NEW YORK (Reuters) - H&R Block Inc (HRB.N), the largest U.S. tax preparer, reported a quarterly loss that was 56 percent smaller than a year earlier on Wednesday, after shedding its money-losing mortgage operations to focus on its tax business.

The net loss totaled $132.7 million, or 41 cents per share, for the fiscal first quarter ended July 31 and compared with a loss of $302.6 million, or 93 cents, a year earlier.

H&R Block's loss from continuing operations was $129.4 million, or 40 cents per share, including $20.4 million for write-downs and increased reserves for credit losses at its banking unit. Revenue fell 11 percent to $339.6 million.

Analysts on average expected a loss of 35 cents per share on revenue of $381.2 million, Reuters Estimates said. Kansas City, Missouri-based H&R Block often loses money in its fiscal first quarter, which falls outside the main tax filing season.

"Compared with a year ago, operating results have improved, and losses from discontinued operations have diminished significantly," Chairman Richard Breeden said in a statement.

H&R Block shares fell 51 cents to $25.99 in after-hours trading. They had risen 94 cents to $26.50 during regular trading and hit their highest level since November 2005.

Also Wednesday, H&R Block said it will buy the operator of 621 franchised tax preparation offices in Texas, Arkansas and Oklahoma, which serve 760,000 clients, for $278 million in cash.

H&R Block said it plans to add more than 400 offices and at least 250,000 clients in the region within five years and command higher royalty fees from any future franchisee. It said the transaction should close by October 31 and add 5 cents per share to earnings in the current fiscal year.

The company still expects full-year profit of $1.60 to $1.70 per share. Analysts projected $1.66.

Breeden, a private investor who used to run the U.S. Securities and Exchange Commission, is shedding units he said distracted H&R Block from tax preparation.

Since ousting Mark Ernst as chief executive last year, Breeden has shut down H&R Block's subprime mortgage lending operations and sold a mortgage servicing business to Wilbur Ross' investment firm WL Ross & Co for $1.1 billion. Last month, H&R Block agreed to sell its securities brokerage to Ameriprise Financial Inc (AMP.N) for $315 million.

(Editing by Jeffrey Benkoe and Andre Grenon)

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