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H&R Block, Inc. | 2014 Form 10-K 57
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, 2014 2013
Portfolio Balance Related Allowance Portfolio Balance Related Allowance
Pooled (less than 60 days past due) $ 158,496 $ 4,508 $ 207,319 $ 5,628
Impaired:
Individually (TDRs) 43,865 4,346 55,061 4,924
Individually (60 days or more past due) 75,062 2,418 87,855 3,762
$ 277,423 $ 11,272 $ 350,235 $ 14,314
Detail of our mortgage loans held for investment and the related allowance as of April 30, 2014 is as follows:
(dollars in 000s)
Outstanding
Principal Balance
Loan Loss Allowance % 30+ Days
Past DueAmount % of Principal
Purchased from SCC $ 159,566 $ 8,655 5.4% 27.1%
All other 117,857 2,617 2.2% 7.5%
$ 277,423 $ 11,272 4.1% 20.1%
We review the credit quality of our portfolio primarily 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
of high, medium or low to each loan. The risk rating is based upon multiple loan characteristics that correlate to
delinquency and loss. These characteristics include, but are not limited to, the five criteria listed above. These loan
attributes are evaluated quarterly against a variety of additional characteristics to ensure the appropriate data is being
utilized to determine the level of risk within the portfolio. All criteria are obtained at the time of origination and are
only subsequently updated if the loan is refinanced.
Credit quality indicators as of April 30, 2014 include the following:
(in 000s)
Credit Quality Indicators Purchased from SCC All Other Total Portfolio
Occupancy status:
Owner occupied $ 117,457 $ 77,572 $ 195,029
Non-owner occupied 42,109 40,285 82,394
$ 159,566 $ 117,857 $ 277,423
Documentation level:
Full documentation $ 53,019 $ 83,833 $ 136,852
Limited documentation 4,897 12,971 17,868
Stated income 88,207 13,075 101,282
No documentation 13,443 7,978 21,421
$ 159,566 $ 117,857 $ 277,423
Internal risk rating:
High $ 45,688 $ — $ 45,688
Medium 113,878 — 113,878
Low — 117,857 117,857
$ 159,566 $ 117,857 $ 277,423