H&R Block To Sell Banking Business To Republic Bank

(RTTNews) - Tax service provider H&R Block, Inc. (HRB) announced Thursday that H&R Block Bank has entered into a definitive purchase and assumption agreement with Republic Bank and Trust Co. to sell certain of its assets and transfer certain liabilities. The deal will see H&R Block Bank merging with and into Republic Bank's parent, Block Financial, LLC, and surrender its bank charter after receiving regulatory approvals.

"We're pleased to take this important step in the process of exiting our bank and finding the right bank to continue offering our best-in-class financial services products," H&R Block's President and CEO Bill Cobb said in a statement. Following the completion of the deal, Republic Bank, as per a service agreement, would also act as the bank for H&R Block's core financial services products: Refund Transfers, Emerald Advance lines of credit, and the Emerald Prepaid MasterCard.

The deal is expected to be completed in time to execute tax season 2014 with Republic as per the service agreement.

H&R Block expects the deal and related costs to result in one-time charges of about $0.03 to $0.04 in fiscal 2014. It also expects the net financial impact of the service agreement with Republic to be dilutive by about $0.06 to $0.09 per share, on an annual basis.

Kansas City, Missouri-based H&R Block, the world's largest consumer tax services provider, had confirmed in mid-October that it is exploring strategic alternatives for H&R Block Bank so as to avoid new capital requirements under the Dodd-Frank Act on savings and loan holding companies.

The company had then hired Goldman Sachs & Co. (GS) to advise it on strategic alternatives. The sale of the bank will result in it no longer being regulated by the Federal Reserve as a savings and loan holding company.

H&R Block has joined other companies that are selling their banking units so as to shed their status as a bank-holding company and avoid the capital constraints imposed by the Federal Reserve.

Insurer MetLife, Inc (MET) agreed in December 2011 to sell its U.S. retail deposit business to GE Capital, the financial services arm of industrial conglomerate General Electric Co. (GE). At that time, MetLife noted that the deal was a significant step towards it no longer being a bank holding company.

In June 2012, the Federal Reserve announced proposed rules that would impose higher capital requirements on savings and loan holding companies such as H&R Block. The Federal Reserve proposed the rules in order to implement changes required by the Dodd-Frank Act.

HRB closed Thursday's regular trading session at $29.94, up $0.36 or 1.22% on a volume of 1.99 million shares.