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60 H&R Block 2013 Form 10-K
NOTE 4: MORTGAGE LOANS HELD FOR INVESTMENT AND RELATED ASSETS
The composition of our mortgage loan portfolio as of April 30, 2013 and 2012 is as follows:
(dollars in 000s)
As of April 30, 2013 2012
Amount % of Total Amount % of Total
Adjustable-rate loans $191,093 55% $ 238,442 56%
Fixed-rate loans 159,142 45% 190,870 44%
350,235 100%429,312 100%
Unamortized deferred fees and costs 2,868 3,429
Less: Allowance for loan losses (14,314)(26,540)
$338,789 $ 406,201
Our loan loss allowance as a percent of mortgage loans was 4.1% as of April 30, 2013, compared to 6.2% as of
April 30, 2012. Activity in the allowance for loan losses for the years ended April 30, 2013, 2012 and 2011 is as follows:
(in 000s)
Year ended April 30, 2013 2012 2011
Balance at beginning of the year $26,540 $ 92,087 $ 93,535
Provision 13,283 24,075 35,567
Recoveries 3,338 292 272
Charge-offs (28,847)(89,914) (37,287)
Balance at end of the year $14,314 $ 26,540 $ 92,087
Charge-offs increased during fiscal year 2012 primarily due to a change in practice, under which we now charge-
off loans 180 days past due as discussed in note 1.
When determining our allowance for loan losses, we evaluate loans less than 60 days past due on a pooled basis,
while loans we consider impaired, including those loans more than 60 days past due or modified as TDRs, are evaluated
individually. The balance of these loans and the related allowance is as follows:
(in 000s)
As of April 30, 2013 2012
Portfolio Balance Related Allowance Portfolio Balance Related Allowance
Pooled (less than 60 days past due) $ 207,319 $ 5,628 $ 248,772 $ 9,237
Impaired:
Individually (TDRs) 55,061 4,924 71,949 7,752
Individually (60 days or more past due) 87,855 3,762 108,591 9,551
$ 350,235 $ 14,314 $ 429,312 $ 26,540
Detail of our mortgage loans held for investment and the related allowance at April 30, 2013 is as follows:
(dollars in 000s)
Outstanding
Principal Balance
Loan Loss Allowance % 30+ Days
Past DueAmount % of Principal
Purchased from SCC $ 198,204 $ 10,926 5.5% 33.7%
All other 152,031 3,388 2.2% 9.3%
$ 350,235 $ 14,314 4.1% 23.1%
We review the credit quality of our portfolio based on the following criteria: (1) originator; (2) the level of
documentation obtained for loan at origination; (3) occupancy status of property at origination; (4) geography; and
(5) credit score and loan to value at origination. We specifically evaluate each loan and assign an internal risk rating