
32 H&R BLOCK 2011 Form 10K