HR Block 2011 Annual Report Download - page 65

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Information related to activities of our non-performing assets is as follows:
For the Year Ended April 30, 2011 2010 2009
(in 000s)
Average impaired loans:
Purchased from SCC $ 252,673
All other 37,082
$ 289,755 $ 307,351 $ 216,391
Interest income on impaired loans:
Purchased from SCC $ 5,795
All other 829
$ 6,624 $ 8,548 $ 5,964
Interest income on impaired loans recognized on a
cash basis on non-accrual status:
Purchased from SCC $ 5,567
All other 744
$ 6,311 $ 7,452 $ 4,927
As of April 30, 2011 and 2010, accrued interest receivable on mortgage loans held for investment totaled
$2.1 million and $2.6 million, respectively. At April 30, 2011, HRB Bank had interest-only mortgage loans in its
investment portfolio totaling $3.7 million.
Our real estate owned includes loans accounted for as in-substance foreclosures of $7.7 million and
$12.5 million at April 30, 2011 and 2010, respectively. Activity related to our real estate owned is as follows:
Year Ended April 30, 2011 2010 2009
(in 000s)
Balance, beginning of the period $ 29,252 $ 44,533 $ 350
Additions 16,463 19,341 65,171
Sales (21,889) (24,308) (9,072)
Impairments (4,294) (10,314) (11,916)
Balance, end of the period $ 19,532 $ 29,252 $ 44,533
NOTE 7: ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
We use the following valuation methodologies for assets and liabilities measured at fair value and the general
classification of these instruments pursuant to the fair value hierarchy.
쐍Available-for-sale securities – Available-for-sale securities are carried at fair value on a recurring basis. When
available, fair value is based on quoted prices in an active market and as such, would be classified as Level 1. If
quoted market prices are not available, we use a third-party pricing service to determine fair value and classify
the securities as Level 2. The service’s pricing model is based on market data and utilizes available trade, bid
and other market information. Available-for-sale securities that we classify as Level 2 include certain agency
and non-agency mortgage-backed securities, U.S. states and political subdivisions debt securities and other
debt and equity securities.
쐍Real estate owned – REO includes foreclosed properties securing mortgage loans. Foreclosed assets are
adjusted to fair value less costs to sell upon transfer of the loans to REO. Fair value is generally based on
independent market prices or appraised values of the collateral. Subsequent holding period losses and losses
arising from the sale of REO are expensed as incurred. Because our REO is valued based on significant inputs
that are unobservable in the market and our own estimates of assumptions that market participants would
use in pricing the asset, these assets are classified as Level 3.
쐍Impaired mortgage loans held for investment – The fair value of impaired mortgage loans held for investment
is generally based on the net present value of discounted cash flows for TDR loans or the appraised value of
the underlying collateral for all other loans. These loans are classified as Level 3.
H&R BLOCK 2011 Form 10K 53