HR Block 2015 Annual Report Download - page 62

H&R Block, Inc. | 2015 Form 10-K 55
NOTE 2: H&R BLOCK BANK
In April 2014, our subsidiaries, HRB Bank and Block Financial LLC, the sole shareholder of HRB Bank (Block Financial),
entered into a definitive Purchase and Assumption Agreement (P&A Agreement) with BofI Federal Bank, a federal
savings bank (BofI). The P&A Agreement is subject to various closing conditions, including the receipt of certain required
approvals, entry into certain additional agreements, and the fulfillment of various other customary conditions. If the
closing conditions (including regulatory approvals) are satisfied, we will complete a transaction in which we will sell
assets and assign certain liabilities, including all of HRB Bank's deposit liabilities, to BofI (P&A Transaction). Additional
information about this agreement and other agreements expected to be entered into upon the closing of the P&A
Transaction is set forth in Part 1, Item 1 under "Recent Developments."
Due to the lack of regulatory approval, we continued to offer financial services products to our clients through
HRB Bank during the 2015 tax season.
Upon the closing of the P&A Transaction, we will make a cash payment to BofI for the difference in the carrying
value of assets sold and the carrying value of liabilities (including deposit liabilities) transferred. The amount of the
cash payment made at closing will primarily be equal to the carrying value of the liabilities to be transferred since the
carrying value of the assets to be transferred is immaterial. The parties to the P&A Agreement entered into another
Letter Agreement, effective February 12, 2015 (February Letter Agreement), which, among other things, set the date
of closing as June 30, 2015, unless otherwise agreed by the parties. As of the date of this filing, the parties have not
received formal regulatory approval and, as a result, the parties do not expect to close the P&A Transaction on the
previously contemplated June 30, 2015 date. Due to the seasonality of our business, the timing of any closing of the
P&A Transaction will impact the amount of deposit liabilities transferred and the cash payment we make. During fiscal
year 2015, our month-end deposit balances ranged from approximately $440 million to approximately $1.7 billion. In
connection with the closing we intend to liquidate the available-for-sale (AFS) securities held by HRB Bank, which
totaled $435 million at April 30, 2015.
The obligations of the parties to complete the P&A Transaction are subject to the fulfillment of numerous
conditions, including regulatory approval. Under the terms of the February Letter Agreement, the P&A Agreement
may currently be terminated at the election of any of the parties thereto. We cannot be certain when or if the conditions
to the P&A Transaction will be satisfied, or whether the P&A Transaction will be completed. In addition, there may
be changes to the terms and conditions of the P&A Agreement and other contemplated agreements prior to any
closing.
NOTE 3: EARNINGS PER SHARE
Basic and diluted earnings per share is computed using the two-class method. The two-class method is an earnings
allocation formula that determines net income per share for each class of common stock and participating security
according to dividends declared and participation rights in undistributed earnings. Per share amounts are computed
by dividing net income from continuing operations attributable to common shareholders by the weighted average
shares outstanding during each period.