The Kansas City, Mo., company operates a $1.2 billion-asset bank in addition to its better known tax-preparation business. (Years ago it owned one of the largest subprime lenders in the U.S. Option One Mortgage Corp., whose servicing rights it later sold to bottom fisher Wilbur Ross.)
In a Securities and Exchange Commission filing, H&R Block stated that guidance from the Federal Reserve Bank of Kansas City would require its holding company to retain significant additional capital, even though it is substantially above the well-capitalized level.
"We have discussed our concerns with the Reserve Bank regarding the negative impact of such guidance," the firm stated. "However, at this time, we do not foresee regulatory flexibility in this regard in light of the Federal Reserve’s views of the statutory requirements imposed under the Dodd-Frank Act."
"We believe that such regulatory constraints are inconsistent with our strategic plans, operational needs, and growth objectives," H&R Block stated in a filing that also cited concern over the impact of Basel III international capital rules.
The document said that H&R Block is evaluating different ways of ceasing to be a savings and loan holding company. It also suggested that the company is not contemplating an exit from its financial services business, but rather looking into possible ways to continue those operations under a different regulatory scheme.
"In connection with that evaluation, we are exploring alternatives to continue to enhance our growth by delivering financial products and services to our customers," the filing stated.
The filing said that the evaluation is in its early stages, and that the company cannot predict the likelihood or timing any potential move, or whether such a move would have a material adverse impact on its business.
H&R Block opened its bank in 2006 as a way to reduce the cost of funding refund anticipation loans. More recently, regulators have sought to stamp out such loans, and H&R Block announced last September that it would not offer them in 2012.
H&R Block Bank offers mortgage loans, in addition to checking accounts, savings accounts, prepaid cards and certificates of deposit.
H&R Block is not the only company that has considered dropping its banking charter as a result of tougher capital rules. MetLife has already disbanded its mortgage lending operation and it is seeking to sell its bank to GE Capital to remove itself from supervision by the Federal Reserve.