Cabela's 2011 Annual Report Download - page 31

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the ability of our Financial Services business to engage in securitization transactions on favorable terms or at all
could be adversely affected by disruptions in the capital markets or other events, which could adversely affect our
business and cause our Financial Services business to lose an important source of capital.
Furthermore, even if we are able to securitize our credit card loans consistent with past practice, poor
performance of our securitized loans, including increased delinquencies and credit losses, lower payment rates,
or a decrease in excess spreads below certain thresholds, could result in a downgrade or withdrawal of the ratings
on the outstanding securities issued in our securitization transactions, cause “early amortization” or “early
redemption” of these securities, or result in higher required credit enhancement levels. This could jeopardize
our ability to complete other securitization transactions on acceptable terms, decrease our liquidity, and force
us to rely on other potentially more expensive funding sources, to the extent available, which would decrease
our profitability.
Our current funding strategy also includes a continued reliance on certificates of deposit to help fund growth
and maturing securitizations. If there is an increase in other financial institutions relying on the certificates of deposit
market for liquidity and funding, competition in the deposits market may increase resulting in less funds available or
funds at unattractive rates. In addition to the non-brokered certificates of deposit market to fund growth and maturing
securitizations, we have access to the brokered certificates of deposit market through multiple financial institutions
for liquidity and funding purposes. Our ability to issue certificates of deposit is reliant on our current regulatory
capital levels. If WFB were to be classified as an “adequately-capitalized” bank, we would be required to obtain a
waiver from the FDIC in order to continue to issue certificates of deposit and would be limited to what interest rate we
can pay on deposits. At December 31, 2011, WFB met the requirements for a “well-capitalized” institution, the highest
of the Federal Deposit Insurance Corporation Improvement Act’s five capital ratio levels.
We may have to reallocate capital from our Retail and Direct businesses to meet the capital needs of
our Financial Services business, which could alter our retail store expansion program.
WFB must satisfy the capital maintenance requirements of government regulators and its agreement with
Visa U.S.A., Inc. (“Visa”). Although WFB satisfied the requirements for the “well-capitalized” classification under
the regulatory framework for prompt corrective action at December 31, 2011, no assurances can be given that WFB
will continue to satisfy such requirements. A variety of factors could cause the capital requirements of WFB to
exceed our ability to generate capital internally or from third party sources. For example, government regulators
or Visa could unilaterally increase their minimum capital requirements. Also, we have significant potential
obligations in the form of the unused credit lines of our cardholders. At December 31, 2011, these unfunded
amounts totaled approximately $20 billion. Draws on these lines of credit could materially exceed predicted line
usage. If WFB ceases to qualify as well-capitalized, WFB would become subject to regulatory restrictions that
could materially adversely affect its liquidity, cost of funds, and ability to conduct normal operations. If WFB’s
capital requirements were to increase, we may have to contribute capital to WFB, which may require us to raise
additional debt or equity capital and/or divert capital from our Retail and Direct businesses, which in turn could
significantly alter our retail store expansion strategy.
It may be difficult to sustain the historical growth and profitability of our Financial Services business,
and we will be subject to various risks as we attempt to grow the business.
We may not be able to retain existing cardholders, grow account balances, or attract new cardholders and the
profits from our Financial Services business could decline, for a variety of reasons, many of which are beyond our
control, including:
• credit risk related to the loans we make to cardholders and the charge-off levels of our credit
card accounts;
• inability of cardholders to make payments to us due to economic conditions and limited access to other
credit sources;
• inability to manage credit risk and keep credit models up to date with current consumer credit trends;
• lack of growth of potential new customers generated by our Retail and Direct businesses;